N-4/A 1 y89019anv4za.txt FORM N-4/A As filed with the Securities and Exchange Commission on April 12, 2011 Registration No. 333-172044 811-21397 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. Form N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X) Pre-Effective Amendment No. 1 (X) REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X) Amendment No. 24 (X) NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV (Exact Name of Registrant) NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (Name of Depositor) 51 Madison Avenue, New York, New York 10010 (Address of Depositor's Principal Executive Office) Depositor's Telephone Number: (212) 576-7000 Charles A. Whites, Jr., Esq. New York Life Insurance and Annuity Corporation 51 Madison Avenue New York, New York 10010 (Name and Address of Agent for Service) Copy to: Richard T. Choi, Esq. Thomas F. English, Esq. Jorden Burt LLP Senior Vice President 1025 Thomas Jefferson Street, NW and Chief Insurance Counsel Suite 400 East New York Life Insurance Company Washington, D.C. 20007-5208 51 Madison Avenue New York, New York 10010 Approximate Date of Proposed Public Offering: Continuous It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) of Rule 485. [ ] on ___________ pursuant to paragraph (b) of Rule 485. [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485. [ ] on ________ pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment. Title of Securities Being Registered: Units of interest in a separate account under variable annuity contracts. Pursuant to Section 24(f) of the Investment Company Act of 1940, Registrant is registering an indefinite amount of the securities being offered pursuant to this Registration Statement, and will file its Notice pursuant to Rule 24f-2 for its fiscal year ending December 31, 2010 on or before March 30, 2011. Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine. PROSPECTUS DATED MAY 1, 2011 FOR NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II FROM NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A DELAWARE CORPORATION) 51 MADISON AVENUE, ROOM 251, NEW YORK, NEW YORK 10010 INVESTING IN NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV This Prospectus describes the individual New York Life Flexible Premium Variable Annuity II policies issued by New York Life Insurance and Annuity Corporation (NYLIAC). We designed these policies to assist individuals with their long-term retirement planning or other long-term needs. You can use these policies with retirement plans that do or do not qualify for special federal income tax treatment. The policies offer flexible premium payments, access to your money through partial withdrawals (some withdrawals may be subject to a surrender charge and/or tax penalty), a choice of when Income Payments commence, and a guaranteed death benefit if the owner dies before Income Payments have commenced. You can choose to have the Mortality and Expense Risk and Administrative Costs Charge (M&E Charge) associated with your policy assessed based on either the Accumulation Value of the policy (which invests in separate Account III) or the Adjusted Premium Payments (which invests in Separate Account IV). The M&E Charge assessed to your policy will be based on the option that you choose. You must choose your M&E Charge option prior to the issuance of the policy. Once the M&E Charge option is chosen it cannot be changed. For Accumulation Value based M&E Charge policies, the M&E charge is assessed based on the Accumulation Value of the policy and will vary with fluctuations in the policy's Accumulation Value. For Premium based M&E Charge policies, the M&E Charge is assessed based on the Adjusted Premium Payments and will not vary with fluctuations in the policy's Accumulation Value. Please see "TABLE OF FEES AND EXPENSES--Periodic Charges Other Than Fund Company Charges" for more information. Your premium payments accumulate on a tax-deferred basis. This means your earnings are not taxed until you take money out of your policy, which can be done in several ways. You can split your premium payments among a Fixed Account, and the Investment Divisions listed below. - MainStay VP Balanced -- Service Class - MainStay VP Bond -- Service Class - MainStay VP Cash Management - MainStay VP Common Stock -- Service Class - MainStay VP Conservative Allocation -- Service Class - MainStay VP Convertible -- Service Class - MainStay VP Flexible Bond Opportunities -- Service Class - MainStay VP Floating Rate -- Service Class - MainStay VP Government -- Service Class - MainStay VP Growth Allocation -- Service Class - MainStay VP Growth Equity -- Service Class - MainStay VP High Yield Corporate Bond -- Service Class - MainStay VP ICAP Select Equity -- Service Class - MainStay VP Income Builder -- Service Class - MainStay VP International Equity -- Service Class - MainStay VP Large Cap Growth -- Service Class - MainStay VP Mid Cap Core -- Service Class - MainStay VP Moderate Allocation -- Service Class - MainStay VP Moderate Growth Allocation -- Service Class - MainStay VP S&P 500 Index -- Service Class - MainStay VP U.S. Small Cap -- Service Class - BlackRock(R) Global Allocation V.I. Fund -- Class III Shares - Calvert VP SRI Balanced Portfolio - Columbia Variable Portfolio -- Small Cap Value Fund -- Class 2 - Dreyfus IP Technology Growth -- Service Shares - Fidelity(R) VIP Contrafund(R) -- Service Class 2 - Fidelity(R) VIP Equity-Income -- Service Class 2 - Fidelity(R) VIP Mid Cap -- Service Class 2 - Janus Aspen Balanced Portfolio -- Service Shares - Janus Aspen Worldwide Portfolio -- Service Shares - MFS(R) Investors Trust Series -- Service Class - MFS(R) Research Series -- Service Class - MFS(R) Utilities Series -- Service Class - Neuberger Berman AMT Mid-Cap Growth Portfolio -- Class S - PIMCO Real Return Portfolio -- Advisor Class - Royce Micro-Cap Portfolio -- Investment Class - Royce Small-Cap Portfolio -- Investment Class - T. Rowe Price Equity Income Portfolio II - UIF Emerging Markets Equity Portfolio -- Class II - Van Eck VIP Global Hard Assets - Victory VIF Diversified Stock -- Class A Shares
WE DO NOT GUARANTEE THE INVESTMENT PERFORMANCE OF THE INVESTMENT DIVISIONS. DEPENDING ON CURRENT MARKET CONDITIONS, YOU CAN MAKE OR LOSE MONEY IN ANY OF THE INVESTMENT DIVISIONS. You should read this Prospectus carefully before investing and keep it for future reference. This Prospectus is not valid unless it is accompanied by the current prospectuses for the MainStay VP Funds Trust, the BlackRock Variable Series Funds, Inc., the Calvert Variable Series, Inc., the Columbia Funds Variable Insurance Trust, the Dreyfus Investment Portfolios, the Fidelity Variable Insurance Products Fund, the Janus Aspen Series, the MFS(R) Variable Insurance Trust(SM), the Neuberger Berman Advisers Management Trust, the PIMCO Variable Insurance Trust, the Royce Capital Fund, the T. Rowe Price Equity Series, Inc., the Universal Institutional Funds, Inc., Van Eck VIP Trust, and the Victory Variable Insurance Funds (the "Funds," and each individually, a "Fund"). Each Investment Division invests in shares of a corresponding Fund portfolio. Please contact Us at (800) 598-2019, or your registered representative if you do not have the accompanying book of underlying fund prospectuses. To learn more about the policies, you can obtain a copy of the Statement of Additional Information (SAI) dated May 1, 2011. The SAI has been filed with the Securities and Exchange Commission (SEC) and is incorporated by reference into this Prospectus. The table of contents for the SAI appears at the end of this Prospectus. For a free copy of the SAI, call Us at (800) 598-2019 or write to Us at the address noted above. The SEC maintains a website (http://www.sec.gov) that contains the SAI and other information that is filed electronically with the SEC. THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE POLICIES INVOLVE RISKS, INCLUDING POTENTIAL LOSS OF PRINCIPAL INVESTED. THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. [THIS PAGE INTENTIONALLY LEFT BLANK] TABLE OF CONTENTS
PAGE ---- DEFINITIONS............................. 3 TABLE OF FEES AND EXPENSES.............. 5 QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II.................................... 9 How Do I Contact NYLIAC?.............. 13 FINANCIAL STATEMENTS.................... 14 CONDENSED FINANCIAL INFORMATION......... 15 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION AND THE SEPARATE ACCOUNT.. 16 New York Life Insurance and Annuity Corporation........................ 16 The Separate Account.................. 16 The Portfolios........................ 16 Additions, Deletions, or Substitutions of Investments..................... 19 Reinvestment.......................... 19 THE POLICIES............................ 19 Selecting the Variable Annuity That's Right for You...................... 20 Qualified and Non-Qualified Policies.. 20 Policy Application and Premium Payments........................... 21 Tax-Free Section 1035 Exchanges....... 22 Payments Returned for Insufficient Funds.............................. 22 Your Right to Cancel ("Free Look").... 23 Issue Ages............................ 23 Transfers............................. 23 Limits on Transfers................... 24 Speculative Investing................. 25 Virtual Service Center and Interactive Voice Response System.............. 25 Dollar Cost Averaging (DCA) Program... 27 Automatic Asset Reallocation.......... 28 Interest Sweep........................ 29 Accumulation Period................... 29 (a) Crediting of Premium Payments.. 29 (b) Valuation of Accumulation Units.......................... 29 Riders................................ 29 (a) Living Needs Benefit/Unemployment Rider.... 30 (b) Enhanced Beneficiary Benefit Rider (optional).............. 30 (c) Enhanced Spousal Continuance Rider (optional).............. 32 (d) Upromise Account Rider (optional)..................... 32 (e) Annual Death Benefit Reset Rider (optional).............. 33 Policyowner Inquiries................. 34 Records and Reports................... 34 CHARGES AND DEDUCTIONS.................. 34 Surrender Charges..................... 34 Amount of Surrender Charge............ 35 Exceptions to Surrender Charges....... 35 Other Charges......................... 35 (a) Mortality and Expense Risk and Administrative Costs Charge.... 35 (b) Policy Service Charge.......... 36 (c) Fund Charges.................. 36 (d) Transfer Fees................. 36 (e) Enhanced Beneficiary Benefit Rider Charge (optional)...... 36 (f) Annual Death Benefit Reset Rider Charge (optional)...... 36 Group and Sponsored Arrangements...... 37 Taxes................................. 37 DISTRIBUTIONS UNDER THE POLICY.......... 37 Surrenders and Withdrawals............ 37 (a) Surrenders..................... 38 (b) Partial Withdrawals............ 38 (c) Periodic Partial Withdrawals... 38 (d) Hardship Withdrawals........... 39 Required Minimum Distribution Option.. 39 Our Right to Cancel................... 39 Annuity Commencement Date............. 39 Death Before Annuity Commencement..... 39 Income Payments....................... 40 (a) Election of Income Payment Options........................ 40 (b) Proof of Survivorship.......... 40 Delay of Payments..................... 40 Designation of Beneficiary............ 41 Restrictions Under Code Section 403(b)(11)......................... 41 Loans................................. 41 THE FIXED ACCOUNT....................... 42 (a) Interest Crediting............. 43 (b) Transfers to Investment Divisions...................... 43 FEDERAL TAX MATTERS..................... 43 Introduction.......................... 43 Taxation of Annuities in General...... 44 3.8 Percent Tax on Certain Investment Income............................. 45 Partial Section 1035 Exchanges........ 45 Qualified Policies.................... 45 (a) 403(b) Plans................... 46 (b) Individual Retirement Annuities...................... 46 (c) Roth Individual Retirement Annuities...................... 46 (d) Inherited IRAs................. 47 (e) Deferred Compensation Plans.... 47 (f) SIMPLE IRAs.................... 47 Taxation of Death Benefits............ 47 DISTRIBUTION AND COMPENSATION ARRANGEMENTS.......................... 48 VOTING RIGHTS........................... 48 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION................ 49
THIS PROSPECTUS IS NOT CONSIDERED AN OFFERING IN ANY STATE WHERE THE SALE OF THIS POLICY CANNOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING OTHER THAN AS DESCRIBED IN THIS PROSPECTUS OR IN ANY ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS OR IN ANY AUTHORIZED SUPPLEMENTAL SALES MATERIAL. 2 DEFINITIONS ACCUMULATION UNIT--An accounting unit We use to calculate the Variable Accumulation Value prior to the Annuity Commencement Date. Each Investment Division of the Separate Account has a distinct variable Accumulation Unit value. ACCUMULATION VALUE--The sum of the Variable Accumulation Value, and the Fixed Accumulation Value of a policy. ADJUSTED DEATH BENEFIT PREMIUM PAYMENTS--The total dollar amount of premium payments made under this Policy reduced by any Adjusted Death Benefit Premium Payment Proportional Withdrawals. ADJUSTED DEATH BENEFIT PREMIUM PAYMENT PROPORTIONAL WITHDRAWAL--An amount equal to the amount withdrawn from this Policy (including any amount withdrawn that may include surrender charges), divided by this Policy's Accumulation Value immediately preceding the withdrawal, multiplied by the Adjusted Death Benefit Premium Payments immediately preceding the withdrawal. ADJUSTED PREMIUM PAYMENT--The total dollar amount of premium payments made under the policy and allocated to the Investment Divisions reduced by any withdrawals and applicable surrender charges in excess of any gain in the policy. ALLOCATION ALTERNATIVES--The Investment Divisions of the Separate Account and the Fixed Account. ANNUITANT--The person named on the Policy Data Page and whose life determines the Income Payments. ANNUITY COMMENCEMENT DATE--The date on which We are to make the first Income Payment under the policy. BENEFICIARY--The person or entity having the right to receive the death benefit set forth in the policy and who is the "designated beneficiary" for purposes of Section 72 of the Internal Revenue Code. BUSINESS DAY--Generally, any day on which the New York Stock Exchange (NYSE) is open for trading. Our Business Day ends at 4:00 p.m. Eastern Time or the close of regular trading of the NYSE, if earlier. CODE--The Internal Revenue Code of 1986, as amended. CONSIDERATION--A premium payment, or a portion thereof and/or, if allowable, a transfer amount from an Investment Division to the Fixed Account. ELIGIBLE PORTFOLIOS (PORTFOLIOS)--The mutual fund portfolios of the Funds that are available for investment through the Investment Divisions of the Separate Account. FIXED ACCOUNT--An account that is credited with a fixed interest rate which NYLIAC declares and is not part of the Separate Account. The Accumulation Value of the Fixed Account is supported by assets in NYLIAC's general account, which are subject to the claims of Our general creditors. FIXED ACCUMULATION VALUE--The sum of premium payments and, if allowable, transfers allocated to the Fixed Account, plus interest credited on those premium payments and, if allowable, transfers, less any transfers and partial withdrawals from the Fixed Account, and less any surrender charges and any policy service charges deducted from the Fixed Account. The Fixed Accumulation Value will never be less than the Fixed Account portion of the Nonforfeiture Value. INCOME PAYMENTS--Periodic payments NYLIAC makes after the Annuity Commencement Date. INVESTMENT DIVISION--The variable investment options available with the policy. Each Investment Division invests exclusively in shares of a specified Eligible Portfolio. NON-QUALIFIED POLICIES--Policies that are not available for use by individuals in connection with employee retirement plans intended to qualify for special federal income tax treatment under Sections 403(b), 408, and 408A of the Code. Non-Qualified Policies include policies issued for other retirement plans or arrangements, including plans qualifying under Section 401(a) of the Code. NONFORFEITURE RATE--The rate used to calculate the Fixed Account Nonforfeiture Value. This rate, as shown on the Policy Data Page, is equal to the lesser of: a) 3.00%, and b) a rate that is not less than 1.00% and determined by using the six-month average of the five-year Constant Maturity Treasury Rate reported by the Federal Reserve for December through May (for period beginning July 1) and June through November (for period beginning January 1), rounded to the nearest .05%, minus 1.25%. NONFORFEITURE VALUE--The Nonforfeiture Value is equal to 87.50% of the Consideration(s) allocated to the Fixed Account accumulated at the Nonforfeiture Rate since the Payment Date or transfer date, minus any amounts 3 withdrawn or transferred from the Fixed Account, with the remaining amount accumulated at the Nonforfeiture Rate since the date of withdrawal or transfer. NYLIAC, WE, OUR OR US--New York Life Insurance and Annuity Corporation. All written service requests must be sent to the NYLIAC Variable Products Service Center ("VPSC") at one of the addresses listed in Question 15 of the section of the Prospectus entitled, "QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II." PAYMENT DATE--The Business Day on which We receive a premium payment at the address specified in this Prospectus to receive such payment. PAYMENT YEAR(S)--With respect to any premium payment, the year(s) beginning on the date such premium payment is made to the policy. POLICY ANNIVERSARY--An anniversary of the Policy Date shown on the Policy Data Page. POLICY DATA PAGE--Page 2 of the policy which contains the policy specifications. POLICY DATE--The date from which We measure Policy Years, quarters, months, and Policy Anniversaries. It is shown on the Policy Data Page. POLICY YEAR--A year starting on the Policy Date. Subsequent Policy Years begin on each Policy Anniversary, unless otherwise indicated. QUALIFIED POLICIES--Policies for use by individuals under employee retirement plans that are intended to qualify for special federal income tax treatment under Sections 403(b), 408, and 408A of the Code. Qualified Policies do not include policies issued for any other retirement plans or arrangements, including plans qualifying under Section 401(a) of the Code. SEPARATE ACCOUNT--NYLIAC Variable Annuity Separate Account-III or NYLIAC Variable Annuity Separate Account IV, each a segregated asset account We established to receive and invest premium payments paid under the policies. The Separate Account's Investment Divisions, in turn, purchase shares of Eligible Portfolios. VARIABLE ACCUMULATION VALUE--The sum of the current Accumulation Unit value(s) for each of the Investment Divisions multiplied by the number of Accumulation Units held in the respective Investment Division. 4 TABLE OF FEES AND EXPENSES The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the policy. The first table describes the fees and expenses that you will pay at the time that you buy the policy, surrender the policy, or transfer Accumulation Value between investment options. State premium taxes may also be deducted. POLICYOWNER TRANSACTION EXPENSES
-------------------------------------------------------------------------------------------------- ACCUMULATION VALUE BASED PREMIUM BASED M&E CHARGE POLICIES M&E CHARGE POLICIES -------------------------------------------------------------------------------------------------- CURRENT AND GUARANTEED MAXIMUM SURRENDER CHARGE as a 7.00% 7.00% percentage of the amount withdrawn(1) CURRENT AND GUARANTEED MAXIMUM TRANSFER FEE for each $30 $30 transfer over 12 in a Policy Year (currently no charge for the first 12 transfers in a Policy Year).
(1) In Policy Years 2 and beyond, the percentage applied to calculate the maximum Surrender Charge is reduced as follows: 7% during Policy Years 1 through 3; 6% during Policy Year 4; 5% during Policy Year 5; 4% during Policy Year 6; 3% during Policy Year 7; 2% during Policy Year 8; 1% during Policy Year 9; and 0% thereafter. The next table describes the fees and expenses that you will pay periodically during the time that you own the policy, not including Fund fees and expenses. PERIODIC CHARGES OTHER THAN FUND COMPANY CHARGES
-------------------------------------------------------------------------------------------------- ACCUMULATION VALUE BASED PREMIUM BASED M&E CHARGE POLICIES M&E CHARGE POLICIES -------------------------------------------------------------------------------------------------- Annual Policy Service Charge (for policies with less $30 $30 than $50,000 Accumulation Value) CURRENT AND GUARANTEED MAXIMUM MORTALITY AND EXPENSE 1.40% 1.60% RISK AND ADMINISTRATIVE COSTS CHARGE (calculated either as an annualized percentage of the daily average Variable Accumulation Value or the Adjusted Premium Payments, includes mortality and expense risk and administrative fees).
OPTIONAL RIDER CHARGES
------------------------------------------------------------------------------------------- ACCUMULATION VALUE AND PREMIUM BASED M&E CHARGE POLICIES ------------------------------------------------------------------------------------------- GUARANTEED MAXIMUM ANNUAL DEATH BENEFIT RESET RIDER CHARGE 1.00% (calculated as an annualized percentage of the Reset Value as of the last Policy Anniversary (or as of the Policy Date if within the first Policy Year), deducted on a quarterly basis; for a detailed explanation of the term "Reset Value," see "THE POLICIES-Riders-Annual Death Benefit Reset Rider"). ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- Current Annual Death Benefit Rider Charge if the oldest 0.30% Owner is age 65 or younger ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- Current Annual Death Benefit Rider Charge if the oldest 0.35% Owner is age 66 to 75 inclusive ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- GUARANTEED MAXIMUM ENHANCED BENEFICIARY BENEFIT RIDER CHARGE 1.00% (calculated as an annualized percentage of the policy's Accumulation Value, deducted on a quarterly basis). ------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------- Current Enhanced Beneficiary Benefit Rider Charge 0.30% -------------------------------------------------------------------------------------------
The next table shows the minimum and maximum total operating expenses charged by the portfolio companies that you may pay periodically during the time that you own the policy (before any fee waiver or expense reimbursement). The expenses are expressed as a percentage of average net assets of the portfolios and may be higher or lower in the future. More detail concerning each portfolio company's fees and expenses is contained in the prospectus for each portfolio company. 5 TOTAL ANNUAL PORTFOLIO COMPANY OPERATING EXPENSES(#)
--------------------------------------------------------------------------------------- MINIMUM MAXIMUM --------------------------------------------------------------------------------------- Expenses that are deducted from the Investment Division assets, including management fees, 12b-1 fees, 0.50% 1.96% administration fees and other expenses as of 12/31/10.
(#) Shown as a percentage of average net assets for the fiscal year ended 12/31/2010. The Fund or its agents provided the fees and charges that are based on 2010 expenses, unless otherwise indicated. We have not verified the accuracy of the information provided by the Fund or its agents. ANNUAL PORTFOLIO COMPANY OPERATING EXPENSES(#)
------------------------------------------------------------------------------------------------------------------- DISTRIBUTION UNDERLYING TOTAL FUND MANAGEMENT (12B-1) OTHER PORTFOLIO FEES ANNUAL FUND FEES FEES(sec.) EXPENSES AND EXPENSES EXPENSE ------------------------------------------------------------------------------------------------------------------- MainStay VP Conservative Allocation -- Service Class 0.00% 0.25% 0.05% 0.83% 1.13% MainStay VP Growth Allocation -- Service Class 0.00% 0.25% 0.06% 1.09% 1.40% MainStay VP Moderate Allocation -- Service Class 0.00% 0.25% 0.05% 0.92% 1.22% MainStay VP Moderate Growth Allocation -- Service Class 0.00% 0.25% 0.05% 1.01% 1.31%
Please refer to the applicable fund prospectus for additional information. (#) Shown as a percentage of average net assets for the fiscal year ended December 31, 2010, unless otherwise indicated. The Fund or its agents provided the fees and charges, which are based on 2010 expenses. We have not verified the accuracy of the information provided by the Fund or its agents. (sec.) Because the 12b-1 fee charge is an ongoing fee, the fee will increase the cost of your investment and may cost you more than paying other types of sales charges.
----------------------------------------------------------------------------------------------- DISTRI- BUTION (12B-1) TOTAL FUND MANAGEMENT FEE- OTHER ANNUAL FUND FEES S(sec.) EXPENSES EXPENSE(#) ----------------------------------------------------------------------------------------------- MainStay VP Balanced -- Service Class 0.75% 0.25% 0.10%(a) 1.10% MainStay VP Bond -- Service Class 0.49% 0.25% 0.06% 0.80% MainStay VP Cash Management 0.44% 0.00% 0.06% 0.50% MainStay VP Common Stock -- Service Class 0.55% 0.25% 0.06% 0.86% MainStay VP Convertible -- Service Class 0.60% 0.25% 0.06% 0.91% MainStay VP Flexible Bond Opportunities -- Service Class 0.60% 0.25% 0.42% 1.27% MainStay VP Floating Rate -- Service Class 0.60% 0.25% 0.07% 0.92% MainStay VP Government -- Service Class 0.50% 0.25% 0.06% 0.81% MainStay VP Growth Equity -- Service Class 0.61% 0.25% 0.05% 0.91% MainStay VP High Yield Corporate Bond -- Service Class 0.56% 0.25% 0.05% 0.86% MainStay VP ICAP Select Equity -- Service Class 0.76% 0.25% 0.05% 1.06% MainStay VP Income Builder -- Service Class 0.57% 0.25% 0.08% 0.90% MainStay VP International Equity -- Service Class 0.89% 0.25% 0.09% 1.23% MainStay VP Large Cap Growth -- Service Class 0.75% 0.25% 0.06% 1.06% MainStay VP Mid Cap Core -- Service Class 0.85% 0.25% 0.07%(b) 1.17% MainStay VP S&P 500 Index -- Service Class 0.30% 0.25% 0.05% 0.60% MainStay VP U.S. Small Cap -- Service Class 0.79% 0.25% 0.06% 1.10% BlackRock Global Allocation V.I. Fund -- Class III Shares 0.65% 0.25% 0.08%(c) 0.98% Calvert VP SRI Balanced Portfolio 0.70% 0.00% 0.21% 0.91% Columbia Variable Portfolio -- Small Cap Value Fund -- Class 2 0.87%(d) 0.25% 0.17%(e) 1.29%(f) Dreyfus IP Technology Growth -- Service Shares 0.75% 0.25% 0.06% 1.06% Fidelity(R) VIP Contrafund(R) -- Service Class 2 0.56% 0.25% 0.09% 0.90%(g) Fidelity(R) VIP Equity-Income -- Service Class 2 0.46% 0.25% 0.10% 0.81%
6
----------------------------------------------------------------------------------------------- DISTRIB- UTION (12B-1) TOTAL FUND MANAGEMENT FEE- OTHER ANNUAL FUND FEES S(sec.) EXPENSES EXPENSE(#) ----------------------------------------------------------------------------------------------- Fidelity(R) VIP Mid Cap -- Service Class 2 0.56% 0.25% 0.10% 0.91%(g) Janus Aspen Balanced Portfolio -- Service Shares 0.55% 0.25% 0.03% 0.83% Janus Aspen Worldwide Portfolio -- Service Shares 0.59% 0.25% 0.06% 0.90% MFS(R) Investors Trust Series -- Service Class 0.75% 0.25% 0.08% 1.08% MFS(R) Research Series -- Service Class 0.75% 0.25% 0.14% 1.14% MFS(R) Utilities Series -- Service Class 0.73% 0.25% 0.08% 1.06% Neuberger Berman AMT Mid-Cap Growth -- Class S 0.85% 0.25% 0.17% 1.27%(h) PIMCO Real Return Portfolio -- Advisor Class 0.50% 0.25% 0.01% 0.76% Royce Micro-Cap Portfolio -- Investment Class 1.25% 0.00% 0.12%(i) 1.37% Royce Small-Cap Portfolio -- Investment Class 1.00% 0.00% 0.06% 1.06% T. Rowe Price Equity Income Portfolio II 0.85% 0.25% 0.00% 1.10% UIF Emerging Markets Equity Portfolio -- Class II 1.22% 0.35% 0.39% 1.96%(j) Van Eck VIP Global Hard Assets Fund 0.89% 0.00% 0.08% 0.97%(k) Victory VIF Diversified Stock -- Class A Shares 0.30% 0.25% 0.68% 1.23% -----------------------------------------------------------------------------------------------
Please refer to the applicable fund prospectus for additional information. Management Fees may include Adviser and/or Administration Fees. sec. Because the distribution (12b-1) fee charge is an ongoing fee, the fee will increase the cost of your investment and may cost you more than paying other types of sales charges. # Shown as a percentage of average net assets for the fiscal year ended December 31, 2010, unless otherwise indicated. The Fund or its agents provided the fees and charges, which are based on 2010 expenses. We have not verified the accuracy of the information provided by the Fund or its agents. (a) Includes Acquired (Underlying) Portfolio/Fund Fees and Expenses of 0.01%. (b) Includes Acquired (Underlying) Portfolio/Fund Fees and Expenses of 0.02%. (c) Includes Acquired Fund Fees and Expenses of 0.02%. (d) Management fees have been restated to reflect contractual changes to the investment advisory and/or administration fee rates. (e) Other expenses have been restated to reflect contractual changes to the transfer agency fees paid. (f) Columbia Management Investment Advisors, LLC (the Adviser) has contractually agreed to bear through April 30, 2012 a portion of the Fund's expenses so that the Fund's ordinary operating expenses (excluding any brokerage commissions, interest, taxes and extraordinary expenses, but including custodian charges relating to overdrafts, if any), after giving effect to any balance credits from the Fund's custodian, do not exceed the annual rate of 1.13% of the Fund's average daily net assets attributable to Class 2 shares. In addition, the Distributor has voluntarily agreed to reimburse the Class 2 distribution fees in excess of 0.15% if the total annual Fund operating expenses applicable to Class 2 shares, including distribution fees, exceed the annual rate of 1.03% of the average daily net assets attributable to Class 2 shares. If this fee waiver were reflected in the table, the distribution fee for Class 2 shares would be 0.15% and the Net annual Fund operating expenses for Class 2 shares would be 1.03%. This expense arrangement may be modified or terminated by the Adviser and/or the Distributor at any time. (g) A portion of the brokerage commissions that the fund pays may be reimbursed and used to reduce the fund's expenses. Including this reduction, the total class operating expenses would have been 0.88% for Fidelity(R) VIP Contrafund(R) -- Service Class 2 and 0.90% for Fidelity VIP Mid Cap -- Service Class 2. These offsets may be discontinued at any time. (h) Neuberger Berman Management LLC ("NBM") has undertaken through December 31, 2014 to waive fees and/or reimburse certain operating expenses, including the compensation of NBM and excluding taxes, interest, extraordinary expenses, brokerage commissions and transaction costs, that exceed, in the aggregate, 1.25% of the average daily net asset value of the Mid-Cap Growth Portfolio. The expense limitation arrangements for the Portfolios are contractual and any excess expenses can be repaid to NBM within three years of the year incurred, provided such recoupment would not cause a Portfolio to exceed its respective limitation. (i) Includes Acquired Fund Fees and Expenses of 0.05%. (j) The Portfolio's adviser, Morgan Stanley Investment Management Inc. (the "Adviser"), has agreed to reduce its advisory fee and/or reimburse the Portfolio so that total annual portfolio operating expenses, excluding certain investment related expenses (such as foreign country tax expense and interest expense on amounts borrowed) (but including any 12b-1 fee), will not exceed 1.65% for UIF Emerging Markets Equity Portfolio -- Class II. The fee waivers and/or expense reimbursements are expected to continue for one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems that such action is appropriate. (k) For the period May 1, 2011 until May 1, 2012, the Adviser contractually agreed to waive fees and reimburse certain operating expenses (excluding interest, dividends paid on securities sold short, trading expenses, taxes and extraordinary expenses) to the extent Total Annual Fund Operating Expenses exceed 1.20% of average daily net assets. The agreement to limit the Total Annual Fund Operating Expenses is limited to the Fund's direct operating expenses and, therefore, does not apply to AFFE, which are indirect expenses incurred by the Fund through its investments in underlying funds. 7 Examples The table below will help you understand the various costs and expenses that you will bear directly and indirectly. The table reflects the Investment Division with the highest charges and expenses of the policy including, policyowner transaction expenses, the annual policy service charge (for policies with less than $50,000 Accumulation Value), separate account annual expenses, portfolio company fees and expenses and optional rider charges where indicated. Therefore, if your policy's Accumulation Value exceeds that amount, the expenses would be slightly lower. For more information on the charges reflected in this table, see "CHARGES AND DEDUCTIONS" and the Fund prospectuses that accompany this Prospectus. NYLIAC may, where premium taxes are imposed by state law, deduct the premium taxes upon surrender of the policy or on the Annuity Commencement Date. You would pay the following expenses on a $10,000 allocation in the Investment Division listed, assuming a 5% annual return on assets: FOR ACCUMULATION VALUE BASED M&E CHARGE NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II POLICIES:
EXPENSES IF YOU EXPENSES IF YOU ANNUITIZE YOUR POLICY SURRENDER YOUR POLICY --------------------------------------------- --------------------------------------------- INVESTMENT DIVISION 1 YR 3 YR 5 YR 10 YR 1 YR 3 YR 5 YR 10 YR ------------------- --------- --------- --------- --------- --------- --------- --------- --------- UIF EMERGING MARKETS EQUITY PORTFOLIO -- CLASS II without any Riders....... $1,022.07 $1,132.01 $1,928.38 $3,997.79 $1,022.07 $1,816.50 $2,437.06 $4,027.79 with EBB Rider........... $1,051.09 $1,222.52 $2,074.95 $4,268.03 $1,051.09 $1,901.01 $2,576.33 $4,298.03 with ADBR Rider.......... $1,054.87 $1,234.35 $2,094.07 $4,302.96 $1,054.87 $1,912.06 $2,594.49 $4,332.96 with All Riders.......... $1,083.89 $1,324.22 $2,238.51 $4,563.96 $1,083.89 $1,995.97 $2,731.72 $4,593.96 EXPENSES IF YOU DO NOT SURRENDER YOUR POLICY ------------------------------------------- INVESTMENT DIVISION 1 YR 3 YR 5 YR 10 YR ------------------- ------- --------- --------- --------- UIF EMERGING MARKETS EQUITY PORTFOLIO -- CLASS II without any Riders....... $352.80 $1,132.01 $1,928.38 $3,997.79 with EBB Rider........... $383.77 $1,222.52 $2,074.95 $4,268.03 with ADBR Rider.......... $387.80 $1,234.35 $2,094.07 $4,302.96 with All Riders.......... $418.77 $1,324.22 $2,238.51 $4,563.96
FOR PREMIUM BASED M&E CHARGE NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II POLICIES:
EXPENSES IF YOU EXPENSES IF YOU ANNUITIZE YOUR POLICY SURRENDER YOUR POLICY --------------------------------------------- --------------------------------------------- INVESTMENT DIVISION 1 YR 3 YR 5 YR 10 YR 1 YR 3 YR 5 YR 10 YR ------------------- --------- --------- --------- --------- --------- --------- --------- --------- UIF EMERGING MARKETS EQUITY PORTFOLIO -- CLASS II without any Riders....... $1,034.25 $1,164.57 $1,972.53 $4,036.32 $1,034.25 $1,846.89 $2,478.96 $4,066.32 with EBB Rider........... $1,063.26 $1,256.28 $2,123.23 $4,325.74 $1,063.26 $1,932.52 $2,622.16 $4,355.74 with ADBR Rider.......... $1,067.05 $1,268.32 $2,142.97 $4,363.25 $1,067.05 $1,943.77 $2,640.92 $4,393.25 with All Riders.......... $1,096.05 $1,359.38 $2,291.48 $4,642.64 $1,096.05 $2,028.80 $2,782.03 $4,672.64 EXPENSES IF YOU DO NOT SURRENDER YOUR POLICY ------------------------------------------- INVESTMENT DIVISION 1 YR 3 YR 5 YR 10 YR ------------------- ------- --------- --------- --------- UIF EMERGING MARKETS EQUITY PORTFOLIO -- CLASS II without any Riders....... $365.80 $1,164.57 $1,972.53 $4,036.32 with EBB Rider........... $396.75 $1,256.28 $2,123.23 $4,325.74 with ADBR Rider.......... $400.80 $1,268.32 $2,142.97 $4,363.25 with All Riders.......... $431.75 $1,359.38 $2,291.48 $4,642.64
8 QUESTIONS AND ANSWERS ABOUT NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II NOTE: THE FOLLOWING SECTION CONTAINS BRIEF QUESTIONS AND ANSWERS ABOUT THE NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II. YOU SHOULD REFER TO THE BODY OF THIS PROSPECTUS FOR MORE DETAILED INFORMATION. 1. WHAT IS THE NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II? The New York Life Flexible Premium Variable Annuity II is a Flexible Premium Deferred Variable Retirement Annuity Policy issued by NYLIAC. You may allocate premium payments to 41 Investment Divisions of the Separate Account, and/or to the Fixed Account. The Accumulation Value will fluctuate according to the performance of the Investment Divisions selected, the daily deduction of the Separate Account charges, and the interest credited on amounts in the Fixed Account. 2. WHERE CAN I ALLOCATE MY PREMIUM PAYMENTS? (a) You can allocate your premium payments to one or more of the following Allocation Alternatives: (i) SEPARATE ACCOUNT Separate Account III currently consists of 68 Investment Divisions, 41 of which are available. Separate Account IV currently consists of 41 Investment Divisions. The available Investment Divisions are listed on the first page of this Prospectus. They offer investments in domestic and international markets. When you allocate a premium payment to one of the Investment Divisions, the Separate Account will invest your premium payment exclusively in shares of the corresponding Eligible Portfolio of the relevant Fund. (ii) FIXED ACCOUNT Each premium payment, or the portion of any premium payment you allocate to the Fixed Account will earn an interest rate at least equal to the guaranteed interest rate. 3. CAN I MAKE TRANSFERS AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT? You can transfer all or part of the Accumulation Value of your policy between the Investment Divisions or from the Investment Divisions to the Fixed Account at least 30 days before the Annuity Commencement Date. For Premium based M&E Charge policies, no transfers are allowed into the Fixed Account. Generally, you can transfer a minimum amount of $25 between Investment Divisions, unless We agree otherwise. You can make unlimited transfers each Policy Year subject to the Limits on Transfers. We currently do not charge for transfers. However, We reserve the right to charge up to $30 for each transfer after the first twelve in a given Policy Year. (See "TRANSFERS.") You can make transfers from the Fixed Account, although certain restrictions may apply. (See "THE FIXED ACCOUNT") In addition, you can request transfers through the traditional Dollar Cost Averaging, Automatic Asset Reallocation, or Interest Sweep options as described herein. 4. WHAT CHARGES ARE ASSESSED AGAINST THE POLICY? Before the date We start making Income Payments to you, We will deduct a policy service charge of $30 on each Policy Anniversary or upon surrender of the policy if on that date the Accumulation Value is below $50,000. In addition, We also deduct a charge for certain mortality and expense risks NYLIAC assumes and for policy administration expenses (M&E Charge) . You may choose to have the M&E Charge assessed based on either the Accumulation Value of the policy or the Adjusted Premium Payments. You must choose your M&E Charge option prior to the issuance of the policy. Once the M&E Charge option is chosen it cannot be changed. The M&E Charge is 1.40% (annualized) of the daily average Variable Accumulation Value for Accumulation Value based policies. For Premium based M&E Charge policies, the M&E Charge is 1.60% (annualized) of the Adjusted Premium Payments and will be deducted from the Investment Divisions through a reduction in Accumulation Units each policy quarter (excluding premium payments allocated to the Fixed Account that are not transferred to the Investment Division). (See "MORTALITY AND EXPENSE RISK AND ADMINISTRATIVE COSTS CHARGE.") The amount of Premium based M&E Charges assessed to your policy will be unaffected by fluctuations in market performance. In a rising market, the Premium based M&E Charge structure will benefit you because the Premium based M&E Charge, when measured as a percentage of separate account assets, will be reduced. In a 9 flat or declining market, the Premium based M&E Charge structure will result in an increase in the charge when measured against separate account assets. The amount of Accumulation Value based M&E Charges assessed to your policy will be affected by fluctuations in market performance. However, the Accumulation Value based M&E Charge structure may be more advantageous in a flat or declining market. We impose a surrender charge on certain partial withdrawals and surrenders of the policies. This charge is assessed as a percentage of the amount withdrawn or surrendered during the first nine Policy Years. The percentage declines after the first three Policy Years as follows:
SURRENDER POLICY YEAR CHARGE ----------- --------- 1............................................................... 7% 2............................................................... 7% 3............................................................... 7% 4............................................................... 6% 5............................................................... 5% 6............................................................... 4% 7............................................................... 3% 8............................................................... 2% 9............................................................... 1% 10+............................................................. 0%
You can make withdrawals from the policy free of surrender charges based on certain limitations. In any one Policy Year, you may withdraw free of a surrender charge the greatest of (a) 10% of the Accumulation Value as of the last Policy Anniversary (10% of the premium payment if the withdrawal is made in the first Policy Year), less any prior Surrender Charge free withdrawals during the Policy Year; (b) the Accumulation Value less the accumulated premium payments; or (c) 10% of the Accumulation Value at the time of the withdrawal, less any prior Surrender Charge free withdrawals during the Policy Year. (See "CHARGES AND DEDUCTIONS--Surrender Charges" and "EXCEPTIONS TO SURRENDER CHARGES.") If you select the Annual Death Benefit Reset Rider ("ADBR") (in jurisdictions where available), We will deduct a charge each policy quarter that the rider is in effect based on the amount that is reset on the last Policy Anniversary. In most jurisdictions, this charge will be deducted from each Investment Division and the Fixed Account, in proportion to its percentage of the Accumulation Value. The maximum annual charge is 1.00% of the amount that is reset on the last Policy Anniversary, applied on a quarterly basis. You should consult with your registered representative to determine the percentage We are currently charging before you select this rider. We may set a lower charge at Our sole discretion. As of the date of this Prospectus, the charges are as follows:
AGE OF OLDEST OWNER ANNUAL CHARGE ------------- ------------- 65 or younger....................................... 0.30% (0.075% per quarter) 66 to 75 inclusive.................................. 0.35% (0.0875% per quarter)
If you select the Enhanced Beneficiary Benefit ("EBB") Rider (in states where available), We will deduct a charge each policy quarter that the rider is in effect based on the Accumulation Value. We will deduct this charge beginning with the first policy quarter after the Policy Date. In most jurisdictions, this charge will be deducted from each Allocation Alternative in proportion to its percentage of the Accumulation Value. The maximum annual charge is 1.00% of the policy's Accumulation Value, applied on a quarterly basis. We may set a lower charge at Our sole discretion. The current charge for the EBB Rider is 0.30% of the policy's Accumulation Value, applied on a quarterly basis (0.075% per quarter). You should consult your registered representative to determine the percentage We are currently charging before you elect this Rider. The original percentage you are charged for the EBB Rider will not change once your policy is issued. NYLIAC may in the future, charge up to the maximum annual amount described above for new policies. Finally, the value of the shares of each Fund reflects advisory fees, administration fees and other expenses deducted from the assets of each Fund. (See the Fund prospectuses which accompany this Prospectus.) 10 5. WHAT ARE THE MINIMUM INITIAL AND MAXIMUM ADDITIONAL PREMIUM PAYMENTS? Unless We permit otherwise, the minimum initial premium payment for Qualified Policies is as follows: (a) for Code Section 403(b) Tax Sheltered Annuities ("TSAs"), a $2,000 single premium or $50 per month; (b) for IRAs and Roth IRAs, a $2,000 single premium or a $1,200 initial premium payment plus pre-authorized monthly deductions of $100 per month; (c) for deferred compensation plans, $50 per month; (d) for SEP plans, $2,000 initial premium payment or $50 per month if part of a pre-authorized billing arrangement; and (e) For SIMPLE IRAs, $4,000 initial premium payment and, if part of a pre- authorized billing arrangement; an additional $100 per month. For Qualified Policies you may not make premium payments in excess of the amount permitted by law for the plan indicated. Unless We permit otherwise, the minimum initial premium payment is $5,000 (or $2,500 plus $100 per month from a pre-authorized billing arrangement) for Non-Qualified Policies. Additional non-scheduled premium payments must be at least $500 for Qualified Policies and Non-Qualified Policies, or such lower amount as We may permit at any time. Subsequent premium payments must be sent to NYLIAC at one of the addresses listed in Question 17 of this Prospectus. We may agree to other methods of payment. The maximum aggregate amount of premium payments We accept without prior approval is set forth on the Policy Data Page. 6. HOW ARE PREMIUM PAYMENTS ALLOCATED? We will allocate the initial premium payment to the Investment Divisions, you have selected and/or the Fixed Account within two Business Days after receipt at the Cleveland or Dallas Service Center, subject to Our receipt of all information necessary to issue a policy. Subsequent premium payments will be allocated at the close of the Business Day on which they are received. (See "THE POLICIES--Policy Application and Premium Payments.") You may raise or lower the percentages (which must be in whole numbers) of the premium payment you place in each Allocation Alternative at the time you make a premium payment. The minimum amount which you may place in any one Allocation Alternative is $25, or such lower amount as We may permit. We reserve the right to limit the amount of a premium payment that may be placed in any one Allocation Alternative and the number of Allocation Alternatives inclusively to which you may allocate your Accumulation Value. ACCEPTANCE OF INITIAL AND ADDITIONAL PREMIUM PAYMENTS IS SUBJECT TO OUR SUITABILITY STANDARDS. 7. WHAT HAPPENS IF PREMIUM PAYMENTS ARE NOT MADE? If We do not receive any premium payments for a period of two years, and the Accumulation Value of your policy would provide Income Payments of less than $20 per month on the Annuity Commencement Date, We reserve the right to terminate your policy subject to applicable state laws. We will notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum. 8. CAN I WITHDRAW MONEY FROM THE POLICY BEFORE THE ANNUITY COMMENCEMENT DATE? You may make withdrawals from your policy before the Annuity Commencement Date. Your withdrawal request must be in a form that is acceptable to Us. Under most circumstances, you may make a minimum partial withdrawal of $500. Withdrawals may be subject to a surrender charge. In addition, you may have to pay income tax and a 10% penalty tax may apply if you are under age 59 1/2. (See "DISTRIBUTIONS UNDER THE POLICY" and "FEDERAL TAX MATTERS.") Please note that certain withdrawal requests must be made in writing and sent to NYLIAC's Variable Products Service Center. (See "DISTRIBUTIONS UNDER THE POLICY--Surrenders and Withdrawals--Partial Withdrawals and Periodic Partial Withdrawals.") 9. HOW WILL NYLIAC MAKE INCOME PAYMENTS ON THE ANNUITY COMMENCEMENT DATE? We will make Income Payments on a fixed basis. We do not currently offer a variable income payment option. We will make payments over the life of the Annuitant with a guarantee of 10 years of payments, even if the Annuitant 11 dies sooner. Income Payments will always be the same specified amount. (See "DISTRIBUTIONS UNDER THE POLICY--INCOME PAYMENTS.") We may offer other options, at Our discretion, where permitted by state law. 10. WHAT HAPPENS IF I DIE BEFORE THE ANNUITY COMMENCEMENT DATE? Unless amended by any rider attached to the policy, if you die before the Annuity Commencement Date, We will pay the Beneficiary(ies) under the policy an amount equal to the greater of: (a) the Accumulation Value, less any outstanding loan balance, or (b) the Adjusted Death Benefit Premium Payments. If the Beneficiary is the spouse (as defined under Federal law) of the Annuitant and the owner, see Question 11. (Also see "DEATH BEFORE ANNUITY COMMENCEMENT" and "FEDERAL TAX MATTERS.") 11. WHAT HAPPENS IF MY SPOUSE IS THE BENEFICIARY? If you are the owner and Annuitant and you die before the Annuity Commencement Date, your spouse (as defined under Federal law) may continue the policy as the new owner and Annuitant if he/she is also the sole Beneficiary of the policy (for Non-Qualified, IRA, Roth IRA, SIMPLE IRA and SEP policies only; TSA and Inherited IRA policies are excluded). If your spouse chooses to continue the policy, We will not pay the death benefit proceeds as a consequence of your death. If you elect the EBB Rider and the Enhanced Spousal Continuance (ESC) Rider applies, see the EBB and ESC Riders for details. 12. CAN I RETURN THE POLICY AFTER IT IS DELIVERED? You can cancel the policy within 10 days of delivery of the policy or such longer period as required under state law. To cancel your policy, you must return it to VPSC at one of the addresses listed in Question 15 of this Prospectus or to the registered representative through whom you purchased it, along with a written request for cancellation. Except where you are entitled by law to receive the total of premium payments less any prior partial withdrawals, We will promptly return the Accumulation Value calculated as of the Business Day that either the registered representative through whom you purchased the policy or VPSC receives the policy along with the written request for cancellation in a form acceptable to Us, but without any deduction for premium taxes or a surrender charge. We will set forth this provision in your policy. (See "THE POLICIES--Your Right to Cancel ("Free Look").") 13. WHAT ABOUT VOTING RIGHTS? You can instruct NYLIAC how to vote shares of the Funds in which you have a voting interest through the Separate Account. (See "VOTING RIGHTS.") 14. ARE POLICY LOANS AVAILABLE? If you have purchased an Accumulation Value based M&E Charge policy in connection with a Code Section 403(b) Tax-Sheltered Annuity ("TSA") plan, you may be able to borrow some of your Accumulation Value subject to certain conditions. Loans are not available for policies issued in the State of New York. YOU MAY NOT BORROW ANY PORTION OF YOUR ACCUMULATION VALUE IF YOU HAVE PURCHASED A PREMIUM BASED M&E CHARGE POLICY IN CONNECTION WITH A TSA PLAN. (See "LOANS.") 15. WHERE DO I SEND WRITTEN SERVICE REQUESTS TO THE NYLIAC VARIABLE PRODUCTS SERVICE CENTER? Certain service requests, including but not limited to death benefit claims and surrenders, are required to be in writing. All written service requests must be sent to the NYLIAC Variable Products Service Center ("VPSC") at one of the following addresses: REGULAR MAIL NYLIAC Variable Products Service Center Madison Square Station P.O. Box 922 New York, NY 10159 EXPRESS MAIL NYLIAC Variable Products Service Center 51 Madison Avenue, Room 251 New York, NY 10010
12 Written service requests will be effective as of the Business Day they are received in a form acceptable to Us at VPSC at one of the addresses listed immediately above. Faxed or e-mailed requests are not acceptable and will not be honored at any time. All NYLIAC requirements must be met in order for Us to process your service requests. Please review all service request forms carefully and provide all required information that is applicable to the transaction. If all requirements are not met, We will not be able to process your service request. We will make every reasonable attempt to notify you in writing of this situation. It is important that you inform NYLIAC of an address change so that you can receive important policy statements. 16. HOW DO I CONTACT NYLIAC BY TELEPHONE OR BY THE INTERNET? A. BY TELEPHONE: Certain service requests, including but not limited to obtaining current unit values and speaking to a customer representative, may be effected by telephone. For telephonic requests, you must contact the NYLIAC Interactive Voice Response System ("IVR") toll-free by calling: (800) 598- 2019. (See "THE POLICIES -- Virtual Service Center and Interactive Voice Response System.") B. BY INTERNET: Certain service requests, including but not limited to transferring assets between investment options and e-mailing your registered representative, may be effected via the Internet. For Internet-based requests, you must contact the NYLIAC Virtual Service Center ("VSC") at www.newyorklife.com/vsc and enter your user name and password. (See "THE POLICIES -- Virtual Service Center and Interactive Voice Response System.") We make IVR and VSC services available at our discretion. In addition, availability of IVR and VSC services may be interrupted temporarily at certain times. We do not assume responsibility for any loss if service through IVR or VSC should become unavailable. We will not accept e-mailed requests for policy transactions or e-mails of imaged, signed service requests. E-mail inquiries that are non-transactional may be sent through Our Virtual Service Center once they have passed all security protocols to identify the policyowner. You may authorize Us to accept electronic instructions from a registered representative or the registered service assistant assigned to your policy in order to make premium allocations, transfers, and changes to your investment objective and/or risk tolerance. You may also authorize your registered representative or registered service assistant to revise your Automatic Asset Reallocation (AAR) arrangement. Your AAR will be cancelled if a premium allocation change or transfer is submitted on your behalf that is inconsistent with your current AAR arrangements. You may prevent this cancellation if a conforming AAR change is processed within one Business Day of the inconsistent premium allocation change or transfer. To authorize the registered representative(s) or registered service assistants assigned to your policy to make premium allocations and transfers, you must send a completed Trading Authorization Form to VPSC at one of the addresses listed in Question 15 of this Prospectus. We may revoke or deny Trading Authorization privileges for certain policyowners (See "Limits on Transfers"). Trading Authorization may be elected, changed or cancelled at any time. We will confirm all transactions in writing. Not all transactions are available on the Internet. NYLIAC is not liable for any loss, cost or expense for action on instructions which are believed to be genuine in accordance with these procedures. As these parties act on your behalf, you are responsible for and bear the consequences of their instructions and other actions, including any limits on transfers. Transfer requests received after the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time or received on a non-Business Day, will be priced as of the next Business Day. 13 17. WHERE DO I SEND SUBSEQUENT PREMIUM PAYMENTS AND LOAN REPAYMENTS? Subsequent premium payments and loan repayments must be sent to one of the following addresses: REGULAR MAIL NYLIAC 75 Remittance Drive Suite 3021 Chicago, IL 60675-3021 EXPRESS MAIL NYLIAC, Suite 3021 c/o The Northern Trust Bank 350 North Orleans Street Receipt & Dispatch, 8th Floor Chicago, IL 60654
Subsequent premium payments and loan repayments will be credited as of the Business Day they are received in a form acceptable to Us at one of the addresses noted in this Question 17. Please note that initial premium payments are those made in connection with the issuance of a policy and are processed in accordance with our procedures. (See "THE POLICIES -- Policy Application and Premium Payments.") FINANCIAL STATEMENTS The consolidated balance sheet of NYLIAC as of December 31, 2010 and 2009, and the consolidated statements of income, of stockholder's equity and of cash flows for each of the three years in the period ended December 31, 2010 (including the report of the independent registered public accounting firm); and each Separate Account's statement of assets and liabilities as of December 31, 2010, and the statements of operations and of changes in net assets and the financial highlights for each of the periods indicated in the Financial Statements (including the report of the independent registered public accounting firm), are included in the SAI. The independent registered public accounting firm is PricewaterhouseCoopers LLP. 14 CONDENSED FINANCIAL INFORMATION The policies are first being offered as of the date of this Prospectus, therefore no condensed financial information is available. 15 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION AND THE SEPARATE ACCOUNT NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION New York Life Insurance and Annuity Corporation (NYLIAC) is a stock life insurance company incorporated in Delaware in 1980. NYLIAC is licensed to sell life, accident and health insurance and annuities in the District of Columbia and all states. In addition to the policies We describe in this Prospectus, NYLIAC offers life insurance policies and other annuities. NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company, a mutual life insurance company doing business in New York since 1845. NYLIAC held assets of $110.3 billion at the end of 2010. New York Life Insurance Company has invested in NYLIAC, and will occasionally make additional contributions to NYLIAC in order to maintain capital and surplus in accordance with state requirements. THE SEPARATE ACCOUNT Separate Account-III was established on November 30, 1994 and Separate Account-IV was established on June 10, 2003, pursuant to resolutions of the NYLIAC Board of Directors. The Separate Accounts are registered as unit investment trusts with the Securities and Exchange Commission under the Investment Company Act of 1940. This registration does not signify that the Securities and Exchange Commission supervises the management, or the investment practices or policies, of the Separate Accounts. Although the assets of the Separate Accounts belong to NYLIAC, these assets are held separately from Our other assets. The Separate Accounts' assets are not chargeable with liabilities incurred in any of NYLIAC's other business operations (except to the extent that assets in the Separate Accounts exceed the reserves and other liabilities of that Separate Account). The income, capital gains and capital losses incurred on the assets of the Separate Accounts are credited to or charged against the assets of the Separate Accounts without regard to the income, capital gains or capital losses arising out of any other business NYLIAC may conduct. Therefore, the investment performance of the Separate Accounts is entirely independent of the investment performance of the Fixed Account, and any other separate account of NYLIAC. Separate Account III currently has 68 Investment Divisions, 41 of which are available. Separate Account IV has 41 Investment Divisions. Premium payments allocated to the Investment Divisions are invested solely in the corresponding Eligible Portfolios of the relevant Fund. THE PORTFOLIOS The assets of each Eligible Portfolio are separate from the others and each such Portfolio has different investment objectives and policies. As a result, each Eligible Portfolio operates as a separate investment fund and the investment performance of one Portfolio has no effect on the investment performance of any other Portfolio. You can make or lose money in any of the Investment Divisions. Portfolios described in this prospectus are different from portfolios that may have similar names but are available directly to the general public. The funds available directly to the general public may have the same adviser, same name, same investment objectives and policies, and substantially similar portfolio securities, but the investment performance may not be the same. WE OFFER NO ASSURANCE THAT ANY OF THE ELIGIBLE PORTFOLIOS WILL ATTAIN THEIR RESPECTIVE STATED OBJECTIVES. The Funds also make their shares available to certain other separate accounts funding variable life insurance policies offered by NYLIAC. This is called "mixed funding." The Funds also may make their shares available to separate accounts of insurance companies unaffiliated with NYLIAC. This is called "shared funding." Although We do not anticipate any inherent difficulties arising from mixed and shared funding, it is theoretically possible that, due to differences in tax treatment or other considerations, the interests of owners of various policies participating in a certain Fund might at some time be in conflict. The Board of Directors/Trustees of each Fund, each Fund's investment advisers, and NYLIAC are required to monitor events to identify any material conflicts that arise from the use of the Funds for mixed and shared funding. For more information about the risks of mixed and shared funding, please refer to the relevant Fund prospectus. 16 The Funds and Eligible Portfolios offered through this product are selected by NYLIAC based on several criteria, including asset class coverage, the strength of the manager's reputation and tenure, brand recognition, performance, and the capability and qualification of each sponsoring investment firm. An affiliate of NYLIAC manages the Mainstay VP Funds Trust and that was a factor in its selection. Another factor that NYLIAC considers during the selection process is whether the Fund or Eligible Portfolio or an affiliate of the Fund will compensate NYLIAC for providing administrative, marketing, and support services that would otherwise be provided by the Fund, the Fund's investment adviser, or its distributor. We receive payments or compensation from the Funds or their investment advisers, or from other service providers of the Funds (who may be affiliates of NYLIAC) in connection with administration, distribution, and other services We provide with respect to the Eligible Portfolios and their availability through the policies. These payments may be derived, in whole or in part, from the advisory fee charged by the Fund and deducted from Fund assets and/or from "Rule 12b-1" fees charged by the Fund and deducted from Fund assets. NYLIAC may use these payments for any corporate purpose, including payment of expenses that NYLIAC and/or its affiliates incur in promoting, marketing, and administering the policies, and in its role as an intermediary of the Funds. Policyowners, through their indirect investment in the Funds, bear the costs of these advisory and 12b-1 fees. The amounts We receive may be substantial, may vary by Eligible Portfolio, and may depend on how much policy value is invested in the particular Eligible Portfolio or Fund. NYLIAC and its affiliates may profit from these payments. Currently, We receive payments or revenue under various arrangements in amounts ranging from 0.05% to 0.35% annually of the aggregate net asset value of the shares of some of the Eligible Portfolios held by the Investment Divisions. We also receive compensation under various distribution services arrangements in amounts ranging from 0.05% to 0.25% annually of the aggregate net asset value of the shares of some of the Eligible Portfolios held by the Investment Divisions. The compensation that your registered representative receives remains the same regardless of which Investment Divisions you choose or the particular arrangements applicable to those Investment Divisions. The Eligible Portfolios of the relevant Funds, along with their investment advisers, are listed in the following table:
-------------------------------------------------------------------------------------- FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS -------------------------------------------------------------------------------------- MainStay VP Funds New York Life MainStay VP Bond; Trust Investment MainStay VP Cash Management; Management LLC MainStay VP Conservative Allocation; MainStay VP Floating Rate; MainStay VP Growth Allocation; MainStay VP Moderate Allocation; MainStay VP Moderate Growth Allocation; Subadviser: MacKay MainStay VP Convertible; Shields LLC MainStay VP Flexible Bond Opportunities; ("MacKay") MainStay VP Government; MainStay VP High Yield Corporate Bond; MainStay VP International Equity; Subadviser: Madison MainStay VP Balanced; Square Investors LLC MainStay VP Common Stock; MainStay VP Growth Equity; MainStay VP Mid Cap Core; MainStay VP S&P 500 Index; Subadviser: MainStay VP ICAP Select Equity Institutional Capital LLC Subadviser: Winslow MainStay VP Large Cap Growth Capital Management, Inc. Subadvisers: Epoch MainStay VP Income Builder Investment Partners, Inc. ("Epoch") and MacKay Subadviser: Epoch MainStay VP U.S. Small Cap --------------------------------------------------------------------------------------
17
-------------------------------------------------------------------------------------- FUND INVESTMENT ADVISERS ELIGIBLE PORTFOLIOS -------------------------------------------------------------------------------------- BlackRock Variable BlackRock Advisors, BlackRock Global Allocation V.I. Fund Series Funds, Inc. LLC Subadvisers: BlackRock Investment Management, LLC and BlackRock International Limited -------------------------------------------------------------------------------------- Calvert Variable Calvert Investment Calvert VP SRI Balanced Portfolio Series, Inc. Management, Inc. Subadviser (equity portion): New Amsterdam Partners LLC (Calvert manages fixed income portion) -------------------------------------------------------------------------------------- Columbia Funds Columbia Management Columbia Variable Portfolio -- Small Cap Variable Insurance Investment Advisers, Value Fund Trust LLC -------------------------------------------------------------------------------------- Dreyfus Investment The Dreyfus Dreyfus IP Technology Growth Portfolios Corporation -------------------------------------------------------------------------------------- Fidelity(R) Variable Fidelity Management Fidelity(R) VIP Contrafund(R) Insurance Products and Research Company Fidelity(R) VIP Equity-Income Fund ("FMR") Fidelity(R) VIP Mid Cap Subadvisers: FMR Co., Inc. ("FMRC") and other affiliates of FMR -------------------------------------------------------------------------------------- Janus Aspen Series Janus Capital Janus Aspen Balanced Portfolio; Management LLC Janus Aspen Worldwide Portfolio -------------------------------------------------------------------------------------- MFS(R) Variable Massachusetts MFS(R) Investors Trust Series; Insurance Trust Financial Services MFS(R) Research Series; Company ("MFS") MFS(R) Utilities Series -------------------------------------------------------------------------------------- Neuberger Berman Neuberger Berman Neuberger Berman AMT Mid-Cap Growth Advisers Management Management LLC Portfolio Trust Subadviser: Neuberger Berman LLC -------------------------------------------------------------------------------------- PIMCO Variable Pacific Investment PIMCO Real Return Portfolio Insurance Trust Management Company LLC ("PIMCO") -------------------------------------------------------------------------------------- The Royce Capital Royce & Associates, Royce Micro-Cap Portfolio Fund LLC Royce Small-Cap Portfolio -------------------------------------------------------------------------------------- T. Rowe Price Equity T. Rowe Price T. Rowe Price Equity Income Portfolio II Series, Inc. Associates, Inc. -------------------------------------------------------------------------------------- The Universal Morgan Stanley UIF Emerging Markets Equity Portfolio Institutional Funds, Investment Inc. Management Inc. Subadvisers: Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company -------------------------------------------------------------------------------------- Van Eck VIP Trust Van Eck Associates Van Eck VIP Global Hard Assets Corporation -------------------------------------------------------------------------------------- Victory Variable Victory Capital Victory VIF Diversified Stock Insurance Funds Management, Inc. --------------------------------------------------------------------------------------
Please refer to the accompanying prospectuses of the respective Funds for a complete description of the Funds, the investment advisers, the sub-advisers, and the Portfolios. The Funds' prospectuses should be read carefully before any decision is made concerning the allocation of premium payments to an Investment Division corresponding to a particular Eligible Portfolio. NYLIAC does not provide investment advice and does not recommend or endorse any particular Eligible Portfolio or Portfolios. NYLIAC is not responsible for choosing the Investment Divisions or the amounts allocated to each. You are responsible for determining that the decisions are appropriate for your own individual circumstances and your investment goals, financial situation, and risk tolerance. Decisions regarding investment allocations should 18 be carefully considered. YOU BEAR THE RISK OF ANY DECLINE IN THE VALUE OF YOUR POLICY RESULTING FROM THE PERFORMANCE OF THE PORTFOLIOS YOU HAVE CHOSEN. Investment selections should be based on a thorough investigation of all of the information regarding the Eligible Portfolios that are available to you, including each Fund's prospectus, statement of additional information, and annual and semi-annual reports. Other sources, such as the Fund's website or newspapers and financial and other magazines, provide more current information, including information about any regulatory actions or investigations relating to a Fund or Eligible Portfolio. After you select Investment Divisions for your initial premium, you should monitor and periodically re-evaluate your allocations to determine if they are still appropriate. ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS NYLIAC retains the right, subject to any applicable law, to make additions to, deletions from, or substitutions for, the Eligible Portfolio shares held by any Investment Division. NYLIAC reserves the right to eliminate the shares of any of the Eligible Portfolios and to substitute shares of another portfolio of a Fund, or of another registered open-end management investment company. We may do this if the shares of the Eligible Portfolios are no longer available for investment or if We believe investment in any Eligible Portfolio would become inappropriate in view of the purposes of the Separate Account. To the extent required by law, We will not make substitutions of shares attributable to your interest in an Investment Division until you have been notified of the change. This does not prevent the Separate Account from purchasing other securities for other series or classes of policies, or from processing a conversion between series or classes of policies on the basis of requests made by policyowners. We may establish new Investment Divisions when We determine, in Our sole discretion, that marketing, tax, investment, or other conditions so warrant. We will make any new Investment Divisions available to existing policyowners on a basis We determine. We may also eliminate one or more Investment Divisions, if We determine, in Our sole discretion, that marketing, tax, investment, or other conditions warrant. In the event of any substitution or change, NYLIAC may, by appropriate endorsement, change the policies to reflect such substitution or change. We also reserve the right to: (a) operate the Separate Account as a management company under the Investment Company Act of 1940, (b) deregister it under such Act in the event such registration is no longer required, (c) combine it with one or more other separate accounts, and (d) restrict or eliminate the voting rights of persons having voting rights as to the Separate Account as permitted by law. REINVESTMENT We automatically reinvest all dividends and capital gain distributions from Eligible Portfolios in shares of the distributing Portfolio at their net asset value on the payable date. THE POLICIES This is a flexible premium policy which means additional premium payments can be made. It is issued on the lives of individual Annuitants. The policies are variable. This means that the Accumulation Value will fluctuate based on the investment experience of the Investment Divisions you select, and the interest credited on the Fixed Accumulation Value. NYLIAC does not guarantee the investment performance of the Separate Account or of the Eligible Portfolios. You bear the entire investment risk with respect to amounts allocated to the Investment Divisions of the Separate Account. We offer no assurance that the investment objectives of the Investment Divisions will be achieved. Accordingly, amounts allocated to the Investment Divisions of the Separate Account are subject to the risks inherent in the securities markets and, specifically, to price fluctuations in the Eligible Portfolios' investments. As the owner of the policy, you have the right to (a) change the Beneficiary, (b) name a new owner (on Non-Qualified Policies only), (c) receive Income Payments, (d) name a payee to receive Income Payments, and (e) transfer funds among the Investment Divisions. You cannot lose these rights. However, all rights of ownership cease upon your death. The current policyowner of a Non-Qualified Policy has the right to transfer ownership to another person(s) or entity. To transfer ownership, the policyowner must complete Our approved "Transfer of Ownership" form in effect at the time of the request. This change will take effect as of the date you signed the form, subject to any payment We made or other action We took before recording the change. Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that becomes the owner of an existing policy. This means the new policyowner(s) will be required to provide their name, address, date of birth, and other identifying 19 information. To complete a transfer of ownership, the new policyowner(s) will also be required to submit financial and suitability information. Certain provisions of the policies may be different than the general description in this Prospectus, and certain riders and options may not be available, because of legal requirements or restrictions in your state. See your policy for specific variations because any such state variations will be included in your policy or in riders or endorsements attached to your policy. See your registered representative or contact Us for specific information that may be applicable to your state. SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU In addition to the policies described in this Prospectus, We offer other variable annuities, each having different features, fees, and charges. Your registered representative can help you decide which is best for you based on your individual circumstances, time horizon, and policy feature preferences. The following chart outlines some of the different features for each New York Life variable annuity We offer. The availability of optional policy features, such as those mentioned in the chart, may increase the cost of the policy. Therefore, when selecting a policy, you should consider what policy features you plan to use within your variable annuity. You should also consider the different surrender charge period associated with each policy in light of the length of time you plan to hold your policy (i.e., your time horizon). If you intend to make multiple contributions to your policy over time, you may want to consider a surrender charge period that is based on the Policy Date. If you intend to make a single contribution or limited contributions over time, you may want to consider a policy with a surrender charge period that is based on each premium payment. In addition to the surrender charges, you should also evaluate the available policy features and the different fees associated with each of the features and of the policy. You should consider the investment objectives, risks, charges and expenses of an investment carefully before investing. Both the product and underlying Fund prospectuses contain this and other information about the variable annuities and underlying investment options. Your registered representative can provide you with prospectuses for one or more of these variable annuities and the underlying Funds. Please read the prospectuses carefully before investing.
-------------------------------------------------------------------------------------------------------------------------- NEW YORK LIFE NEW YORK LIFE NEW YORK LIFE NEW YORK LIFE FLEXIBLE PREMIUM PREMIER PREMIER PLUS COMPLETE ACCESS VARIABLE ANNUITY II VARIABLE ANNUITY VARIABLE ANNUITY VARIABLE ANNUITY -------------------------------------------------------------------------------------------------------------------------- Surrender Charge Period 9 Years (7%, 7%, 7%, 7 Years (8%, 7%, 6%, 8 Years (8%, 8%, 7%, None 6%, 5%, 4%, 3%, 2%, 5%, 4%, 3%, 2% -- 6%, 5%, 4%, 3%, 1% -- based on based on each 2% -- based on each policy date) premium payment premium payment date) date) -------------------------------------------------------------------------------------------------------------------------- DCA Advantage Plan No Yes (6 month Yes (6 month No account) account) -------------------------------------------------------------------------------------------------------------------------- Interest Sweep Yes Yes Yes Yes -------------------------------------------------------------------------------------------------------------------------- Premium Credit No No Yes No -------------------------------------------------------------------------------------------------------------------------- Fixed Account Yes Yes Yes Yes One-Year One-Year One-Year One-Year -------------------------------------------------------------------------------------------------------------------------- Annual Death Benefit Reset Ages 65 or Ages 65 or Ages 65 or Ages 65 or Rider (ADBR) Charge* Younger: 0.30% Younger: 0.30% Younger: 0.30% Younger: 0.30% Ages 66-75: 0.35% Ages 66-75: 0.35% Ages 66-75: 0.35% Ages 66-75: 0.35% -------------------------------------------------------------------------------------------------------------------------- Mortality and Expense Risk and Accumulation Value Accumulation Value Accumulation Value Accumulation Value Administration Costs Charge Based: 1.40%(1) Based: 1.35%(1) Based: 1.65%(1) Based: 1.65%(1) Premium Based: Premium Based: Premium Based: 1.60%(2) 1.55%(2) 1.75%(2) -------------------------------------------------------------------------------------------------------------------------- Annual Policy Service Charge $30 $30 $30 $40 -------------------------------------------------------------------------------------------------------------------------- Minimum Cash Value Required to $50,000 $100,000 $100,000 $100,000 Waive Annual Policy Service Charge --------------------------------------------------------------------------------------------------------------------------
All policies and features may not be available in all jurisdictions. (1) Charge is reflected in the Accumulation Unit Value. (2) Charge is not reflected in the Accumulation Unit Value. QUALIFIED AND NON-QUALIFIED POLICIES We designed the policies primarily for the accumulation of retirement savings, and to provide income at a future date. We issue both Qualified and Non-Qualified Policies. Both types of policies offer tax-deferred accumulation. You 20 may purchase a Non-Qualified Policy to provide for retirement income other than through a tax-qualified plan. You may purchase a Qualified Policy for use with any one of the tax-qualified plans listed below. (1) TSAs purchased by employees of certain tax-exempt organizations and certain state-supported educational institutions, in each case in accordance with the employer's plan document and/or applicable tax requirements (see FEDERAL TAX MATTERS--Qualified Policies--Important Information Regarding Final Code Section 403 (b) Regulations. We will no longer be accepting contributions or issuing new policies for ERISA 403(b) plans); (2) Section 408 or 408A Individual Retirement Annuities (IRAs), including: Roth IRAs, Inherited IRAs, SEP and SIMPLE IRAs; and (3) Section 457 Deferred Compensation Plans. Please see "FEDERAL TAX MATTERS" for a detailed description of these plans. If you are considering the purchase of a Qualified Policy or a Non- Qualified Policy to fund another type of tax-qualified retirement plan, such as a plan qualifying under Section 401(a) of the Code, you should be aware that this policy will fund a retirement plan that already provides tax deferral under the Code. Therefore, the tax deferral of the annuity does not provide additional benefits. However, this annuity is designed to provide certain payment guarantees and features other than tax deferral, some of which may not be available in other investments. There are fees and charges in an annuity that may not be included in other types of investments. These additional features and benefits include: - A guaranteed death benefit, as explained in this Prospectus. - The option for you to receive a guaranteed stream of income payments for life after you have owned the policy for one year. - A Fixed Account that features a guaranteed fixed interest rate. - An optional Interest Sweep feature that automatically allocates interest earned on monies in the Fixed Account to other investment divisions offered under the policy. - The flexibility to easily transfer money among Investment Divisions in the annuity managed by different investment managers and to have your investment mix automatically rebalanced periodically. These features are explained in detail in this Prospectus. You should purchase this annuity with tax-qualified money because of the additional features the annuity provides and not for the tax deferral to which the tax-qualified plan is already entitled. You should consult with your tax or legal adviser to determine if the policy is suitable for your tax qualified plan. POLICY APPLICATION AND PREMIUM PAYMENTS To purchase a policy, you must complete an application. The application is sent by your registered representative to NYLIAC's Cleveland or Dallas Service Center with your initial premium payment. (Initial premium payments received in connection with 1035 exchanges, rollovers and TSAs must be sent to either the Cleveland or Dallas Service Center, or one of the addresses noted in Question 17 of this Prospectus.) If the application is complete and accurate, and We have received all other information necessary to process the application, We will credit the initial premium payment to the investment options you have selected within two Business Days after receipt at the Cleveland or Dallas Service Center. (Or, in the case of initial premium payments received in connection with 1035 exchanges, rollovers and TSAs, at the Cleveland or Dallas Service Centers or at one of the addresses noted in Question 17 of this Prospectus.) If We cannot credit the initial premium payment within five Business Days after We receive it because the application is incomplete or inaccurate, We will contact you and explain the reason for the delay. Unless you consent to NYLIAC's retaining the initial premium payment and crediting it as soon as the necessary requirements are fulfilled, We will refund the initial premium payment immediately. Acceptance of applications is subject to NYLIAC's rules. We reserve the right to reject any application or initial premium payment. Generally, only one policyowner is named. If We issue a jointly owned policy, ownership rights and privileges under the policy must be exercised jointly and benefits under the policy will be paid upon the death of any joint owner. ACCEPTANCE OF INITIAL AND SUBSEQUENT PREMIUM PAYMENTS IS SUBJECT TO OUR SUITABILITY STANDARDS. 21 You may allocate premium payments in up to 41 Investment Divisions, and the Fixed Account immediately. We will credit subsequent premium payments to the policy at the close of the Business Day on which they are received by NYLIAC. Moreover, you may increase or decrease the percentages of the premium payments (which must be in whole number percentages) allocated to each Allocation Alternative at the time a premium payment is made. Unless We permit otherwise, the minimum initial premium payment is $5,000 (or $2,500 plus $100 per month from a pre-authorized billing arrangement) for Non-Qualified Policies. Additional non-scheduled premium payments must be at least $500 for Qualified Policies and Non-Qualified Policies, or such lower amount as We may permit at any time. Subsequent premium payments must be sent to NYLIAC at one of the addresses listed in Question 17 of this Prospectus. We may agree to other methods of payment. The maximum aggregate amount of premium payments We accept without prior approval is set forth on the Policy Data Page. Unless We permit otherwise, the minimum initial premium payment for Qualified Policies is as follows: (a) for Code Section 403(b) Tax Sheltered Annuities ("TSAs"), a $2,000 single premium or $50 per month; (b) for IRAs and Roth IRAs, a $2,000 single premium or a $1,200 initial premium payment plus pre-authorized monthly deductions of $100 per month; (c) for deferred compensation plans, $50 per month; (d) for SEP plans, $2,000 initial premium payment or $50 per month if part of a pre-authorized billing arrangement; and (e) For SIMPLE IRAs, $4,000 initial premium payment and, if part of a pre- authorized billing arrangement; an additional $100 per month. For Qualified Policies you may not make premium payments in excess of the amount permitted by law for the plan indicated. Additional Premium Payments can be made until 12 months after you reach age 75. The currently available methods of payment are direct payments to NYLIAC or any other method agreed to by Us. The maximum aggregate amount of premium payments We accept is $1,000,000 without prior approval. NYLIAC reserves the right to limit the dollar amount of any premium payment. TAX-FREE SECTION 1035 EXCHANGES Subject to certain restrictions, you can make a tax-free exchange under Section 1035 of the Code of all or a portion of one annuity contract, or all of a life insurance policy for an annuity contract. Section 1035 also provides that an annuity contract may be exchanged in a tax-free transaction for a long-term care insurance policy. Before making an exchange, you should compare both contracts carefully. Remember that if you exchange a life insurance policy or annuity contract for the Contract described in this prospectus: - you might have to pay a withdrawal charge on your previous contract, - there may be a new withdrawal charge period for this Contract, - other charges under this Contract may be higher (or lower), - the benefits may be different, - you will no longer have access to any benefits from your previous contract (or the benefits may be different), and - access to your cash value following a partial exchange may be subject to tax-related limitations. If the exchange does not qualify for Section 1035 treatment, you also may have to pay federal income tax, including a 10 percent federal penalty tax, on the exchange. You should not exchange an existing life insurance policy or another annuity contract for this Contract unless you determine that the exchange is in your best interest. IF YOU CONTEMPLATE SUCH AN EXCHANGE, YOU SHOULD CONSULT A TAX ADVISOR TO DISCUSS THE POTENTIAL TAX EFFECTS OF SUCH A TRANSACTION. PAYMENTS RETURNED FOR INSUFFICIENT FUNDS If your premium payment is returned for insufficient funds, We reserve the right to reverse the investment options chosen and charge you a $20 fee for each returned payment. In addition, the Fund may also redeem shares to cover any losses it incurs as result of a returned payment. If a payment is returned for insufficient funds for two consecutive periods, the privileges to pay by check or electronically will be suspended until VPSC receives 22 a written request to reinstate it in a form acceptable to us at one of the addresses noted in Question 15 of this Prospectus, and We agree. YOUR RIGHT TO CANCEL ("FREE LOOK") You can cancel the policy within 10 days of delivery of the policy or such longer period as required under state law. To cancel your policy, you must return it to VPSC at one of the addresses listed in Question 15 of this Prospectus or to the registered representative through whom you purchased it, with a written request for cancellation. Except where you are entitled by law to receive the total of premium payments less any prior partial withdrawals, We will promptly return the Accumulation Value calculated as of the Business Day that either the registered representative through whom you purchased the policy or VPSC receives the policy along with a written request for cancellation in a form acceptable to Us, but without any deduction for premium taxes or a surrender charge. We will set forth the provision in your policy. ISSUE AGES To purchase a Non-Qualified Policy you must not be older than age 75. If the Owner of the policy is not a natural person, the Annuitant must not be older than age 75. For IRA, Roth IRA, SIMPLE IRA, TSA and SEP plans, you must also be the Annuitant. We can issue Qualified Policies if you are between the ages of 18 and 75 (between 0-75 for Inherited IRAs). We will accept additional premium payments until 12 months after you reach age 75, unless otherwise limited by the terms of a particular plan or unless We agree otherwise. TRANSFERS You may transfer amounts between Investment Divisions of the Separate Account or to the Fixed Account at least 30 days before the Annuity Commencement Date, although certain restrictions may apply with respect to transfers into the Fixed Account for Premium based M&E Charge policies. Except in connection with transfers made pursuant to traditional Dollar Cost Averaging, Automatic Asset Reallocation, and Interest Sweep, the minimum amount that you may transfer from one Investment Division to other Investment Divisions or to the Fixed Account, is $500. Except for the traditional Dollar Cost Averaging, Automatic Asset Reallocation and Interest Sweep options, if the value of the remaining Accumulation Units in an Investment Division or the Fixed Account would be less than $25 after you make a transfer, We will transfer the entire value unless NYLIAC in its discretion determines otherwise. The amount(s) transferred to other Investment Divisions must be a minimum of $25 for each Investment Division. There is no charge for the first twelve transfers in any one Policy Year. NYLIAC reserves the right to charge up to $30 for each transfer in excess of twelve, subject to any applicable state insurance law requirements. Any transfer made in connection with traditional Dollar Cost Averaging, Automatic Asset Reallocation, and Interest Sweep will not count as a transfer toward the twelve transfer limit. You may make transfers from the Fixed Account to the Investment Divisions in connection with the Interest Sweep option and in certain other situations. (See "THE FIXED ACCOUNT.") You can request a transfer by any of the four methods listed below. Transfer requests are subject to limitations and must be made in accordance with our established procedures. (See "Virtual Service Center (VSC) and Interactive Voice Response System (IVR).") - submit your request in writing on a form We approve to VPSC at one of the addresses listed in Question 15 of this prospectus (or any other address We indicate to you in writing); - use the IVR at 800-598-2019; - speak to a Customer Service Representative at 800-598-2019 on Business Days between the hours of 9:00 a.m. and 6:00 p.m. (Eastern Time); or - make your request through the Virtual Service Center. NYLIAC is not liable for any loss, cost or expense for action based on telephone instructions which are believed to be genuine in accordance with these procedures. Transfer requests received after the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time or received on a non- Business Day, will be priced as of the next Business Day. 23 LIMITS ON TRANSFERS Procedures Designed to Limit Potentially Harmful Transfers--This policy is not intended as a vehicle for market timing. Accordingly, your ability to make transfers under the policy is subject to limitation if We determine, in Our sole opinion, that the exercise of that privilege may disadvantage or potentially hurt the rights or interests of other policyowners. Any modification of the transfer privilege could be applied to transfers to or from some or all of the Investment Divisions. If not expressly prohibited by the policy, We may, for example: - reject a transfer request from you or from any person acting on your behalf - restrict the method of making a transfer - charge you for any redemption fee imposed by an underlying Fund - limit the dollar amount, frequency, or number of transfers. Currently, if you or someone acting on your behalf requests BY TELEPHONE AND/OR ELECTRONICALLY transfers into or out of one or more Investment Divisions on three or more days within any 60-day period, We will send you a letter notifying you that the transfer limitation has been exceeded. If We receive an additional transfer request that would result in transfers into or out of one or more Investment Divisions on three or more days within any 60-day period, We will process the transfer request. Thereafter, We will immediately suspend your ability to make transfers electronically and by telephone, regardless of whether you have received the warning letter. All subsequent transfer requests for your policy must then be made in writing through the U.S. mail or an overnight courier and received by VPSC at one of the addresses listed in Question 15 of this Prospectus. We will provide you with written notice when We take this action. We currently do not include the following transfers in these limitations, although we reserve the right to include them in the future: transfers to and from the Fixed Account, the first transfer out of the MainStay VP Cash Management Investment Division within six months of the issuance of a policy, and transfers made pursuant to the Dollar Cost Averaging, Automatic Asset Reallocation, and Interest Sweep options. WE MAY CHANGE THESE LIMITATIONS OR RESTRICTIONS OR ADD NEW ONES AT ANY TIME WITHOUT PRIOR NOTICE; YOUR POLICY WILL BE SUBJECT TO THESE CHANGES REGARDLESS OF THE ISSUE DATE OF YOUR POLICY. All transfers are subject to the limits set forth in the prospectus in effect on the date of the transfer request, regardless of when your policy was issued. Note, also, that any applicable transfer rules, either as indicated above or that We may utilize in the future, will be applied even if We cannot identify any specific harmful effect from any particular transfer. We apply Our limits on transfers procedures to all owners of this policy without exception. Orders for the purchase of Fund portfolio shares are subject to acceptance by the relevant Fund. We will reject or reverse, without prior notice, any transfer request into an Investment Division if the purchase of shares in the corresponding Fund portfolio is not accepted by the Fund for any reason. For transfers into multiple Investment Divisions, the entire transfer request will be rejected or reversed if any part of it is not accepted by any one of the Funds. We will provide you with written notice of any transfer request We reject or reverse. You should read the Fund prospectuses for more details regarding their ability to refuse or restrict purchases or redemptions of their shares. In addition, a Fund may requires Us to share specific policyowner transactional data with them, such as taxpayer identification numbers and transfer information. Risks Associated with Potentially Harmful Transfers--Our procedures are designed to limit potentially harmful transfers. However, We cannot guarantee that Our procedures will be effective in detecting and preventing all transfer activity that could disadvantage or potentially hurt the rights or interests of other policyowners. The risks described below apply to policyowners and other persons having material rights under the policies. - We do not currently impose redemption fees on transfers or expressly limit the number or size of transfers in a given period. Redemption fees, transfer limits, and other procedures or restrictions may be more or less successful than Our procedures in deterring or preventing potentially harmful transfer activity. - Our ability to detect and deter potentially harmful transfer activity may be limited by policy provisions. - (1) The underlying Fund portfolios may have adopted their own policies and procedures with respect to trading of their respective shares. The prospectuses for the underlying Fund portfolios, in effect at the time of any trade, describe any such policies and procedures. The trading policies and procedures of an underlying Fund portfolio may vary from Ours and be more or less effective at preventing harm. 24 Accordingly, the sole protection you may have against potentially harmful frequent transfers is the protection provided by the procedures described herein. (2) The purchase and redemption orders received by the underlying Fund portfolios reflect the aggregation and netting of multiple orders from owners of this policy and other variable policies issued by Us. The nature of these combined orders may limit the underlying Fund portfolios' ability to apply their respective trading policies and procedures. In addition, if an underlying Fund portfolio believes that a combined order We submit may reflect one or more transfer requests from owners engaged in potentially harmful transfer activity, the underlying Fund portfolio may reject the entire order and thereby prevent Us from implementing any transfers that day. We do not generally expect this to happen. Alternatively, Funds may request information on individual policyowner transactions and may impose restrictions on individual policyowner transfer activity. - Other insurance companies that invest in the Fund portfolios underlying this policy, may have adopted their own policies and procedures to detect and prevent potentially harmful transfer activity. The policies and procedures of other insurance companies may vary from Ours and be more or less effective at preventing harm. If their policies and procedures fail to successfully discourage potentially harmful transfer activity, there could be a negative effect on the owners of all of the variable policies, including Ours, whose variable investment options correspond to the affected underlying Fund portfolios. - Potentially harmful transfer activity could result in reduced performance results for one or more Investment Divisions, due to among other things: (1) an adverse effect on portfolio management, such as: a) impeding a portfolio manager's ability to sustain an investment objective; b) causing the underlying Fund portfolio to maintain a higher level of cash than would otherwise be the case; or c) causing an underlying Fund portfolio to liquidate investments prematurely (or at an otherwise inopportune time) in order to pay withdrawals or transfers out of the underlying Fund portfolio. (2) increased administrative and Fund brokerage expenses. (3) dilution of the interests of long-term investors in an Investment Division if purchases or redemptions into or out of an underlying Fund portfolio are made when, and if, the underlying Fund portfolio's investments do not reflect an accurate value (sometimes referred to as "time-zone arbitrage" and "liquidity arbitrage"). SPECULATIVE INVESTING Do not purchase this policy if you plan to use it, or any of its riders, for speculation, arbitrage, viatication or any other type of collective investment scheme. Your policy may not be traded on any stock exchange or secondary market. By purchasing this policy you represent and warrant that you are not using this policy, or any of its riders, for speculation, arbitrage, viatication or any other type of collective investment scheme. VIRTUAL SERVICE CENTER (VSC) AND INTERACTIVE VOICE RESPONSE SYSTEM (IVR) Through the VSC and the IVR, you can get up-to-date information about your policy and request transfers. We may revoke VSC and IVR privileges for certain policyowners (see "Limits on Transfers"). To enable you to access the IVR, you will automatically receive a Personal Identification Number (PIN). Along with your Social Security Number, the PIN will give you access to the IVR using the toll-free number 1-800-598-2019. You should protect your PIN and your Social Security number, because Our self- service options will be available to anyone who provides your Social Security number and your PIN; We will not be able to verify that the person providing electronic service instructions via the VSC or IVR is you or is authorized by you. In order to obtain policy information online via the VSC, you are required to register for access. Visit WWW.NEWYORKLIFE.COM/VSC and click the "Register Now" button to enroll. You will be required to register a unique User Name and Password to gain access. In a safe and secure environment, you can, among other things, access policy values, change your address, download service forms, view policy statements, and submit policy transactions. 25 As described herein, We will use reasonable procedures to make sure that the instructions We receive through the VSC and IVR are genuine. We are not responsible for any loss, cost, or expense for any actions We take based on instructions received through IVR or VSC that We believe are genuine. We will confirm all transactions in writing. Service requests are binding on all owners if the policy is jointly owned. Financial requests received after 4:00 p.m. (Eastern Time) or non Business Days will be processed as of the next Business Day. We make the VSC or IVR available at Our discretion. In addition, availability of the VSC or IVR may temporarily be interrupted at certain times. We do not assume responsibility for any loss while the VSC or IVR is unavailable. If you are experiencing problems, you can send service requests to Us at one of the addresses listed in Question 15 of this Prospectus. VSC The VSC is open Monday through Friday, from 7 a.m. until 4 a.m. and Saturday, from 7 a.m. until 10 p.m. (Eastern Time). The VSC enables you to: - e-mail your registered representative or VPSC; - obtain current policy values; - transfer assets between investment options; - change the allocation of future premium payments; - reset your password; - change your address; - obtain service forms; - view and download policy statements, and - Modify an existing Automatic Asset Reallocation arrangement. The VSC enables you to sign-up to receive future prospectuses and policyowner annual and semi-annual reports for your Policy online at www.newyorklife.com/vsc. Electronic delivery is not available for policies that are owned by corporations, trusts or organizations at this time. IVR The IVR is available 24 hours a day, seven days a week. We record all calls. The IVR enables you to: - obtain current Policy values; - transfer assets between investment options; - change the allocation of future premium payments; and - speak with one of Our Customer Service Representatives on Business Days, between the hours of 9:00 a.m. to 6:00 p.m. (Eastern Time). REGISTERED REPRESENTATIVE ACTIONS You may authorize a third party to have access to your policy information and to make fund transfers, allocation changes and other permitted transactions by completing a telephone request form. To authorize a third party to have access to your policy information and to make fund transfers, allocation changes and other permitted transactions, you must send VPSC a Telephone Request Form completed in a form acceptable to Us to one of the addresses noted in Question 15 of this Prospectus. The Customer Service representative will require certain identifying information (Social Security number, address of record, date of birth) before taking any requests or providing any information to ensure that the individual giving instructions is authorized. See "The Policies--Transfers" for information on how to transfer assets between Investment Divisions. 26 NYLIAC does not permit current or former registered representatives to obtain authorization to effect policy transactions through the Telephone Request Form. Authorization to these registered representatives will be limited to accessing policy information only. You may authorize Us to accept electronic instructions from a registered representative or the registered service assistant assigned to your policy in order to make premium allocations, transfers among investment options, Automatic Asset Allocation (AAR) updates (if applicable) and changes to your investment objective and/or risk tolerance. Your AAR will be cancelled if a premium allocation change or fund transfer is submitted on your behalf and the AAR is not also modified at that time to be consistent with your fund transfer and premium allocation changes. To authorize the registered representative(s) or registered service assistants assigned to your policy to perform premium allocations and transfers, you must send a completed Trading Authorization Form to VPSC at one of the addresses listed in Question 15 of this Prospectus. We may revoke or deny Trading Authorization privileges for certain policyowners (See "Limits on Transfers"). Trading Authorization may be elected, changed or canceled at any time. We will confirm all transactions in writing. Not all transactions are available on the Internet. NYLIAC is not liable for any loss, cost or expense for action on instructions which are believed to be genuine in accordance with the procedures. As these parties act on your behalf, you are responsible for and bear the consequences of their instructions and other actions, including any limits on transfers. Faxed requests are not acceptable and will not be honored at any time. In addition, We will not accept e-mailed requests for policy transactions or emails of imaged, signed service requests. E-mail inquires that are non-transactional may be sent through Our Virtual Service Center once they have passed all security protocols to identify the policyowner. DOLLAR COST AVERAGING PROGRAM The main objective of dollar cost averaging is to achieve an average cost per share that is lower than the average price per share during volatile market conditions. Since you transfer the same dollar amount to an Investment Division with each transfer, you purchase more units in an Investment Division if the value per unit is low and fewer units if the value per unit is high. Therefore, you achieve a lower than average cost per unit if prices fluctuate over the long term. Similarly, for each transfer out of an Investment Division, you sell more units in an Investment Division if the value per unit is low and fewer units if the value per unit is high. Dollar cost averaging does not assure a profit or protect against a loss in declining markets. Because it involves continuous investing regardless of price levels, you should consider your financial ability to continue to make purchases during periods of low price levels. We do not count transfers under dollar cost averaging as part of your 12 free transfers each Policy Year. There is no charge imposed for the Dollar Cost Averaging program. We have set forth below an example of how dollar cost averaging works. In the example, We have assumed that you want to transfer $100 from the MainStay VP Cash Management Investment Division to the MainStay VP Common Stock--Service Class Investment Division each month. Assuming the Accumulation Unit values below, you would purchase the following number of Accumulation Units:
AMOUNT ACCUMULATION ACCUMULATION UNITS MONTH TRANSFERRED UNIT VALUE PURCHASED 1 $100 $10.00 10.00 2 $100 $ 8.00 12.50 3 $100 $12.50 8.00 4 $100 $ 7.50 13.33 Total $400 $38.00 43.83
The average unit price is calculated as follows: Total share price $38.00 ----------------- = ------ = $9.50 Number of months 4
The average unit cost is calculated as follows: Total amount transferred $400.00 ------------------------ = ------- = $9.13 Total units purchased 43.83
In this example, you would have paid an average cost of $9.13 per unit while the average price per unit is $9.50. 27 This option, which is available at no additional cost, permits systematic investing to be made in equal installments over various market cycles to help reduce risk. You may specify, prior to the Annuity Commencement Date, a specific dollar amount to be transferred from any Investment Divisions to any combination of Investment Divisions and/or the Fixed Account. Please note that for Premium based M&E Charge policies, amounts cannot be transferred to the Fixed Account. You will specify the Investment Divisions to transfer money from, the Investment Divisions and/or Fixed Account to transfer money to, the amounts to be transferred, the date on which transfers will be made, subject to Our rules, and the frequency of the transfers (either monthly, quarterly, semi-annually or annually). You may not make transfers from the Fixed Account, but you may make transfers into the Fixed Account. Each transfer from an Investment Division must be at least $100. You must have a minimum Accumulation Value of $2,500 to elect this option. Once all money has been allocated to the Investment Divisions of your choice or the balance in the Investment Division you are transferring from is less than $100, Dollar Cost Averaging will cease. A new request must be submitted to reactivate this feature. NYLIAC may reduce the minimum transfer amount and minimum Accumulation Value at its discretion. NYLIAC will make all Dollar Cost Averaging transfers on the day of each calendar month that you specify or on the next Business Day (if the day you have specified is not a Business Day). You may specify any day of the month except the 29th, 30th, or 31st. In order to process Dollar Cost Averaging transfers, VPSC must have received a completed Dollar Cost Averaging request form at one of the addresses listed in Question 15 of this Prospectus no later than five Business Days prior to the date transfers are to begin. If your Dollar Cost Averaging request form for this option is received less than five Business Days prior to the date you request it to begin, the transfers will begin on the day of the month you specify in the month following the receipt of your request. All completed Dollar Cost Averaging request forms must be sent to VPSC at one of the addresses listed in Question 15 of this Prospectus. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. You may cancel the Dollar Cost Averaging at any time. To cancel Dollar Cost Averaging, you must send a written cancellation request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. NYLIAC may also cancel Dollar Cost Averaging if the Accumulation Value is less than $2,500, or such lower amount as We may determine. You may not elect Dollar Cost Averaging if you have selected the Automatic Asset Reallocation option. AUTOMATIC ASSET REALLOCATION This option, which is available at no additional cost, allows you to maintain the percentage allocated to each Investment Division at a pre-set level. For example, you might specify that 50% of the Variable Accumulation Value of your policy be allocated to the MainStay VP Convertible Investment Division and 50% of the Variable Accumulation Value be allocated to the MainStay VP International Equity Investment Division. Over time, the fluctuations in each of these Investment Division's investment results will shift the percentages. If you elect this Automatic Asset Reallocation option, NYLIAC will automatically transfer your Variable Accumulation Value back to the percentages you specify. You may choose to have reallocations made quarterly, semi-annually or annually. You must also specify the day of the month that reallocations are to occur (with the exception of the 29th, 30th or 31st of a month). To process an Automatic Asset Reallocation transfer, you must send a completed Automatic Asset Reallocation request form to VPSC at one of the addresses listed in Question 15 of this Prospectus. VPSC must receive the completed Automatic Asset Reallocation request form at least five Business days before the date transfers are scheduled to begin. If your completed Automatic Asset Reallocation request form for this option is received less than five Business Days prior to the date you request it to begin, the reallocation will begin on the day of the month you specify in the month following the receipt of your request. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e- mails of imaged, signed requests. You may modify an existing Automatic Asset Reallocation Option by contacting Us by phone at the number provided in Question 16 of this Prospectus. The minimum Accumulation Value required to elect this option is $2,500. We will suspend this feature automatically if the Separate Account Value is less than $2,000 on a reallocation date. Once the Separate Account Value equals or exceeds this amount, Automatic Asset Reallocation will resume automatically as scheduled. There is no minimum amount that you must allocate among the Investment Divisions under this option. Your Automatic Asset Reallocation will be cancelled if a premium allocation change or transfer is submitted on your behalf that is inconsistent with your current Automatic Asset Reallocation arrangements. You may prevent this cancellation if a conforming Automatic Asset Reallocation change is processed within one Business Day of the inconsistent premium allocation change or transfer. You can cancel the Automatic Asset Reallocation option at any time. To cancel the Automatic Asset Reallocation Option, you may send a written cancellation request in a form acceptable to Us to VPSC at one of the 28 addresses listed in Question 15 of this Prospectus or contact us by phone at the number provided in Question 16 of this Prospectus. You may not elect the Automatic Asset Reallocation option if you have selected Dollar Cost Averaging. However, you have the option of alternating between these two features. INTEREST SWEEP This option, which is available at no additional cost, allows the interest earned on monies allocated to the Fixed Account to be transferred from the Fixed Account to one or any combination of Investment Divisions. You must specify the Investment Divisions, the frequency of the transfers (either monthly, quarterly, semi-annually or annually), and the day of each calendar month to make the transfers (except the 29th, 30th and 31st of a month). NYLIAC will make all Interest Sweep transfers on the day of each calendar month you have specified or on the next Business Day (if the day you have specified is not a Business Day). There is no charge imposed for the Interest Sweep option. The Interest Sweep option may be utilized in addition to either Dollar Cost Averaging or Automatic Asset Reallocation. If an Interest Sweep transfer is scheduled for the same day as a transfer related to Dollar Cost Averaging or the Automatic Asset Reallocation option, We will process the Interest Sweep transfer first. You can cancel the Interest Sweep option at any time. To cancel the Interest Sweep Option, you must send a written cancellation request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. We may also cancel this option if the Fixed Accumulation Value is less than $2,500, or such a lower amount as We may determine. Please note that you must utilize the Interest Sweep option if 100% of your premium payments are allocated to the Fixed Account. Also note that Interest Sweep is not available for policies issued in the State of New York. To establish a new Interest Sweep transfer after the option has been cancelled, you must send a completed Interest Sweep request form to VPSC at one of the addresses listed in Question 15 of this Prospectus. VPSC must receive a completed Interest Sweep request form at least five Business Days prior to the date transfers are scheduled to begin. If VPSC does not receive a completed Interest Sweep request form at least five Business Days prior to the date you request it to begin, transfers will begin on the day of the month you specify in the month following the receipt of your request. Faxed requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e- mails of imaged, signed requests. The minimum Fixed Accumulation Value required to elect this option is $2,500, but this amount may be reduced at Our discretion. ACCUMULATION PERIOD (a) Crediting of Premium Payments You can allocate a portion of each premium payment to one or more Investment Divisions and/or the Fixed Account. The minimum amount that you may allocate to any one Investment Division or the Fixed Account is $25. We will allocate additional premium payments to the Allocation Alternatives at the close of the Business Day on which they are received by NYLIAC. We will credit that portion of each premium payment you allocate to an Investment Division in the form of Accumulation Units. We determine the number of Accumulation Units We credit to a policy by dividing the amount allocated to each Investment Division by the Accumulation Unit value for that Investment Division as of the close of Business Day We are making this calculation. The value of an Accumulation Unit will vary depending on the investment experience of the Portfolio in which the Investment Division invests. The number of Accumulation Units We credit to a policy will not, however, change as a result of any fluctuations in the value of an Accumulation Unit. (See "THE FIXED ACCOUNT" for a description of interest crediting.) (b) Valuation of Accumulation Units The value of Accumulation Units in each Investment Division will change daily to reflect the investment experience of the corresponding Portfolio as well as the daily deduction of the Separate Account charges. The Statement of Additional Information contains a detailed description of how We value the Accumulation Units. RIDERS At no additional charge, We include a Living Needs Benefit/Unemployment Rider. We also include the Upromise Account Rider at no additional cost for Non- Qualified Policies only. We also offer the Annual Death Benefit Reset Rider and Enhanced Beneficiary Benefit (EBB) Rider described below, which are available at an additional cost. We also include the Enhanced Spousal Continuance Rider (if the EBB Rider is selected) at no additional cost. The riders are only available in those states where they have been 29 approved. Please consult with your registered representative regarding the availability of these riders in your jurisdiction. Please note that benefits under the riders are payable from NYLIAC's general account and are subject to the claims paying ability of NYLIAC. (a) Living Needs Benefit/Unemployment Rider In jurisdictions where approved, this rider provides for an increase in the amount that can be withdrawn from your policy which will not be subject to a surrender charge upon the happening of certain qualifying events. Please contact your registered representative to determine the availability of this rider. Rider benefits and requirements to qualify for the rider benefits may not be the same in all jurisdictions. In Connecticut, the rider is named the "Living Needs Benefit Rider" and the Unemployment and disability portions of the rider are not available. In New York, the rider is named "Waiver Of Surrender Charges For Living Needs Qualifying Events" and the Unemployment portion of the rider is not available. In New Jersey, the rider is named the "Living Needs Benefit Rider" and the unemployment portion of the rider is not available. You may be eligible to receive all or a portion of the Accumulation Value of your policy without paying a surrender charge if you provide satisfactory proof that a Qualifying Event (as defined below) has occurred. In order to receive the benefit associated with this rider, your policy must have been in force for at least one year and have a minimum Accumulation Value of $5,000 and the Qualifying Event must occur on or after the Policy Date. For the Disability portion of the rider, any withdrawal after your 66(th) birthday will not be eligible for the rider benefit and surrender charges may apply. In addition, none of the benefits of this rider are available for policies where any Owner(s) has attained their 86(th) birthday on the Policy Date. The types of Qualifying Events are defined as follows: Health Care Facility: The Owner is enrolled and living in a Health Care Facility for 60 consecutive days. Terminal Illness: A determination by a licensed physician that the Owner has a life expectancy of 12 months or less. Disability: A determination by a licensed physician that the Owner has a disability that prevents them from performing any work for pay or profit for at least 12 consecutive months. Unemployment: A determination letter from the applicable state's Department of Labor that the Owner qualifies for and has been receiving state unemployment benefits for 60 consecutive days. A Health Care Facility is defined as a state licensed/certified nursing home/assisted living facility. In addition, we may also require proof of continued disability as of the date of the withdrawal. You will be able to receive benefits under this rider the later of the date you meet the above requirements or the date we receive your documentation in a form acceptable to Us at VPSC at one of the addresses listed in Question 15 of this Prospectus. There is no additional charge for this rider. (b) Enhanced Beneficiary Benefit Rider (optional) THE ENHANCED BENEFICIARY BENEFIT (EBB) RIDER IS AVAILABLE ONLY AT THE TIME OF APPLICATION, IN JURISDICTIONS WHERE APPROVED. The EBB Rider is available on Non-Qualified Policies and, where permitted by the IRS, also on Qualified Policies. The EBB Rider can increase the death benefit if you die before the Annuity Commencement Date. If you select this Rider, the EBB, in addition to the amount payable under the terms of your policy, may be payable to your Beneficiary(ies) if you die prior to the Annuity Commencement Date. Therefore, under this Rider, the total death benefit payable will be the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus plus the EBB, if any. While this rider is in effect, We will deduct a charge from your Accumulation Value each policy quarter. (See "CHARGES AND DEDUCTIONS--Other Charges--Enhanced Beneficiary Benefit Rider Charge.") The payment under the EBB Rider is calculated as a percentage of any Gain in the policy as of the date We receive all necessary requirements to pay death benefit proceeds at VPSC. The applicable percentage varies based upon your issue age. As of the date of this Prospectus, the applicable percentages are as follows: 50% where the 30 oldest owner is 70 or younger, and 25% where the oldest owner is 71 to 75 inclusive. We may change the applicable percentages under the EBB Rider from time to time, within the following ranges:
RANGE OF AGE OF OLDEST OWNER AT ISSUE APPLICABLE PERCENTAGES ---------------------------- ---------------------- 70 OR YOUNGER NOT LESS THAN 40% NOR GREATER THAN 60% 71 TO 75 INCLUSIVE NOT LESS THAN 20% NOR GREATER THAN 40%
WHEN YOU SELECT THE EBB RIDER, THE APPLICABLE PERCENTAGE WILL APPEAR ON YOUR POLICY DATA PAGE. THE APPLICABLE PERCENTAGE FOR THE POLICY WILL NOT CHANGE ONCE THE POLICY IS ISSUED. PLEASE CHECK WITH YOUR REGISTERED REPRESENTATIVE FOR FURTHER DETAILS. The Gain equals the policy's Accumulation Value minus the Adjusted Premium Payments. Adjusted Premium Payments are the total of all premium payments less proportional withdrawals ("EBB Proportional Withdrawals"). EBB Proportional Withdrawals are the amount(s) withdrawn from the policy (Including any surrender charges) divided by the policy's Accumulation Value immediately preceding the withdrawal, multiplied by the total of all Adjusted Premium Payments immediately preceding the withdrawal. If more than one Beneficiary is named, each Beneficiary will be paid a pro rata portion of the EBB. The EBB will be calculated for a Beneficiary on each date that We receive all necessary requirements to pay such Beneficiary at VPSC. Due to market fluctuations, the EBB may increase or decrease and Beneficiaries may therefore be paid different amounts. The maximum amount payable under the EBB Rider, regardless of the Gain, is equal to a percentage of Adjusted Premium Payments. As of the date of this Prospectus, the applicable percentages are as follows: 100% where the oldest owner is 70 or younger, and 75% where the oldest owner is 71 to 75 inclusive. We may change the applicable percentages under the EBB Rider from time to time, but the maximum amount payable will not exceed 200% of Adjusted Premium Payments. If you select this rider, the applicable percentage will appear on your Policy Data Page. Please check with your registered representative for further details. There will be no payment under the EBB Rider if on the date We calculate the EBB: 1) there is no Gain, 2) the policy's Accumulation Value is less than your premium payments made and not previously withdrawn, or 3) the rider has ended or terminated. The EBB Rider will end on the earliest of the following: 1) on the Annuity Commencement Date, 2) if you surrender the policy, 3) if your spouse, as the sole primary Beneficiary, elects to continue the policy upon your death (see THE POLICIES--Riders--Enhanced Spousal Continuance Rider) 4) if We elect to terminate the policy pursuant to the policy's termination provisions, or 5) if you transfer ownership of the policy. As discussed below in "THE POLICIES--Riders--Enhanced Spousal Continuance Rider", if upon your death prior to the Annuity Commencement Date your spouse elects to continue the policy as the new owner (and Annuitant, if you are the Annuitant), the Accumulation Value will be adjusted (as of the date We receive due proof of death and all other requirements at VPSC) to equal the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus, plus, if applicable, any EBB provided by the EBB Rider. THIS RIDER CANNOT BE CANCELLED WITHOUT SURRENDERING YOUR POLICY. You will forfeit any benefits under the EBB Rider if you elect to receive Income Payments, or surrender or transfer your policy. If you expect to do any of these, the EBB Rider may not be appropriate for you. 31 Below is an example of how the benefit of this Rider may be realized and how withdrawals impact the benefit under this Rider. In this example, We assume the following: 1. The rider is elected at the time of application; 2. You purchase this policy with a $200,000 initial premium payment (no additional premium payments are made); 3. A withdrawal of $20,000 is made in the fourth Policy Year; 4. Immediately preceding the withdrawal, the Accumulation Value has increased to $250,000, and the total Adjusted Premium Payments equaled $200,000 (since there have been no previous withdrawals); 5. If You die in the fifth Policy Year and the Accumulation Value of the policy has increased once again to $250,000 as of the date We receive the necessary requirements to pay the death benefit; and 6. The Enhanced Beneficiary Benefit Rider percentage equals 50%. First, the EBB Proportional Withdrawal amount is calculated (withdrawal amount divided by the Accumulation Value immediately preceding the withdrawal, multiplied by the Adjusted Premium Payments immediately preceding the withdrawal): EBB Proportional Withdrawal = ($20,000/$250,000) x $200,000 = $16,000 Second, the amount of current Adjusted Premium Payments (after the withdrawal) is calculated (total of all premium payments minus EBB Proportional Withdrawals): Adjusted Premium Payments = $200,000 - $16,000 = $184,000 Third, the Gain is calculated (Accumulation Value - Adjusted Premium Payments): Gain = $250,000 - $184,000 = $66,000 Finally, the Enhanced Beneficiary Benefit amount is calculated (Gain multiplied by the applicable EBB rider percentage): Enhanced Beneficiary Benefit = $66,000 x 50% = $33,000 In this example, the Enhanced Beneficiary Benefit is equal to $33,000. This amount would be payable in addition to the guaranteed death benefit amount under the policy. (c) Enhanced Spousal Continuance Rider (optional) If you elect the EBB Rider at the time of application (see above), your policy will, subject to state availability, also include the ESC Rider at no charge. The ESC Rider will not be included on policies sold in connection with TSAs. Under the ESC Rider, if your spouse is the sole primary Beneficiary, upon your death prior to the Annuity Commencement Date, your spouse may elect to continue the policy as the new owner. If the election is made, the Accumulation Value will be adjusted (as of the date We receive due proof of death and all other requirements at VPSC) to equal the greatest of any of the amounts payable as described in the Death Before Annuity Commencement section of the Prospectus, plus, if applicable, any EBB provided by the EBB Rider. Unless We notify you otherwise, any additional Accumulation Value calculated under the ESC Rider will be allocated to the policy according to the premium allocation instructions on record. The ESC Rider ends upon the earliest of the following: 1) if you surrender the policy, 2) if Income Payments begin, 3) once the ESC Rider has been exercised, or 4) if you transfer ownership of the policy to someone other than your spouse. THIS RIDER CANNOT BE CANCELLED WITHOUT SURRENDERING YOUR POLICY. Upon exercising the ESC Rider and continuing the policy, the EBB Rider and the quarterly charges for the EBB Rider will cease. All other policy provisions will continue as if your spouse had purchased the policy on the original Policy Date. (d) Upromise Account Rider (optional) THE UPROMISE ACCOUNT RIDER IS AVAILABLE ONLY AT THE TIME OF APPLICATION, IN JURISDICTIONS WHERE APPROVED. The Upromise Rider is available only on Non- Qualified Policies funded directly by you (non-Section 1035 exchanged policies). For you to qualify for the benefit of this rider, We require that you either have a valid Upromise Account at 32 the time of application, or that you open one within 90 days of the policy delivery date, and that you register the policy with Upromise within 90 days of the policy delivery date. Once We confirm that you have met all requirements, We will deposit the amount of $40 into your Upromise Account no sooner than 30 days but no later than 60 days from the date you register the policy with Upromise. The cost basis of your variable annuity for tax purposes will be lowered by the amount of Our contribution to your Upromise Account. For additional information on the Upromise Program, you may visit the Upromise web site at www.upromise.com. The Upromise Account Rider will automatically terminate 90 days after the policy delivery date if at the time of application you do not have a valid Upromise Account, or you do not open one within 90 days of the policy delivery date. The rider will also automatically terminate if you fail to register the policy with Upromise within 90 days of the policy delivery date, or if Upromise (or a successor organization), ceases operation before the one-time amount of $40 is deposited into your Upromise Account. (e) Annual Death Benefit Reset (ADBR) Rider (optional) YOU MAY ENHANCE YOUR POLICY'S STANDARD DEATH BENEFIT BY PURCHASING THE OPTIONAL ADBR RIDER. THE ADBR RIDER IS AVAILABLE ONLY AT THE TIME OF APPLICATION, IN JURISDICTIONS WHERE APPROVED. If you select this rider and you die prior to the Annuity Commencement Date, We will pay an amount as proceeds to the designated Beneficiary, as of the date We receive proof of death and all requirements necessary to make the payment at VPSC. For policies owned by a grantor trust, all of whose grantors are individuals, benefits will be paid upon the death of any grantor. The amount will be the greatest of: (a) the Accumulation Value less any outstanding loan balance; or (b) the Adjusted Death Benefit Premium Payments; or (c) the "Reset Value" plus any additional premium payments made since the most recent "Reset Anniversary," less proportional withdrawals ("ADBR Proportional Withdrawals") made since the most recent Reset Anniversary. We recalculate the Reset Value, with respect to any policy, every year from the Policy Date ("Reset Anniversary") until you reach age 80 (or the Annuitant if the Owner is not a natural person). For policies owned by a grantor trust, the Reset Value will be recalculated until any grantor reaches age 80. On the First Policy Anniversary, We calculate the Reset Value by comparing (a) the Accumulation Value; and (b) the Adjusted Death Benefit Premium Payments. The reset value calculated on the second and subsequent Reset Anniversaries is based on a comparison between (a) the Accumulation Value on the current Reset Anniversary; and (b) the Reset Value on the prior Reset Anniversary, plus any premium payments applied since the prior Reset Anniversary, less any ADBR Proportional Withdrawals since the prior Reset Anniversary. The greater of the compared values will be the new Reset Value. In jurisdictions where approved, the rider benefit will no longer reset after the Owner's death or for grantor trust owned policies, the death of any grantor. The only exception is if the policy remains inforce under the spousal option provision of the Policy, if available. If the Owner is not a natural person, or a grantor trust, the rider benefit will no longer reset after the death of the Annuitant. In addition, in jurisdictions where approved, if an ownership change of assignment of the policy is made, other than as explicitly described in the rider, the rider will terminate and no Reset Value will be payable. If the rider is terminated, the death benefit payable will be the benefit provided in the Death Before Annuity Commencement section of this Prospectus. An ADBR Proportional Withdrawal is an amount equal to the amount withdrawn from the policy (including applicable surrender charges) divided by the policy's Accumulation Value immediately preceding the withdrawal, multiplied by the Reset Value immediately preceding the withdrawal. We have set forth below an example of how the ADBR Rider is calculated for an owner who is age 63. The current annual rider charge is 0.30% of the Reset Value as of the last Policy Anniversary, deducted quarterly. In this example, We have assumed the following: (1) you purchase this policy with a $200,000 initial premium payment (no additional premium payments are made) (2) the Accumulation Value as of the first Policy Anniversary is $250,000 (this is the Reset Value) (3) the current Accumulation Value is $240,000 (4) you make a partial withdrawal of $15,000 in the Policy Year 2 (no surrender charges are applicable) (5) you die at the beginning of the second policy quarter of Policy Year 2 after the withdrawal (6) the Accumulation Value on the date We receive the necessary requirements to pay the death benefit is $225,000 ($240,000 - $15,000) 33 (7) the charge for the ADBR Rider is assessed: 0.30% annually (0.075% per quarter) (8) the Death Benefit is the greatest of: a) the Accumulation Value $225,000 b) the Adjusted Death Benefit Premium Payments = $187,500 c) the "Reset Value," which is the greatest of: 1. the Accumulation Value $225,000 2. the prior Reset Value as of the last Reset Anniversary, plus any premium payments applied since the prior Reset Anniversary, less ADBR Proportional Withdrawals since the prior Reset Anniversary. = $234,375 In this example, your Beneficiary would receive $234,375.00. The ADBR Rider ends upon the earlier of the following: 1) the Annuity Commencement Date, 2) the date you surrender the policy, or 3) the date we terminate the policy. Notwithstanding the foregoing, the Rider will not end and all of the Rider's provisions and quarterly charges will continue to be deducted as if the new owner had purchased the policy on the original Policy Date if your spouse, as the sole primary Beneficiary, elects to continue the policy upon your death. YOU CANNOT CANCEL THIS RIDER WITHOUT SURRENDERING YOUR POLICY. POLICYOWNER INQUIRIES Your inquiries and written requests for service must be addressed to NYLIAC as indicated in the response to Questions 15, 16 and 17 of this Prospectus. Facsimile requests for service will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. All phone calls for service requests are recorded. We will confirm all transactions in writing. If you feel that a transaction has been processed incorrectly, it is your responsibility to contact Us in writing and provide Us with all relevant details. To correct an error, We must receive your request for correction within 15 days of the date of the confirmation with the transaction in question. You must provide Us with the nature of the error, the date of the error, the corresponding telephone reference number (if applicable) and any other relevant details. RECORDS AND REPORTS NYLIAC will mail to you at your last known address of record, at least semi-annually after the first Policy Year, reports containing information required under the federal securities laws or by any other applicable law or regulation. Generally, NYLIAC will immediately mail to you confirmation of any transactions involving the Separate Account. When We receive premium payments on your behalf involving the Separate Account initiated through pre-authorized monthly deductions from banks ("Check-o-Matic"), payments forwarded by your employer ("list billing"), or through other payments made by pre-authorized deductions to which We agree, a summary of these policy transactions will only appear on your quarterly statement and you will not receive a confirmation statement after each such transaction. IT IS IMPORTANT THAT YOUR CONFIRMATION AND QUARTERLY STATEMENTS BE REVIEWED IMMEDIATELY TO ENSURE THAT THERE ARE NO ERRORS. IN ORDER TO CORRECT AN ERROR, YOU MUST CALL IT TO OUR ATTENTION WITHIN 15 DAYS OF THE DATE OF THE STATEMENT. IT IS IMPORTANT THAT YOU INFORM NYLIAC OF AN ADDRESS CHANGE SO THAT YOU CAN RECEIVE THESE POLICY STATEMENTS (SEE QUESTION 16 OF THIS PROSPECTUS). IN THE EVENT YOUR STATEMENT IS RETURNED FROM THE US POSTAL SERVICE AS UNDELIVERABLE, WE RESERVE THE RIGHT TO SUSPEND MAILING FUTURE CORRESPONDENCE AND ALSO SUSPEND CURRENT TRANSACTION PROCESSING UNTIL AN ACCURATE ADDRESS IS OBTAINED. IN ADDITION, NO NEW SERVICE REQUESTS CAN BE PROCESSED UNTIL A VALID CURRENT ADDRESS IS PROVIDED. CHARGES AND DEDUCTIONS SURRENDER CHARGES Since no deduction for a sales charge is made from premium payments, We impose a surrender charge on certain partial withdrawals and surrenders of the policies. The surrender charge covers certain expenses relating to the sale of the policies, including commissions to registered representatives and other promotional expenses. We 34 measure the surrender charge as a percentage of the amount withdrawn or surrendered. The surrender charge may apply to amounts applied under certain Income Payment options. If you surrender your policy, We deduct the surrender charge from the amount paid to you. In the case of a partial withdrawal, you can direct NYLIAC to take surrender charges either from the remaining value of the Allocation Alternatives from which the partial withdrawals are made, or from the amount paid to you. If the remaining value in an Allocation Alternative is less than the necessary surrender charge, We will deduct the remainder of the charge from the amount withdrawn from that Allocation Alternative. The surrender charge is 7% of the amounts withdrawn or surrendered during the first three Policy Years. The percentage of the charge declines 1% for each additional Policy Year, until the ninth Policy Year, after which no surrender charge is made, as shown in the following chart: AMOUNT OF SURRENDER CHARGE
POLICY YEAR CHARGE ----------- ------ 1................................................................ 7% 2................................................................ 7% 3................................................................ 7% 4................................................................ 6% 5................................................................ 5% 6................................................................ 4% 7................................................................ 3% 8................................................................ 2% 9................................................................ 1% 10+............................................................... 0
The duration of the surrender charge schedule is based solely on the Policy Date. Additional premium payments do not begin their own surrender charge schedules. EXCEPTIONS TO SURRENDER CHARGES We will not assess a surrender charge: (a) on amounts you withdraw in any one Policy Year that are less than or equal to the greater of: (i) 10% of the Accumulation Value at the time of surrender or withdrawal, less any prior Surrender Charge free withdrawals during the Policy Year; (ii) 10% of the Accumulation Value as of the prior Policy Anniversary (10% of the premium payment if the withdrawal is made in the first Policy Year), less any prior Surrender Charge free withdrawals during the Policy Year; or (iii) the Accumulation Value less accumulated premium payments. (b) if NYLIAC cancels the policy; (c) when We pay proceeds upon the death of the policyowner or the Annuitant; (d) when you elect to receive Income Payments in any Policy Year after the first Policy Anniversary; (e) when a required minimum distribution calculated based on the value of this policy is made under a Qualified Policy (this amount will, however, count against the first exception); (f) on withdrawals at age 59 1/2 or older if the policy is tax-qualified and if the money withdrawn from the policy was transferred or rolled over from a NYLIAC fixed deferred annuity policy; (g) on withdrawals you make under the Living Needs Benefit Rider/Unemployment Rider; (h) when the aggregate surrender charges under a policy exceed 9.0% of the total premium payments; and (i) on monthly or quarterly periodic partial withdrawals made pursuant to Section 72(t)(2)(A)(iv) of the Code. OTHER CHARGES (a) Mortality and Expense Risk and Administrative Costs Charge Prior to the Annuity Commencement Date, We deduct a daily charge from the assets of the Separate Account to compensate Us for certain mortality and expense risks and administrative costs (M&E Charge) We assume under the policies and for providing policy administration services. You may choose to have the M&E Charge assessed based on either the Accumulation Value of the policy or the Adjusted Premium Payments. The M&E Charge is 1.40% (annualized) of the daily average Variable Accumulation Value for Accumulation Value based policies. For premium based policies, the M&E Charge is 1.60% (annualized) of the Adjusted Premium Payments 35 and will be deducted from the Investment Divisions through a reduction in Accumulation Units each policy quarter (excluding premiums allocated to the Fixed Account that are not transferred to the Investment Divisions). For Accumulation Value based M&E Charge policies, the M&E charge may vary based on the Accumulation Value of the policy when the M&E charge is assessed. For Premium based M&E Charge policies, the M&E Charge is assessed based on the Adjusted Premium Payments and will not vary with fluctuations in the policy's Accumulation Value. We guarantee that this charge will not increase. If the charge is insufficient to cover actual costs and assumed risks, the loss will fall on NYLIAC. We expect to profit from this charge. We may use these proceeds for any corporate purpose, including expenses relating to the sale of the policies, to the extent that surrender charges do not adequately cover sales expenses. The amount of Premium based M&E Charges assessed to your policy will be unaffected by fluctuations in market performance. In a rising market, the Premium based M&E Charge structure will benefit the policyowner because the Premium based M&E Charge, when measured as a percentage of separate account assets, will be reduced. In a flat or declining market, The Premium based M&E Charge structure will result in an increase in the charge when measured against separate account assets. The amount of Accumulation Value based M&E Charges assessed to your policy will be affected by fluctuations in market performance. However, the Accumulation Value based M&E Charge structure may be more advantageous in a flat or declining market. The mortality risk assumed is the risk that Annuitants as a group will live for a longer time than Our actuarial tables predict. As a result, We would be paying more Income Payments than We planned. We also assume a risk that the mortality assumptions reflected in Our guaranteed annuity payment tables, shown in each policy, will differ from actual mortality experience. Lastly, We assume a mortality risk that, at the time of death, the guaranteed minimum death benefit will exceed the policy's Accumulation Value. The expense risk assumed is the risk that the cost of issuing and administering the policies will exceed the amount We charge for these services. We expect to make a profit from this charge, which We may use for any purpose. (b) Policy Service Charge We deduct an annual policy service charge of $30 each Policy Year on the Policy Anniversary and upon surrender of the policy if on the Policy Anniversary and date of surrender the Accumulation Value is less than $50,000. We deduct the annual policy service charge from each Allocation Alternative in proportion to its percentage of the Accumulation Value on the Policy Anniversary or date of surrender. This charge is designed to cover the costs for providing services under the policy such as collecting, processing and confirming premium payments and establishing and maintaining the available methods of payment. (c) Fund Charges The value of the assets of the Separate Account will indirectly reflect the Funds' total fees and expenses. The Funds' total fees and expenses are not part of the policy. They may vary in amount from year to year. These fees and expenses are described in detail in the relevant Fund's prospectus. (d) Transfer Fees There is no charge for the first 12 transfers in any one Policy Year. NYLIAC reserves the right to charge up to $30 for each transfer in excess of 12, subject to any applicable state insurance law requirements. Transfers made under Dollar Cost Averaging, Interest Sweep and Automatic Asset Reallocation do not count toward this transfer limit. (e) Enhanced Beneficiary Benefit Rider Charge (optional) If you elect the EBB Rider (in jurisdictions where available), We will deduct a charge each policy quarter that the rider is in effect based on the Accumulation Value. We will deduct this charge beginning with the first policy quarter after the Policy Date. In most jurisdictions, this charge will be deducted quarterly from each Allocation Alternative, in proportion to its percentage of the Accumulation Value. The maximum annual charge is 1.00% of the policy's Accumulation Value, applied on a quarterly basis. We may set a lower charge at Our sole discretion. The current charge for the EBB Rider is 0.30% of the policy's Accumulation Value, applied on a quarterly basis (0.075% per quarter). You should check with your registered representative to determine the percentage We are currently charging before you elect this rider. This charge will not change once your policy is issued. (f) Annual Death Benefit Reset (ADBR) Rider Charge (optional) If you select the ADBR Rider, We will deduct a charge each policy quarter that the Rider is in effect based on the amount that is guaranteed as of the last Reset Anniversary. In most jurisdictions, this charge will be deducted from each Investment Division, and the Fixed Account, in proportion to its percentage of the Accumulation Value of 36 the applicable quarter and will not reduce your Adjusted Premium Payments. This charge will continue to be deducted while the policy remains in-force. The charge for the ADBR rider is based upon your age when the policy is issued, which will not change. The maximum annual charge is 1.00% of the amount that is reset on the last policy anniversary, or the initial premium payment in the first Policy Year. You should check with your registered representative to determine the percentage We are currently charging. As of the date of this Prospectus, the charges are as follows:
AGE OF OLDEST OWNER OR ANNUITANT ANNUAL CHARGE ------------------ ------------- 65 or younger........................................ 0.30% (.0750% per quarter) 66 to 75 inclusive................................... 0.35% (.0875% per quarter)
GROUP AND SPONSORED ARRANGEMENTS For certain group or sponsored arrangements, We may reduce the surrender charge and the policy service charge or change the minimum initial and additional premium payment requirements. Group arrangements include those in which a trustee or an employer, for example, purchases policies covering a group of individuals on a group basis. Sponsored arrangements include those in which an employer allows Us to sell policies to its employees or retirees on an individual basis. Our costs for sales, administration, and mortality generally vary with the size and stability of the group among other factors. We take all these factors into account when reducing charges. To qualify for reduced charges, a group or sponsored arrangement must meet certain requirements, including Our requirements for size and number of years in existence. Group or sponsored arrangements that have been set up solely to buy policies or that have been in existence less than six months will not qualify for reduced charges. We will make any reductions according to Our rules in effect when an application or enrollment form for a policy is approved. We may change these rules from time to time. Any variation in the surrender charge or policy service charge will reflect differences in costs or services and will not be unfairly discriminatory. TAXES NYLIAC may, where premium taxes are imposed by state law, deduct such taxes from your policy either (i) when a surrender or cancellation occurs, or (ii) at the Annuity Commencement Date. Applicable premium tax rates depend upon such factors as your current state of residency, and the insurance laws and NYLIAC's status in states where premium taxes are incurred. Current premium tax rates range from 0% to 3.5%. Applicable premium tax rates are subject to change by legislation, administrative interpretations or judicial acts. We may in the future seek to amend the policies to deduct premium taxes when a premium payment is received. Under present laws, NYLIAC will also incur state and local taxes (in addition to the premium taxes described above) in several states. NYLIAC may assess charges for such taxes. NYLIAC does not expect to incur any federal income tax liability attributable to investment income or capital gains retained as part of the Separate Account reserves under the policies. (See "FEDERAL TAX MATTERS.") Based upon these expectations, no charge is being made currently for corporate federal income taxes which may be attributable to the Separate Account. Such a charge may be made in future years for any federal income taxes NYLIAC incurs. DISTRIBUTIONS UNDER THE POLICY SURRENDERS AND WITHDRAWALS You can make partial withdrawals, periodic partial withdrawals, hardship withdrawals or surrender the policy to receive part or all of the Accumulation Value at any time before the Annuity Commencement Date. To request a surrender or withdrawal, you must send a written request on a form acceptable to Us to VPSC at one of the addresses listed on Question 15 of this Prospectus. Fax transmissions are not acceptable and will not be honored at any time. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. If the request is complete and We have received all other information necessary to process the request, the amount available for withdrawal is the Accumulation Value at the end of the Business Day that VPSC receives the written request, less any outstanding loan balance, surrender charges, taxes that We may deduct, and the annual policy service charge, if applicable. If you have not provided Us with a written election not to withhold federal income taxes at the time you make a withdrawal or surrender request, NYLIAC must by law withhold such taxes from the taxable portion of any surrender or withdrawal. We will remit that amount to the federal government. In addition, some states have enacted legislation requiring withholding. NYLIAC will pay all surrenders or withdrawals within seven days of receipt 37 of all documents (including documents necessary to comply with federal and state tax law), subject to postponement in certain circumstances. (See "DELAY OF PAYMENTS.") Since you assume the investment risk with respect to amounts allocated to the Separate Account and because certain surrenders or withdrawals are subject to a surrender charge and premium tax deduction, the total amount paid upon surrender of the policy (taking into account any prior withdrawals) may be more or less than the total premium payments made. Surrenders and withdrawals may be taxable transactions, and the Code provides that a 10% penalty tax may be imposed on certain early surrenders or withdrawals (the penalty tax is increased to 25% in the case of a distribution from a SIMPLE IRA within the first two years of your participation in the SIMPLE IRA Plan.) (See "FEDERAL TAX MATTERS--TAXATION OF ANNUITIES IN GENERAL.") In addition, taxable surrenders and withdrawals may be subject to an additional 3.8 percent tax on net investment income. (See "FEDERAL TAX MATTERS--3.8 Percent Tax on Certain Investment Income.") (a) Surrenders We may deduct a surrender charge and any state premium tax, if applicable, any outstanding loan balance, and the annual policy service charge, if applicable, from the amount paid. We will pay the proceeds in a lump sum to you unless you elect a different Income Payment method. (See "INCOME PAYMENTS.") Surrenders may be taxable transactions and the 10% penalty tax provisions may be applicable. (See "FEDERAL TAX MATTERS--TAXATION OF ANNUITIES IN GENERAL.") (b) Partial Withdrawals The minimum amount that can be withdrawn is $500, unless We agree otherwise. We will withdraw the amount from the Allocation Alternatives in accordance with your request. If you do not specify how to allocate a partial withdrawal among the Allocation Alternatives, We will allocate the partial withdrawal on a pro-rata basis. We will pay any partial withdrawals generally within seven days after we receive all of the necessary documentation and information. Your requested partial withdrawal will be effective on the date we receive your written request. However, if the day we receive your request is not a Business Day or if your request is received after the close of the NYSE, then the requested partial withdrawal will be effective on the next Business Day. Partial withdrawals may be taxable transactions and the 10% penalty tax provisions may be applicable. (See "FEDERAL TAX MATTERS--TAXATION OF ANNUITIES IN GENERAL.") If the requested partial withdrawal is equal to the value in any of the Allocation Alternatives from which the partial withdrawal is being made, We will pay the entire value of that Allocation Alternative, less any surrender charge that may apply, to you. If honoring a partial withdrawal request would result in an Accumulation Value of less than $2,000, We reserve the right to terminate your policy, subject to any applicable state insurance law or regulation. We will notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum. Also note that partial withdrawal requests for amounts greater than $25,000, or partial withdrawal requests made from policies that are less than 90 days old or that effected an address or ownership change within 30 days of such partial withdrawal request must be made in writing and sent to VPSC at one of the addresses noted in Question 15 of this Prospectus. Faxed requests are not acceptable and will not be honored at any time. In addition, we will not accept e-mailed partial withdrawal requests or e-mails of imaged, signed requests. (c) Periodic Partial Withdrawals You may elect to receive regularly scheduled partial withdrawals from the policy. These periodic partial withdrawals may be paid on a monthly, quarterly, semi-annual, or annual basis. You will elect the frequency of the withdrawals and the day of the month for the withdrawals to be made (may not be the 29th, 30th or 31st of a month). We will make all withdrawals on the day of each calendar month you specify, or on the next Business Day (if the day you have specified is not a Business Day or does not exist in that month). To process Periodic Partial Withdrawals, you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. NYLIAC must receive a request in writing no later than five Business Days prior to the date the withdrawals are to begin. If your request for this option is received less than five Business Days prior to the date you request it to begin, the withdrawals will begin on the day of the month you specify in the month following the receipt of your request. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e- mails of imaged, signed requests. You must specify the Investment Divisions and/or the Fixed Account from which the periodic partial withdrawals will be made. The minimum amount under this feature is $100, or such lower amount as We may permit. Periodic partial withdrawals may be taxable transactions and the 10% penalty tax provisions may be applicable. (See "FEDERAL TAX 38 MATTERS--TAXATION OF ANNUITIES IN GENERAL.") If you do not specify otherwise, We will withdraw money on a pro-rata basis from each Investment Division and/or the Fixed Account. You can elect to receive "Interest Only" periodic partial withdrawals for the interest earned on monies allocated to the Fixed Account. This option is not available for policies issued in the State of New York. If this option is chosen, the $100 minimum for periodic partial withdrawals will be waived. However, you must have at least $5,000 in the Fixed Account at the time of each periodic partial withdrawal, unless We agree otherwise. (d) Hardship Withdrawals Under certain Qualified Policies, the Plan Administrator (as defined in Code Section 414(g)) may allow, in its sole discretion, certain withdrawals it determines to be "Hardship Withdrawals." The surrender charge and 10% penalty tax, if applicable, and provisions applicable to partial withdrawals apply to Hardship Withdrawals. REQUIRED MINIMUM DISTRIBUTION OPTION For IRAs, SIMPLE IRAs and SEP IRAs, the policyowner is generally not required to elect the required minimum distribution option until April 1st of the year following the calendar year he or she attains age 70 1/2. For TSAs, the policyowner is generally not required to elect the required minimum distribution option until April 1st of the year following the calendar year he or she attains age 70 1/2 or until April 1st of the year following the calendar year he or she retires, whichever occurs later. For Inherited IRAs, the policyowner is required to take the first required minimum distribution on or before December 31 of the calendar year following the year of the original owner's death. OUR RIGHT TO CANCEL If We do not receive any premium payments for a period of two years, and the Accumulation Value of your policy would provide Income Payments of less than $20 per month on the Annuity Commencement Date, We reserve the right to terminate your policy subject to any applicable state insurance law or regulation. We will notify you of Our intention to exercise this right and give you 90 days to make a premium payment. If We terminate your policy, We will pay you the Accumulation Value of your policy in one lump sum. ANNUITY COMMENCEMENT DATE The Annuity Commencement Date is the date specified on the Policy Data Page. The Annuity Commencement Date is the day that Income Payments are scheduled to commence unless the policy has been surrendered or an amount has been paid as proceeds to the designated Beneficiary prior to that date. The earliest possible annuity commencement date is the first Policy Anniversary. If We agree, you may change the Annuity Commencement Date to an earlier date. If We agree, you may also defer the Annuity Commencement Date to a later date, provided that We receive a written notice of the request at least one month before the last selected Annuity Commencement Date. To request to change or defer the Annuity Commencement Date to a later date, subject to the constraints noted above, you must send a written notice in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. The Annuity Commencement Date and Income Payment method for Qualified Policies may also be controlled by endorsements, the plan, or applicable law. DEATH BEFORE ANNUITY COMMENCEMENT Unless amended by any rider attached to the policy, if you die prior to the Annuity Commencement Date, We will pay an amount as proceeds to the designated Beneficiary, as of the date VPSC receives proof of death and all requirements necessary to make the payment at one of the addresses listed in Question 15 of this Prospectus. For policies owned by a grantor trust, all of whose grantors are individuals, benefits will be paid upon the death of any grantor. The amount will be the greater of: (a) the Accumulation Value less any outstanding loan balance; or (b) the Adjusted Death Benefit Premium Payments. We will make payments in a lump sum to the Beneficiary unless you have elected or the Beneficiary elects otherwise in a signed written notice which gives Us the information that We need. If such an election is properly made, We will apply all or part of these proceeds: (i) under the Life Income Payment Option to provide an immediate annuity for the Beneficiary who will be the policyowner and Annuitant; or (ii) under another Income Payment option We may offer at the time. Payments under the annuity or under any other method of payment We make available must be for the life of the Beneficiary, or for a number of years that is not more than the life expectancy of the Beneficiary at the time of the policyowner's death (as determined for federal tax purposes), and must begin within one year after the policyowner's death. (See "INCOME PAYMENTS.") 39 If your spouse (as defined under Federal law) is the sole primary Beneficiary, We can pay the proceeds to the surviving spouse if you die before the Annuity Commencement Date or the policy can continue with the surviving spouse as (a) the new policyowner and, (b) The Annuitant, if you were the Annuitant. Generally, NYLIAC will not issue a policy to joint owners. However, if NYLIAC makes an exception and issues a jointly owned policy, ownership rights and privileges under the policy must be exercised jointly and benefits under the policy will be paid upon the death of any joint owner. (See "FEDERAL TAX MATTERS--TAXATION OF ANNUITIES IN GENERAL.") If the Annuitant and, where applicable under another Income Payment option, the joint Annuitant, if any, die after the Annuity Commencement Date, NYLIAC will pay the sum required by the Income Payment option in effect. We will make any distribution or application of policy proceeds within 7 days after VPSC receives all documents (including documents necessary to comply with federal and state tax law) in connection with the event or election that causes the distribution to take place at one of the addresses listed in Question 15 of this Prospectus, subject to postponement in certain circumstances. (See "DELAY OF PAYMENTS.") INCOME PAYMENTS (a) Election of Income Payment Options We will make Income Payments under the Life Income Payment Option or under such other option We may offer at that time where permitted by state laws. (See "ANNUITY PAYMENTS" in the Statement of Additional Information.) We will require that a lump sum payment be made if the Accumulation Value is less than $2,000. You may not request a lump sum payment to be made prior to the maturity date listed on the Policy Data Page of your policy. If the Life Income Payment Option is not chosen, you may change the Income Payment Option or request any other method of payment We agree to at any time before the Annuity Commencement Date. To change the Income Payment Option or to request another method of payment prior to the Annuity Commencement Date, you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. However, once payments begin, you may not change the option. If the Life Income Payment Option is chosen, We may require proof of birth date before Income Payments begin. For Income Payment Options involving life income, the actual age of the Annuitant will affect the amount of each payment. Since payments based on older Annuitants are expected to be fewer in number, the amount of each annuity payment should be greater. We will make payments under the Life Income Payment option in the same specified amount and over the life of the Annuitant with a guarantee of 10 years of payments, even if the Annuitant dies sooner. NYLIAC does not currently offer variable Income Payment Options. Effective for amounts received in taxable years beginning after December 31, 2010, a policyholder may elect to apply a portion of the Accumulation Value toward one of the Income Payment options we may offer, while the remainder of the policy continues to accumulate income on a tax-deferred basis. This is called a partial annuitization. A partial annuitization will reduce the benefits provided under this policy. The Accumulation Value will be reduced by the amount placed under one of the Income Payment options We may offer. Under a partial annuitization, the policy's Accumulation Value, any riders under the policy and any charges assessed will be treated the same as they would under any other withdrawal from the policy's Accumulation Value, except that surrender charges will not be assessed. (See "FEDERAL TAX MATTERS.") Under Income Payment Options involving life income, the payee may not receive Income Payments equal to the total premium payments made under the policy if the Annuitant dies before the actuarially predicted date of death. We base Income Payment Options involving life income on annuity tables that vary on the basis of gender, unless the policy was issued under an employer sponsored plan or in a state which requires unisex rates. Taxable Income Payments may be subject to an additional 3.8 percent tax on net investment income. (See "FEDERAL TAX MATTERS--3.8 Percent Tax on Certain Investment Income.") (b) Proof of Survivorship We may require satisfactory proof of survival from time to time, before We pay any Income Payments or other benefits. We will request the proof at least 30 days prior to the next scheduled payment date. DELAY OF PAYMENTS We will pay any amounts due from the Separate Account under the policy within seven days of the date VPSC receives all documents (including documents necessary to comply with federal and state tax law) in connection with a request at one of the addresses listed in Question 15 of this Prospectus. 40 Situations where payment may be delayed: 1. We may delay payment of any amounts due from the Separate Account under the policy and transfers among Investment Divisions during any period that: (a) The New York Stock Exchange (NYSE) is closed for other than usual weekends or holidays, trading is restricted by the Securities and Exchange Commission (SEC); or the SEC declares that an emergency exists; (b) The SEC, by order, permits Us to delay payment in order to protect Our policyowners; or (c) The check used to pay the premium has not cleared through the banking system. This may take up to 15 days. 2. We may delay payment of any amounts due from the Fixed Account. When permitted by law, We may defer payment of any partial withdrawal or full surrender request for up to six months from the date of surrender from the Fixed Account. We will pay interest of at least 3.0% per year on any partial withdrawal or full surrender request deferred for 30 days or more. 3. Federal laws made to combat terrorism and prevent money laundering by criminals might, in certain circumstances, require Us to reject a premium payment and/or "freeze" a policy. If these laws apply in a particular policy(ies), We would not be allowed to pay any request for transfers, partial withdrawals, surrenders or death benefits. If a policy or an account is frozen, the Accumulation Value would be moved to a special segregated interest-bearing account and held in that account until We receive instructions from the appropriate federal regulator. DESIGNATION OF BENEFICIARY You may select one or more Beneficiaries and name them in the application. Thereafter, before the Annuity Commencement Date and while you are living, you may change the Beneficiary by written notice in a form acceptable to NYLIAC. To change the Beneficiary, you must send a written request in a form acceptable to Us to VPSC at one of the addresses listed in Question 15 of this Prospectus. If before the Annuity Commencement Date, the Annuitant dies while you are still living, you will become the new Annuitant under the policy. If you are the Annuitant, the proceeds pass to your estate. However, if the policyowner who is not the Annuitant dies before the Annuity Commencement Date, and no Beneficiary for the proceeds or for a stated share of the proceeds survives, the right to the proceeds or shares of the proceeds passes to the policyowner's estate. If no Beneficiary for any amount payable, or for a stated share, survives you, the right to this amount or this share will pass to your estate. Payment of the proceeds will be made in a single sum to your estate. If any Beneficiary dies at the same time as you, or within fifteen (15) days after your death, but before we receive proof of death and all claim information, We will pay any amount payable as though the Beneficiary died first. RESTRICTIONS UNDER CODE SECTION 403(B)(11) With respect to 403(b) TSAs, distributions attributable to salary reduction contributions made in years beginning after December 31, 1988 (including the earnings on these contributions), as well as to earnings in such years on salary reduction accumulations held as of the end of the last year beginning before January 1, 1989, may not begin before the employee attains age 59 1/2, has a severance from employment, dies or becomes disabled. The Code section 403(b) plan may also provide for distribution in the case of hardship. However, hardship distributions are limited to amounts contributed by salary reduction. The earnings on such amounts may not be withdrawn. Even though a distribution may be permitted under these rules (e.g. for hardship or due to a severance from employment), it may still be subject to a 10% additional income tax as a premature distribution. Under the final Code section 403(b) regulations, which the Department of Treasury published on July 26, 2007, employer contributions made to Code section 403(b) TSA contracts will be subject to new withdrawal restrictions. Under the new rules, amounts attributable to employer contributions to a Code section 403(b) TSA contract that is issued after December 31, 2008 may not be distributed earlier than the earliest of severance from employment or upon the occurrence of a certain event, such as after a fixed number of years, the attainment of a stated age, or disability. These new withdrawal restrictions do not apply to Code section 403(b) TSA contracts issued before January 1, 2009. Under the terms of your Code section 403(b) plan, you may have the option to invest in other funding vehicles, including Code section 403(b)(7) custodial accounts. You should consult your plan document to make this determination. LOANS Loans are available only if you have purchased an Accumulation Value based M&E Charge policy in connection with a 403(b) plan and may not be available in all states for plans subject to the Employment Retirement Income Security Act of 1974 (ERISA). To request a TSA loan, you must send a written request on a form acceptable to Us 41 to VPSC. Under your 403(b) policy, you may borrow against your policy's Accumulation Value after the first Policy Year and prior to the Annuity Commencement Date. Unless We agree otherwise, only one loan may be outstanding at a time. There must be a minimum Accumulation Value of $5,000 in the policy at the time of the loan. The minimum loan amount is $500. The maximum loan that you may take is the lesser of: (a) 50% of the policy's Accumulation Value on the date of the loan or (b) $50,000 minus your highest outstanding principal balance in the previous 12 months from your policy and any qualified employer plan (as defined under Sections 72(p)(4) and 72(p)(2)(D) of the Code). Please note that adverse tax consequences could result from your failure to comply with this limitation. NYLIAC, and its affiliates and agents do not provide legal or tax advice nor assume responsibility or liability for any legal or tax consequences of any TSA loan taken under a 403(b) policy or the compliance of such loan with the Code limitations set forth in this paragraph or for determining whether any plan or loan is subject to and/or complies with ERISA. We withdraw a loan processing fee of $25 from the Accumulation Value on a pro rata basis, unless prohibited by applicable state law or regulation. If on the date of the loan you do not have a Fixed Accumulation Value equal to at least 125% of the loan amount, We will transfer sufficient Accumulation Value from the Investment Divisions on a pro rata basis so that the Fixed Accumulation Value equals 125% of the loan amount. While a loan is outstanding, you may not make partial withdrawals or transfers which would reduce the Fixed Accumulation Value to an amount less than 125% of the outstanding loan balance. For all loans, of the assets being held in the Fixed Account to secure 125% of the loan amount, the interest rate credited to the amount representing the outstanding loan balance will be 2% less than the interest rate charged on the loan. The additional 25% being held in the Fixed Account to secure the loan will be credited with the current declared interest rate for both non-ERISA and ERISA subject plans, but will always be at least equal to the minimum guaranteed interest rate stated on the data page of your policy. For plans subject to ERISA, interest charged will be based on the Prime Rate, as reported in the Wall Street Journal on the first business day of a calendar year or the Moodys Corporate Bond Yield Average as of two months before the date the rate is determined. The rate is determined on the first business day of the calendar year. We will assess interest in arrears as part of the periodic loan repayments. You must repay the loan on a periodic basis not less frequent than quarterly and over a period no greater than five years from the date it is taken. If a loan repayment is in default We will withdraw the amount in default from the Fixed Accumulation Value to the extent permitted by federal income tax rules. We will take such a repayment on a first-in, first-out (FIFO) basis from amounts allocated to the Fixed Account. We permit loans to acquire a principal residence under the same terms described above, except that: (a) the minimum loan amount is $5,000; and (b) repayment of the loan amount may be extended to a maximum of twenty-five years. We deduct any outstanding loan balance including any accrued interest from the Fixed Accumulation Value prior to payment of a surrender or the commencement of the annuity benefits. On death of the policyowner or Annuitant, We deduct any outstanding loan balance from the Fixed Accumulation Value as a partial withdrawal as of the date We receive the notice of death. Loans are subject to the terms of the policy, your 403(b) plan and the Code, which may impose restrictions upon them. We reserve the right to suspend, modify, or terminate the availability of loans under this policy at any time. However, any action taken by Us will not affect already outstanding loans. ALSO NOTE THAT FOR PREMIUM BASED M&E CHARGE POLICIES PURCHASED IN CONNECTION WITH TSA PLANS, YOU MAY NOT BORROW ANY PORTION OF YOUR ACCUMULATION VALUE. THE FIXED ACCOUNT The Fixed Account is supported by the assets in NYLIAC's general account, which includes all of NYLIAC's assets except those assets specifically allocated to NYLIAC's separate accounts. NYLIAC has sole discretion to invest the assets of the Fixed Account subject to applicable law. The Fixed Account is not registered under the federal securities laws and is generally not subject to their provisions. Therefore, generally you do not have the benefits and protections of these statutes for amounts allocated to the Fixed Account. Furthermore, the staff of the SEC has not reviewed the disclosures in this Prospectus relating to the Fixed Account. These disclosures regarding the Fixed Account may be subject to certain applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. 42 (a) Interest Crediting NYLIAC guarantees that it will credit interest at an annual effective rate of at least the minimum guaranteed interest rate stated on the Policy Data Page of your policy, to amounts allocated or transferred to the Fixed Account under the policies. We credit interest on a daily basis. NYLIAC may, at its sole discretion, credit a higher rate or rates of interest to amounts allocated or transferred to the Fixed Account. Interest rates will be set on the anniversary of each premium payment or transfer. All premium payments, and additional amounts (including transfers from other Investment Divisions) allocated to the Fixed Account, plus prior interest earned on such amounts, will receive their applicable interest rate for one-year periods from the anniversary on which the allocation or transfer was made. The Fixed Accumulation Value will never be less than the Fixed Account portion of the Nonforfeiture Value. (b) Transfers to Investment Divisions Generally, you may transfer amounts from the Fixed Account (if applicable) to the Investment Divisions up to 30 days prior to the Annuity Commencement Date, subject to the following conditions. 1. The maximum amount you are allowed to transfer from the Fixed Account to the Investment Divisions, including Interest Sweep transfers, during any Policy Year while the surrender charge period for the initial premium payment is in effect is 25% of the highest attained Fixed Accumulation Value as of the beginning of each Policy Year. When the surrender charge period is no longer in effect, the maximum amount that you are allowed to transfer from the Fixed Account to the Investment Divisions may not exceed 50% of the highest attained Fixed Accumulation Value as of the beginning of each Policy Year, regardless of any new surrender charge periods applicable to additional premium payments. The highest attained Fixed Accumulation Value will decrease by the amount of any withdrawals made from the Fixed Account, and increase by the amount of any additional premium payments made to the Fixed Account. When the Fixed Accumulation Value is zero, all previous Fixed Account values are disregarded, and the next Premium Payment to the Fixed Account will then be considered the highest attained Fixed Accumulation Value until a subsequent anniversary results in a higher balance. 2. The remaining value in the Fixed Account after a transfer from the Fixed Account to the Investment Divisions must be at least $25. If, after a contemplated transfer, the remaining values in the Fixed Account would be less than $25, that amount must be included in the transfer, unless NYLIAC in its discretion permits otherwise. We determine amounts transferred from the Fixed Account on a first-in, first-out (FIFO) basis, for purposes of determining the rate at which We credit interest on monies remaining in the Fixed Account. 3. No transfers are allowed into the Fixed Account for Premium based M&E Charge policies. For Premium based M&E Charge policies, premium payments transferred from the Fixed Account to the Investment Divisions are subject to a Mortality and Expense Risk and Administrative Costs Charge. Except as part of an existing request relating to Dollar Cost Averaging or the Interest Sweep, you may not transfer money into the Fixed Account if you made a transfer out of the Fixed Account during the previous six-month period. You must make transfer requests in writing in a form acceptable to Us and sent to VPSC at one of the addresses listed in Question 15 of this Prospectus, by telephone in accordance with established procedures or through our Virtual Service Center. Facsimile requests will not be accepted or processed. In addition, we will not accept e-mailed requests or e-mails of imaged, signed requests. We will deduct partial withdrawals and apply any surrender charges to the Fixed Account on a FIFO basis (i.e., from any value in the Fixed Account attributable to premium payments or transfers from Investment Divisions in the same order in which you allocated such payments or transfers to the Fixed Account during the life of the policy). FEDERAL TAX MATTERS INTRODUCTION THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. The Qualified Policies are designed for use by individuals in retirement plans which are intended to qualify as plans qualified for special income tax treatment under Sections 219, 403, 408 or 408A of the Code. The ultimate effect of federal income taxes on the Accumulation Value, on Income Payments and on the economic benefit to you, the Annuitant or the Beneficiary depends on the type of retirement plan for which the Qualified Policy is purchased, on the tax and employment status of the individual concerned and on NYLIAC's tax status. The following discussion assumes that Qualified Policies are used in retirement plans that qualify for the special federal income tax treatment described above. This discussion is not intended to address the tax consequences resulting from all of the situations in which a person may be entitled to or 43 may receive a distribution under a policy. Any person concerned about these tax implications should consult a tax adviser before making a premium payment. This discussion is based upon NYLIAC's understanding of the present federal income tax laws as they are currently interpreted by the Internal Revenue Service. We cannot predict the likelihood of continuation of the present federal income tax laws or of the current interpretations by the Internal Revenue Service, which may change from time to time without notice. Any such change could have retroactive effects regardless of the date of enactment. Moreover, this discussion does not take into consideration any applicable state or other tax laws except with respect to the imposition of any state premium taxes. We suggest you consult with your tax adviser. TAXATION OF ANNUITIES IN GENERAL The following discussion assumes that the policies will qualify as annuity contracts for federal income tax purposes. The Statement of Additional Information discusses such qualifications. Section 72 of the Code governs taxation of annuities in general. NYLIAC believes that an annuity policyowner generally is not taxed on increases in the value of a policy until distribution occurs either in the form of a lump sum received by withdrawing all or part of the Accumulation Value (i.e., surrenders or partial withdrawals) or as Income Payments under the Income Payment option elected. The exception to this rule is that generally, a policyowner of any deferred annuity policy who is not a natural person must include in income any increase in the excess of the policyowner's Accumulation Value over the policyowner's investment in the contract during the taxable year. However, there are some exceptions to this exception. You may wish to discuss these with your tax counsel. The taxable portion of a distribution (in the form of an annuity or lump sum payment) is generally taxed as ordinary income. For this purpose, the assignment, pledge, or agreement to assign or pledge any portion of the Accumulation Value generally will be treated as a distribution. In the case of a withdrawal or surrender distributed to a participant or Beneficiary under a Qualified Policy, a ratable portion of the amount received is taxable, generally based on the ratio of the investment in the contract to the total policy value. The "investment in the contract" generally equals the portion, if any, of any premium payments paid by or on behalf of an individual under a policy which is not excluded from the individual's gross income. For policies issued in connection with qualified plans, the "investment in the contract" can be zero. The law requires the use of special simplified methods to determine the taxable amount of payments that are based in whole or in part on the Annuitant's life and that are paid from TSAs. Generally, in the case of a withdrawal under a Non-Qualified Policy before the Annuity Commencement Date, amounts received are first treated as taxable income to the extent that the Accumulation Value immediately before the withdrawal exceeds the "investment in the contract" at that time. Any additional amount withdrawn is not taxable. On the other hand, upon a full surrender of a Non-Qualified Policy, if the "investment in the contract" exceeds the Accumulation Value (less any surrender charges), the loss is treated as an ordinary loss for federal income tax purposes. However, limitations may apply to the amount of the loss that may be deductible. It is the IRS's view that a loss on the surrender of a variable annuity contract is treated as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit. Although the tax consequences may vary depending on the Income Payment option elected under the policy, in general, only the portion of the Income Payment that represents the amount by which the Accumulation Value exceeds the "investment in the contract" will be taxed. After the investment in the Policy is recovered, the full amount of any additional Income Payments is taxable. For fixed Income Payments, in general, there is no tax on the portion of each payment which represents the same ratio that the "investment in the contract" bears to the total expected value of the Income Payments for the term of the payments. However, the remainder of each Income Payment is taxable until the recovery of the investment in the contract, and thereafter the full amount of each annuity payment is taxable. If death occurs before full recovery of the investment in the contract, the unrecovered amount may be deducted on the Annuitant's final tax return. Effective for amounts received in taxable years beginning after December 31, 2010, a policyowner may elect to apply a portion of the Accumulation Value towards one of the Income Payment options we may offer, while the remainder of the policy continues to accumulate income on a tax-deferred basis. This is called a partial annuitization. If a policyowner chooses to partially annuitize a policy, the resulting payments will be taxed as fixed income Payments described above, only if such payments are received for one of the following periods: (1) the annuitant's life (or the lives of the joint annuitants, if applicable), or (2) a period of 10 years or more. Provided such requirements are met, the "investment in the contract" will be allocated pro rata between each portion of the policy from which amounts are received as an annuity and the portion of the policy from which amounts are not received as an annuity. In the case of a distribution, a penalty tax equal to 10% of the amount treated as taxable income may be imposed. The penalty tax is not imposed in certain circumstances, including, generally, distributions: (1) made on or after the 44 date on which the policyowner attains age 59 1/2, (2) made as a result of the policyowner's (or, where the policyowner is not an individual, the Annuitant's) death, (3) made as a result of the policyowner's disability, (4) which are part of a series of substantially equal periodic payments (at least annually) made for the life (or life expectancy) of the policyowner or the joint lives (or joint life expectancies) of the policyowner and his or her designated beneficiary, or (5) received from an Inherited IRA. Other tax penalties may apply to certain distributions pursuant to a Qualified Policy. All non-qualified, deferred annuity contracts issued by NYLIAC (or its affiliates) to the same policyowner during any calendar year are to be treated as one annuity contract for purposes of determining the amount includible in an individual's gross income. In addition, there may be other situations in which the Treasury Department may conclude (under its authority to issue regulations) that it would be appropriate to aggregate two or more annuity contracts purchased by the same policyowner. Accordingly, a policyowner should consult a tax adviser before purchasing more than one policy or other annuity contract. A transfer of ownership of a policy, or designation of an Annuitant or other Beneficiary who is not also the policyowner, may result in certain income or gift tax consequences to the policyowner. A policyowner contemplating any transfer or assignment of a policy should consult a tax adviser with respect to the potential tax effects of such a transaction. 3.8 PERCENT TAX ON CERTAIN INVESTMENT INCOME Beginning in 2013, in general, a tax of 3.8 percent will apply to net investment income ("NII") received by an individual taxpayer to the extent his or her modified adjusted gross income ("MAGI") exceeds certain thresholds (e.g., $250,000 in the case of taxpayers filing jointly, $125,000 in the case of a married taxpayer filing separately and $200,000 in the case of other individual taxpayers). For this purpose, NII includes gross income from various investments, including gross income received with respect to annuities that are not held through a tax-qualified plan (e.g., a traditional IRA or Section 403(b) plan). Such income (as well as gross income from tax qualified plans) will also increase a taxpayer's MAGI for purposes of the taxable thresholds described above. This tax also applies to trusts and estates under a special set of rules. The IRS and the Treasury Department have not yet provided guidance regarding this new tax. You should consult your tax advisor to determine the applicability of this tax in your individual circumstances and with respect to any amount received under this annuity contract. PARTIAL SECTION 1035 EXCHANGES Section 1035 of the Code provides that an annuity contract may be exchanged in a tax-free transaction for another annuity contract or a long-term care insurance policy. The IRS has issued guidance which provides that the direct transfer of a portion of an annuity contract into another annuity contract can qualify as a tax-free exchange, provided certain requirements are met. Under this IRS guidance, no distributions or withdrawals can occur from the old or new annuity contract within 12 months of the partial exchange, unless you qualify for an exception. If a partial exchange does not meet applicable IRS requirements, it will not be treated as a tax-free transaction and will instead be treated as a distribution (taxable on an income-first basis) followed by a payment for the new contract. This IRS guidance, however, does not address the tax treatment of a partial exchange of an annuity contract for a long-term care insurance policy, and, in fact, the IRS has not yet provided any guidance with respect to such exchanges. Although we believe that taking a distribution or withdrawal from the Contract described in this prospectus within one year of a partial exchange of such Contract for a long-term care insurance policy should not cause such prior partial exchange to be treated as taxable, there can be no assurance that the IRS will not expand the 12-month rule described above to partial exchanges of an annuity contract for a long-term care insurance policy, or that the IRS will not provide other guidance with respect to such partial exchanges. IF YOU CONTEMPLATE SUCH AN EXCHANGE, YOU SHOULD CONSULT A TAX ADVISOR TO DISCUSS THE POTENTIAL TAX EFFECTS OF SUCH A TRANSACTION. QUALIFIED POLICIES Qualified Policies are designed for use with retirement plans that qualify for special federal income tax treatment under Sections 219, 403(b), 408, and 408A of the Code. The tax rules applicable to participants and beneficiaries in these plans vary according to the type of plan and the terms and conditions of the plan itself. Special favorable tax treatment may be available for certain types of contributions and distributions (including special rules for certain lump sum distributions to individuals who attained the age of 50 by January 1, 1986). Adverse tax consequences may result from contributions in excess of specified limits, distributions prior to age 59 1/2 (subject to certain exceptions), distributions that do not conform to specified minimum distribution rules and in certain other circumstances. Therefore, this discussion only provides general information about the use of Qualified Policies with the plans described below. Policyowners and participants under these plans, as well as Annuitants and Beneficiaries are cautioned that the rights of any person to any benefits under the plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the policy issued in connection with the plan. Purchasers of Qualified Policies should seek legal and tax advice regarding the suitability of the policy. 45 (a) 403(b) Plans. Under Section 403(b) of the Code, payments made by public school systems and certain tax exempt organizations to purchase annuity policies for their employees are excludible from the gross income of the employee, subject to certain limitations. However, such payments may be subject to FICA (Social Security) taxes. Important Information Regarding Final Code Section 403(b) Regulations On July 26, 2007, the Department of the Treasury published final Code section 403(b) regulations that were largely effective on January 1, 2009. These comprehensive regulations include several new rules and requirements, such as a requirement that employers maintain their Code section 403(b) plans pursuant to a written plan. The final regulations, subsequent IRS guidance, and the terms of the written plan and/or the written information sharing agreement between the employer and NYLIAC may impose new restrictions on both new and existing Code section 403(b) TSA contracts, including restrictions on the availability of loans, distributions, transfers and exchanges, regardless of when a contract was purchased. Prior to the effective date of the final regulations, IRS guidance applicable to tax-free transfers and exchanges of Code section 403(b) TSA contracts or custodial accounts became effective September 25, 2007, replacing existing rules under IRS Revenue Ruling 90-24 previously applicable to such transfers and exchanges (a "90-24 transfer"). Under this guidance, transfers and exchanges (both referred to below as "transfers") are available only to the extent permitted under the employer's written Code section 403(b) plan. Transfers occurring after September 24, 2007 that do not comply with this guidance can result in the applicable contract becoming taxable on January 1, 2009, or the date of the transfer, whichever is later. If you make a transfer to a contract or custodial account that is not part of the employer's Code section 403(b) plan (other than a transfer to a different plan), and the contract provider and employer fail to enter into an information sharing agreement by January 1, 2009, the transfer would be considered a "failed" transfer, resulting in the applicable contract becoming subject to tax. Additional guidance issued by the IRS generally permits a failed transfer to be corrected no later than June 30, 2009, by re-transferring to a contract or custodial account that is part of the employer's Code section 403(b) plan and/or that is subject to an information-sharing agreement with the employer. In general, certain contracts originally established by a 90-24 transfer prior to September 25, 2007, are exempt (or grandfathered) from some of the requirements of the final regulations; provided that no salary reduction or other contributions have ever been made to such contracts, and that no additional transfers are made to such contracts on or after September 25, 2007. Further, contracts that are not grandfathered are generally required to be part of, and subject to the requirements of, an employer's written Code section 403(b) plan no later than by January 1, 2009. The new rules in the final regulations generally do not affect a participant's ability to transfer some or all of a Code section 403(b) TSA contract to a state-defined benefit plan to purchase service credits, where such a transfer is otherwise consistent with applicable rules and requirements and with the terms of the employer's plan. You should discuss with your tax advisor the final Code section 403(b) regulations and other applicable IRS guidance in order to determine the impact they may have on any existing Code section 403(b) TSA contracts that you may own and/or on any Code section 403(b) TSA contract that you may consider purchasing. (b) Individual Retirement Annuities. Sections 219 and 408 of the Code permit individuals or their employers to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "IRA", including an employer-sponsored Simplified Employee Pension or "SEP". Individual Retirement Annuities are subject to limitations on the amount which may be contributed and deducted and the time when distributions may commence. In addition, distributions from certain other types of qualified plans may be placed into IRAs on a tax-deferred basis. (c) Roth Individual Retirement Annuities. Section 408A of the Code permits individuals with incomes below a certain level to contribute to an individual retirement program known as a "Roth Individual Retirement Annuity" or "Roth IRA." Roth IRAs are subject to limitations on the amount that may be contributed. Contributions to Roth IRAs are not deductible, but distributions from Roth IRAs that meet certain requirements are not included in gross income. Individuals generally may convert their existing non-Roth IRAs into Roth IRAs. Beginning in 2008, a direct rollover may also be made from an eligible retirement plan other than a non-Roth IRA (such as a qualified retirement plan, section 403(b) tax sheltered annuity, or eligible governmental section 457 plan) to a Roth IRA provided applicable requirements are met. Such conversions and rollovers will be subject to income tax at the time of conversion or rollover. 46 (d) Inherited IRAs. This policy may also be issued as an inherited IRA if, after the death of the owner of an IRA, the named Beneficiary (other than the IRA owner's spouse) directs that the IRA death proceeds be transferred to a new policy issued as an Inherited IRA. Beginning in 2007, a non-spouse beneficiary of an eligible retirement plan (such as a qualified retirement plan, section 403(b) tax sheltered annuity, or eligible governmental section 457 plan) may, if all applicable requirements are met, directly rollover a distribution from such plan into an Inherited IRA. The named Beneficiary of the original IRA policy or eligible retirement plan (as the case may be) will become the Annuitant under the Inherited IRA and may generally exercise all rights under the Inherited IRA policy, including the right to name his or her own Beneficiary in the event of death. Special tax rules apply to an Inherited IRA. The tax law does not permit additional premiums to be contributed to an Inherited IRA policy. Also, in order to avoid certain income tax penalties, a Required Minimum Distribution (RMD) must be withdrawn each year from an inherited IRA policy. The first RMD must be taken on or before December 31 of the calendar year following the year of the original IRA owner's or eligible retirement plan participants' death. The tax penalty equals 50% of the excess of the RMD amount over the amounts, if any, actually withdrawn from the Inherited IRA during the calendar year. (e) Deferred Compensation Plans. Section 457 of the Code, while not actually providing for a qualified plan as that term is normally used, provides for certain deferred compensation plans with respect to service for state governments, local governments, political subdivisions, agencies, instrumentalities and certain affiliates of such entities and tax exempt organizations which enjoy special treatment. The policies can be used with such plans. Under such plans, a participant may specify the form of investment in which his or her participation will be made. Such investments are generally owned by, and are subject to the claims of the general creditors of, the sponsoring employer, except that Section 457 plans of state and local government must be held and used for the exclusive benefit of participants and beneficiaries in a trust or annuity contract. (f) SIMPLE IRAs. SIMPLE IRAs permit certain small employers to establish SIMPLE IRA plans as provided by Section 408(p) of the Code, under which employees may elect to defer to a Simple IRA a percentage of compensation up to $11,500 for 2011 (and thereafter, adjusted for cost-of- living increases in accordance with the Code). Employees who attain age 50 or over by the end of the relevant calendar year may also elect to make an additional catch-up contribution. Such additional contribution may be up to $2,500 for 2011 (and thereafter adjusted for cost-of-living increases in accordance with the Code). The sponsoring employer is generally required to make matching or non-elective contributions on behalf of employees. Distributions from SIMPLE IRAs are subject to the same restrictions that apply to IRA distributions and are taxed as ordinary income. Subject to certain exceptions, distributions prior to age 59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the distribution occurs within the first two years after the commencement of the employee's participation in the SIMPLE IRA plan. All references in this Prospectus to the 10% penalty tax should be read to include this limited 25% penalty tax if your Qualified Policy is used as a SIMPLE IRA. The Qualified Policies are subject to the required minimum distribution ("RMD") rules under Code section 401(a)(9) and the regulations issued thereunder. Under these rules, generally, distributions under your Qualified Policy must begin no later than the beginning date required by the Internal Revenue Service ("IRS"). The beginning date is determined by the type of Qualified Policy that you own. For each calendar year that an RMD is not timely made, a 50% excise tax is imposed on the amount that should have been distributed, but was not. Unless the distributions are made in the form of an annuity that complies with Code section 401(a)(9) and the regulations issued thereunder, the minimum amount required to be distributed for each calendar year is generally determined by dividing the value of the Qualified Policy as of the end of the prior calendar year by the applicable distribution period (determined under IRS tables). Beginning in 2006, regulations under Code section 401(a)(9) provide a new method for calculating the amount of RMDs from Qualified Policies. Under these regulations, during the accumulation phase of the Qualified Policy, the actuarial present value of certain additional benefits provided under the policy (such as guaranteed death benefits) must be taken into account in calculating the value of the Qualified Policy for purposes of determining the annual RMD for the Qualified Policy. As a result, under these regulations, it is possible that, after taking account of the value of such benefits, there may not be sufficient Accumulation Value to satisfy the applicable RMD requirement. This generally will depend on the investment performance of your policy. You may need to satisfy such RMD from other tax-qualified plans that you own. Your should consult with your tax advisor regarding these requirements and the implications of purchasing any riders or other benefits in connection with your Qualified Policy. TAXATION OF DEATH BENEFITS The tax treatment of amounts distributed from your contract upon the death of the policyowner or annuitant depends on whether the policyowner or annuitant dies before or after the Annuity Commencement Date. If death 47 occurs prior to the Annuity Commencement Date, and the Beneficiary receives payments under an annuity payout option, the benefits are generally taxed in the manner described above for annuity payouts. If the benefits are received in a lump sum, they are taxed to the extent they exceed the remaining investment in the contract. If death occurs after the Annuity Commencement Date, amounts received by the Beneficiary are not taxed until they exceed the remaining investment in the contract. DISTRIBUTION AND COMPENSATION ARRANGEMENTS NYLIFE Distributors LLC (NYLIFE Distributors), the underwriter and distributor of the policies, is registered with the SEC and the Financial Industry Regulatory Authority, Inc. (FINRA) as a broker-dealer. The firm is an indirect wholly-owned subsidiary of New York Life, and an affiliate of NYLIAC. Its principal business address is 169 Lackawanna Avenue, Parsippany, New Jersey 07054. The policies are sold by registered representatives of NYLIFE Securities, LLC ("NYLIFE Securities"), a broker-dealer that is an affiliate of NYLIFE Distributors. Your registered representative is also a licensed insurance agent with New York Life. He or she may be qualified to offer other forms of life insurance, annuities, and other investment products. In certain circumstances, NYLIFE Securities registered representatives can sell both products manufactured and issued by New York Life or its affiliates and products provided by other companies. The selling broker-dealer, and in turn your registered representative, will receive compensation for selling you this policy or any other investment product. Compensation may consist of commissions, asset-based compensation, allowances for expenses, and other compensation programs. The amount of compensation received by your registered representative will vary depending on the policy that he or she sells, on sales production goals, and on the specific payment arrangements of the relevant broker-dealer. Differing compensation arrangements have the potential to influence the recommendation made by your registered representative or broker-dealer. The maximum commission paid to broker-dealers who have entered into dealer arrangements with NYLIFE Distributors is typically 6.25% of all premiums received. New York Life also has other compensation programs where registered representatives, managers, and employees involved in the sales process receive additional compensation related to the sale of products manufactured and issued by New York Life or its affiliates. NYLIFE Securities registered representatives who are members of the General Office management team receive compensation based on a number of incentive programs designed to compensate for education, supervision, training, and recruiting of agents. NYLIFE Securities registered representatives can qualify to attend New York Life-sponsored educational, training, and development conferences based on the sales they make of life insurance, annuities, and investment products during a particular twelve-month period. In addition, qualification for recognition programs sponsored by New York Life depends on the sale of products manufactured and issued by New York Life or its affiliates. VOTING RIGHTS The Funds are not required to and typically do not hold routine annual stockholder meetings. Special stockholder meetings will be called when necessary. To the extent required by law, NYLIAC will vote the Eligible Portfolio shares held in the Investment Divisions at special shareholder meetings of the Funds in accordance with instructions We receive from persons having voting interests in the corresponding Investment Division. If, however, the federal securities laws are amended, or if NYLIAC's present interpretation should change, and as a result, NYLIAC determines that it is allowed to vote the Eligible Portfolio shares in its own right, We may elect to do so. Prior to the Annuity Commencement Date, you hold a voting interest in each Investment Division to which you have money allocated. We will determine the number of votes which are available to you by dividing the Accumulation Value attributable to an Investment Division by the net asset value per share of the applicable Eligible Portfolios. We will calculate the number of votes which are available to you separately for each Investment Division. We will determine that number by applying your percentage interest, if any, in a particular Investment Division to the total number of votes attributable to the Investment Division. We will determine the number of votes of the Eligible Portfolio which are available as of the date established by the Portfolio of the relevant Fund. Voting instructions will be solicited by written or electronic communication prior to such meeting in accordance with procedures established by the relevant Fund. If We do not receive timely instructions, We will vote those shares in proportion to the voting instructions which are received with respect to all policies participating in that Investment Division. As a result, a small number of policyholders may control the outcome of the vote. We will apply voting instructions to abstain on any item to be voted upon on a pro rata basis to reduce the votes eligible to be cast. Each person having a voting interest in an Investment Division will receive proxy material, reports and other materials relating to the appropriate Eligible Portfolio. 48 TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION (SAI) The SAI contains more details concerning the subjects discussed in this Prospectus. The following is the Table of Contents for the SAI:
PAGE ---- THE POLICIES.................................................................... 2 Valuation of Accumulation Units............................................ 2 ANNUITY PAYMENTS................................................................ 2 GENERAL MATTERS................................................................. 3 FEDERAL TAX MATTERS............................................................. 3 Taxation of New York Life Insurance and Annuity Corporation................ 3 Tax Status of the Policies................................................. 3 SAFEKEEPING OF SEPARATE ACCOUNT ASSETS.......................................... 4 STATE REGULATION................................................................ 4 RECORDS AND REPORTS............................................................. 4 LEGAL PROCEEDINGS............................................................... 5 FINANCIAL STATEMENTS............................................................ 5 OTHER INFORMATION............................................................... 5 NYLIAC AND SEPARATE ACCOUNT FINANCIAL STATEMENTS................................ F-1
How to obtain a New York Life Flexible Premium Variable Annuity II Statement of Additional Information. The New York Life Flexible Premium Variable Annuity II Statement of Additional Information is posted on Our website, www.newyorklife.com. For a paper copy of the Statement of Additional Information, call (800) 598-2019 or send this request form to: NYLIAC Variable Products Service Center Madison Square Station P.O. Box 922 New York, New York 10159 -------------------------------------------------------------------------------- Please send me a New York Life Flexible Premium Variable Annuity II Statement of Additional Information dated May 1, 2011 --------------------------------------------------------------------------- Name --------------------------------------------------------------------------- Address --------------------------------------------------------------------------- City State Zip 49 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2011 FOR NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II FROM NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A DELAWARE CORPORATION) 51 MADISON AVENUE, ROOM 251 NEW YORK, NEW YORK 10010 INVESTING IN NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV This Statement of Additional Information ("SAI") is not a prospectus. This SAI contains information that expands upon subjects discussed in the current New York Life Flexible Premium Variable Annuity II Prospectus. You should read the SAI in conjunction with the current New York Life Flexible Premium Variable Annuity II Prospectus dated May 1, 2011. You may obtain a copy of the Prospectus by calling NYLIAC at (800) 598-2019 or writing to NYLIAC Variable Products Service Center, Madison Square Station, P.O. Box 922, New York, NY 10159. Terms used but not defined in this SAI have the same meaning as in the current New York Life Flexible Premium Variable Annuity II Prospectus. TABLE OF CONTENTS
PAGE ---- THE POLICIES.................................................................... 2 Valuation of Accumulation Units............................................ 2 ANNUITY PAYMENTS................................................................ 2 GENERAL MATTERS................................................................. 3 FEDERAL TAX MATTERS............................................................. 3 Taxation of New York Life Insurance and Annuity Corporation................ 3 Tax Status of the Policies................................................. 3 SAFEKEEPING OF SEPARATE ACCOUNT ASSETS.......................................... 4 STATE REGULATION................................................................ 4 RECORDS AND REPORTS............................................................. 4 LEGAL PROCEEDINGS............................................................... 5 FINANCIAL STATEMENTS............................................................ 5 OTHER INFORMATION............................................................... 5 NYLIAC AND SEPARATE ACCOUNT FINANCIAL STATEMENTS................................ F-1
THE POLICIES The following provides additional information about the policies and supplements the description in the Prospectus. VALUATION OF ACCUMULATION UNITS Accumulation Units are valued separately for each Investment Division of the Separate Account. The method used for valuing Accumulation Units in each Investment Division is the same. We arbitrarily set the value of each Accumulation Unit as of the date operations began for the Investment Division. Thereafter, the value of an Accumulation Unit of an Investment Division for any Business Day equals the value of an Accumulation Unit in that Investment Division as of the immediately preceding Business Day multiplied by the "Net Investment Factor" for that Investment Division for the current Business Day. We determine the Net Investment Factor for Accumulation Value Based M&E Charge (Separate Account-III) policies for each Investment Division for any period from the close of the preceding Business Day to the close of the current Business Day (the "Valuation Period") by the following formula: (a/b) - c Where: a = the result of: (1) the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined at the end of the current Valuation Period, plus (2) the per share amount of any dividend or capital gain distribution made by the Eligible Portfolio for shares held in the Investment Division if the "ex-dividend" date occurs during the current Valuation Period; b = the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined as of the end of the immediately preceding Valuation Period; and c = the daily Mortality and Expense Risk and Administrative Costs charge, which is 1/365th* of the annual Mortality and Expense Risk and Administrative Costs Charge shown on the Policy Data Page. * In a leap year, this calculation is based on 366 days. In each case, the Net Investment Factor for Premium Based M&E Charge (Separate Account-IV) policies is determined by the following formula: (a/b) Where: a = the result of: (1) the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined at the end of the current Valuation Period, plus (2) the per share amount of any dividend or capital gain distribution made by the Eligible Portfolio for shares held in the Investment Division if the "ex-dividend" date occurs during the current Valuation Period; b = is the net asset value per share of the Eligible Portfolio shares held in the Investment Division determined as of the end of the immediately preceding Valuation Period. In each case, the Net Investment Factor may be greater or less than one. Therefore, the value of an Accumulation Unit in an Investment Division may increase or decrease from Valuation Period to Valuation Period. ANNUITY PAYMENTS We will make equal annuity payments each month under the Life Income Payment Option during the lifetime of the Annuitant. Once payments begin, they do not change and are guaranteed for 10 years even if the Annuitant dies sooner. If the Annuitant dies before all guaranteed payments have been made, the rest will be made to the Beneficiary. We may require that the payee submit proof of the Annuitant's survivorship as a condition for future payments beyond the 10- year guaranteed payment period. On the Annuity Commencement Date, We will determine the Accumulation Value of your policy and use that value to calculate the amount of each annuity payment. We determine each annuity payment by applying the Accumulation Value, less any premium taxes, to the annuity factors specified in the annuity table set forth in the policy. Those factors are based on a set amount per $1,000 of proceeds applied. The appropriate rate must be determined by the gender (except where, as in the case of certain Qualified Policies and other employer-sponsored retirement plans, such classification is not permitted), date of application and age of the Annuitant. The dollars 2 applied are then divided by 1,000 and the result multiplied by the appropriate annuity factor from the table to compute the amount of the each monthly annuity payment. GENERAL MATTERS NON-PARTICIPATING. The policies are non-participating. Dividends are not paid. MISSTATEMENT OF AGE OR GENDER. If the Annuitant's stated age and/or gender in the policy are incorrect, NYLIAC will change the benefits payable to those which the premium payments would have purchased for the correct age and gender. Gender is not a factor when annuity benefits are based on unisex annuity payment rate tables. (See "Income Payments--Election of Income Payment Options" in the Prospectus.) If We made payments based on incorrect age or gender, We will increase or reduce a later payment or payments to adjust for the error. Any adjustment will include interest, at 3.5% per year, from the date of the wrong payment to the date the adjustment is made. ASSIGNMENTS. If permitted by the plan or by law for the plan indicated in the application for the policy, you may assign your interest in a Non-Qualified Policy or any interest in it prior to the Annuity Commencement Date and during the Owner's lifetime. In order to effect an assignment of all or any part of your interest in a Non-Qualified Policy prior to the Annuity Commencement Date and during the Owner's lifetime, you must send a duly executed instrument of assignment to VPSC at one of the addresses listed in Question 15 of the Prospectus. NYLIAC will not be deemed to know of an assignment unless it receives a copy of a duly executed instrument evidencing such assignment. Further, NYLIAC assumes no responsibility for the validity of any assignment. (See "Federal Tax Matters--Taxation of Annuities in General" of the Prospectus.) MODIFICATION. NYLIAC may not modify the policy without your consent except to make the policy meet the requirements of the Investment Company Act of 1940, or to make the policy comply with any changes in the Code or as required by the Code in order to continue treatment of the policy as an annuity, or by any other applicable law. INCONTESTABILITY. We rely on statements made in the application. They are representations, not warranties. We will not contest the policy after it has been in force during the lifetime of the Annuitant for two years from the Policy Date. FEDERAL TAX MATTERS TAXATION OF NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION NYLIAC is taxed as a life insurance company. Because the Separate Account is not an entity separate from NYLIAC, and its operations form a part of NYLIAC, it will not be taxed separately as a "regulated investment company" under Subchapter M of the Code. As a result, NYLIAC takes into account applicable tax attributes of the assets of the Separate Account on its corporate income tax return, including corporate dividends received deductions and foreign tax credits that may be produced by assets of the Separate Account. Investment income and realized net capital gains on the assets of the Separate Account are reinvested and are taken into account in determining the Accumulation Value. As a result, such investment income and realized net capital gains are automatically retained as part of the reserves under the policy. Under existing federal income tax law, NYLIAC believes that Separate Account investment income and realized net capital gains should not be taxed to the extent that such income and gains are retained as part of the tax-deductible reserves under the policy. TAX STATUS OF THE POLICIES Section 817(h) of the Code requires that the investments of the Separate Account must be "adequately diversified" in accordance with Treasury regulations in order for the policies to qualify as annuity contracts under Section 72 of the Code. The Separate Account intends to comply with the diversification requirements prescribed by the Treasury under Treasury Regulation Section 1.817- 5. To comply with regulations under Section 817(h) of the Code, the Separate Account is required to diversify its investments, so that on the last day of each quarter of a calendar year, no more than 55% of the value of its assets is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments, and no more than 90% is represented by any four investments. For this purpose, securities of a single issuer are treated as one investment and each U.S. Government agency or instrumentality is treated as a separate issuer. Any security issued, guaranteed, or insured (to the extent so guaranteed or insured) by the U.S. Government or an agency or instrumentality of the U.S. Government is treated as a security issued by the U.S. Government or its agency or instrumentality, whichever is applicable. 3 Although the Treasury Department has issued regulations on the diversification requirements, such regulations do not provide guidance concerning the extent to which policyowners may direct their investments to particular subaccounts of a separate account, or the permitted number of such subaccounts. It is unclear whether additional guidance in this regard will be issued in the future. It is possible that if such guidance is issued, the policy may need to be modified to comply with such additional guidance. For these reasons, NYLIAC reserves the right to modify the policy as necessary to attempt to prevent the policyowner from being considered the owner of the assets of the Separate Account or otherwise to qualify the policy for favorable tax treatment. The Code also requires that non-qualified annuity contracts contain specific provisions for distribution of the policy proceeds upon the death of any policyowner. In order to be treated as an annuity contract for federal income tax purposes, the Code requires that such policies provide that (a) if any policyowner dies on or after the Annuity Commencement Date and before the entire interest in the policy has been distributed, the remaining portion must be distributed at least as rapidly as under the method in effect on the policyowner's death; and (b) if any policyowner dies before the Annuity Commencement Date, the entire interest in the policy must generally be distributed within 5 years after the policyowner's date of death. For policies owned by a grantor trust, all of whose grantors are individuals, these distribution requirements apply at the death of any grantor. These requirements will be considered satisfied if the entire interest of the policy is used to purchase an immediate annuity under which payments will begin within one year of the policyowner's death and will be made for the life of the Beneficiary or for a period not extending beyond the life expectancy of the Beneficiary. If the Beneficiary is the policyowner's surviving spouse (as defined under Federal law), the Policy may be continued with the surviving spouse as the new policyowner. If the policyowner is not a natural person, these "death of Owner" rules apply when the primary Annuitant dies or is changed. Non-Qualified Policies contain provisions intended to comply with these requirements of the Code. No regulations interpreting these requirements of the Code have yet been issued and thus no assurance can be given that the provisions contained in these policies satisfy all such Code requirements. The provisions contained in these policies will be reviewed and modified if necessary to assure that they comply with the Code requirements when clarified by regulation or otherwise. Withholding of federal income taxes on the taxable portion of all distributions may be required unless the recipient elects not to have any such amounts withheld and properly notifies NYLIAC of that election. Different rules may apply to United States citizens or expatriates living abroad. In addition, some states have enacted legislation requiring withholding. Even if a recipient elects no withholding, special rules may require NYLIAC to disregard the recipient's election if the recipient fails to supply NYLIAC with a "TIN" or taxpayer identification number (social security number for individuals) or if the Internal Revenue Service notifies NYLIAC that the TIN provided by the recipient is incorrect. SAFEKEEPING OF SEPARATE ACCOUNT ASSETS NYLIAC holds title to assets of the Separate Accounts. The assets are kept physically segregated and held separate and apart from NYLIAC's general corporate assets. Records are maintained of all purchases and redemptions of Eligible Portfolio shares held by each of the Investment Divisions. STATE REGULATION NYLIAC is a stock life insurance company organized under the laws of Delaware, and is subject to regulation by the Delaware State Insurance Department. We file an annual statement with the Delaware Commissioner of Insurance on or before March 1 of each year covering the operations and reporting on the financial condition of NYLIAC as of December 31 of the preceding calendar year. Periodically, the Delaware Commissioner of Insurance examines the financial condition of NYLIAC, including the liabilities and reserves of the Separate Account. In addition, NYLIAC is subject to the insurance laws and regulations of all the states where it is licensed to operate. The availability of certain policy rights and provisions depends on state approval and/or filing and review processes. Where required by state law or regulation, the policies will be modified accordingly. RECORDS AND REPORTS NYLIAC maintains all records and accounts relating to the Separate Account. As presently required by the federal securities laws, NYLIAC will mail to you at your last known address of record, at least semi-annually after the first Policy Year, reports containing information required under the federal securities laws or by any other applicable law or regulation. IT IS IMPORTANT THAT YOUR CONFIRMATION AND QUARTERLY STATEMENTS BE REVIEWED IMMEDIATELY TO ENSURE THAT THERE ARE NO ERRORS. IN ORDER TO CORRECT AN ERROR, YOU MUST CALL IT TO OUR ATTENTION WITHIN 15 DAYS OF THE DATE OF THE STATEMENT. 4 IT IS IMPORTANT THAT YOU INFORM NYLIAC OF AN ADDRESS CHANGE SO THAT YOU CAN RECEIVE THESE POLICY STATEMENTS (SEE "HOW DO I CONTACT NYLIAC BY TELEPHONE OR BY THE INTERNET?" IN THE PROSPECTUS). IN THE EVENT YOUR STATEMENT IS RETURNED FROM THE US POSTAL SERVICE AS UNDELIVERABLE, WE RESERVE THE RIGHT TO SUSPEND MAILING FUTURE CORRESPONDENCE AND ALSO SUSPEND CURRENT TRANSACTION PROCESSING UNTIL AN ACCURATE ADDRESS IS OBTAINED. ADDITIONALLY, NO NEW SERVICE REQUESTS CAN BE PROCESSED UNTIL A VALID CURRENT ADDRESS IS PROVIDED. LEGAL PROCEEDINGS NYLIAC is a defendant in lawsuits arising from its agency sales force, insurance (including variable contracts registered under the federal securities law) and/or other operations. Most of these actions seek substantial or unspecified compensatory and punitive damages. NYLIAC is from time to time involved in various governmental, administrative, and investigative proceedings and inquiries. Notwithstanding the uncertain nature of litigation and regulatory inquiries, the outcome of which cannot be predicted, NYLIAC believes that, after provisions made in the financial statements, the ultimate liability that could result from litigation and proceedings would not have a material adverse effect on NYLIAC's financial position; however, it is possible that settlements or adverse determinations in one or more actions or other proceedings in the future could have a material adverse effect on NYLIAC's operating results for a given year. FINANCIAL STATEMENTS The consolidated balance sheet of NYLIAC as of December 31, 2010 and 2009, and the consolidated statements of income, of stockholder's equity and of cash flows for each of the three years in the period ended December 31, 2010 included in this SAI have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The Separate Account statement of assets and liabilities as of December 31, 2010 and the statements of operations and of changes in net assets and the financial highlights for each of the periods indicated in the financial statements have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. OTHER INFORMATION NYLIAC filed a registration statement with the Securities and Exchange Commission, under the Securities Act of 1933 as amended, with respect to the policies discussed in the Prospectus and this Statement of Additional Information. We have not included all of the information set forth in the registration statement, amendments and exhibits to the registration statement in the Prospectus and this Statement of Additional Information. We intend the statements contained in the Prospectus and this Statement of Additional Information concerning the content of the policies and other legal instruments to be summaries. For a complete statement of the terms of these documents, you should refer to the instruments filed with the Securities and Exchange Commission. The omitted information may be obtained at the principal offices of the Securities and Exchange Commission in Washington, D.C., upon payment of prescribed fees, or through the Commission's website at www.sec.gov. 5 Supplement dated May 1, 2011 to the Prospectuses dated May 1, 2011 for NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY NEW YORK LIFE FLEXIBLE PREMIUM VARIABLE ANNUITY II NEW YORK LIFE COMPLETE ACCESS VARIABLE ANNUITY NEW YORK LIFE PREMIER PLUS VARIABLE ANNUITY NEW YORK LIFE PREMIER VARIABLE ANNUITY INVESTING IN NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-III; AND NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV This supplement amends the Prospectus for the New York Life Flexible Premium Variable Annuity, New York Life Flexible Premium Variable Annuity II, New York Life Complete Access, the New York Life Premier Plus Variable Annuity, and the New York Life Premier Variable Annuity policies ("policies"). You should read this information carefully and retain this supplement for future reference together with the prospectus(es). All capitalized terms have the same meaning as those included in the prospectuses. This supplement only applies to Non-Qualified Policies issued to fund a Pension Plan. The purpose of this supplement is to modify the prospectuses to disclose the terms under which the policies will be issued to fund a Pension Plan qualified under Section 401(a) of the Internal Revenue Code of 1986 as amended (Code). The main differences between the policies described in the May 1, 2010 prospectuses and policies issued to fund a Pension Plan, are that Non-Qualified Policies issued to fund a Pension Plan: (1) will have higher minimum initial and additional premium payments, (2) will not include the Unemployment Benefit Rider, and (3) cannot add the Enhanced Spousal Continuance Rider. Keeping this in mind, please note that the prospectuses for Non-Qualified Policies issued to fund a Pension Plan are modified as follows: A. DEFINITIONS 1. Replace the definition of "Non-Qualified Policies" with the following: Non-Qualified Policies: Policies that are not available for use by individuals in connection with employee retirement plans that are intended to qualify for special federal income tax treatment under Sections 403(b), 408, 408A and 457 of the Code. Non-Qualified Policies include policies issued to other retirement plans or arrangements, including Pension Plans qualifying under Section 401(a) of the Code. 2. Replace the definition of "Qualified Policies" with the following: Qualified Policies: Policies for use by individuals under employee retirement plans that are intended to qualify for special federal income tax treatment under Sections 403(b), 408, 408A and 457 of the Code. Qualified Policies do not include policies issued to any other retirement plan or arrangement, including Pension Plans qualifying under Section 401(a) of the Code. 3. Add the following definition of "Pension Plan": Pension Plan: A retirement plan that is qualified under Section 401(a) of the Code. B. QUESTIONS AND ANSWERS 1. For New York Life Variable Annuity, New York Life Premium Plus, New York Life Premium Plus II, New York Life Essentials, New York Life Elite, New York Life Premium Plus Elite, New York Life Access, New York Life Complete Access, New York Life Premier Plus and New York Life Premier policies, delete the first two sentences to "What are the minimum initial and maximum additional premium payments?" and replace them with the following: (a) for New York Life Complete Access policies: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional premium payment is $1,000 or such lower amount as We may permit at any time. (b) For New York Life Premier Plus and New York Life Premier policies: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional premium payment is $1,000 or such lower amount as We may permit at any time. 2. For New York Life Flexible Premium and New York Life Flexible Premium II policies, delete the first two sentences of the third full paragraph to the answer to "What are the minimum initial and maximum additional premium payments?" and replace them with the following: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional payment is $50 or such lower amount as We may permit at any time. C. THE POLICIES -- Qualified and Non-Qualified Policies 1. Under the first paragraph of this section, delete the fourth sentence and replace the fifth sentence with the following: You may purchase a Qualified Policy for use with any one of the retirement plans listed below. 2. Under the next full paragraph that begins "If you are considering a Qualified Policy. . .," revise the first sentence to read: If you are considering a Qualified Policy or a Non-Qualified Policy issued to fund a Pension Plan, you should be aware that this annuity will fund a retirement plan that already provides for tax deferral under the Code. D. THE POLICIES -- Policy Application and Premium Payments 1. For New York Life Complete Access, New York Life Premier Plus and New York Life Premier Variable Annuity policies, under the section entitled Policy Application and Premium Payments, delete the first two sentences of the fourth paragraph and replace them with the following: (a) for New York Life Complete Access policies: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional premium payment is $1,000 or such lower amount as We may permit at any time. (b) For New York Life Premier Plus and New York Life Premier policies: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional premium payment is $1,000 or such lower amount as We may permit at any time. 2. For New York Life Flexible Premium II policies, under the section entitled Policy Application and Premium Payments, delete the first two sentences of the fifth paragraph and replace them with the following: Unless We permit otherwise, the minimum initial premium for Non- Qualified Policies issued to fund a Pension Plan is $10,000. The minimum additional payment is $50 or such lower amount as We may permit at any time. E. THE POLICIES -- Riders 1. For the New York Life Flexible Premium Variable Annuity, the New York Life Variable Annuity, the New York Life Premium Plus Variable Annuity, the New York Life Premium Plus II Variable Annuity, the New York Life Essentials Variable Annuity, the New York Life Elite Variable Annuity, the New York Life Premium Plus Elite Variable Annuity, the New York Life Premier Plus Variable Annuity and the New York Life Premier Variable Annuity policies, under the heading "Riders," delete the second sentence and replace the first sentence with the following: At no additional charge, We include a Living Needs Benefit/Unemployment Benefit Rider. The Unemployment Benefit portion of the rider is not available for Non-Qualified Policies issued to fund a Pension Plan. 2. Under the heading "Riders - Enhanced Beneficiary Benefit Rider (optional)," delete the eighth full paragraph and replace it with the following: There will be no payment under the EBB Rider if, on the date We calculate the EBB: 1) there is no Gain, 2) the policy's Accumulation Value is less than your premium payments made and not previously withdrawn, or 3) the rider has ended or terminated. The EBB Rider will end on the earliest of the following: 1) on the Annuity Commencement Date, 2) if you surrender the policy or 3) if you transfer ownership of the policy. You cannot cancel this rider without surrendering your policy. 3. Under the section "Riders," delete the heading "Enhanced Spousal Continuance Rider (optional)" and the four paragraphs of disclosure under that heading. -------------------------------------------------------------------------------- New York Life Insurance and Annuity Corporation 51 Madison Avenue New York, New York 10010 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV FINANCIAL STATEMENTS F-1 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV (THIS PAGE INTENTIONALLY LEFT BLANK) F-2 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV (THIS PAGE INTENTIONALLY LEFT BLANK) F-3 STATEMENT OF ASSETS AND LIABILITIES As of December 31, 2010
MAINSTAY VP MAINSTAY VP MAINSTAY VP BALANCED-- BOND-- CASH SERVICE CLASS SERVICE CLASS MANAGEMENT ---------------------------------------------- ASSETS: Investment at net asset value......... $52,749,141 $140,370,332 $153,898,900 Dividends due and accrued............. -- -- 1,177 Net receivable (payable) to New York Life Insurance and Annuity Corporation........................ (21,299) 205,116 939,443 LIABILITIES: Liability to New York Life Insurance and Annuity Corporation for: Mortality and expense risk charges.......................... 104,078 289,160 408,655 ----------- ------------ ------------ Total net assets................. $52,623,764 $140,286,288 $154,430,865 =========== ============ ============ TOTAL NET ASSETS REPRESENTED BY: Net Assets of Policyowners: Series I Policies..................... $37,202,331 $ 91,562,096 $116,449,939 Series II Policies.................... $ 3,858,621 $ 16,567,628 $ 10,654,059 Series III Policies................... $11,562,812 $ 32,156,564 $ 27,326,867 ----------- ------------ ------------ Total net assets................. $52,623,764 $140,286,288 $154,430,865 =========== ============ ============ Series I Variable accumulation unit value............................ $ 12.39 $ 14.22 $ 1.17 =========== ============ ============ Series II Variable accumulation unit value....................... $ 12.03 $ 11.05 $ 10.00 =========== ============ ============ Series III Variable accumulation unit value....................... $ 12.31 $ 11.05 $ 10.00 =========== ============ ============ Identified Cost of Investment........... $51,549,464 $138,577,079 $153,913,641 =========== ============ ============
Not all Investment Divisions are available under all policies. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-4 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP COMMON CONSERVATIVE MAINSTAY VP FLOATING MAINSTAY VP GROWTH GROWTH STOCK-- ALLOCATION-- CONVERTIBLE-- RATE-- GOVERNMENT-- ALLOCATION-- EQUITY-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS ---------------------------------------------------------------------------------------------------------------- $22,454,593 $160,242,386 $132,486,360 $141,058,964 $94,843,091 $118,955,727 $12,900,486 -- -- -- 514,054 -- -- -- 500 485,285 (2,793) 76,119 4,325 (1,873) 460 47,720 318,071 261,897 304,888 208,661 262,774 25,301 ----------- ------------ ------------ ------------ ----------- ------------ ----------- $22,407,373 $160,409,600 $132,221,670 $141,344,249 $94,638,755 $118,691,080 $12,875,645 =========== ============ ============ ============ =========== ============ =========== $20,426,035 $105,901,397 $ 86,954,190 $ 92,391,887 $69,232,531 $ 96,060,182 $10,687,162 $ 667,454 $ 14,388,502 $ 14,449,778 $ 16,164,820 $ 9,232,161 $ 6,308,810 $ 641,752 $ 1,313,884 $ 40,119,701 $ 30,817,702 $ 32,787,542 $16,174,063 $ 16,322,088 $ 1,546,731 ----------- ------------ ------------ ------------ ----------- ------------ ----------- $22,407,373 $160,409,600 $132,221,670 $141,344,249 $94,638,755 $118,691,080 $12,875,645 =========== ============ ============ ============ =========== ============ =========== $ 14.05 $ 12.69 $ 17.30 $ 12.20 $ 13.66 $ 11.27 $ 13.26 =========== ============ ============ ============ =========== ============ =========== $ 12.22 $ 11.96 $ 13.54 $ 11.28 $ 10.77 $ 12.67 $ 12.69 =========== ============ ============ ============ =========== ============ =========== $ 12.50 $ 11.88 $ 13.54 $ 11.26 $ 10.68 $ 12.67 $ 12.69 =========== ============ ============ ============ =========== ============ =========== $26,151,855 $148,826,193 $116,435,490 $136,000,389 $95,807,197 $117,669,694 $12,022,638 =========== ============ ============ ============ =========== ============ ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-5 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) As of December 31, 2010
MAINSTAY VP HIGH YIELD MAINSTAY VP MAINSTAY VP CORPORATE ICAP SELECT INCOME BOND-- EQUITY-- BUILDER-- SERVICE CLASS SERVICE CLASS SERVICE CLASS ---------------------------------------------- ASSETS: Investment at net asset value......... $434,622,738 $189,591,339 $17,221,014 Dividends due and accrued............. -- -- -- Net receivable (payable) to New York Life Insurance and Annuity Corporation........................ 834,403 (24,516) (1,145) LIABILITIES: Liability to New York Life Insurance and Annuity Corporation for: Mortality and expense risk charges.......................... 878,309 395,282 32,019 ------------ ------------ ----------- Total net assets................. $434,578,832 $189,171,541 $17,187,850 ============ ============ =========== TOTAL NET ASSETS REPRESENTED BY: Net Assets of Policyowners: Series I Policies..................... $277,037,930 $146,718,140 $13,362,406 Series II Policies.................... $ 50,388,056 $ 16,894,266 $ 1,470,045 Series III Policies................... $107,152,846 $ 25,559,135 $ 2,355,399 ------------ ------------ ----------- Total net assets................. $434,578,832 $189,171,541 $17,187,850 ============ ============ =========== Series I Variable accumulation unit value............................ $ 17.14 $ 15.00 $ 14.48 ============ ============ =========== Series II Variable accumulation unit value....................... $ 12.50 $ 13.10 $ 12.69 ============ ============ =========== Series III Variable accumulation unit value....................... $ 12.43 $ 13.17 $ 12.63 ============ ============ =========== Identified Cost of Investment........... $414,316,264 $177,507,091 $17,522,892 ============ ============ ===========
Not all Investment Divisions are available under all policies. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-6 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MODERATE MAINSTAY VP MAINSTAY VP INTERNATIONAL LARGE CAP MID CAP MODERATE GROWTH S&P 500 U.S. SMALL EQUITY-- GROWTH-- CORE-- ALLOCATION-- ALLOCATION-- INDEX-- CAP-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS ---------------------------------------------------------------------------------------------------------------- $138,236,634 $85,031,891 $111,991,148 $240,071,921 $328,680,437 $71,938,289 $51,859,250 -- -- -- -- -- -- -- 8,262 50,310 (24,358) 145,675 613,275 8,825 20,363 298,969 168,732 230,222 460,282 602,858 146,667 101,107 ------------ ----------- ------------ ------------ ------------ ----------- ----------- $137,945,927 $84,913,469 $111,736,568 $239,757,314 $328,690,854 $71,800,447 $51,778,506 ============ =========== ============ ============ ============ =========== =========== $106,008,908 $56,630,686 $ 97,722,634 $142,875,782 $178,772,520 $62,916,201 $44,390,984 $ 12,627,483 $ 9,861,789 $ 5,951,116 $ 24,992,312 $ 42,103,088 $ 2,950,864 $ 2,603,968 $ 19,309,536 $18,420,994 $ 8,062,818 $ 71,889,220 $107,815,246 $ 5,933,382 $ 4,783,554 ------------ ----------- ------------ ------------ ------------ ----------- ----------- $137,945,927 $84,913,469 $111,736,568 $239,757,314 $328,690,854 $71,800,447 $51,778,506 ============ =========== ============ ============ ============ =========== =========== $ 18.19 $ 13.65 $ 17.60 $ 12.28 $ 11.82 $ 13.97 $ 18.01 ============ =========== ============ ============ ============ =========== =========== $ 11.43 $ 13.50 $ 14.26 $ 12.33 $ 12.50 $ 12.89 $ 14.20 ============ =========== ============ ============ ============ =========== =========== $ 11.57 $ 13.37 $ 13.97 $ 12.18 $ 12.87 $ 12.81 $ 14.03 ============ =========== ============ ============ ============ =========== =========== $161,032,394 $72,286,674 $ 98,464,590 $226,620,474 $313,786,669 $71,743,806 $43,201,048 ============ =========== ============ ============ ============ =========== ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-7 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) As of December 31, 2010
COLUMBIA SMALL CAP ALGER CALVERT VALUE FUND, SMALL CAP VP SRI VARIABLE GROWTH-- BALANCED SERIES-- CLASS S SHARES PORTFOLIO CLASS B ---------------------------------------------- ASSETS: Investment at net asset value......... $20,025,490 $12,808,331 $32,846,030 Dividends due and accrued............. -- -- -- Net receivable (payable) to New York Life Insurance and Annuity Corporation........................ (561) 63,355 6,827 LIABILITIES: Liability to New York Life Insurance and Annuity Corporation for: Mortality and expense risk charges.......................... 39,352 19,324 60,248 ----------- ----------- ----------- Total net assets................. $19,985,577 $12,852,362 $32,792,609 =========== =========== =========== TOTAL NET ASSETS REPRESENTED BY: Net Assets of Policyowners: Series I Policies..................... $19,985,577 $ 5,731,154 $25,430,723 Series II Policies.................... $ -- $ 2,247,352 $ 3,317,770 Series III Policies................... $ -- $ 4,873,856 $ 4,044,116 ----------- ----------- ----------- Total net assets................. $19,985,577 $12,852,362 $32,792,609 =========== =========== =========== Series I Variable accumulation unit value............................ $ 20.43 $ 12.75 $ 14.30 =========== =========== =========== Series II Variable accumulation unit value....................... $ -- $ 12.27 $ 13.91 =========== =========== =========== Series III Variable accumulation unit value....................... $ -- $ 11.97 $ 13.90 =========== =========== =========== Identified Cost of Investment........... $17,264,989 $12,634,873 $30,117,791 =========== =========== ===========
Not all Investment Divisions are available under all policies. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-8 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
FIDELITY(R) DREYFUS IP FIDELITY(R) VIP VIP JANUS ASPEN JANUS ASPEN MFS(R) TECHNOLOGY FIDELITY(R) VIP EQUITY- MID CAP-- BALANCED WORLDWIDE INVESTORS GROWTH-- CONTRAFUND(R)-- INCOME-- SERVICE CLASS PORTFOLIO-- PORTFOLIO-- TRUST SERIES-- SERVICE SHARES SERVICE CLASS 2 SERVICE CLASS 2 2 SERVICE SHARES SERVICE SHARES SERVICE CLASS -------------------------------------------------------------------------------------------------------------------------- $42,373,342 $205,010,225 $53,608,313 $131,901,170 $93,168,968 $25,732,783 $4,441,852 -- -- -- -- -- -- -- 219,938 50,961 (16,494) 42,676 133,710 (4,437) (46) 73,485 417,413 115,580 248,287 180,053 53,292 9,292 ----------- ------------ ----------- ------------ ----------- ----------- ---------- $42,519,795 $204,643,773 $53,476,239 $131,695,559 $93,122,625 $25,675,054 $4,432,514 =========== ============ =========== ============ =========== =========== ========== $28,127,159 $164,103,628 $45,420,078 $ 92,609,123 $51,065,973 $17,987,790 $3,382,408 $ 4,875,205 $ 17,114,380 $ 2,629,611 $ 13,911,254 $14,552,920 $ 2,309,607 $ 239,039 $ 9,517,431 $ 23,425,765 $ 5,426,550 $ 25,175,182 $27,503,732 $ 5,377,657 $ 811,067 ----------- ------------ ----------- ------------ ----------- ----------- ---------- $42,519,795 $204,643,773 $53,476,239 $131,695,559 $93,122,625 $25,675,054 $4,432,514 =========== ============ =========== ============ =========== =========== ========== $ 16.52 $ 17.66 $ 13.23 $ 23.99 $ 17.22 $ 13.36 $ 14.64 =========== ============ =========== ============ =========== =========== ========== $ 15.52 $ 13.37 $ 12.84 $ 14.57 $ 11.79 $ 13.12 $ 11.68 =========== ============ =========== ============ =========== =========== ========== $ 15.26 $ 13.42 $ 12.70 $ 14.65 $ 11.72 $ 12.66 $ 12.36 =========== ============ =========== ============ =========== =========== ========== $31,736,576 $220,622,114 $62,541,134 $118,116,032 $88,566,277 $24,533,343 $4,018,661 =========== ============ =========== ============ =========== =========== ==========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-9 STATEMENT OF ASSETS AND LIABILITIES (CONTINUED) As of December 31, 2010
NEUBERGER BERMAN AMT MFS(R) MFS(R) MID-CAP RESEARCH UTILITIES GROWTH SERIES-- SERIES-- PORTFOLIO-- SERVICE CLASS SERVICE CLASS CLASS S -------------------------------------------------- ASSETS: Investment at net asset value......... $6,454,988 $244,277,575 $22,831,876 Dividends due and accrued............. -- -- -- Net receivable (payable) to New York Life Insurance and Annuity Corporation........................ 66 (49,622) 9,612 LIABILITIES: Liability to New York Life Insurance and Annuity Corporation for: Mortality and expense risk charges.......................... 13,028 519,159 43,630 ---------- ------------ ----------- Total net assets................. $6,442,026 $243,708,794 $22,797,858 ========== ============ =========== TOTAL NET ASSETS REPRESENTED BY: Net Assets of Policyowners: Series I Policies..................... $5,418,155 $190,757,916 $18,924,852 Series II Policies.................... $ 293,269 $ 17,072,114 $ 1,825,123 Series III Policies................... $ 730,602 $ 35,878,764 $ 2,047,883 ---------- ------------ ----------- Total net assets................. $6,442,026 $243,708,794 $22,797,858 ========== ============ =========== Series I Variable accumulation unit value............................ $ 15.76 $ 24.01 $ 17.95 ========== ============ =========== Series II Variable accumulation unit value....................... $ 12.87 $ 12.82 $ 14.49 ========== ============ =========== Series III Variable accumulation unit value....................... $ 12.91 $ 12.87 $ 14.65 ========== ============ =========== Identified Cost of Investment........... $5,725,329 $256,938,977 $20,698,057 ========== ============ ===========
Not all Investment Divisions are available under all policies. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-10 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
PIMCO UIF REAL ROYCE ROYCE EMERGING VICTORY RETURN MICRO-CAP SMALL-CAP T. ROWE PRICE MARKETS VAN ECK VIF PORTFOLIO-- PORTFOLIO-- PORTFOLIO-- EQUITY EQUITY VIP GLOBAL DIVERSIFIED ADVISOR INVESTMENT INVESTMENT INCOME PORTFOLIO-- HARD STOCK-- CLASS CLASS CLASS PORTFOLIO--II CLASS II ASSETS CLASS A SHARES ---------------------------------------------------------------------------------------------------------------------- $37,938,947 $93,709,165 $65,357,465 $84,096,014 $161,199,143 $284,354,508 $11,568,246 31,858 -- -- -- -- -- -- 281,527 72,025 30,903 (7,277) 7,391 22,292 (2,148) 30,760 179,183 133,054 173,679 332,551 544,890 24,550 ----------- ----------- ----------- ----------- ------------ ------------ ----------- $38,221,572 $93,602,007 $65,255,314 $83,915,058 $160,873,983 $283,831,910 $11,541,548 =========== =========== =========== =========== ============ ============ =========== $14,324,694 $64,178,297 $46,316,440 $69,212,853 $119,936,254 $215,346,789 $ 9,577,887 $ 9,046,832 $ 9,533,785 $ 7,262,358 $ 7,087,720 $ 12,946,829 $ 22,287,027 $ 810,639 $14,850,046 $19,889,925 $11,676,516 $ 7,614,485 $ 27,990,900 $ 46,198,094 $ 1,153,022 ----------- ----------- ----------- ----------- ------------ ------------ ----------- $38,221,572 $93,602,007 $65,255,314 $83,915,058 $160,873,983 $283,831,910 $11,541,548 =========== =========== =========== =========== ============ ============ =========== $ 10.40 $ 17.98 $ 15.14 $ 14.95 $ 32.66 $ 42.46 $ 13.46 =========== =========== =========== =========== ============ ============ =========== $ 10.40 $ 15.39 $ 13.57 $ 12.54 $ 14.22 $ 15.75 $ 11.82 =========== =========== =========== =========== ============ ============ =========== $ 10.40 $ 15.64 $ 13.57 $ 13.09 $ 13.78 $ 15.04 $ 12.38 =========== =========== =========== =========== ============ ============ =========== $38,366,213 $79,297,681 $56,744,022 $89,974,456 $156,445,411 $232,530,939 $10,898,349 =========== =========== =========== =========== ============ ============ ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-11 STATEMENT OF OPERATIONS For the year ended December 31, 2010
MAINSTAY VP MAINSTAY VP MAINSTAY VP BALANCED-- BOND-- CASH SERVICE CLASS SERVICE CLASS MANAGEMENT ---------------------------------------------- INVESTMENT INCOME (LOSS): Dividend income....................... $ 562,496 $ 3,957,501 $ 29,160 Mortality and expense risk charges.... (767,032) (2,058,898) (2,910,954) ----------- ------------ ------------ Net investment income (loss)..... (204,536) 1,898,603 (2,881,794) ----------- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS): Proceeds from sale of investments..... 4,212,957 11,145,940 76,699,478 Cost of investments sold.............. (4,478,107) (10,300,628) (76,700,747) ----------- ------------ ------------ Net realized gain (loss) on investments................... (265,150) 845,312 (1,269) Realized gain distribution received... -- 1,730,959 -- Change in unrealized appreciation (depreciation) on investments..... 5,258,325 817,508 (16,186) ----------- ------------ ------------ Net gain (loss) on investments... 4,993,175 3,393,779 (17,455) ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations............. $ 4,788,639 $ 5,292,382 $ (2,899,249) =========== ============ ============
MAINSTAY VP HIGH YIELD MAINSTAY VP MAINSTAY VP CORPORATE ICAP SELECT INCOME BOND-- EQUITY-- BUILDER-- SERVICE CLASS SERVICE CLASS SERVICE CLASS ---------------------------------------------- INVESTMENT INCOME (LOSS): Dividend income....................... $ 22,118,159 $ 1,201,274 $ 420,402 Mortality and expense risk charges.... (6,258,850) (2,917,119) (239,044) ------------ ------------ ----------- Net investment income (loss)..... 15,859,309 (1,715,845) 181,358 ------------ ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS): Proceeds from sale of investments..... 31,267,366 11,334,044 1,096,385 Cost of investments sold.............. (32,834,782) (15,153,367) (1,368,844) ------------ ------------ ----------- Net realized gain (loss) on investments................... (1,567,416) (3,819,323) (272,459) Realized gain distribution received... -- -- -- Change in unrealized appreciation (depreciation) on investments...... 20,324,492 29,892,707 1,780,508 ------------ ------------ ----------- Net gain (loss) on investments... 18,757,076 26,073,384 1,508,049 ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations............. $ 34,616,385 $ 24,357,539 $ 1,689,407 ============ ============ ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-12 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP COMMON CONSERVATIVE MAINSTAY VP MAINSTAY VP MAINSTAY VP GROWTH GROWTH STOCK-- ALLOCATION-- CONVERTIBLE-- FLOATING RATE-- GOVERNMENT-- ALLOCATION-- EQUITY-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS ---------------------------------------------------------------------------------------------------------------- $ 292,227 $ 3,279,851 $ 3,095,353 $ 4,456,913 $ 2,773,556 $ 1,045,892 $ 36,692 (369,481) (2,284,846) (1,877,003) (2,173,655) (1,491,557) (1,979,929) (190,297) ----------- ------------ ----------- ------------ ------------ ------------ ----------- (77,254) 995,005 1,218,350 2,283,258 1,281,999 (934,037) (153,605) ----------- ------------ ----------- ------------ ------------ ------------ ----------- 2,355,096 11,639,071 7,711,066 12,003,085 21,863,911 10,645,971 1,522,376 (3,505,743) (12,060,804) (7,943,613) (12,665,851) (21,023,917) (12,962,359) (1,580,003) ----------- ------------ ----------- ------------ ------------ ------------ ----------- (1,150,647) (421,733) (232,547) (662,766) 839,994 (2,316,388) (57,627) -- -- -- -- 1,428,513 -- -- 3,335,784 11,775,237 15,318,458 5,087,866 (1,342,662) 16,519,794 1,416,099 ----------- ------------ ----------- ------------ ------------ ------------ ----------- 2,185,137 11,353,504 15,085,911 4,425,100 925,845 14,203,406 1,358,472 ----------- ------------ ----------- ------------ ------------ ------------ ----------- $ 2,107,883 $ 12,348,509 $16,304,261 $ 6,708,358 $ 2,207,844 $ 13,269,369 $ 1,204,867 =========== ============ =========== ============ ============ ============ ===========
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MODERATE MAINSTAY VP MAINSTAY VP INTERNATIONAL LARGE CAP MID CAP MODERATE GROWTH S&P 500 U.S. SMALL EQUITY-- GROWTH-- CORE-- ALLOCATION-- ALLOCATION-- INDEX-- CAP-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------------------------------------------------------- $ 3,932,190 $ -- $ 254,098 $ 4,054,545 $ 3,673,012 $ 1,045,412 $ -- (2,182,883) (1,201,581) (1,773,752) (3,252,278) (4,229,293) (1,131,268) (776,763) ----------- ----------- ------------ ------------ ------------ ----------- ----------- 1,749,307 (1,201,581) (1,519,654) 802,267 (556,281) (85,856) (776,763) ----------- ----------- ------------ ------------ ------------ ----------- ----------- 7,246,195 4,542,975 11,997,721 12,880,349 13,478,383 6,585,714 5,431,996 (8,849,953) (4,182,707) (16,941,661) (13,687,716) (14,859,048) (6,837,396) (9,361,108) ----------- ----------- ------------ ------------ ------------ ----------- ----------- (1,603,758) 360,268 (4,943,940) (807,367) (1,380,665) (251,682) (3,929,112) -- -- -- -- -- -- -- 4,432,334 11,155,071 25,623,925 20,703,929 33,686,121 8,093,326 13,934,715 ----------- ----------- ------------ ------------ ------------ ----------- ----------- 2,828,576 11,515,339 20,679,985 19,896,562 32,305,456 7,841,644 10,005,603 ----------- ----------- ------------ ------------ ------------ ----------- ----------- $ 4,577,883 $10,313,758 $ 19,160,331 $ 20,698,829 $ 31,749,175 $ 7,755,788 $ 9,228,840 =========== =========== ============ ============ ============ =========== ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-13 STATEMENT OF OPERATIONS (CONTINUED) For the year ended December 31, 2010
COLUMBIA SMALL CAP ALGER CALVERT VALUE FUND, SMALL CAP VP SRI VARIABLE GROWTH-- BALANCED SERIES-- CLASS S SHARES PORTFOLIO CLASS B ------------------------------------------------ INVESTMENT INCOME (LOSS): Dividend income....................... $ -- $ 174,498 $ 264,031 Mortality and expense risk charges.... (317,938) (135,488) (455,070) ----------- --------- ----------- Net investment income (loss)..... (317,938) 39,010 (191,039) ----------- --------- ----------- REALIZED AND UNREALIZED GAIN (LOSS): Proceeds from sale of investments..... 2,725,596 587,080 2,920,714 Cost of investments sold.............. (2,559,129) (707,114) (3,776,031) ----------- --------- ----------- Net realized gain (loss) on investments................... 166,467 (120,034) (855,317) Realized gain distribution received... -- -- -- Change in unrealized appreciation (depreciation) on investments........................ 3,992,226 997,336 6,782,310 ----------- --------- ----------- Net gain (loss) on investments... 4,158,693 877,302 5,926,993 ----------- --------- ----------- Net increase (decrease) in net assets resulting from operations............. $ 3,840,755 $ 916,312 $ 5,735,954 =========== ========= ===========
NEUBERGER BERMAN AMT MFS(R) MFS(R) MID-CAP RESEARCH UTILITIES GROWTH SERIES-- SERIES-- PORTFOLIO-- SERVICE CLASS SERVICE CLASS CLASS S ---------------------------------------------- INVESTMENT INCOME (LOSS): Dividend income....................... $ 38,570 $ 6,168,072 $ -- Mortality and expense risk charges.... (98,283) (3,837,908) (337,145) --------- ------------ ----------- Net investment income (loss)..... (59,713) 2,330,164 (337,145) --------- ------------ ----------- REALIZED AND UNREALIZED GAIN (LOSS): Proceeds from sale of investments..... 687,515 19,362,814 2,372,185 Cost of investments sold.............. (670,482) (20,888,751) (2,655,397) --------- ------------ ----------- Net realized gain (loss) on investments................... 17,033 (1,525,937) (283,212) Realized gain distribution received... -- -- -- Change in unrealized appreciation (depreciation) on investments........................ 811,137 23,977,279 5,059,825 --------- ------------ ----------- Net gain (loss) on investments... 828,170 22,451,342 4,776,613 --------- ------------ ----------- Net increase (decrease) in net assets resulting from operations............. $ 768,457 $ 24,781,506 $ 4,439,468 ========= ============ ===========
(a) For the period May 1, 2010 (Commencement of Operations) through December 31, 2010. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-14 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
DREYFUS IP FIDELITY(R) VIP JANUS ASPEN JANUS ASPEN MFS(R) TECHNOLOGY FIDELITY(R) VIP EQUITY- FIDELITY(R) VIP BALANCED WORLDWIDE INVESTORS GROWTH-- CONTRAFUND(R)-- INCOME-- MID CAP-- PORTFOLIO-- PORTFOLIO-- TRUST SERIES-- SERVICE SHARES SERVICE CLASS 2 SERVICE CLASS 2 SERVICE CLASS 2 SERVICE SHARES SERVICE SHARES SERVICE CLASS ------------------------------------------------------------------------------------------------------------------------ $ -- $ 1,882,292 $ 798,355 $ 141,716 $ 1,957,674 $ 105,084 $ 36,631 (523,175) (3,113,740) (876,377) (1,810,720) (1,242,424) (380,483) (69,342) ----------- ------------ ----------- ----------- ----------- ----------- --------- (523,175) (1,231,448) (78,022) (1,669,004) 715,250 (275,399) (32,711) ----------- ------------ ----------- ----------- ----------- ----------- --------- 3,661,178 16,153,211 5,184,450 5,072,848 6,552,649 2,440,437 661,901 (3,180,243) (23,591,660) (7,278,956) (5,456,380) (6,097,821) (2,751,878) (785,508) ----------- ------------ ----------- ----------- ----------- ----------- --------- 480,935 (7,438,449) (2,094,506) (383,532) 454,828 (311,441) (123,607) -- 86,140 -- 326,730 -- -- -- 8,104,051 34,563,747 8,184,313 26,310,586 3,645,371 3,463,739 544,827 ----------- ------------ ----------- ----------- ----------- ----------- --------- 8,584,986 27,211,438 6,089,807 26,253,784 4,100,199 3,152,298 421,220 ----------- ------------ ----------- ----------- ----------- ----------- --------- $ 8,061,811 $ 25,979,990 $ 6,011,785 $24,584,780 $ 4,815,449 $ 2,876,899 $ 388,509 =========== ============ =========== =========== =========== =========== =========
PIMCO UIF REAL ROYCE ROYCE EMERGING VICTORY RETURN MICRO-CAP SMALL-CAP T. ROWE PRICE MARKETS VAN ECK VIF PORTFOLIO-- PORTFOLIO-- PORTFOLIO-- EQUITY EQUITY VIP GLOBAL DIVERSIFIED ADVISOR INVESTMENT INVESTMENT INCOME PORTFOLIO-- HARD STOCK-- CLASS(A) CLASS CLASS PORTFOLIO--II CLASS II ASSETS CLASS A SHARES -------------------------------------------------------------------------------------------------------------- $ 120,142 $ 1,506,022 $ 70,043 $ 1,211,723 $ 777,121 $ 716,098 $ 78,090 (208,288) (1,282,735) (949,071) (1,308,130) (2,429,250) (3,992,969) (183,464) ----------- ------------ ----------- ----------- ------------ ------------ ----------- (88,146) 223,287 (879,028) (96,407) (1,652,129) (3,276,871) (105,374) ----------- ------------ ----------- ----------- ------------ ------------ ----------- 1,141,218 7,958,182 3,755,928 5,736,508 15,165,217 28,006,758 2,608,600 (1,113,181) (10,860,390) (4,081,298) (7,038,364) (20,859,737) (28,847,151) (3,699,009) ----------- ------------ ----------- ----------- ------------ ------------ ----------- 28,037 (2,902,208) (325,370) (1,301,856) (5,694,520) (840,393) (1,090,409) 292,953 -- -- -- -- -- -- (427,267) 21,544,719 10,587,831 10,556,533 29,376,132 62,850,444 2,312,865 ----------- ------------ ----------- ----------- ------------ ------------ ----------- (106,277) 18,642,511 10,262,461 9,254,677 23,681,612 62,010,051 1,222,456 ----------- ------------ ----------- ----------- ------------ ------------ ----------- $ (194,423) $ 18,865,798 $ 9,383,433 $ 9,158,270 $ 22,029,483 $ 58,733,180 $ 1,117,082 =========== ============ =========== =========== ============ ============ ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-15 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 2010 and December 31, 2009
MAINSTAY VP MAINSTAY VP BALANCED-- BOND-- SERVICE CLASS SERVICE CLASS -------------------------- --------------------------- 2010 2009 2010 2009 --------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ (204,536) $ 264,329 $ 1,898,603 $ 1,767,711 Net realized gain (loss) on investments................ (265,150) (1,163,705) 845,312 218,069 Realized gain distribution received.................... -- -- 1,730,959 268,898 Change in unrealized appreciation (depreciation) on investments.......................................... 5,258,325 6,819,143 817,508 1,083,251 ----------- ----------- ------------ ----------- Net increase (decrease) in net assets resulting from operations........................................ 4,788,639 5,919,767 5,292,382 3,337,929 ----------- ----------- ------------ ----------- Contributions and (Withdrawals): Payments received from policyowners.................... 8,207,154 1,797,429 20,994,193 10,366,048 Policyowners' surrenders............................... (2,396,385) (1,483,205) (6,771,206) (3,985,354) Policyowners' annuity and death benefits............... (138,580) (141,072) (624,751) (671,983) Net transfers from (to) Fixed Account.................. 6,767,423 1,216,028 24,687,388 9,292,523 Transfers between Investment Divisions................. (841,506) (1,542,824) 15,443,390 5,086,944 ----------- ----------- ------------ ----------- Net contributions and (withdrawals).................. 11,598,106 (153,644) 53,729,014 20,088,178 ----------- ----------- ------------ ----------- Increase (decrease) in net assets................. 16,386,745 5,766,123 59,021,396 23,426,107 NET ASSETS: Beginning of period.................................... 36,237,019 30,470,896 81,264,892 57,838,785 ----------- ----------- ------------ ----------- End of period.......................................... $52,623,764 $36,237,019 $140,286,288 $81,264,892 =========== =========== ============ ===========
MAINSTAY VP MAINSTAY VP FLOATING RATE-- GOVERNMENT-- SERVICE CLASS SERVICE CLASS --------------------------- --------------------------- 2010 2009 2010 2009 ---------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ 2,283,258 $ 873,536 $ 1,281,999 $ 919,441 Net realized gain (loss) on investments................ (662,766) (850,442) 839,994 1,342,335 Realized gain distribution received.................... -- -- 1,428,513 71,180 Change in unrealized appreciation (depreciation) on investments.......................................... 5,087,866 15,214,110 (1,342,662) (2,956,692) ------------ ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations........................................ 6,708,358 15,237,204 2,207,844 (623,736) ------------ ----------- ----------- ------------ Contributions and (Withdrawals): Payments received from policyowners.................... 21,617,847 13,470,140 12,183,645 9,136,484 Policyowners' surrenders............................... (7,423,042) (5,459,393) (6,541,145) (6,835,181) Policyowners' annuity and death benefits............... (262,387) (415,174) (302,992) (686,208) Net transfers from (to) Fixed Account.................. 23,824,105 8,670,704 10,686,481 10,578,086 Transfers between Investment Divisions................. 3,360,946 21,860,555 3,881,978 (14,712,394) ------------ ----------- ----------- ------------ Net contributions and (withdrawals).................. 41,117,469 38,126,832 19,907,967 (2,519,213) ------------ ----------- ----------- ------------ Increase (decrease) in net assets................. 47,825,827 53,364,036 22,115,811 (3,142,949) NET ASSETS: Beginning of period.................................... 93,518,422 40,154,386 72,522,944 75,665,893 ------------ ----------- ----------- ------------ End of period.......................................... $141,344,249 $93,518,422 $94,638,755 $ 72,522,944 ============ =========== =========== ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-16 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
MAINSTAY VP MAINSTAY VP MAINSTAY VP CONSERVATIVE MAINSTAY VP CASH COMMON STOCK-- ALLOCATION-- CONVERTIBLE-- MANAGEMENT SERVICE CLASS SERVICE CLASS SERVICE CLASS ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (2,881,794) $ (3,609,200) $ (77,254) $ (53,078) $ 995,005 $ 836,322 $ 1,218,350 $ 76,162 (1,269) 4,522 (1,150,647) (803,685) (421,733) (1,611,843) (232,547) (487,364) -- -- -- -- -- 1,489,989 -- -- (16,186) (2,867) 3,335,784 4,126,822 11,775,237 13,223,929 15,318,458 19,425,214 ------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- (2,899,249) (3,607,545) 2,107,883 3,270,059 12,348,509 13,938,397 16,304,261 19,014,012 ------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- 39,024,002 39,115,696 858,448 1,578,537 19,239,293 9,988,908 15,917,842 10,344,476 (22,203,042) (26,093,492) (975,493) (709,990) (6,634,622) (5,789,109) (5,224,827) (2,602,362) (361,082) (1,102,891) (30,712) (28,773) (127,241) (483,043) (550,283) (293,395) 19,112,708 18,645,934 1,115,989 1,664,895 27,959,697 10,628,131 20,182,262 7,568,067 (30,844,101) (51,893,514) (888,639) (425,558) 8,905,558 3,834,758 5,250,175 12,574,864 ------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- 4,728,485 (21,328,267) 79,593 2,079,111 49,342,685 18,179,645 35,575,169 27,591,650 ------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- 1,829,236 (24,935,812) 2,187,476 5,349,170 61,691,194 32,118,042 51,879,430 46,605,662 152,601,629 177,537,441 20,219,897 14,870,727 98,718,406 66,600,364 80,342,240 33,736,578 ------------ ------------ ----------- ----------- ------------ ----------- ------------ ----------- $154,430,865 $152,601,629 $22,407,373 $20,219,897 $160,409,600 $98,718,406 $132,221,670 $80,342,240 ============ ============ =========== =========== ============ =========== ============ ===========
MAINSTAY VP MAINSTAY VP MAINSTAY VP GROWTH MAINSTAY VP HIGH YIELD ICAP SELECT ALLOCATION-- GROWTH EQUITY-- CORPORATE BOND-- EQUITY-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (934,037) $ (86,244) $ (153,605) $ (155,624) $ 15,859,309 $ 12,727,335 $ (1,715,845) $ (1,162,684) (2,316,388) (1,781,159) (57,627) (746,339) (1,567,416) (927,509) (3,819,323) (2,407,618) -- 1,535,479 -- -- -- -- -- -- 16,519,794 18,675,781 1,416,099 3,238,594 20,324,492 49,189,567 29,892,707 22,972,979 ------------ ----------- ----------- ----------- ------------ ------------ ------------ ------------ 13,269,369 18,343,857 1,204,867 2,336,631 34,616,385 60,989,393 24,357,539 19,402,677 ------------ ----------- ----------- ----------- ------------ ------------ ------------ ------------ 9,483,790 9,778,082 1,204,360 897,174 72,388,991 46,878,124 13,775,493 11,030,691 (5,665,362) (3,659,825) (656,026) (556,219) (20,236,673) (12,199,260) (7,578,367) (4,434,037) (157,939) (36,578) -- (35,748) (2,254,697) (924,937) (854,194) (469,289) 11,499,710 8,044,772 1,220,960 427,145 64,604,665 24,902,616 22,733,572 10,045,727 (3,784,266) (3,809,432) (322,868) (1,185,130) 7,593,189 44,919,006 (2,130,414) 35,587,532 ------------ ----------- ----------- ----------- ------------ ------------ ------------ ------------ 11,375,933 10,317,019 1,446,426 (452,778) 122,095,475 103,575,549 25,946,090 51,760,624 ------------ ----------- ----------- ----------- ------------ ------------ ------------ ------------ 24,645,302 28,660,876 2,651,293 1,883,853 156,711,860 164,564,942 50,303,629 71,163,301 94,045,778 65,384,902 10,224,352 8,340,499 277,866,972 113,302,030 138,867,912 67,704,611 ------------ ----------- ----------- ----------- ------------ ------------ ------------ ------------ $118,691,080 $94,045,778 $12,875,645 $10,224,352 $434,578,832 $277,866,972 $189,171,541 $138,867,912 ============ =========== =========== =========== ============ ============ ============ ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-17 STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) For the years ended December 31, 2010 and December 31, 2009
MAINSTAY VP MAINSTAY VP INTERNATIONAL INCOME BUILDER-- EQUITY-- SERVICE CLASS SERVICE CLASS -------------------------------- -------------------------------- 2010 2009 2010 2009 -------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ 181,358 $ 127,801 $ 1,749,307 $ 4,464,285 Net realized gain (loss) on investments................ (272,459) (614,866) (1,603,758) (2,070,411) Realized gain distribution received.................... -- -- -- -- Change in unrealized appreciation (depreciation) on investments.......................................... 1,780,508 2,209,011 4,432,334 11,752,828 ----------- ----------- ------------ ------------ Net increase (decrease) in net assets resulting from operations........................................ 1,689,407 1,721,946 4,577,883 14,146,702 ----------- ----------- ------------ ------------ Contributions and (Withdrawals): Payments received from policyowners.................... 1,574,457 1,220,995 12,499,618 9,188,901 Policyowners' surrenders............................... (725,278) (797,302) (6,238,662) (4,103,857) Policyowners' annuity and death benefits............... (12,424) (48,502) (339,497) (219,181) Net transfers from (to) Fixed Account.................. 2,172,519 655,472 17,274,693 8,044,781 Transfers between Investment Divisions................. 1,734,861 (60,593) 2,338,030 (4,709,774) ----------- ----------- ------------ ------------ Net contributions and (withdrawals).................. 4,744,135 970,070 25,534,182 8,200,870 ----------- ----------- ------------ ------------ Increase (decrease) in net assets................. 6,433,542 2,692,016 30,112,065 22,347,572 NET ASSETS: Beginning of period.................................... 10,754,308 8,062,292 107,833,862 85,486,290 ----------- ----------- ------------ ------------ End of period.......................................... $17,187,850 $10,754,308 $137,945,927 $107,833,862 =========== =========== ============ ============
MAINSTAY VP MAINSTAY VP MODERATE MODERATE GROWTH ALLOCATION-- ALLOCATION-- SERVICE CLASS SERVICE CLASS -------------------------------- -------------------------------- 2010 2009 2010 2009 -------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ 802,267 $ 700,963 $ (556,281) $ 801,194 Net realized gain (loss) on investments................ (807,367) (1,312,709) (1,380,665) (1,653,531) Realized gain distribution received.................... -- 2,449,369 -- 3,182,754 Change in unrealized appreciation (depreciation) on investments.......................................... 20,703,929 20,302,185 33,686,121 30,558,877 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations........................................ 20,698,829 22,139,808 31,749,175 32,889,294 ------------ ------------ ------------ ------------ Contributions and (Withdrawals): Payments received from policyowners.................... 47,204,316 19,031,503 76,812,805 22,195,609 Policyowners' surrenders............................... (9,137,010) (7,304,665) (10,624,362) (6,382,221) Policyowners' annuity and death benefits............... (923,403) (760,044) (763,331) (367,859) Net transfers from (to) Fixed Account.................. 41,225,599 14,172,039 60,370,542 16,493,160 Transfers between Investment Divisions................. 1,444,376 (1,478,864) (5,002,248) (6,519,730) ------------ ------------ ------------ ------------ Net contributions and (withdrawals).................. 79,813,878 23,659,969 120,793,406 25,418,959 ------------ ------------ ------------ ------------ Increase (decrease) in net assets................. 100,512,707 45,799,777 152,542,581 58,308,253 NET ASSETS: Beginning of period.................................... 139,244,607 93,444,830 176,148,273 117,840,020 ------------ ------------ ------------ ------------ End of period.......................................... $239,757,314 $139,244,607 $328,690,854 $176,148,273 ============ ============ ============ ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-18 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
MAINSTAY VP LARGE CAP MAINSTAY VP MAINSTAY VP MAINSTAY VP GROWTH-- MID CAP CORE-- MID CAP GROWTH-- MID CAP VALUE-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $(1,201,581) $ (802,811) $ (1,519,654) $(1,636,741) $-- $ 115,656 $-- $ 1,281,899 360,268 (341,263) (4,943,940) (2,913,239) -- (16,501,662) -- (18,394,795) -- -- -- -- -- 730,383 -- -- 11,155,071 12,888,739 25,623,925 16,551,013 -- 25,369,982 -- 23,632,080 ----------- ----------- ------------ ----------- --- ------------ --- ------------ 10,313,758 11,744,665 19,160,331 12,001,033 -- 9,714,359 -- 6,519,184 ----------- ----------- ------------ ----------- --- ------------ --- ------------ 10,656,163 7,427,110 6,332,180 3,705,153 -- 1,624,047 -- 1,547,133 (3,224,086) (1,601,683) (5,659,182) (1,838,711) -- (1,702,164) -- (1,575,564) (84,118) (33,370) (533,460) (110,563) -- (90,494) -- (111,736) 13,769,088 5,133,874 5,963,607 3,020,732 -- 2,105,708 -- 1,526,925 1,984,840 2,237,537 (3,735,450) 41,928,745 -- (44,436,165) -- (38,611,102) ----------- ----------- ------------ ----------- --- ------------ --- ------------ 23,101,887 13,163,468 2,367,695 46,705,356 -- (42,499,068) -- (37,224,344) ----------- ----------- ------------ ----------- --- ------------ --- ------------ 33,415,645 24,908,133 21,528,026 58,706,389 -- (32,784,709) -- (30,705,160) 51,497,824 26,589,691 90,208,542 31,502,153 -- 32,784,709 -- 30,705,160 ----------- ----------- ------------ ----------- --- ------------ --- ------------ $84,913,469 $51,497,824 $111,736,568 $90,208,542 $-- $ -- $-- $ -- =========== =========== ============ =========== === ============ === ============
MAINSTAY VP ALGER MAINSTAY VP SMALL CAP MAINSTAY VP SMALL CAP S&P 500 INDEX-- GROWTH-- U.S. SMALL CAP-- GROWTH-- SERVICE CLASS SERVICE CLASS SERVICE CLASS CLASS S SHARES ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (85,856) $ 234,389 $-- $ 39,167 $ (776,763) $ (713,719) $ (317,938) $ (326,366) (251,682) (995,581) -- (9,545,595) (3,929,112) (1,292,002) 166,467 (463,268) -- -- -- -- -- -- -- -- 8,093,326 11,780,279 -- 12,114,172 13,934,715 8,060,256 3,992,226 6,309,682 ----------- ----------- --- ------------ ----------- ----------- ----------- ----------- 7,755,788 11,019,087 -- 2,607,744 9,228,840 6,054,535 3,840,755 5,520,048 ----------- ----------- --- ------------ ----------- ----------- ----------- ----------- 5,358,641 4,675,149 -- 1,210,699 3,346,117 2,601,396 65,971 34,931 (3,932,709) (2,701,788) -- (603,732) (2,357,613) (804,049) (1,068,924) (871,845) (301,052) (145,096) -- (44,490) (80,140) (49,711) (13,734) (59,122) 3,930,679 2,596,819 -- 503,502 3,136,204 1,431,084 91,609 66,049 34,681 (966,835) -- (15,651,594) (1,140,814) 16,479,028 (1,011,978) (946,315) ----------- ----------- --- ------------ ----------- ----------- ----------- ----------- 5,090,240 3,458,249 -- (14,585,615) 2,903,754 19,657,748 (1,937,056) (1,776,302) ----------- ----------- --- ------------ ----------- ----------- ----------- ----------- 12,846,028 14,477,336 -- (11,977,871) 12,132,594 25,712,283 1,903,699 3,743,746 58,954,419 44,477,083 -- 11,977,871 39,645,912 13,933,629 18,081,878 14,338,132 ----------- ----------- --- ------------ ----------- ----------- ----------- ----------- $71,800,447 $58,954,419 $-- $ -- $51,778,506 $39,645,912 $19,985,577 $18,081,878 =========== =========== === ============ =========== =========== =========== ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-19 STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) For the years ended December 31, 2010 and December 31, 2009
COLUMBIA CALVERT SMALL CAP VP SRI VALUE FUND, BALANCED VARIABLE PORTFOLIO SERIES--CLASS B -------------------------------- -------------------------------- 2010 2009 2010 2009 -------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ 39,010 $ 13,688 $ (191,039) $ (188,883) Net realized gain (loss) on investments................ (120,034) (207,243) (855,317) (770,002) Realized gain distribution received.................... -- -- -- 29,288 Change in unrealized appreciation (depreciation) on investments.......................................... 997,336 1,051,404 6,782,310 4,425,185 ----------- ---------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........................................ 916,312 857,849 5,735,954 3,495,588 ----------- ---------- ----------- ----------- Contributions and (Withdrawals): Payments received from policyowners.................... 3,664,504 373,687 3,379,263 1,992,228 Policyowners' surrenders............................... (316,428) (143,013) (1,167,385) (760,960) Policyowners' annuity and death benefits............... -- (22,816) (60,952) (38,944) Net transfers from (to) Fixed Account.................. 3,259,841 375,732 3,089,035 1,287,271 Transfers between Investment Divisions................. 281,449 (34,712) 2,236,620 (10,201) ----------- ---------- ----------- ----------- Net contributions and (withdrawals).................. 6,889,366 548,878 7,476,581 2,469,394 ----------- ---------- ----------- ----------- Increase (decrease) in net assets................. 7,805,678 1,406,727 13,212,535 5,964,982 NET ASSETS: Beginning of period.................................... 5,046,684 3,639,957 19,580,074 13,615,092 ----------- ---------- ----------- ----------- End of period.......................................... $12,852,362 $5,046,684 $32,792,609 $19,580,074 =========== ========== =========== ===========
JANUS ASPEN JANUS ASPEN WORLDWIDE BALANCED PORTFOLIO-- PORTFOLIO-- SERVICE SHARES SERVICE SHARES -------------------------------- -------------------------------- 2010 2009 2010 2009 -------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ 715,250 $ 302,383 $ (275,399) $ (111,566) Net realized gain (loss) on investments................ 454,828 53,190 (311,441) (389,226) Realized gain distribution received.................... -- 1,423,729 -- -- Change in unrealized appreciation (depreciation) on investments.......................................... 3,645,371 6,599,438 3,463,739 4,250,242 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........................................ 4,815,449 8,378,740 2,876,899 3,749,450 ----------- ----------- ----------- ----------- Contributions and (Withdrawals): Payments received from policyowners.................... 19,902,050 6,158,399 3,350,979 2,159,589 Policyowners' surrenders............................... (2,658,022) (2,227,592) (1,018,904) (703,922) Policyowners' annuity and death benefits............... (151,983) (257,123) (46,263) (45,178) Net transfers from (to) Fixed Account.................. 20,459,881 5,869,091 2,664,927 1,222,273 Transfers between Investment Divisions................. (353,370) 2,365,430 709,926 966,083 ----------- ----------- ----------- ----------- Net contributions and (withdrawals).................. 37,198,556 11,908,205 5,660,665 3,598,845 ----------- ----------- ----------- ----------- Increase (decrease) in net assets................. 42,014,005 20,286,945 8,537,564 7,348,295 NET ASSETS: Beginning of period.................................... 51,108,620 30,821,675 17,137,490 9,789,195 ----------- ----------- ----------- ----------- End of period.......................................... $93,122,625 $51,108,620 $25,675,054 $17,137,490 =========== =========== =========== ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-20 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
DREYFUS IP FIDELITY(R) FIDELITY(R) FIDELITY(R) TECHNOLOGY VIP VIP VIP GROWTH-- CONTRAFUND(R)-- EQUITY-INCOME-- MID CAP-- SERVICE SHARES SERVICE CLASS 2 SERVICE CLASS 2 SERVICE CLASS 2 ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (523,175) $ (279,425) $ (1,231,448) $ (1,166,218) $ (78,022) $ (4,375) $ (1,669,004) $ (938,510) 480,935 (73,782) (7,438,449) (4,205,171) (2,094,506) (3,808,755) (383,532) (1,223,346) -- -- 86,140 38,531 -- -- 326,730 336,380 8,104,051 6,365,350 34,563,747 42,692,474 8,184,313 13,060,613 26,310,586 20,048,491 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ----------- 8,061,811 6,012,143 25,979,990 37,359,616 6,011,785 9,247,483 24,584,780 18,223,015 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ----------- 6,423,371 3,852,778 15,146,083 11,726,180 3,311,278 2,717,948 14,468,121 7,560,958 (1,382,278) (631,146) (8,650,290) (6,276,845) (2,693,764) (2,223,279) (4,727,222) (2,749,895) (26,193) (27,015) (620,432) (367,435) (153,214) (94,861) (409,430) (219,304) 5,083,802 1,700,669 20,050,749 11,935,634 3,787,972 2,019,427 18,362,921 5,847,306 1,880,073 3,238,759 (5,200,533) (3,994,223) (918,397) (2,076,813) 4,514,071 227,103 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ----------- 11,978,775 8,134,045 20,725,577 13,023,311 3,333,875 342,422 32,208,461 10,666,168 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ----------- 20,040,586 14,146,188 46,705,567 50,382,927 9,345,660 9,589,905 56,793,241 28,889,183 22,479,209 8,333,021 157,938,206 107,555,279 44,130,579 34,540,674 74,902,318 46,013,135 ----------- ----------- ------------ ------------ ----------- ----------- ------------ ----------- $42,519,795 $22,479,209 $204,643,773 $157,938,206 $53,476,239 $44,130,579 $131,695,559 $74,902,318 =========== =========== ============ ============ =========== =========== ============ ===========
MFS(R) NEUBERGER MFS(R) INVESTORS MFS(R) UTILITIES BERMAN TRUST SERIES-- RESEARCH SERIES-- SERIES-- AMT MID-CAP SERVICE CLASS SERVICE CLASS SERVICE CLASS GROWTH PORTFOLIO--CLASS S ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (32,711) $ (18,981) $ (59,713) $ (44,406) $ 2,330,164 $ 3,447,334 $ (337,145) $ (279,225) (123,607) (183,103) 17,033 (68,154) (1,525,937) (1,799,178) (283,212) (576,686) -- -- -- -- -- -- -- -- 544,827 760,029 811,137 1,170,167 23,977,279 39,924,738 5,059,825 4,070,904 ---------- ---------- ---------- ---------- ------------ ------------ ----------- ----------- 388,509 557,945 768,457 1,057,607 24,781,506 41,572,894 4,439,468 3,214,993 ---------- ---------- ---------- ---------- ------------ ------------ ----------- ----------- 277,236 316,862 376,390 304,353 18,628,723 14,650,541 1,624,634 834,145 (223,124) (98,525) (255,028) (303,059) (10,701,396) (7,470,925) (1,052,809) (546,075) (4,363) (2,636) (4,025) -- (1,263,478) (619,717) (87,534) (73,719) 476,055 357,474 721,695 461,422 28,670,815 16,148,498 2,007,658 1,002,436 349,080 (219,837) (201,728) 163,239 (8,219,565) (5,163,170) 860,370 (696,143) ---------- ---------- ---------- ---------- ------------ ------------ ----------- ----------- 874,884 353,338 637,304 625,955 27,115,099 17,545,227 3,352,319 520,644 ---------- ---------- ---------- ---------- ------------ ------------ ----------- ----------- 1,263,393 911,283 1,405,761 1,683,562 51,896,605 59,118,121 7,791,787 3,735,637 3,169,121 2,257,838 5,036,265 3,352,703 191,812,189 132,694,068 15,006,071 11,270,434 ---------- ---------- ---------- ---------- ------------ ------------ ----------- ----------- $4,432,514 $3,169,121 $6,442,026 $5,036,265 $243,708,794 $191,812,189 $22,797,858 $15,006,071 ========== ========== ========== ========== ============ ============ =========== ===========
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-21 STATEMENT OF CHANGES IN NET ASSETS (CONTINUED) For the years ended December 31, 2010 and December 31, 2009
PIMCO REAL RETURN ROYCE MICRO-CAP PORTFOLIO-- PORTFOLIO-- ADVISOR CLASS(A) INVESTMENT CLASS ---------------- -------------------------------------- 2010 2010 2009 ------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ (88,146) $ 223,287 $ (909,372) Net realized gain (loss) on investments................ 28,037 (2,902,208) (2,553,104) Realized gain distribution received.................... 292,953 -- -- Change in unrealized appreciation (depreciation) on investments.......................................... (427,267) 21,544,719 21,564,672 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........................................ (194,423) 18,865,798 18,102,196 ----------- ----------- ----------- Contributions and (Withdrawals): Payments received from policyowners.................... 12,095,053 10,223,287 5,115,113 Policyowners' surrenders............................... (397,116) (3,351,180) (1,630,168) Policyowners' annuity and death benefits............... -- (177,507) (42,925) Net transfers from (to) Fixed Account.................. 8,755,780 11,759,569 4,282,619 Transfers between Investment Divisions................. 17,962,278 (535,365) 1,456,541 ----------- ----------- ----------- Net contributions and (withdrawals).................. 38,415,995 17,918,804 9,181,180 ----------- ----------- ----------- Increase (decrease) in net assets................. 38,221,572 36,784,602 27,283,376 NET ASSETS: Beginning of period.................................... -- 56,817,405 29,534,029 ----------- ----------- ----------- End of period.......................................... $38,221,572 $93,602,007 $56,817,405 =========== =========== ===========
VICTORY VIF DIVERSIFIED STOCK-- CLASS A SHARES ------------------------------------- 2010 2009 ------------------------------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income (loss)........................... $ (105,374) $ (109,864) Net realized gain (loss) on investments................ (1,090,409) (452,626) Realized gain distribution received.................... -- -- Change in unrealized appreciation (depreciation) on investments.......................................... 2,312,865 2,625,800 ----------- ----------- Net increase (decrease) in net assets resulting from operations........................................ 1,117,082 2,063,310 ----------- ----------- Contributions and (Withdrawals): Payments received from policyowners.................... 727,199 818,281 Policyowners' surrenders............................... (509,090) (316,418) Policyowners' annuity and death benefits............... (41,724) (39,958) Net transfers from (to) Fixed Account.................. 1,304,808 1,273,904 Transfers between Investment Divisions................. (1,547,256) 167,578 ----------- ----------- Net contributions and (withdrawals).................. (66,063) 1,903,387 ----------- ----------- Increase (decrease) in net assets................. 1,051,019 3,966,697 NET ASSETS: Beginning of period.................................... 10,490,529 6,523,832 ----------- ----------- End of period.......................................... $11,541,548 $10,490,529 =========== ===========
(a) For the period May 1, 2010 (Commencement of Operations) through December 31, 2010. The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-22 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV
ROYCE SMALL-CAP T. ROWE PRICE UIF VAN ECK PORTFOLIO-- EQUITY INCOME EMERGING MARKETS VIP GLOBAL INVESTMENT CLASS PORTFOLIO--II EQUITY PORTFOLIO--CLASS II HARD ASSETS ----------------------------- ----------------------------- ----------------------------- ----------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 ----------------------------------------------------------------------------------------------------------------------- $ (879,028) $ (690,860) $ (96,407) $ (203,666) $ (1,652,129) $ (1,852,997) $ (3,276,871) $ (2,880,341) (325,370) (1,026,203) (1,301,856) (2,892,254) (5,694,520) (4,174,529) (840,393) (1,729,110) -- -- -- -- -- -- -- 664,328 10,587,831 11,046,248 10,556,533 14,900,669 29,376,132 47,867,766 62,850,444 65,462,798 ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ 9,383,433 9,329,185 9,158,270 11,804,749 22,029,483 41,840,240 58,733,180 61,517,675 ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ 6,549,776 4,402,300 5,366,302 4,499,614 16,473,036 11,975,986 23,510,352 18,533,338 (2,802,785) (1,444,506) (3,782,311) (2,533,822) (6,946,741) (4,316,615) (12,483,640) (7,536,288) (75,365) (252,443) (406,905) (243,792) (267,377) (180,996) (606,066) (504,153) 8,971,364 5,246,105 7,800,030 3,624,504 18,903,229 7,591,996 29,038,229 13,829,924 723,615 415,996 513,693 (2,736,020) (6,575,437) 3,483,974 (8,749,265) 4,887,270 ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ 13,366,605 8,367,452 9,490,809 2,610,484 21,586,710 18,554,345 30,709,610 29,210,091 ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ 22,750,038 17,696,637 18,649,079 14,415,233 43,616,193 60,394,585 89,442,790 90,727,766 42,505,276 24,808,639 65,265,979 50,850,746 117,257,790 56,863,205 194,389,120 103,661,354 ----------- ----------- ----------- ----------- ------------ ------------ ------------ ------------ $65,255,314 $42,505,276 $83,915,058 $65,265,979 $160,873,983 $117,257,790 $283,831,910 $194,389,120 =========== =========== =========== =========== ============ ============ ============ ============
The notes to the financial statements are an integral part of, and should be read in conjunction with, the financial statements. F-23 NOTES TO FINANCIAL STATEMENTS NOTE 1--Organization and Accounting Policies: -------------------------------------------------------------------------------- NYLIAC Variable Annuity Separate Account-IV ("Separate Account") was established on June 10, 2003, under Delaware law by New York Life Insurance and Annuity Corporation ("NYLIAC"), a wholly-owned subsidiary of New York Life Insurance Company. The Separate Account funds Series I policies (New York Life Elite Variable Annuity, New York Life Premium Plus Elite Variable Annuity and New York Life Longevity Benefit Variable Annuity), Series II policies (New York Life Premier Variable Annuity) and Series III policies (New York Life Premier Plus Variable Annuity). Effective July 27, 2009, sales of the New York Life Longevity Benefit Variable Annuity were discontinued. Effective August 16, 2010, sales of the New York Life Elite Variable Annuity and New York Life Premium Plus Elite Variable Annuity were discontinued. This account was established to receive and invest premium payments under Non-Qualified Deferred and Tax-Qualified Deferred Flexible Premium Variable Retirement Annuity Policies ("the policies") issued by NYLIAC. The Non-Qualified policies are designed to establish retirement benefits to provide individuals with supplemental retirement income. The Tax-Qualified policies are designed to establish retirement benefits for individuals who participate in tax-qualified pension, profit sharing or annuity plans. The policies are distributed by NYLIFE Distributors LLC and sold by registered representatives of NYLIFE Securities LLC, and certain banking and financial institutions that have entered into selling agreements with NYLIAC and registered representatives of unaffiliated broker-dealers. NYLIFE Securities LLC and NYLIFE Distributors LLC are both indirect, wholly-owned subsidiaries of New York Life Insurance Company. The Separate Account is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. The assets of the Separate Account, which are currently all in the accumulation phase, are invested in shares of eligible portfolios of the MainStay VP Series Fund, Inc., the Alger Portfolios, the Calvert Variable Series, Inc., the Columbia Funds Variable Insurance Trust, the Dreyfus Investment Portfolios, the Fidelity Variable Insurance Products Fund, the Janus Aspen Series, the MFS(R) Variable Insurance Trust(SM), the Neuberger Berman Advisers Management Trust, the PIMCO Variable Insurance Trust, the Royce Capital Fund, the T. Rowe Price Equity Series, Inc., the Van Eck VIP Trust, the Universal Institutional Funds, Inc., and the Victory Variable Insurance Funds (collectively, "Funds"). These assets are clearly identified and distinguished from the other assets and liabilities of NYLIAC. These assets are the property of NYLIAC; however, the portion of the assets attributable to the policies will not be charged with liabilities arising out of any other business NYLIAC may conduct. The Fixed Account and the Dollar Cost Averaging Advantage Account represent the general assets of NYLIAC. NYLIAC's Fixed Account and the Dollar Cost Averaging Advantage Account may be charged with liabilities arising out of other business NYLIAC may conduct. New York Life Investment Management LLC ("New York Life Investments"), provides investment advisory services to the MainStay VP Series Fund, Inc. for a fee. New York Life Investments retains several sub-advisors, including MacKay Shields LLC ("Mackay Shields"), Madison Square Investors LLC ("Madison Square Investors"), Epoch Investment Partners, Inc. ("Epoch"), Institutional Capital LLC ("ICAP") and Winslow Capital Management Inc. ("Winslow Capital"), to provide investment advisory services to certain portfolios of the MainStay VP Series Fund, Inc. New York Life Investments, Mackay Shields, Madison Square Investors and ICAP are all indirect, wholly-owned subsidiaries of New York Life. Epoch is an independent investment advisory firm. Winslow Capital is a wholly-owned subsidiary of Nuveen Investments, Inc. The following Investment Divisions, with their respective fund portfolios, are available in this Separate Account: MainStay VP Balanced--Service Class MainStay VP Bond--Service Class MainStay VP Cash Management MainStay VP Common Stock--Service Class MainStay VP Conservative Allocation--Service Class MainStay VP Convertible--Service Class MainStay VP Floating Rate--Service Class MainStay VP Government--Service Class MainStay VP Growth Allocation--Service Class MainStay VP Growth Equity--Service Class MainStay VP High Yield Corporate Bond--Service Class MainStay VP ICAP Select Equity--Service Class MainStay VP Income Builder--Service Class MainStay VP International Equity--Service Class MainStay VP Large Cap Growth--Service Class MainStay VP Mid Cap Core--Service Class MainStay VP Moderate Allocation--Service Class MainStay VP Moderate Growth Allocation--Service Class MainStay VP S&P 500 Index--Service Class MainStay VP U.S. Small Cap--Service Class Alger Small Cap Growth--Class S Shares(1) Calvert VP SRI Balanced Portfolio(2) Columbia Small Cap Value Fund, Variable Series--Class B Dreyfus IP Technology Growth--Service Shares Fidelity(R) VIP Contrafund(R)--Service Class 2 Fidelity(R) VIP Equity-Income--Service Class 2 Fidelity(R) VIP Mid Cap--Service Class 2 Janus Aspen Balanced Portfolio--Service Shares Janus Aspen Worldwide Portfolio--Service Shares MFS(R) Investors Trust Series--Service Class MFS(R) Research Series--Service Class MFS(R) Utilities Series--Service Class Neuberger Berman AMT Mid-Cap Growth Portfolio--Class S PIMCO Real Return Portfolio--Advisor Class Royce Micro-Cap Portfolio--Investment Class Royce Small-Cap Portfolio--Investment Class T. Rowe Price Equity Income Portfolio--II UIF Emerging Markets Equity Portfolio--Class II(3) Van Eck VIP Global Hard Assets(4) Victory VIF Diversified Stock--Class A Shares ------- (1) New allocations to Alger Small Cap Growth--Class S Shares investment division will not be accepted from policyowners who were not invested in the investment division as of June 1, 2007. (2) Formerly CVS Calvert Social Balanced. (3) Formerly Van Kampen's UIF Emerging Markets Equity--Class II. (4) Formerly Van Eck Worldwide Hard Assets. F-24 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV -------------------------------------------------------------------------------- For all policies within Series I, II and III, initial premium payments are allocated to the Investment Divisions, Fixed Account and/or Dollar Cost Averaging (DCA) Advantage Account within two Business Days after receipt. Subsequent premium payments are allocated to the Investment Divisions, Fixed Account and/or DCA Advantage Account at the close of the Business Day they are received. In those states where NYLIAC offered a single premium version of the Series I policies, only one premium payment was permitted. In addition, the policyowner has the option to transfer amounts between the Investment Divisions of the Separate Account or from the DCA Advantage Account into the Investment Divisions. The policyowner may also transfer interest earned on monies in the Fixed Account into the Investment Divisions of the Separate Account. On the accompanying statement of changes in net assets, all references to the Fixed Account include the Fixed Account and the DCA Advantage Account. No Federal income tax is payable on investment income or capital gains of Separate Account-IV under current Federal income tax law. Security Valuation--The investments are valued at the net asset value of shares of the respective Fund portfolios. Security Transactions--Realized gains and losses from security transactions are reported on the identified cost basis. Security transactions are accounted for as of the date the securities are purchased or sold (trade date). Distributions Received--Dividend income and capital gain distributions are recorded on the ex-dividend date and reinvested in the corresponding portfolio. The authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance also establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are based on the inputs to the valuation as follows: Level 1--Quoted prices for identical instruments in active markets. Level 1 fair values generally are supported by market transactions that occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2--Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data for substantially the full term of the asset. Level 3--Unobservable inputs supported by little or no market activity and often requiring significant management judgment or estimation, such as an entity's own assumptions about the cash flows or other significant components of value that market participants would use in pricing the asset or liability. The fair values of all the investments in the respective Fund Portfolios listed above are at net asset values ("NAV's"). The NAV's are calculated daily without restrictions using quoted market prices of the underlying investments and are considered actively traded within Level 1. The amounts shown as net receivable from (payable to) NYLIAC on the Statement of Assets and Liabilities reflect transactions that occurred on the last business day of the reporting period. These amounts will be deposited to or withdrawn from the separate account in accordance with the policyowners' instructions on the first business day subsequent to the close of the period presented. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Subsequent events were evaluated through February 18, 2011, the date the financial statements were issued and there have been no subsequent events that would have a material effect on the accompanying financial statements. F-25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Investments (in 000's): -------------------------------------------------------------------------------- At December 31, 2010, the investments of Separate Account-IV are as follows:
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP COMMON BALANCED-- BOND-- CASH STOCK-- SERVICE CLASS SERVICE CLASS MANAGEMENT SERVICE CLASS -------------------------------------------------------------------- Number of shares....... 4,860 9,664 153,906 1,407 Identified cost........ $51,549 $138,577 $153,914 $26,152
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP ICAP SELECT INCOME INTERNATIONAL LARGE CAP EQUITY-- BUILDER-- EQUITY-- GROWTH-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------- Number of shares....... 15,254 1,216 10,869 5,763 Identified cost........ $177,507 $17,523 $161,032 $72,287
Investment activity for the year ended December 31, 2010, was as follows:
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP COMMON BALANCED-- BOND-- CASH STOCK-- SERVICE CLASS SERVICE CLASS MANAGEMENT SERVICE CLASS -------------------------------------------------------------------- Purchases.............. $15,712 $68,580 $77,692 $2,407 Proceeds from sales.... 4,213 11,146 76,699 2,355
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP ICAP SELECT INCOME INTERNATIONAL LARGE CAP EQUITY-- BUILDER-- EQUITY-- GROWTH-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------- Purchases.............. $35,706 $6,031 $34,772 $26,601 Proceeds from sales.... 11,334 1,096 7,246 4,543
F-26 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP HIGH YIELD CONSERVATIVE MAINSTAY VP FLOATING MAINSTAY VP GROWTH GROWTH CORPORATE ALLOCATION-- CONVERTIBLE-- RATE-- GOVERNMENT-- ALLOCATION-- EQUITY-- BOND-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------------------------------------------------------------- 14,208 11,146 15,229 8,273 12,144 526 45,627 $148,826 $116,435 $136,000 $95,807 $117,670 $12,023 $414,316
MAINSTAY VP MAINSTAY VP MAINSTAY VP MODERATE MAINSTAY VP MAINSTAY VP ALGER CALVERT MID CAP MODERATE GROWTH S&P 500 U.S. SMALL SMALL CAP VP SRI CORE-- ALLOCATION-- ALLOCATION-- INDEX-- CAP-- GROWTH-- BALANCED SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS CLASS S SHARES PORTFOLIO -------------------------------------------------------------------------------------------------------------------------- 9,510 22,103 31,645 2,836 5,717 639 7,557 $98,465 $226,620 $313,787 $71,744 $43,201 $17,265 $12,635
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP HIGH YIELD CONSERVATIVE MAINSTAY VP FLOATING MAINSTAY VP GROWTH GROWTH CORPORATE ALLOCATION-- CONVERTIBLE-- RATE-- GOVERNMENT-- ALLOCATION-- EQUITY-- BOND-- SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------------------------------------------------------------- $61,596 $44,831 $55,442 $44,587 $21,142 $2,818 $168,785 11,639 7,711 12,003 21,864 10,646 1,522 31,267
MAINSTAY VP MAINSTAY VP MAINSTAY VP MODERATE MAINSTAY VP MAINSTAY VP ALGER CALVERT MID CAP MODERATE GROWTH S&P 500 U.S. SMALL SMALL CAP VP SRI CORE-- ALLOCATION-- ALLOCATION-- INDEX-- CAP-- GROWTH-- BALANCED SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS CLASS S SHARES PORTFOLIO -------------------------------------------------------------------------------------------------------------------------- $12,884 $93,589 $133,385 $11,693 $7,401 $ 455 $7,463 11,998 12,880 13,478 6,586 5,432 2,726 587
F-27 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2--Investments (in 000's) (Continued): --------------------------------------------------------------------------------
COLUMBIA FIDELITY(R) FIDELITY(R) SMALL CAP VIP VIP VALUE FUND, DREYFUS IP CONTRA- EQUITY- VARIABLE TECHNOLOGY FUND(R)-- INCOME-- SERIES-- GROWTH-- SERVICE CLASS SERVICE CLASS CLASS B SERVICE SHARES 2 2 -------------------------------------------------------------------- Number of shares....... 1,878 3,342 8,728 2,859 Identified cost........ $30,118 $31,737 $220,622 $62,541
ROYCE ROYCE T. ROWE PIMCO MICRO-CAP SMALL-CAP PRICE REAL RETURN PORTFOLIO-- PORTFOLIO-- EQUITY PORTFOLIO-- INVESTMENT INVESTMENT INCOME ADVISOR CLASS CLASS CLASS PORTFOLIO-II -------------------------------------------------------------------- Number of shares....... 2,887 7,694 6,254 4,230 Identified cost........ $38,366 $79,298 $56,744 $89,974
COLUMBIA FIDELITY(R) FIDELITY(R) SMALL CAP VIP VIP VALUE FUND, DREYFUS IP CONTRA- EQUITY- VARIABLE TECHNOLOGY FUND(R)-- INCOME-- SERIES-- GROWTH-- SERVICE CLASS SERVICE CLASS CLASS B SERVICE SHARES 2 2 -------------------------------------------------------------------- Purchases.............. $10,183 $15,001 $35,885 $8,473 Proceeds from sales.... 2,921 3,661 16,153 5,184
ROYCE ROYCE T. ROWE PIMCO MICRO-CAP SMALL-CAP PRICE REAL RETURN PORTFOLIO-- PORTFOLIO-- EQUITY PORTFOLIO-- INVESTMENT INVESTMENT INCOME ADVISOR CLASS CLASS CLASS PORTFOLIO-II -------------------------------------------------------------------- Purchases.............. $39,479 $26,217 $16,398 $15,231 Proceeds from sales.... 1,141 7,958 3,756 5,737
F-28 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
FIDELITY(R) VIP JANUS ASPEN JANUS ASPEN MFS(R) MFS(R) MID CAP-- BALANCED WORLDWIDE MFS(R) INVESTORS RESEARCH UTILITIES SERVICE CLASS PORTFOLIO-- PORTFOLIO-- TRUST SERIES-- SERIES-- SERIES-- 2 SERVICE SHARES SERVICE SHARES SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------------------------------------------------------- 4,105 3,167 864 223 341 9,791 $118,116 $88,566 $24,533 $4,019 $5,725 $256,939 NEUBERGER BERMAN AMT MID-CAP GROWTH PORTFOLIO-- CLASS S -------------- 850 $20,698
VICTORY UIF VIF EMERGING DIVERSI- MARKETS VAN ECK FIED EQUITY VIP GLOBAL STOCK-- PORTFOLIO-- HARD CLASS A CLASS II ASSETS SHARES -------------------------------------------------- 10,508 7,549 1,183 $156,445 $232,531 $10,898
FIDELITY(R) VIP JANUS ASPEN JANUS ASPEN MFS(R) MFS(R) MID CAP-- BALANCED WORLDWIDE MFS(R) INVESTORS RESEARCH UTILITIES SERVICE CLASS PORTFOLIO-- PORTFOLIO-- TRUST SERIES-- SERIES-- SERIES-- 2 SERVICE SHARES SERVICE SHARES SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------------------------------------------------------------------------------------------------------------- $36,126 $44,499 $7,854 $1,509 $1,268 $49,102 5,073 6,553 2,440 662 688 19,363 NEUBERGER BERMAN AMT MID-CAP GROWTH PORTFOLIO-- CLASS S -------------- $5,357 2,372
VICTORY UIF VIF EMERGING DIVERSI- MARKETS VAN ECK FIED EQUITY VIP GLOBAL STOCK-- PORTFOLIO-- HARD CLASS A CLASS II ASSETS SHARES -------------------------------------------------- $35,398 $55,716 $2,388 15,165 28,007 2,609
F-29 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 3--Expenses and Related Party Transactions: -------------------------------------------------------------------------------- NYLIAC deducts a surrender charge on certain partial withdrawals from and surrenders of Series I, II and III policies, depending on the length of time a premium payment is in the policy before it is withdrawn. For New York Life Elite Variable Annuity policies, which are part of Series I, this charge is 8% during the first three payment years and declines by 1% per year for each additional payment year, until the eighth payment year, after which no charge is made. In those states where NYLIAC offered a single premium version of New York Life Elite Variable Annuity the surrender charge was lower. For New York Life Premium Plus Elite Variable Annuity and New York Life Longevity Benefit Variable Annuity policies, which are also part of Series I, this charge is 8% during the first three payment years and declines to 7% in the fourth payment year, 6% in the fifth payment year, 5% in the sixth payment year, 4% in the seventh payment year and 3% in the eighth, ninth and tenth payment year, after which no charge is made. In those states where NYLIAC offered a single premium version of the New York Life Premium Plus Elite Variable Annuity the surrender charge was lower. For New York Life Premier Variable Annuity policies which are part of Series II, this charge is 8% during the first payment year and declines by 1% per year for each additional payment year, until the seventh payment year, after which no charge is made. For New York Life Premier Plus Variable Annuity policies which are part of Series III, this charge is 8% during the first two payment years and declines by 1% per year for each additional payment year, until the eighth payment year, after which no charge is made. All surrender charges are recorded with policyowners' surrenders in the accompanying statement of changes in net assets. Surrender charges are paid to NYLIAC. For Series I, II and III policies, NYLIAC also deducts an annual policy service charge from the policy's Accumulation Value on each policy anniversary date and upon surrender, if on the policy anniversary and/or date of surrender, the Accumulation Value is less than $100,000. This charge is $30 per policy. Additionally, NYLIAC reserves the right to charge Series I, II and III policies, $30 for each transfer in excess of 12 in any one policy year, subject to certain restrictions. The policies are also subject to an annualized mortality and expense risk and administrative costs charge, that is deducted on a quarterly basis from the Investment Divisions. For Series I, policies, this charge is 1.70% for New York Life Elite Variable Annuity, 1.90% for New York Life Premium Plus Elite Variable Annuity and 1.35% for New York Life Longevity Benefit Variable Annuity; for Series II policies, this charge is 1.55% for New York Life Premier Variable Annuity; for Series III policies, this charge is 1.75% for New York Life Premier Plus Variable Annuity, of the Adjusted Premium Payments allocated to the Investment Divisions, and is the same rate for each of the five periods presented in the Financial Highlights section, (including portions of the premium payment(s) transferred from the Fixed Account under the New York Life Premium Plus Elite Variable Annuity, New York Life Longevity Benefit Variable Annuity, New York Life Premier Variable Annuity and New York Life Premier Plus Variable Annuity) and the DCA Advantage Account. In addition, a pro-rata portion of the charge will be deducted on the date the policy is surrendered and upon payment of any death benefit proceeds. The mortality and expense risk and administrative charges are recorded in the accompanying summary of operations. In addition, New York Life Longevity Benefit Variable Annuity policies, which are part of Series I, are subject to a Longevity Benefit Charge. This charge is deducted each policy quarter by reducing the number of Accumulation Units in the Investment Divisions. On an annual basis, the charge equals 1.00% (0.25% quarterly) of the premium payment made to the policy. NOTE 4--Distribution of Net Income: -------------------------------------------------------------------------------- The Separate Account does not expect to declare dividends to policyowners from accumulated net investment income and realized gains. The income and gains are distributed to policyowners as part of withdrawals of amounts (in the form of surrenders, death benefits, transfers, or annuity payments) in excess of the net premium payments. F-30 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV (THIS PAGE INTENTIONALLY LEFT BLANK) F-31 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--Unit Transactions (in 000's): -------------------------------------------------------------------------------- The changes in units outstanding for the years ended December 31, 2010 and 2009 were as follows:
MAINSTAY VP MAINSTAY VP COMMON MAINSTAY VP BALANCED-- MAINSTAY VP MAINSTAY VP STOCK-- CONSERVATIVE SERVICE BOND-- CASH SERVICE ALLOCATION-- CLASS SERVICE CLASS MANAGEMENT CLASS SERVICE CLASS ------------ -------------- ------------------ ------------ ------------------------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 ---------------------------------------------------------------------------------------------------- SERIES I POLICIES Units issued................ 118 153 1,477 1,313 25,624 26,040 58 228 1,167 1,523 Units redeemed.............. (342) (354) (674) (365) (48,419) (55,452) (174) (109) (864) (628) ---- ---- ----- ----- ------- ------- ---- ---- ----- ----- Net increase (decrease)... (224) (201) 803 948 (22,795) (29,412) (116) 119 303 895 ==== ==== ===== ===== ======= ======= ==== ==== ===== ===== SERIES II POLICIES Units issued................ 321 23 1,270 254 1,590 419 45 15 965 247 Units redeemed.............. (23) -- (23) (1) (772) (191) (5) -- (6) (1) ---- ---- ----- ----- ------- ------- ---- ---- ----- ----- Net increase (decrease)... 298 23 1,247 253 818 228 40 15 959 246 ==== ==== ===== ===== ======= ======= ==== ==== ===== ===== SERIES III POLICIES Units issued................ 889 62 2,636 385 3,191 1,962 78 36 3,021 453 Units redeemed.............. (8) -- (126) (1) (1,257) (1,237) (8) (1) (128) -- ---- ---- ----- ----- ------- ------- ---- ---- ----- ----- Net increase (decrease)... 881 62 2,510 384 1,934 725 70 35 2,893 453 ==== ==== ===== ===== ======= ======= ==== ==== ===== =====
MAINSTAY VP MAINSTAY VP INCOME MAINSTAY VP MAINSTAY VP MAINSTAY VP ICAP SELECT BUILDER-- INTERNATIONAL LARGE CAP MID CAP EQUITY-- SERVICE EQUITY-- GROWTH-- CORE-- SERVICE CLASS CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS -------------- ------------ ------------- ------------- ------------------------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 ------------------------------------------------------------------------------------------------ SERIES I POLICIES Units issued................ 263 3,918 192 98 379 683 533 986 157 3,304 Units redeemed.............. (829) (438) (67) (86) (404) (689) (361) (166) (756) (164) ----- ----- --- --- ----- ---- ----- ---- ---- ----- Net increase (decrease)... (566) 3,480 125 12 (25) (6) 172 820 (599) 3,140 ===== ===== === === ===== ==== ===== ==== ==== ===== SERIES II POLICIES Units issued................ 1,046 274 113 9 926 189 600 142 342 99 Units redeemed.............. (29) (1) (6) -- (10) -- (11) -- (23) -- ----- ----- --- --- ----- ---- ----- ---- ---- ----- Net increase (decrease)... 1,017 273 107 9 916 189 589 142 319 99 ===== ===== === === ===== ==== ===== ==== ==== ===== SERIES III POLICIES Units issued................ 1,594 366 153 51 1,350 348 1,137 251 486 115 Units redeemed.............. (13) (1) (17) -- (26) (1) (7) (1) (22) -- ----- ----- --- --- ----- ---- ----- ---- ---- ----- Net increase (decrease)... 1,581 365 136 51 1,324 347 1,130 250 464 115 ===== ===== === === ===== ==== ===== ==== ==== =====
F-32 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP MAINSTAY VP MAINSTAY VP GROWTH MAINSTAY VP FLOATING MAINSTAY VP GROWTH EQUITY-- CONVERTIBLE-- RATE-- GOVERNMENT-- ALLOCATION-- SERVICE SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS CLASS -------------- -------------- ---------------- --------------- ------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 ------------------------------------------------------------------------------- 520 1,855 827 3,331 1,150 1,206 305 1,662 76 97 (455) (237) (751) (552) (1,370) (1,799) (1,026) (919) (113) (197) ----- ----- ----- ----- ------ ------ ------ ----- ---- ---- 65 1,618 76 2,779 (220) (593) (721) 743 (37) (100) ===== ===== ===== ===== ====== ====== ====== ===== ==== ==== 863 222 1,196 253 803 111 433 77 55 4 (17) -- (14) (1) (56) -- (11) -- (8) -- ----- ----- ----- ----- ------ ------ ------ ----- ---- ---- 846 222 1,182 252 747 111 422 77 47 4 ===== ===== ===== ===== ====== ====== ====== ===== ==== ==== 1,928 393 2,636 576 1,519 253 1,093 216 114 17 (45) (1) (281) (21) (256) (1) (20) -- (9) -- ----- ----- ----- ----- ------ ------ ------ ----- ---- ---- 1,883 392 2,355 555 1,263 252 1,073 216 105 17 ===== ===== ===== ===== ====== ====== ====== ===== ==== ==== MAINSTAY VP HIGH YIELD CORPORATE BOND-- SERVICE CLASS ------------------------------ 2010 2009 ------------------------------ 1,597 6,891 (1,860) (992) ------ ----- (263) 5,899 ====== ===== 3,312 785 (54) (3) ------ ----- 3,258 782 ====== ===== 6,960 1,684 (78) (2) ------ ----- 6,882 1,682 ====== =====
MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MAINSTAY VP MODERATE S&P 500 MID CAP MID CAP MODERATE GROWTH INDEX-- GROWTH-- VALUE-- ALLOCATION-- ALLOCATION-- SERVICE SERVICE CLASS SERVICE CLASS SERVICE CLASS SERVICE CLASS CLASS -------------- -------------- ---------------- ---------------- ------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 -------------------------------------------------------------------------------- -- 262 -- 238 731 2,491 430 2,905 298 491 -- (3,174) -- (3,155) (1,084) (1,126) (1,215) (1,537) (500) (399) -- ------ -- ------ ------ ------ ------ ------ ---- ---- -- (2,912) -- (2,917) (353) 1,365 (785) 1,368 (202) 92 == ====== == ====== ====== ====== ====== ====== ==== ==== -- 27 -- 23 1,826 233 3,167 205 181 55 -- (27) -- (23) (30) -- (6) (5) (7) -- -- ------ -- ------ ------ ------ ------ ------ ---- ---- -- -- -- -- 1,796 233 3,161 200 174 55 == ====== == ====== ====== ====== ====== ====== ==== ==== -- 29 -- 28 5,373 569 7,607 802 415 73 -- (29) -- (28) (45) -- (52) (2) (25) -- -- ------ -- ------ ------ ------ ------ ------ ---- ---- -- -- -- -- 5,328 569 7,555 800 390 73 == ====== == ====== ====== ====== ====== ====== ==== ==== MAINSTAY VP SMALL CAP GROWTH-- SERVICE CLASS ------------------------------ 2010 2009 ------------------------------ -- 178 -- (1,677) -- ------ -- (1,499) == ====== -- 16 -- (16) -- ------ -- -- == ====== -- 7 -- (7) -- ------ -- -- == ======
F-33 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--Unit Transactions (in 000's) (Continued): --------------------------------------------------------------------------------
COLUMBIA ALGER SMALL CAP MAINSTAY VP SMALL CAP CALVERT VALUE FUND, DREYFUS IP U.S. SMALL GROWTH-- VP SRI VARIABLE TECHNOLOGY CAP-- CLASS S BALANCED SERIE- GROWTH-- SERVICE CLASS SHARES PORTFOLIO S--CLASS B SERVICE SHARES ------------- ------------ ------------ ------------ ------------------------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 --------------------------------------------------------------------------------------------- SERIES I POLICIES Units issued................ 140 1,376 26 5 59 56 329 249 346 617 Units redeemed.............. (339) (68) (155) (173) (43) (24) (220) (85) (229) (61) ---- ----- ---- ---- --- --- ---- --- ---- --- Net increase (decrease)... (199) 1,308 (129) (168) 16 32 109 164 117 556 ==== ===== ==== ==== === === ==== === ==== === SERIES II POLICIES Units issued................ 153 42 -- -- 183 5 225 28 281 53 Units redeemed.............. (12) -- -- -- (4) (1) (14) -- (20) -- ---- ----- ---- ---- --- --- ---- --- ---- --- Net increase (decrease)... 141 42 -- -- 179 4 211 28 261 53 ==== ===== ==== ==== === === ==== === ==== === SERIES III POLICIES Units issued................ 277 77 -- -- 398 7 264 40 510 135 Units redeemed.............. (13) -- -- -- (3) -- (12) (1) (33) -- ---- ----- ---- ---- --- --- ---- --- ---- --- Net increase (decrease)... 264 77 -- -- 395 7 252 39 477 135 ==== ===== ==== ==== === === ==== === ==== ===
NEUBERGER MFS(R) BERMAN AMT RESEARCH MFS(R) MID-CAP PIMCO ROYCE SERIES-- UTILITIES GROWTH REAL RETURN MICRO-CAP SERVICE SERIES-- PORTFOLIO-- PORTFOLIO-- PORTFOLIO-- CLASS SERVICE CLASS CLASS S ADVISOR CLASS INVESTMENT CLASS ------------ -------------- ------------ ------------- ------------------------------ 2010 2009 2010 2009 2010 2009 2010(A) 2010 2009 ----------------------------------------------------------------------------------------------- SERIES I POLICIES Units issued................ 29 63 197 1,143 140 108 1,446 326 544 Units redeemed.............. (44) (25) (901) (841) (140) (118) (69) (506) (173) --- --- ----- ----- ---- ---- ----- ----- ---- Net increase (decrease)... (15) 38 (704) 302 -- (10) 1,377 (180) 371 === === ===== ===== ==== ==== ===== ===== ==== SERIES II POLICIES Units issued................ 19 7 1,104 244 114 18 888 521 110 Units redeemed.............. (3) -- (15) -- (6) -- (20) (12) -- --- --- ----- ----- ---- ---- ----- ----- ---- Net increase (decrease)... 16 7 1,089 244 108 18 868 509 110 === === ===== ===== ==== ==== ===== ===== ==== SERIES III POLICIES Units issued................ 53 7 2,282 529 144 14 1,428 1,011 296 Units redeemed.............. (3) -- (14) (1) (18) -- (21) (33) -- --- --- ----- ----- ---- ---- ----- ----- ---- Net increase (decrease)... 50 7 2,268 528 126 14 1,407 978 296 === === ===== ===== ==== ==== ===== ===== ====
(a) For the period May 1, 2010 (Commencement of Investments) through December 31, 2010. F-34 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
FIDELITY(R) VIP FIDELITY(R) JANUS ASPEN JANUS ASPEN EQUITY- VIP BALANCED WORLDWIDE FIDELITY(R) VIP INCOME-- MID CAP-- PORTFOLIO-- PORTFOLIO-- CONTRAFUND(R)-- SERVICE SERVICE CLASS SERVICE SERVICE SERVICE CLASS 2 CLASS 2 2 SHARES SHARES --------------- ------------ ------------- ------------- ------------ 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 ------------------------------------------------------------------------- 298 1,250 143 267 349 483 338 686 184 243 (1,031) (884) (396) (485) (226) (194) (310) (176) (169) (77) ------ ----- ---- ---- ----- ---- ----- ---- ---- --- (733) 366 (253) (218) 123 289 28 510 15 166 ====== ===== ==== ==== ===== ==== ===== ==== ==== === 1,051 246 182 54 798 171 1,152 124 160 27 (15) -- (31) -- (16) -- (41) -- (11) -- ------ ----- ---- ---- ----- ---- ----- ---- ---- --- 1,036 246 151 54 782 171 1,111 124 149 27 ====== ===== ==== ==== ===== ==== ===== ==== ==== === 1,436 379 344 99 1,467 273 2,175 267 320 131 (7) (63) (15) -- (19) (1) (101) (1) (25) -- ------ ----- ---- ---- ----- ---- ----- ---- ---- --- 1,429 316 329 99 1,448 272 2,074 266 295 131 ====== ===== ==== ==== ===== ==== ===== ==== ==== === MFS(R) INVESTORS TRUST SERIES-- SERVICE CLASS ------------------------------ 2010 2009 ------------------------------ 46 44 (42) (34) --- --- 4 10 === === 21 2 (3) -- --- --- 18 2 === === 60 13 (7) -- --- --- 53 13 === ===
T. ROWE UIF ROYCE SMALL- PRICE EMERGING VICTORY CAP EQUITY MARKETS VAN ECK VIP VIF PORTFOLIO-- INCOME EQUITY GLOBAL DIVERSIFIED INVESTMENT PORTFO- PORTFOLIO-- HARD STOCK-- CLASS LIO--II CLASS II ASSETS CLASS A SHARES ------------ ------------ ------------- ------------- ---------------------------------- 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 -------------------------------------------------------------------------------------------- 274 656 200 468 235 643 317 868 55 203 (255) (286) (404) (528) (524) (209) (794) (298) (204) (35) ---- ---- ---- ---- ----- ---- ----- ---- ---- --- 19 370 (204) (60) (289) 434 (477) 570 (149) 168 ==== ==== ==== ==== ===== ==== ===== ==== ==== === 446 99 464 106 743 188 1,200 263 67 10 (9) -- (4) -- (20) -- (48) -- (8) -- ---- ---- ---- ---- ----- ---- ----- ---- ---- --- 437 99 460 106 723 188 1,152 263 59 10 ==== ==== ==== ==== ===== ==== ===== ==== ==== === 616 271 511 96 1,561 525 2,422 757 86 12 (27) -- (23) -- (48) (2) (99) (2) (5) -- ---- ---- ---- ---- ----- ---- ----- ---- ---- --- 589 271 488 96 1,513 523 2,323 755 81 12 ==== ==== ==== ==== ===== ==== ===== ==== ==== ===
F-35 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's): -------------------------------------------------------------------------------- The following table presents financial highlights for each Investment Division as of December 31, 2010, 2009, 2008, 2007 and 2006:
MAINSTAY VP BALANCED-- SERVICE CLASS ----------------------------------------------- 2010 2009 2008 2007 2006 ----------------------------------------------- SERIES I POLICIES Net Assets.................... $37,202 $35,249 $30,471 $45,343 $32,449 Units Outstanding............. 3,010 3,234 3,435 3,823 2,793 Variable Accumulation Unit Value....................... $ 12.39 $ 10.93 $ 8.90 $ 11.88 $ 11.58 Total Return.................. 13.3% 22.8% (25.0%) 2.6% 10.4% Investment Income Ratio....... 1.2% 2.9% -- 2.2% 2.3% SERIES II POLICIES Net Assets.................... $ 3,859 $ 245 $ -- $ -- $ -- Units Outstanding............. 321 23 -- -- -- Variable Accumulation Unit Value....................... $ 12.03 $ 10.61 $ -- $ -- $ -- Total Return.................. 13.3% 6.1% -- -- -- Investment Income Ratio....... 12.2% 1.3% -- -- -- SERIES III POLICIES Net Assets.................... $11,563 $ 743 $ -- $ -- $ -- Units Outstanding............. 943 62 -- -- -- Variable Accumulation Unit Value....................... $ 12.31 $ 10.86 $ -- $ -- $ -- Total Return.................. 13.3% 8.6% -- -- -- Investment Income Ratio....... 14.2% 2.1% -- -- --
MAINSTAY VP COMMON STOCK-- SERVICE CLASS ----------------------------------------------- 2010 2009 2008 2007 2006 ----------------------------------------------- SERIES I POLICIES Net Assets.................... $20,426 $19,628 $14,871 $20,713 $10,931 Units Outstanding............. 1,457 1,573 1,454 1,281 710 Variable Accumulation Unit Value....................... $ 14.05 $ 12.51 $ 10.25 $ 16.15 $ 15.39 Total Return.................. 12.3% 22.1% (36.5%) 4.9% 16.2% Investment Income Ratio....... 1.4% 1.9% 1.3% 1.3% 0.5% SERIES II POLICIES Net Assets.................... $ 667 $ 160 $ -- $ -- $ -- Units Outstanding............. 55 15 -- -- -- Variable Accumulation Unit Value....................... $ 12.22 $ 10.87 $ -- $ -- $ -- Total Return.................. 12.3% 8.7% -- -- -- Investment Income Ratio....... 31.3% 0.6% -- -- -- SERIES III POLICIES Net Assets.................... $ 1,314 $ 432 $ -- $ -- $ -- Units Outstanding............. 105 35 -- -- -- Variable Accumulation Unit Value....................... $ 12.50 $ 11.13 $ -- $ -- $ -- Total Return.................. 12.3% 11.3% -- -- -- Investment Income Ratio....... 50.5% 1.2% -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-36 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP BOND-- MAINSTAY VP SERVICE CLASS CASH MANAGEMENT ---------------------------------------------- ------------------------------------------------ 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------------ $91,562 $74,630 $57,839 $34,806 $19,422 $116,450 $143,009 $177,537 $48,819 $18,765 6,457 5,654 4,706 2,925 1,734 100,274 123,069 152,481 42,596 17,010 $ 14.22 $ 13.22 $ 12.30 $ 11.88 $ 11.18 $ 1.17 $ 1.17 $ 1.16 $ 1.14 $ 1.09 7.6% 7.5% 3.5% 6.3% 4.3% 0.0% 0.0% 2.2% 4.8% 4.6% 3.2% 4.6% 4.7% 4.2% 1.2% 0.0% 0.0% 1.7% 4.5% 4.4% $16,568 $ 2,606 $ -- $ -- $ -- $ 10,654 $ 2,314 $ -- $ -- $ -- 1,500 253 -- -- -- 1,046 228 -- -- -- $ 11.05 $ 10.27 $ -- $ -- $ -- $ 10.00 $ 10.00 $ -- $ -- $ -- 7.6% 2.7% -- -- -- 0.0% 0.0% -- -- -- 26.0% 2.9% -- -- -- 32.8% 0.0% -- -- -- $32,157 $ 4,029 $ -- $ -- $ -- $ 27,327 $ 7,278 $ -- $ -- $ -- 2,894 384 -- -- -- 2,659 725 -- -- -- $ 11.05 $ 10.27 $ -- $ -- $ -- $ 10.00 $ 10.00 $ -- $ -- $ -- 7.6% 2.7% -- -- -- 0.0% 0.0% -- -- -- 22.3% 3.8% -- -- -- 36.6% 0.0% -- -- --
MAINSTAY VP MAINSTAY VP CONSERVATIVE ALLOCATION-- CONVERTIBLE-- SERVICE CLASS SERVICE CLASS ------------------------------------------------ ----------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------------- $105,901 $91,288 $66,600 $51,209 $12,984 $86,954 $73,137 $33,737 $34,342 $21,580 8,361 8,058 7,163 4,477 1,207 5,041 4,976 3,358 2,220 1,601 $ 12.69 $ 11.35 $ 9.31 $ 11.44 $ 10.67 $ 17.30 $ 14.71 $ 10.10 $ 15.44 $ 13.47 11.7% 21.9% (18.6%) 7.2% 6.7% 17.6% 45.7% (34.6%) 14.6% 10.1% 2.4% 3.1% 0.0% 4.0% 2.6% 2.8% 2.2% 2.3% 2.3% 2.6% $ 14,389 $ 2,628 $ -- $ -- $ -- $14,450 $ 2,553 $ -- $ -- $ -- 1,205 246 -- -- -- 1,068 222 -- -- -- $ 11.96 $ 10.70 $ -- $ -- $ -- $ 13.54 $ 11.52 $ -- $ -- $ -- 11.7% 7.0% -- -- -- 17.6% 15.2% -- -- -- 32.6% 1.6% -- -- -- 28.9% 1.3% -- -- -- $ 40,120 $ 4,802 $ -- $ -- $ -- $30,818 $ 4,653 $ -- $ -- $ -- 3,346 453 -- -- -- 2,275 392 -- -- -- $ 11.88 $ 10.63 $ -- $ -- $ -- $ 13.54 $ 11.52 $ -- $ -- $ -- 11.7% 6.3% -- -- -- 17.6% 15.2% -- -- -- 22.8% 1.1% -- -- -- 25.5% 1.2% -- -- --
F-37 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
MAINSTAY VP FLOATING RATE-- SERVICE CLASS ------------------------------------------------ 2010 2009 2008 2007 2006 ------------------------------------------------ SERIES I POLICIES Net Assets.................... $92,392 $84,944 $40,154 $58,459 $37,645 Units Outstanding............. 7,597 7,521 4,742 5,288 3,485 Variable Accumulation Unit Value....................... $ 12.20 $ 11.31 $ 8.49 $ 11.02 $ 10.77 Total Return.................. 7.8% 33.3% (23.0%) 2.3% 5.7% Investment Income Ratio....... 3.8% 3.3% 5.1% 6.2% 5.8% SERIES II POLICIES Net Assets.................... $16,165 $ 2,745 $ -- $ -- $ -- Units Outstanding............. 1,434 252 -- -- -- Variable Accumulation Unit Value....................... $ 11.28 $ 10.46 $ -- $ -- $ -- Total Return.................. 7.8% 4.6% -- -- -- Investment Income Ratio....... 29.1% 1.3% -- -- -- SERIES III POLICIES Net Assets.................... $32,788 $ 5,829 $ -- $ -- $ -- Units Outstanding............. 2,910 555 -- -- -- Variable Accumulation Unit Value....................... $ 11.26 $ 10.44 $ -- $ -- $ -- Total Return.................. 7.8% 4.4% -- -- -- Investment Income Ratio....... 28.4% 1.2% -- -- --
MAINSTAY VP GROWTH EQUITY-- SERVICE CLASS ------------------------------------------------ 2010 2009 2008 2007 2006 ------------------------------------------------ SERIES I POLICIES Net Assets.................... $10,687 $9,983 $ 8,340 $12,938 $9,114 Units Outstanding............. 808 845 945 890 704 Variable Accumulation Unit Value....................... $ 13.26 $11.84 $ 8.85 $ 14.51 $12.94 Total Return.................. 11.9% 72.4% (39.0%) 12.1% 4.2% Investment Income Ratio....... 0.3% 0.3% 0.3% -- 0.2% SERIES II POLICIES Net Assets.................... $ 642 $ 47 $ -- $ -- $ -- Units Outstanding............. 51 4 -- -- -- Variable Accumulation Unit Value....................... $ 12.69 $11.34 $ -- $ -- $ -- Total Return.................. 11.9% 13.4% -- -- -- Investment Income Ratio....... 12.2% 0.1% -- -- -- SERIES III POLICIES Net Assets.................... $ 1,547 $ 194 $ -- $ -- $ -- Units Outstanding............. 122 17 -- -- -- Variable Accumulation Unit Value....................... $ 12.69 $11.34 $ -- $ -- $ -- Total Return.................. 11.9% 13.4% -- -- -- Investment Income Ratio....... 21.6% 0.0% -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-38 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP MAINSTAY VP GOVERNMENT-- GROWTH ALLOCATION-- SERVICE CLASS SERVICE CLASS ---------------------------------------------- --------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 --------------------------------------------------------------------------------------------- $69,233 $68,795 $75,666 $20,652 $13,260 $96,060 $90,782 $65,385 $73,680 $27,267 5,080 5,300 5,893 1,765 1,204 8,545 9,266 8,523 5,913 2,392 $ 13.66 $ 13.00 $ 12.83 $ 11.71 $ 11.01 $ 11.27 $ 9.82 $ 7.69 $ 12.35 $ 11.22 5.1% 1.4% 9.5% 6.4% 3.8% 14.7% 27.7% (37.7%) 10.1% 12.2% 3.0% 3.3% 4.1% 5.3% 1.0% 1.0% 2.2% 0.6% 1.3% 1.5% $ 9,232 $ 1,147 $ -- $ -- $ -- $ 6,309 $ 851 $ -- $ -- $ -- 858 111 -- -- -- 499 77 -- -- -- $ 10.77 $ 10.25 $ -- $ -- $ -- $ 12.67 $ 11.04 $ -- $ -- $ -- 5.1% 2.5% -- -- -- 14.7% 10.4% -- -- -- 21.7% 2.0% -- -- -- 23.1% 1.4% -- -- -- $16,174 $ 2,581 $ -- $ -- $ -- $16,322 $ 2,413 $ -- $ -- $ -- 1,515 252 -- -- -- 1,289 216 -- -- -- $ 10.68 $ 10.17 $ -- $ -- $ -- $ 12.67 $ 11.04 $ -- $ -- $ -- 5.1% 1.7% -- -- -- 14.7% 10.4% -- -- -- 26.7% 3.3% -- -- -- 24.1% 1.1% -- -- --
MAINSTAY VP MAINSTAY VP HIGH YIELD CORPORATE BOND-- ICAP SELECT EQUITY-- SERVICE CLASS SERVICE CLASS ------------------------------------------------------------------------ ---------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------------------------------------ $277,038 $250,536 $113,302 $133,734 $84,029 $146,718 $131,647 $67,705 $53,113 $10,141 16,195 16,458 10,559 9,450 6,045 9,803 10,369 6,889 3,326 678 $ 17.14 $ 15.25 $ 10.71 $ 14.14 $ 13.86 $ 15.00 $ 12.73 $ 9.86 $ 15.85 $ 14.86 12.4% 42.5% (24.3%) 2.1% 11.8% 17.8% 29.1% (37.7%) 6.6% 19.0% 5.8% 8.4% 9.6% 7.4% 2.2% 0.7% 1.6% 0.5% 0.6% 0.2% $ 50,388 $ 8,548 $ -- $ -- $ -- $ 16,894 $ 3,079 $ -- $ -- $ -- 4,040 782 -- -- -- 1,290 273 -- -- -- $ 12.50 $ 11.12 $ -- $ -- $ -- $ 13.10 $ 11.12 $ -- $ -- $ -- 12.4% 11.2% -- -- -- 17.8% 11.2% -- -- -- 28.9% 5.1% -- -- -- 30.1% 0.6% -- -- -- $107,153 $ 18,782 $ -- $ -- $ -- $ 25,559 $ 4,142 $ -- $ -- $ -- 8,564 1,682 -- -- -- 1,946 365 -- -- -- $ 12.43 $ 11.06 $ -- $ -- $ -- $ 13.17 $ 11.17 $ -- $ -- $ -- 12.4% 10.6% -- -- -- 17.8% 11.7% -- -- -- 30.0% 4.4% -- -- -- 27.5% 1.1% -- -- --
F-39 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
MAINSTAY VP INCOME BUILDER-- SERVICE CLASS ----------------------------------------------- 2010 2009 2008 2007 2006 ----------------------------------------------- SERIES I POLICIES Net Assets.................... $13,362 $10,097 $ 8,062 $11,045 $8,400 Units Outstanding............. 925 800 788 781 640 Variable Accumulation Unit Value....................... $ 14.48 $ 12.65 $ 10.26 $ 14.08 $13.13 Total Return.................. 14.5% 23.2% (27.1%) 7.2% 9.2% Investment Income Ratio....... 3.1% 3.5% 3.1% 2.2% 0.5% SERIES II POLICIES Net Assets.................... $ 1,470 $ 95 $ -- $ -- $ -- Units Outstanding............. 116 9 -- -- -- Variable Accumulation Unit Value....................... $ 12.69 $ 11.08 $ -- $ -- $ -- Total Return.................. 14.5% 10.8% -- -- -- Investment Income Ratio....... 13.2% 2.5% -- -- -- SERIES III POLICIES Net Assets.................... $ 2,355 $ 562 $ -- $ -- $ -- Units Outstanding............. 187 51 -- -- -- Variable Accumulation Unit Value....................... $ 12.63 $ 11.03 $ -- $ -- $ -- Total Return.................. 14.5% 10.3% -- -- -- Investment Income Ratio....... 41.6% 2.8% -- -- --
MAINSTAY VP MID CAP CORE-- SERVICE CLASS ---------------------------------------------- 2010 2009 2008 2007 2006 ---------------------------------------------- SERIES I POLICIES Net Assets.................... $97,723 $87,726 $31,502 $50,418 $30,960 Units Outstanding............. 5,564 6,163 3,023 2,778 1,780 Variable Accumulation Unit Value....................... $ 17.60 $ 14.27 $ 10.45 $ 18.14 $ 17.31 Total Return.................. 23.3% 36.6% (42.4%) 4.8% 14.7% Investment Income Ratio....... 0.3% 0.2% 0.0% 0.3% -- SERIES II POLICIES Net Assets.................... $ 5,951 $ 1,164 $ -- $ -- $ -- Units Outstanding............. 418 99 -- -- -- Variable Accumulation Unit Value....................... $ 14.26 $ 11.56 $ -- $ -- $ -- Total Return.................. 23.3% 15.6% -- -- -- Investment Income Ratio....... 31.6% 0.1% -- -- -- SERIES III POLICIES Net Assets.................... $ 8,063 $ 1,319 $ -- $ -- $ -- Units Outstanding............. 579 115 -- -- -- Variable Accumulation Unit Value....................... $ 13.97 $ 11.33 $ -- $ -- $ -- Total Return.................. 23.3% 13.3% -- -- -- Investment Income Ratio....... 27.1% 0.1% -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-40 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP MAINSTAY VP INTERNATIONAL EQUITY-- LARGE CAP GROWTH-- SERVICE CLASS SERVICE CLASS ------------------------------------------------ --------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ----------------------------------------------------------------------------------------------- $106,009 $101,729 $85,486 $101,083 $54,334 $56,631 $46,865 $26,590 $25,083 $9,060 5,841 5,866 5,872 5,119 2,878 4,155 3,983 3,163 1,806 790 $ 18.19 $ 17.39 $ 14.60 $ 19.70 $ 18.82 $ 13.65 $ 11.78 $ 8.43 $ 13.81 $11.41 4.6% 19.1% (25.9%) 4.7% 31.0% 15.9% 39.7% (38.9%) 21.0% 7.0% 3.1% 7.1% 1.3% 0.6% 0.3% -- -- -- -- -- $ 12,627 $ 2,158 $ -- $ -- $ -- $ 9,862 $ 1,754 $ -- $ -- $ -- 1,105 189 -- -- -- 731 142 -- -- -- $ 11.43 $ 10.93 $ -- $ -- $ -- $ 13.50 $ 11.65 $ -- $ -- $ -- 4.6% 9.3% -- -- -- 15.9% 16.5% -- -- -- 28.3% 3.3% -- -- -- 28.5% -- -- -- -- $ 19,310 $ 3,946 $ -- $ -- $ -- $18,421 $ 2,879 $ -- $ -- $ -- 1,671 347 -- -- -- 1,380 250 -- -- -- $ 11.57 $ 11.06 $ -- $ -- $ -- $ 13.37 $ 11.53 $ -- $ -- $ -- 4.6% 10.6% -- -- -- 15.9% 15.3% -- -- -- 32.1% 5.4% -- -- -- 25.6% -- -- -- --
MAINSTAY VP MAINSTAY VP MID CAP GROWTH-- MID CAP VALUE-- SERVICE CLASS SERVICE CLASS ---------------------------------------------- --------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 --------------------------------------------------------------------------------------------- $-- $-- $32,785 $57,638 $38,503 $-- $-- $30,705 $46,890 $36,644 -- -- 2,912 2,810 2,170 -- -- 2,917 2,988 2,301 $-- $-- $ 11.29 $ 20.46 $ 17.72 $-- $-- $ 10.57 $ 15.68 $ 15.90 -- -- (44.8%) 15.5% 9.0% -- -- (32.6%) (1.4%) 13.8% -- -- -- -- -- -- -- 1.4% 0.9% -- $-- $-- $ -- $ -- $ -- $-- $-- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- $-- $-- $ -- $ -- $ -- $-- $-- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $-- $-- $ -- $ -- $ -- $-- $-- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- $-- $-- $ -- $ -- $ -- $-- $-- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
F-41 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
MAINSTAY VP MODERATE ALLOCATION-- SERVICE CLASS ------------------------------------------------ 2010 2009 2008 2007 2006 ------------------------------------------------ SERIES I POLICIES Net Assets.................... $142,876 $130,482 $93,445 $78,007 $29,581 Units Outstanding............. 11,665 12,018 10,653 6,580 2,701 Variable Accumulation Unit Value....................... $ 12.28 $ 10.88 $ 8.78 $ 11.76 $ 10.84 Total Return.................. 12.8% 24.0% (25.4%) 8.5% 8.4% Investment Income Ratio....... 2.0% 2.7% 0.3% 2.8% 2.0% SERIES II POLICIES Net Assets.................... $ 24,992 $ 2,548 $ -- $ -- $ -- Units Outstanding............. 2,029 233 -- -- -- Variable Accumulation Unit Value....................... $ 12.33 $ 10.93 $ -- $ -- $ -- Total Return.................. 12.8% 9.3% -- -- -- Investment Income Ratio....... 19.5% 1.1% -- -- -- SERIES III POLICIES Net Assets.................... $ 71,889 $ 6,215 $ -- $ -- $ -- Units Outstanding............. 5,897 569 -- -- -- Variable Accumulation Unit Value....................... $ 12.18 $ 10.80 $ -- $ -- $ -- Total Return.................. 12.8% 8.0% -- -- -- Investment Income Ratio....... 17.1% 1.0% -- -- --
MAINSTAY VP SMALL CAP GROWTH-- SERVICE CLASS ------------------------------------------- 2010 2009 2008 2007 2006 ------------------------------------------- SERIES I POLICIES Net Assets.................... $-- $-- $11,978 $19,582 $18,253 Units Outstanding............. -- -- 1,499 1,462 1,313 Variable Accumulation Unit Value....................... $-- $-- $ 8.03 $ 13.40 $ 13.88 Total Return.................. -- -- (40.1%) (3.4%) 6.1% Investment Income Ratio....... -- -- -- -- -- SERIES II POLICIES Net Assets.................... $-- $-- $ -- $ -- $ -- Units Outstanding............. -- -- -- -- -- Variable Accumulation Unit Value....................... $-- $-- $ -- $ -- $ -- Total Return.................. -- -- -- -- -- Investment Income Ratio....... -- -- -- -- -- SERIES III POLICIES Net Assets.................... $-- $-- $ -- $ -- $ -- Units Outstanding............. -- -- -- -- -- Variable Accumulation Unit Value....................... $-- $-- $ -- $ -- $ -- Total Return.................. -- -- -- -- -- Investment Income Ratio....... -- -- -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-42 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
MAINSTAY VP MODERATE GROWTH MAINSTAY VP ALLOCATION-- S&P 500 INDEX-- SERVICE CLASS SERVICE CLASS ------------------------------------------------ --------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ----------------------------------------------------------------------------------------------- $178,773 $164,894 $117,840 $121,306 $47,438 $62,916 $57,516 $44,477 $67,171 $49,694 15,160 15,945 14,577 10,088 4,262 4,514 4,716 4,624 4,355 3,378 $ 11.82 $ 10.36 $ 8.09 $ 12.01 $ 11.01 $ 13.97 $ 12.20 $ 9.69 $ 15.42 $ 14.69 14.0% 28.1% (32.6%) 9.1% 10.1% 14.4% 25.9% (37.2%) 5.0% 15.2% 1.4% 2.7% 0.5% 2.2% 2.0% 1.6% 2.6% 2.1% 1.5% 0.4% $ 42,103 $ 2,198 $ -- $ -- $ -- $ 2,951 $ 622 $ -- $ -- $ -- 3,361 200 -- -- -- 229 55 -- -- -- $ 12.50 $ 10.96 $ -- $ -- $ -- $ 12.89 $ 11.26 $ -- $ -- $ -- 14.0% 9.6% -- -- -- 14.4% 12.6% -- -- -- 12.0% 1.5% -- -- -- 34.1% 1.6% -- -- -- $107,815 $ 9,057 $ -- $ -- $ -- $ 5,933 $ 817 $ -- $ -- $ -- 8,355 800 -- -- -- 463 73 -- -- -- $ 12.87 $ 11.28 $ -- $ -- $ -- $ 12.81 $ 11.20 $ -- $ -- $ -- 14.0% 12.8% -- -- -- 14.4% 12.0% -- -- -- 17.7% 1.9% -- -- -- 22.5% 1.7% -- -- --
MAINSTAY VP ALGER U.S. SMALL CAP-- SMALL CAP GROWTH-- SERVICE CLASS CLASS S SHARES ---------------------------------------------- ----------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ----------------------------------------------------------------------------------------------- $44,391 $38,280 $13,934 $22,164 $8,389 $19,986 $18,082 $14,338 $30,933 $23,631 2,470 2,669 1,361 1,128 582 980 1,109 1,277 1,466 1,302 $ 18.01 $ 14.44 $ 10.26 $ 19.49 $14.36 $ 20.43 $ 16.35 $ 11.27 $ 21.15 $ 18.08 24.7% 59.3% (47.3%) 35.8% 12.4% 24.9% 45.1% (46.7%) 16.9% 19.7% -- -- -- -- -- -- -- -- -- -- $ 2,604 $ 483 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- 183 42 -- -- -- -- -- -- -- -- $ 14.20 $ 11.38 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- 24.7% 13.8% -- -- -- -- -- -- -- -- 30.4% -- -- -- -- -- -- -- -- -- $ 4,784 $ 883 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- 341 77 -- -- -- -- -- -- -- -- $ 14.03 $ 11.25 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- 24.7% 12.5% -- -- -- -- -- -- -- -- 30.5% -- -- -- -- -- -- -- -- --
F-43 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
CALVERT VP SRI BALANCED PORTFOLIO -------------------------------------------- 2010 2009 2008 2007 2006 -------------------------------------------- SERIES I POLICIES Net Assets.................... $5,731 $4,926 $ 3,640 $4,644 $3,648 Units Outstanding............. 450 434 402 352 283 Variable Accumulation Unit Value....................... $12.75 $11.37 $ 9.08 $13.22 $12.86 Total Return.................. 12.1% 25.3% (31.3%) 2.8% 8.8% Investment Income Ratio....... 1.5% 2.4% 2.8% 2.7% 2.8% SERIES II POLICIES Net Assets.................... $2,247 $ 48 $ -- $ -- $ -- Units Outstanding............. 183 4 -- -- -- Variable Accumulation Unit Value....................... $12.27 $10.95 $ -- $ -- $ -- Total Return.................. 12.1% 9.5% -- -- -- Investment Income Ratio....... 5.0% 3.0% -- -- -- SERIES III POLICIES Net Assets.................... $4,874 $ 73 $ -- $ -- $ -- Units Outstanding............. 402 7 -- -- -- Variable Accumulation Unit Value....................... $11.97 $10.68 $ -- $ -- $ -- Total Return.................. 12.1% 6.8% -- -- -- Investment Income Ratio....... 4.3% 4.6% -- -- --
FIDELITY(R) VIP CONTRAFUND(R)-- SERVICE CLASS 2 ------------------------------------------------ 2010 2009 2008 2007 2006 ------------------------------------------------ SERIES I POLICIES Net Assets.................... $164,104 $151,306 $107,555 $151,634 $83,381 Units Outstanding............. 9,314 10,047 9,681 7,781 5,010 Variable Accumulation Unit Value....................... $ 17.66 $ 15.10 $ 11.15 $ 19.45 $ 16.58 Total Return.................. 16.9% 35.5% (42.7%) 17.3% 11.4% Investment Income Ratio....... 1.0% 1.2% 0.9% 0.9% 1.1% SERIES II POLICIES Net Assets.................... $ 17,114 $ 2,927 $ -- $ -- $ -- Units Outstanding............. 1,282 246 -- -- -- Variable Accumulation Unit Value....................... $ 13.37 $ 11.43 $ -- $ -- $ -- Total Return.................. 16.9% 14.3% -- -- -- Investment Income Ratio....... 28.5% 2.1% -- -- -- SERIES III POLICIES Net Assets.................... $ 23,426 $ 3,705 $ -- $ -- $ -- Units Outstanding............. 1,745 316 -- -- -- Variable Accumulation Unit Value....................... $ 13.42 $ 11.48 $ -- $ -- $ -- Total Return.................. 16.9% 14.8% -- -- -- Investment Income Ratio....... 25.5% 1.2% -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-44 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
COLUMBIA SMALL CAP VALUE FUND, DREYFUS IP VARIABLE SERIES-- TECHNOLOGY GROWTH-- CLASS B SERVICE SHARES ---------------------------------------------- ---------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ---------------------------------------------------------------------------------------------- $25,431 $18,826 $13,615 $18,097 $13,367 $28,127 $20,218 $ 8,333 $11,697 $7,293 1,782 1,673 1,509 1,438 1,030 1,704 1,587 1,031 846 603 $ 14.30 $ 11.31 $ 9.05 $ 12.59 $ 12.93 $ 16.52 $ 12.75 $ 8.11 $ 13.81 $12.07 26.5% 25.0% (28.2%) (2.6%) 19.4% 29.7% 57.1% (41.2%) 14.4% 4.0% 1.1% 0.9% 0.5% 0.3% 0.4% -- 0.1% -- -- -- $ 3,318 $ 312 $ -- $ -- $ -- $ 4,875 $ 668 $ -- $ -- $ -- 239 28 -- -- -- 314 53 -- -- -- $ 13.91 $ 11.00 $ -- $ -- $ -- $ 15.52 $ 11.97 $ -- $ -- $ -- 26.5% 10.0% -- -- -- 29.7% 19.7% -- -- -- 17.7% -- -- -- -- 23.5% -- -- -- -- $ 4,044 $ 442 $ -- $ -- $ -- $ 9,517 $ 1,593 $ -- $ -- $ -- 291 39 -- -- -- 612 135 -- -- -- $ 13.90 $ 10.99 $ -- $ -- $ -- $ 15.26 $ 11.77 $ -- $ -- $ -- 26.5% 9.9% -- -- -- 29.7% 17.7% -- -- -- 20.8% -- -- -- -- 27.7% -- -- -- --
FIDELITY(R) VIP FIDELITY(R) VIP EQUITY-INCOME-- MID CAP-- SERVICE CLASS 2 SERVICE CLASS 2 ---------------------------------------------- ----------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ----------------------------------------------------------------------------------------------- $45,420 $42,428 $34,541 $57,443 $35,470 $92,609 $69,799 $46,013 $66,993 $40,507 3,442 3,695 3,913 3,703 2,312 3,869 3,746 3,457 3,029 2,108 $ 13.23 $ 11.51 $ 8.86 $ 15.50 $ 15.30 $ 23.99 $ 18.66 $ 13.35 $ 22.11 $ 19.17 14.9% 29.9% (42.8%) 1.3% 19.9% 28.6% 39.8% (39.6%) 15.3% 12.4% 1.6% 2.1% 2.5% 1.9% 3.0% 0.1% 0.5% 0.2% 0.5% 0.1% $ 2,630 $ 607 $ -- $ -- $ -- $13,911 $ 1,954 $ -- $ -- $ -- 205 54 -- -- -- 953 171 -- -- -- $ 12.84 $ 11.17 $ -- $ -- $ -- $ 14.57 $ 11.33 $ -- $ -- $ -- 14.9% 11.7% -- -- -- 28.6% 13.3% -- -- -- 34.1% 3.1% -- -- -- 24.4% 0.7% -- -- -- $ 5,427 $ 1,096 $ -- $ -- $ -- $25,175 $ 3,149 $ -- $ -- $ -- 428 99 -- -- -- 1,720 272 -- -- -- $ 12.70 $ 11.05 $ -- $ -- $ -- $ 14.65 $ 11.39 $ -- $ -- $ -- 14.9% 10.5% -- -- -- 28.6% 13.9% -- -- -- 32.9% 2.4% -- -- -- 22.0% 0.7% -- -- --
F-45 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
JANUS ASPEN BALANCED PORTFOLIO-- SERVICE SHARES ---------------------------------------------- 2010 2009 2008 2007 2006 ---------------------------------------------- SERIES I POLICIES Net Assets.................... $51,066 $46,781 $30,822 $27,363 $17,360 Units Outstanding............. 2,972 2,944 2,434 1,809 1,267 Variable Accumulation Unit Value....................... $ 17.22 $ 15.93 $ 12.68 $ 15.11 $ 13.70 Total Return.................. 8.1% 25.6% (16.1%) 10.3% 10.4% Investment Income Ratio....... 2.6% 2.8% 2.6% 2.4% 2.1% SERIES II POLICIES Net Assets.................... $14,553 $ 1,405 $ -- $ -- $ -- Units Outstanding............. 1,235 124 -- -- -- Variable Accumulation Unit Value....................... $ 11.79 $ 10.91 $ -- $ -- $ -- Total Return.................. 8.1% 9.1% -- -- -- Investment Income Ratio....... 17.9% 1.8% -- -- -- SERIES III POLICIES Net Assets.................... $27,504 $ 2,922 $ -- $ -- $ -- Units Outstanding............. 2,340 266 -- -- -- Variable Accumulation Unit Value....................... $ 11.72 $ 10.84 $ -- $ -- $ -- Total Return.................. 8.1% 8.4% -- -- -- Investment Income Ratio....... 20.2% 1.9% -- -- --
MFS(R) RESEARCH SERIES-- SERVICE CLASS -------------------------------------------- 2010 2009 2008 2007 2006 -------------------------------------------- SERIES I POLICIES Net Assets.................... $5,418 $4,887 $ 3,353 $4,545 $2,574 Units Outstanding............. 344 359 321 277 176 Variable Accumulation Unit Value....................... $15.76 $13.63 $ 10.47 $16.42 $14.54 Total Return.................. 15.6% 30.2% (36.3%) 12.9% 10.2% Investment Income Ratio....... 0.7% 1.1% 0.3% 0.4% 0.3% SERIES II POLICIES Net Assets.................... $ 293 $ 74 $ -- $ -- $ -- Units Outstanding............. 23 7 -- -- -- Variable Accumulation Unit Value....................... $12.87 $11.13 $ -- $ -- $ -- Total Return.................. 15.6% 11.3% -- -- -- Investment Income Ratio....... 35.7% -- -- -- -- SERIES III POLICIES Net Assets.................... $ 731 $ 75 $ -- $ -- $ -- Units Outstanding............. 57 7 -- -- -- Variable Accumulation Unit Value....................... $12.91 $11.17 $ -- $ -- $ -- Total Return.................. 15.6% 11.7% -- -- -- Investment Income Ratio....... 16.3% -- -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-46 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
JANUS ASPEN MFS(R) WORLDWIDE PORTFOLIO-- INVESTORS TRUST SERIES-- SERVICE SHARES SERVICE CLASS --------------------------------------------- -------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------- $17,988 $15,393 $ 9,789 $14,003 $7,258 $3,382 $3,000 $ 2,258 $2,401 $1,639 1,349 1,334 1,168 910 519 231 227 217 154 115 $ 13.36 $ 11.57 $ 8.42 $ 15.25 $13.95 $14.64 $13.21 $ 10.44 $15.63 $14.22 15.5% 37.4% (44.8%) 9.4% 17.9% 10.9% 26.6% (33.3%) 10.0% 12.7% 0.5% 1.3% 1.1% 0.6% 1.7% 1.0% 1.3% 0.5% 0.5% 0.2% $ 2,310 $ 315 $ -- $ -- $ -- $ 239 $ 19 $ -- $ -- $ -- 176 27 -- -- -- 20 2 -- -- -- $ 13.12 $ 11.35 $ -- $ -- $ -- $11.68 $10.53 $ -- $ -- $ -- 15.5% 13.5% -- -- -- 10.9% 5.3% -- -- -- 21.2% 0.9% -- -- -- 16.2% -- -- -- -- $ 5,378 $ 1,430 $ -- $ -- $ -- $ 811 $ 150 $ -- $ -- $ -- 426 131 -- -- -- 66 13 -- -- -- $ 12.66 $ 10.96 $ -- $ -- $ -- $12.36 $11.15 $ -- $ -- $ -- 15.5% 9.6% -- -- -- 10.9% 11.5% -- -- -- 38.3% 0.6% -- -- -- 27.0% -- -- -- --
MFS(R) NEUBERGER BERMAN AMT UTILITIES SERIES-- MID-CAP GROWTH PORTFOLIO-- SERVICE CLASS CLASS S ----------------------------------------------- ----------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------------ $190,758 $182,983 $132,694 $171,544 $68,838 $18,925 $14,639 $11,270 $17,927 $5,644 7,965 8,669 8,367 6,684 3,422 1,056 1,056 1,066 950 366 $ 24.01 $ 21.15 $ 15.92 $ 25.59 $ 20.07 $ 17.95 $ 13.94 $ 10.61 $ 18.79 $15.38 13.5% 32.9% (37.8%) 27.6% 31.0% 28.7% 31.3% (43.5%) 22.2% 14.5% 3.1% 4.5% 1.2% 0.6% 1.5% -- -- -- -- -- $ 17,072 $ 2,789 $ -- $ -- $ -- $ 1,825 $ 203 $ -- $ -- $ -- 1,333 244 -- -- -- 126 18 -- -- -- $ 12.82 $ 11.30 $ -- $ -- $ -- $ 14.49 $ 11.25 $ -- $ -- $ -- 13.5% 13.0% -- -- -- 28.7% 12.5% -- -- -- 26.5% -- -- -- -- 23.0% -- -- -- -- $ 35,879 $ 6,040 $ -- $ -- $ -- $ 2,048 $ 164 $ -- $ -- $ -- 2,796 528 -- -- -- 140 14 -- -- -- $ 12.87 $ 11.34 $ -- $ -- $ -- $ 14.65 $ 11.38 $ -- $ -- $ -- 13.5% 13.4% -- -- -- 28.7% 13.8% -- -- -- 26.4% -- -- -- -- 16.1% -- -- -- --
F-47 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6--Financial Highlights (Net Assets and Units Outstanding in 000's) (Continued): --------------------------------------------------------------------------------
PIMCO REAL RETURN ROYCE PORTFOLIO-- MICRO-CAP PORTFOLIO-- ADVISOR CLASS INVESTMENT CLASS ------------- ---------------------------------------------- 2010 2010 2009 2008 2007 2006 ------------------------------------------------------------- SERIES I POLICIES Net Assets.................... $14,325 $64,178 $51,857 $29,534 $37,445 $16,410 Units Outstanding............. 1,377 3,574 3,754 3,383 2,407 1,098 Variable Accumulation Unit Value....................... $ 10.40 $ 17.98 $ 13.84 $ 8.75 $ 15.43 $ 14.84 Total Return.................. 4.0% 30.0% 58.0% (43.3%) 4.0% 21.1% Investment Income Ratio....... 0.7% 1.9% -- 3.1% 1.9% 0.3% SERIES II POLICIES Net Assets.................... $ 9,047 $ 9,534 $ 1,369 $ -- $ -- $ -- Units Outstanding............. 868 619 110 -- -- -- Variable Accumulation Unit Value....................... $ 10.40 $ 15.39 $ 11.84 $ -- $ -- $ -- Total Return.................. 4.0% 30.0% 18.4% -- -- -- Investment Income Ratio....... -- 24.9% -- -- -- -- SERIES III POLICIES Net Assets.................... $14,850 $19,890 $ 3,591 $ -- $ -- $ -- Units Outstanding............. 1,407 1,274 296 -- -- -- Variable Accumulation Unit Value....................... $ 10.40 $ 15.64 $ 12.03 $ -- $ -- $ -- Total Return.................. 4.0% 30.0% 20.3% -- -- -- Investment Income Ratio....... -- 29.3% -- -- -- --
UIF EMERGING MARKETS EQUITY PORTFOLIO-- CLASS II ------------------------------------------------ 2010 2009 2008 2007 2006 ------------------------------------------------ SERIES I POLICIES Net Assets.................... $119,936 $108,915 $56,863 $94,355 $38,547 Units Outstanding............. 3,683 3,972 3,538 2,520 1,445 Variable Accumulation Unit Value....................... $ 32.66 $ 27.46 $ 16.14 $ 37.31 $ 26.56 Total Return.................. 18.9% 70.1% (56.7%) 40.5% 37.2% Investment Income Ratio....... 0.6% -- -- 0.4% 0.7% SERIES II POLICIES Net Assets.................... $ 12,947 $ 2,258 $ -- $ -- $ -- Units Outstanding............. 911 188 -- -- -- Variable Accumulation Unit Value....................... $ 14.22 $ 11.95 $ -- $ -- $ -- Total Return.................. 18.9% 19.5% -- -- -- Investment Income Ratio....... 27.1% -- -- -- -- SERIES III POLICIES Net Assets.................... $ 27,991 $ 6,085 $ -- $ -- $ -- Units Outstanding............. 2,036 523 -- -- -- Variable Accumulation Unit Value....................... $ 13.78 $ 11.59 $ -- $ -- $ -- Total Return.................. 18.9% 15.9% -- -- -- Investment Income Ratio....... 31.8% -- -- -- --
Annualized percentages are shown for the Investment Income Ratio for all investment divisions in all periods. During the year that an individual division commenced operations, Total Return is calculated from the date of commencement through the end of the year. Charges and fees levied by NYLIAC are disclosed in Note 3. F-48 NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV --------------------------------------------------------------------------------
ROYCE T. ROWE PRICE SMALL-CAP PORTFOLIO-- EQUITY INCOME INVESTMENT CLASS PORTFOLIO--II ----------------------------------------------- ----------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ------------------------------------------------------------------------------------------------ $46,316 $38,335 $24,809 $24,568 $12,973 $69,213 $62,953 $50,851 $75,977 $50,422 3,066 3,047 2,677 1,924 990 4,638 4,842 4,902 4,658 3,172 $ 15.14 $ 12.56 $ 9.29 $ 12.76 $ 13.03 $ 14.95 $ 13.03 $ 10.40 $ 16.33 $ 15.85 20.5% 35.2% (27.2%) (2.1%) 15.4% 14.7% 25.3% (36.3%) 3.0% 18.6% 0.1% -- 0.7% 0.1% 0.1% 1.7% 1.7% 2.2% 1.5% 1.4% $ 7,262 $ 1,131 $ -- $ -- $ -- $ 7,088 $ 1,201 $ -- $ -- $ -- 536 99 -- -- -- 566 106 -- -- -- $ 13.57 $ 11.26 $ -- $ -- $ -- $ 12.54 $ 10.93 $ -- $ -- $ -- 20.5% 12.6% -- -- -- 14.7% 9.3% -- -- -- 25.9% -- -- -- -- 28.4% 0.7% -- -- -- $11,677 $ 3,039 $ -- $ -- $ -- $ 7,614 $ 1,112 $ -- $ -- $ -- 860 271 -- -- -- 584 96 -- -- -- $ 13.57 $ 11.26 $ -- $ -- $ -- $ 13.09 $ 11.40 $ -- $ -- $ -- 20.5% 12.6% -- -- -- 14.7% 14.0% -- -- -- 37.0% -- -- -- -- 23.4% 0.9% -- -- --
VAN ECK VICTORY VIF VIP GLOBAL DIVERSIFIED STOCK-- HARD ASSETS CLASS A SHARES ----------------------------------------------- ---------------------------------------------- 2010 2009 2008 2007 2006 2010 2009 2008 2007 2006 ----------------------------------------------------------------------------------------------- $215,347 $182,347 $103,661 $149,372 $58,353 $9,578 $10,254 $ 6,524 $7,567 $5,009 5,082 5,559 4,989 3,847 2,184 713 862 694 499 362 $ 42.46 $ 32.86 $ 20.86 $ 38.71 $ 26.63 $13.46 $ 11.98 $ 9.43 $15.18 $13.80 29.2% 57.5% (46.1%) 45.4% 24.5% 12.3% 27.1% (37.9%) 10.0% 13.7% 0.4% 0.2% 0.3% 0.1% -- 0.7% 0.8% 0.8% 0.6% 0.3% $ 22,287 $ 3,256 $ -- $ -- $ -- $ 811 $ 108 $ -- $ -- $ -- 1,415 263 -- -- -- 69 10 -- -- -- $ 15.75 $ 12.19 $ -- $ -- $ -- $11.82 $ 10.52 $ -- $ -- $ -- 29.2% 21.9% -- -- -- 12.3% 5.2% -- -- -- 25.2% -- -- -- -- 22.1% 0.2% -- -- -- $ 46,198 $ 8,786 $ -- $ -- $ -- $1,153 $ 128 $ -- $ -- $ -- 3,078 755 -- -- -- 93 12 -- -- -- $ 15.04 $ 11.63 $ -- $ -- $ -- $12.38 $ 11.02 $ -- $ -- $ -- 29.2% 16.3% -- -- -- 12.3% 10.2% -- -- -- 31.0% -- -- -- -- 17.4% 0.2% -- -- --
F-49 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- To the Board of Directors of New York Life Insurance and Annuity Corporation and the Variable Annuity Separate Account-IV Policyowners: In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the investment divisions listed in Note 1 of the New York Life Insurance and Annuity Corporation Variable Annuity Separate Account-IV as of December 31, 2010, the results of each of their operations, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and the financial highlights (hereafter referred to as "financial statements") are the responsibility of New York Life Insurance and Annuity Corporation management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments at December 31, 2010 by correspondence with the funds, provide a reasonable basis for our opinion. /S/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York February 18, 2011 F-50 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS (GAAP BASIS) DECEMBER 31, 2010 AND 2009 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------ 2010 2009 -------- ------- (IN MILLIONS) ASSETS Fixed maturities, at fair value Available-for-sale (includes securities pledged as collateral that can be sold or repledged of $452 in 2010 and $449 in 2009)........................................ $ 64,374 $57,248 Trading securities.......................................... 96 43 Equity securities, at fair value Available-for-sale.......................................... 23 45 Trading securities.......................................... 3 2 Mortgage loans, net of allowances............................. 5,805 5,779 Policy loans.................................................. 822 807 Securities purchased under agreements to resell............... 146 172 Investments in affiliates..................................... 1,047 973 Other investments............................................. 1,080 1,046 -------- ------- Total investments........................................ 73,396 66,115 Cash and cash equivalents..................................... 761 487 Deferred policy acquisition costs............................. 3,429 4,041 Interest in annuity contracts................................. 5,454 4,858 Amounts recoverable from reinsurer Affiliated.................................................. 7,095 6,684 Unaffiliated................................................ 255 243 Other assets.................................................. 1,121 966 Separate account assets....................................... 18,759 16,089 -------- ------- Total assets............................................. $110,270 $99,483 ======== ======= LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Policyholders' account balances............................... $ 60,656 $56,268 Future policy benefits........................................ 6,937 5,292 Policy claims................................................. 231 237 Obligations under structured settlement agreements............ 5,454 4,858 Amounts payable to reinsurer Affiliated.................................................. 6,148 5,906 Unaffiliated................................................ 37 35 Other liabilities............................................. 2,688 2,978 Separate account liabilities.................................. 18,759 16,089 -------- ------- Total liabilities........................................ 100,910 91,663 -------- ------- STOCKHOLDER'S EQUITY Capital stock -- par value $10,000 (20,000 shares authorized, 2,500 issued and outstanding)............................... 25 25 Additional paid in capital.................................... 3,628 3,628 Accumulated other comprehensive income........................ 1,000 111 Retained earnings............................................. 4,707 4,056 -------- ------- Total stockholder's equity............................... 9,360 7,820 -------- ------- Total liabilities and stockholder's equity............... $110,270 $99,483 ======== =======
The accompanying notes are an integral part of the consolidated financial statements 2 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ------------------------ 2010 2009 2008 ------ ------ ------ (IN MILLIONS) REVENUES Premiums................................................ $1,892 $1,797 $1,374 Fees-universal life and annuity policies................ 731 635 619 Net investment income................................... 3,567 3,265 2,755 Net investment gains (losses) Total other-than-temporary impairments on fixed maturity securities................................ (172) (397) (331) Total other-than-temporary impairments on fixed maturity securities recognized in accumulated other comprehensive income............................... 57 241 -- All other net investment gains (losses), net............ 124 71 (75) ------ ------ ------ Total net investment gains (losses).................. 9 (85) (406) Net revenue from reinsurance............................ 218 145 206 Other income............................................ 47 41 35 ------ ------ ------ Total revenues....................................... 6,464 5,798 4,583 ------ ------ ------ EXPENSES Interest credited to policyholders' account balances.... 2,217 2,068 2,141 Increase in liabilities for future policy benefits...... 1,467 1,480 1,225 Policyholder benefits................................... 674 502 349 Operating expenses...................................... 1,247 954 900 ------ ------ ------ Total expenses....................................... 5,605 5,004 4,615 ------ ------ ------ Income (loss) before income taxes....................... 859 794 (32) Income tax expense (benefit)............................ 208 260 (63) ------ ------ ------ NET INCOME................................................ $ 651 $ 534 $ 31 ====== ====== ======
The accompanying notes are an integral part of the consolidated financial statements 3 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ------------------------------- NET UNREALIZED GAINS (LOSSES) ON OTHER-THAN NET TEMPORARILY ADDITIONAL UNREALIZED IMPAIRED FIXED TOTAL CAPITAL PAID IN INVESTMENT MATURITY RETAINED STOCKHOLDER'S STOCK CAPITAL GAINS (LOSSES) INVESTMENTS EARNINGS EQUITY ------- ---------- -------------- -------------- -------- ------------- BALANCE AT JANUARY 1, 2008...... $25 $1,410 $ 95 $ -- $3,443 $ 4,973 ------- Comprehensive income: Net income.................... 31 31 ------- Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes.................... (2,232) (2,232) ------- Other comprehensive loss...... (2,232) ------- Total comprehensive loss........ (2,201) ------- Capital Contribution.......... 1,218 1,218 --- ------ ------- ---- ------ ------- BALANCE AT DECEMBER 31, 2008.... 25 2,628 (2,137) -- 3,474 3,990 ------- Cumulative effect of change in accounting principle, net of related offsets and income tax........... (40) (8) 48 -- --- ------ ------- ---- ------ ------- BALANCE AT JANUARY 1, 2009, AS ADJUSTED...................... 25 2,628 (2,177) (8) 3,522 3,990 ------- Comprehensive income: Net income.................... 534 534 ------- Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes.................... 2,360 (64) 2,296 ------- Other comprehensive income.... 2,296 ------- Total comprehensive income...... 2,830 ------- Capital Contribution.......... 1,000 1,000 --- ------ ------- ---- ------ ------- BALANCE AT DECEMBER 31, 2009.... 25 3,628 183 (72) 4,056 7,820 ------- Comprehensive income: Net income.................... 651 651 ------- Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................... 875 14 889 ------- Other comprehensive income.... 889 ------- Total comprehensive income...... 1,540 --- ------ ------- ---- ------ ------- BALANCE AT DECEMBER 31, 2010.... $25 $3,628 $ 1,058 $(58) $4,707 $ 9,360 === ====== ======= ==== ====== =======
The accompanying notes are an integral part of the consolidated financial statements 4 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------ 2010 2009 2008 -------- -------- -------- (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income............................................ $ 651 $ 534 $ 31 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization...................... (8) (26) 10 Net capitalization of deferred policy acquisition costs............................................ (83) (403) (324) Universal life and annuity fees.................... (570) (529) (489) Interest credited to policyholders' account balances......................................... 2,217 2,068 2,141 Net investment (gains) losses...................... (9) 85 406 Equity in earnings of limited partnerships......... (22) (25) 65 Deferred income taxes.............................. 72 53 104 Net revenue from intercompany reinsurance.......... (1) (35) (74) Net change in unearned revenue liability........... 36 42 36 Changes in: Other assets and other liabilities............... (225) 34 23 Reinsurance recoverables (payables).............. (52) 12 38 Policy claims.................................... (6) 44 10 Future policy benefits........................... 1,476 1,482 1,233 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES..... 3,476 3,336 3,210 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from: Sale of available-for-sale fixed maturities........ 24,722 19,826 16,084 Maturity of available-for-sale fixed maturities.... 1,573 1,176 1,217 Sale of equity securities.......................... 40 1,526 51 Repayment of mortgage loans........................ 996 625 491 Sale of other investments.......................... 746 109 129 Sale of trading securities......................... 22 16 17 Securities purchased under agreements to resell.... 26 13 497 Cost of: Available-for-sale fixed maturities acquired....... (31,524) (31,912) (23,354) Equity securities acquired......................... (11) (369) (241) Cash collateral paid on derivatives................ -- 13 (12) Mortgage loans acquired............................ (1,055) (803) (936) Acquisition of other investments................... (997) (633) (994) Acquisition of trading securities.................. (73) -- (10) Policy loans (net).................................... (18) (57) (47) -------- -------- -------- NET CASH USED IN INVESTING ACTIVITIES......... (5,553) (10,470) (7,108) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Policyholders' account balances: Deposits........................................... 7,756 10,396 9,509 Withdrawals........................................ (4,467) (4,415) (4,973) Net transfers to the separate accounts............. (567) (29) (307) (Decrease) increase in loaned securities.............. -- (736) (460) Securities sold under agreements to repurchase (net).. (353) 499 34 Net (paydowns) proceeds from debt..................... (52) 65 -- Change in book and bank overdrafts.................... 17 (22) 29 Cash collateral received on derivatives............... 14 79 69 Cash contribution from parent......................... -- 877 11 -------- -------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES........ 2,348 6,714 3,912 -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents........................................... 3 -- -- -------- -------- -------- Net increase (decrease) in cash and cash equivalents.... 274 (420) 14 Cash and cash equivalents, beginning of year............ 487 907 893 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR.................. $ 761 $ 487 $ 907 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements 5 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (GAAP BASIS) DECEMBER 31, 2010, 2009 AND 2008 NOTE 1 -- NATURE OF OPERATIONS New York Life Insurance and Annuity Corporation (the "Company"), domiciled in the State of Delaware, is a direct, wholly owned subsidiary of New York Life Insurance Company ("New York Life"). The Company is comprised of two primary business operations: U.S. Life Insurance and Agency ("U.S. Life") and Retirement Income Security ("RIS"). The Company offers a wide variety of interest sensitive and variable life insurance and annuity products to a large cross section of the insurance market. The Company markets its products in all 50 of the United States, and the District of Columbia, primarily through New York Life's agency force with certain products also marketed through independent brokers and brokerage general agents. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and reflect the consolidation with majority owned and controlled limited liability companies, as well as a variable interest entity in which the Company is considered the primary beneficiary. All intercompany transactions have been reconciled in consolidation. Certain amounts in prior years have been reclassified to conform to the current year presentation. These reclassifications had no effect on net income or stockholder's equity as previously reported. The Delaware State Insurance Department ("the Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company, and for determining its solvency under the Delaware State Insurance Law. Accounting practices used to prepare statutory financial statements for regulatory filings of life insurance companies differ in certain instances from GAAP (refer to Note 17 -- Statutory Financial Information for further discussion). NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs ("DAC") and related amortization; valuation of investments including derivatives and recognition of other-than-temporary impairments ("OTTI"); future policy benefits including guarantees; provision for income taxes and valuation of deferred tax assets; and reserve for contingent liabilities, including reserves for losses in connection with unresolved legal matters. INVESTMENTS Fixed maturity investments classified as available-for-sale or trading are reported at fair value. For a discussion on valuation methods for fixed maturities reported at fair value, refer to Note 15 -- Fair Value Measurements. The amortized cost of debt securities is adjusted for amortization of premium and accretion of discounts. Interest income, as well as the related amortization of premium and accretion of discount, is included in net investment income in the accompanying Consolidated Statement of Income. Unrealized gains and losses on available-for-sale securities are reported in net unrealized investment gains (losses) in accumulated other comprehensive income ("AOCI"), net of deferred taxes and related adjustments, in the accompanying Consolidated Balance Sheet. 6 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Unrealized gains and losses from fixed maturity investments classified as trading are reflected in net investment gains (losses) in the accompanying Consolidated Statement of Income. Included within fixed maturity investments are mortgage-backed and asset- backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of cash flows of the underlying loans, including prepayment assumptions based on data obtained from external sources such as Bloomberg, Intex and Blackrock Solutions or internal estimates. For high credit quality mortgage-backed and asset-backed securities (those rated AA or above at date of acquisition), projected future cash flows are updated quarterly, and the amortized cost and effective yield of the securities are adjusted as necessary to reflect historical prepayment experience and changes in estimated future prepayments. The adjustments to amortized cost are recorded as a charge or credit to net investment income in accordance with the retrospective method. For mortgage-backed and asset-backed securities that are not of high credit quality (those rated below AA at date of acquisition), certain floating rate securities and securities with the potential for a loss of a portion of the original investment due to contractual prepayments (i.e. interest only securities), the effective yield is adjusted prospectively for any changes in estimated cash flows. Equity securities are carried at fair value. For a discussion on valuation methods for equity securities refer to Note 15 -- Fair Value Measurements. Unrealized gains and losses on equity securities classified as available-for- sale are reflected in net unrealized investment gains (losses) in AOCI, net of deferred taxes and related adjustments, in the accompanying Consolidated Balance Sheet. Unrealized gains and losses from investments in equity securities classified as trading are reflected in net investment gains (losses) in the accompanying Consolidated Statement of Income. The cost basis of available-for-sale fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary. Factors considered in evaluating whether a decline in value is other-than- temporary include: (i) whether the decline is substantial; (ii) the duration that the fair value has been less than cost; and (iii) the financial condition and near-term prospects of the issuer. For equity securities, the Company also 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 value to an amount equal to or greater than cost. When it is determined that a decline in value is other-than-temporary, the carrying value of the equity security is reduced to its fair value with the associated realized loss reported in net investment gains (losses). With respect to fixed maturities in an unrealized loss position, an OTTI is recognized in earnings when it is anticipated that the amortized cost will not be recovered. The entire difference between the fixed maturity security's cost and its fair value is recognized in earnings when the Company (i) has the intent to sell the fixed maturity security or (ii) more likely than not will be required to sell the fixed maturity security before its anticipated recovery. If neither of these two conditions exist, an OTTI would be recognized in earnings ("credit loss") for the difference between the amortized cost basis of the fixed maturity and the present value of projected future cash flows expected to be collected. If the 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 ("non-credit loss") would be recognized in other comprehensive income ("OCI"). The net present value is calculated by discounting the Company's best estimate of projected future cash flows at the effective interest rate implicit in the debt security prior to impairment. The determination of cash flow estimates in the net present value is subjective and methodologies will vary, depending on the type of security. The Company considers all information relevant to the collectability of the security, including past events, current conditions and reasonably supportable assumptions and forecasts in developing the estimate of cash flows expected to be collected. This information generally includes, but may not be limited to, the remaining payment terms of the security, estimated prepayment speeds, defaults, recoveries upon liquidation of the underlying collateral securing the notes and the financial condition of the issuer(s), credit 7 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) enhancements and other third-party guarantees. In addition, other information, such as industry analyst reports and forecasts, sector credit ratings, the financial condition of the bond insurer for insured fixed income securities and other market data relevant to the collectability may also be considered, as well as the expected timing of the receipt of insured payments, if any. The estimated fair value of the collateral may be used to estimate recovery value if the Company determines that the security is dependent on the liquidation of the collateral for recovery. For the non-agency residential mortgage-backed security ("RMBS") portfolio, the Company updates cash flow projections quarterly. The projections are determined for each security based upon the evaluation of prepayment, delinquency and default rates for the pool of mortgages collateralizing each security, and the projected impact on the course of future prepayments, defaults and loss in the pool of mortgages, but do not include market prices. As a result, forecasts may change from period to period and additional impairments may be recognized over time as a result of deterioration in the fundamentals of a particular security or group of securities and/or a continuation of heightened mortgage defaults for a period longer than the assumptions used in the forecasts. Both qualitative and quantitative factors are used in creating the Company's RMBS cash flow models. As such, any estimate of impairments is subject to the inherent limitation on the Company's ability to predict the aggregate course of future events. It should, therefore, be expected that actual losses may vary from any estimate and the Company may recognize additional OTTI. The new cost basis of an impaired security is not adjusted for subsequent increases in estimated fair value. In periods subsequent to the recognition of an OTTI, the impaired fixed maturity security is accounted for 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 may be accreted into net investment income in future periods based on prospective changes in cash flow estimates, to reflect adjustments to the effective yield. Mortgage loans on real estate are carried at unpaid principal balances, net of discounts/premiums and valuation allowances, and are secured. Specific valuation allowances are established for the excess carrying value of the mortgage loan over the estimated fair value of the collateral when it is probable that, based on current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Fair value of the collateral is estimated by a current appraisal. The Company also has a general valuation allowance for probable incurred but not specifically identified losses. The general valuation allowance is determined by applying a factor against the commercial and residential mortgage loan portfolios, excluding loans for which a specific allowance has already been recorded, to estimate potential losses in each portfolio. The general allowance factor for the commercial mortgage loan portfolio is based on the Company's historical loss experience as well as industry data regarding commercial loan delinquency rates. The Company analyzes industry data regarding specific credit risk based on specific metropolitan areas and property types as well as probability of default, timing of default and loss severity for each loan in a given portfolio. The general allowance factor for the residential mortgage loan portfolio takes into account loan-to-value ratios ("LTV") of the portfolio, as well as expected defaults and loss severity of loans deemed to be delinquent. For commercial and residential mortgage loans, the Company accrues interest income on loans to the extent it is deemed collectible and the loan continues to perform under its original or restructured contractual terms. The Company places loans on non-accrual status and ceases to recognize interest income when management determines that collection of interest and repayment of principal is not probable. Any accrued, but uncollected, interest is reversed out of interest income once a loan is put on non-accrual status. Interest payments received on loans where interest payments have been deemed uncollectible are recognized on a cash basis and recorded as interest income. Policy loans are stated at the aggregate balance due. A valuation allowance is established for policy loan balances, including capitalized interest that exceeds the related policy's cash surrender value. 8 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are carried at fair value. Short-term investments are included in fixed maturities in the accompanying Consolidated Balance Sheet. Other investments consist primarily of direct investments in limited partnerships and limited liability companies, derivatives (see discussion on Derivative Financial Instruments below), real estate and collateralized third- party commercial loans. Investments in limited partnerships and limited liability companies are accounted for using the equity method of accounting. Investments in real estate, which the Company has the intent to hold for the production of income, are carried at depreciated cost, net of write-downs for other-than-temporary declines in fair value. Properties held-for-sale are carried at the lower of depreciated cost or fair value, less estimated selling costs and are not further depreciated once classified as such. In many cases, limited partnerships and limited liability companies that the Company invests in qualify as investment companies and apply specialized accounting practices, which result in unrealized gains and losses being recorded in the accompanying Consolidated Statement of Income. The Company retains this specialized accounting practice in consolidation. For consolidated limited partnerships, the underlying investments, which may consist of various classes of assets, are aggregated and stated at fair value in other investments in the accompanying Consolidated Balance Sheet. For limited partnerships accounted for under the equity method, the unrealized gains and losses from the underlying investments are reported in net investment income in the accompanying Consolidated Statement of Income. Collateralized third-party commercial loans that management has the intent and ability to hold until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-off or loss reserve and net of any deferred fees on originated loans, or unamortized premiums or discounts on purchased loans. The Company assesses its loans on a regular basis for collectability in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower's ability to repay and prevailing economic conditions. Specific loans are considered for impairment when it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and the financial condition of the borrower. Impaired loan measurement may be based on the present value of expected future cash flows discounted at the loan's measurement effective interest rate, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. A loss reserve is established for the calculated impairment. A general valuation allowance for probable incurred but not specifically identified losses is determined for the remainder of the portfolio. These loans are assigned internal risk ratings and the Company utilizes a specific reserve percentage for each category of risk rating. The loss reserve rate is multiplied by outstanding debt in each related risk category to determine the general reserve on these loans. At the time of funding of a loan, management determines the amount of the loan that will be held for sale. The syndication amounts have historically been sold within one year. Loans held-for-sale are carried at the lower of cost or fair value on an individual asset basis. Net investment gains or losses on sales are generally computed using the specific identification method. Cash equivalents include investments that have remaining maturities of three months or less at date of purchase and are carried at fair value. VARIABLE INTEREST ENTITIES ("VIES") In the normal course of its investment activities, the Company enters into relationships with various special purpose entities and other entities that are deemed to be VIEs. A VIE is an entity that either (i) has equity investors that lack certain essential characteristics of a controlling financial interest (including the ability to control activities of the entity, the obligation to absorb the entity's expected losses and the right to receive the entity's expected 9 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) residual returns) or (ii) lacks sufficient equity to finance its own activities without financial support provided by other entities, which in turn would be expected to absorb at least some of the expected losses of the VIE. If the Company determines that it is the VIE's primary beneficiary, it is required to consolidate the VIE. In June 2009, the Financial Accounting Standards Board ("FASB") amended the consolidation guidance for VIEs (see Note 3 -- Recent Accounting Pronouncements). Under this amended guidance, the Company is the primary beneficiary if the Company has (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of or the right to receive benefits from the entity that could be potentially significant to the VIE or the right to receive benefits from the entity that could be potentially significant. If both conditions are present, the Company is required to consolidate the VIE. This amended guidance also included an indefinite deferral of the application of the new guidance provided to certain entities that have the attributes of investment companies, with the exception of securitizations, asset-backed financings, collateralized structure and former qualifying special purpose entities. In addition, entities are not eligible for the deferral if any obligation to fund losses or guarantee performance exists. In accordance with the deferral provision included in the amended guidance, the Company is the primary beneficiary and is required to consolidate the VIE if it stands to absorb the majority of the VIE's expected losses or to receive a majority of the VIE's expected residual returns, or both. LOANED SECURITIES AND REPURCHASE AGREEMENTS The Company enters into securities lending agreements whereby certain investment securities are loaned to third-parties for the purpose of enhancing income on certain securities held. Securities loaned are treated as financing arrangements, and are recorded at the amount of cash advanced or received. With respect to securities loaned, the Company requires initial collateral, usually in the form of cash, equal to 102% of the fair value of domestic securities loaned. If foreign securities are loaned and the denomination of the collateral is other than the denomination of the currency of the loaned securities, then initial required collateral is 105% of the face value. The Company monitors the fair value of securities loaned with additional collateral obtained as necessary. The Company enters into agreements to purchase and resell securities, and agreements to sell and repurchase securities for the purpose of enhancing income on the securities portfolio. Securities purchased under agreements to resell are treated as investing activities and are carried at fair value, including accrued interest. It is the Company's policy to generally take possession, or control, of the securities purchased under these agreements to resell. However, for tri- party repurchase agreements, the Company's designated custodian takes possession of the underlying collateral securities. Securities purchased under agreement to resell are reflected separately in the accompanying Consolidated Balance Sheet. Under agreements to sell and repurchase securities, the Company obtains the use of funds from a broker for generally one month. Assets to be repurchased are the same, or substantially the same, as the assets transferred. Securities sold under agreements to repurchase are treated as financing arrangements. Collateral received is invested in short-term investments with an offsetting collateral liability. The liability is included in other liabilities in the accompanying Consolidated Balance Sheet. The fair value of the securities to be repurchased or resold is monitored and additional collateral is obtained, where appropriate, to protect against credit exposure. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new and maintaining renewal business and certain costs of issuing policies that vary with and are primarily related to the production of new and renewal business have been deferred and recorded as an asset in the accompanying Consolidated Balance Sheet. These costs consist primarily of commissions, certain expenses of underwriting and issuing contracts and certain agency expenses. 10 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For universal life and deferred annuity contracts, such costs are amortized in proportion to estimated gross profits over the effective life of those contracts. Changes in assumptions for all policies and contracts are reflected as retroactive adjustments in the current year's amortization. For these contracts the carrying amount of DAC is adjusted at each balance sheet date as if the unrealized investment gains or losses had been realized and included in the gross margins or gross profits used to determine current period amortization. The increase or decrease in DAC, due to unrealized investment gains or losses, is recorded in OCI. Beginning in 2009 for new business, the Company increased the expected life for universal life policies and deferred annuity contracts up to a maximum of 99 years. For single premium immediate annuities with life contingencies, all acquisition costs are charged to expense immediately because generally all premiums are received at the inception of the contract. The Company assesses internal replacements to determine whether such modifications significantly change the contract terms. When the modification substantially changes the contract, DAC is written-off immediately through income and only new deferrable expenses associated with the replacements are deferred. DAC written-off at the date of lapse cannot be restored when a policy subsequently reinstates. If the contract modifications do not substantially change the contract, DAC amortization on the original policy will continue and any acquisition costs associated with the related modification are expensed. SALES INDUCEMENTS For some deferred annuity products, the Company offers policyholders a bonus equal to a specified percentage of the policyholder's initial deposit and additional credits to the policyholder's account value related to minimum accumulation benefits, which are considered sales inducements in certain instances. The Company defers these aforementioned sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. Deferred sales inducements are reported in other assets in the accompanying Consolidated Balance Sheet. INTANGIBLE ASSETS An intangible asset with a finite life is amortized over its useful life. Intangible assets with a finite useful life are tested for impairment when facts and circumstances indicate that its carrying amount may not be recoverable, and an impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows attributable to the asset. The amount of the impairment loss to be recorded is calculated by the excess of the asset's carrying value over its fair value. Fair value is generally determined using discounted cash flow analysis using assumptions that a market participant would use. All intangible assets are reported in other assets in the accompanying Consolidated Balance Sheet. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are accounted for at fair value. The treatment of changes in the fair value of derivatives depends on the characteristics of the transaction, including whether it has been designated and qualifies as part of a hedging relationship. Derivatives that do not qualify for hedge accounting are carried at fair value with changes in value included in net investment gains (losses) in the accompanying Consolidated Statement of Income. To qualify as a hedge, the hedge relationship is designated and formally documented at inception by detailing the particular risk management objective and strategy for the hedge. This includes the item and risk that is being hedged, the derivative that is being used, as well as how effectiveness is being assessed and measured. A derivative must be highly effective in accomplishing the objective of offsetting either changes in fair value, or cash flows, for the risk being hedged. The hedging relationship is considered highly effective if the changes in fair value or 11 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) discounted cash flows of the hedging instrument are within 80% and 125% of the inverse changes in the fair value or discounted cash flows of the hedged item. The Company formally assesses effectiveness of its hedging relationships both at the hedge inception and on a quarterly basis in accordance with its risk management policy. The Company discontinues hedge accounting prospectively if: (i) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expired or is sold, terminated or exercised; (iii) the derivative is de-designated as a hedge instrument; (iv) it is probable that the forecasted transaction will not occur, or (v) management determines that designation of the derivative as a hedge instrument is no longer appropriate. The Company continually assesses the credit standing of the derivative counterparty and if the counterparty is deemed to be no longer creditworthy, the hedge will no longer be effective. As a result, the Company will prospectively discontinue hedge accounting. During 2010 and 2009, the Company evaluated the creditworthiness of counterparties, and, except as discussed in Note 12 -- Derivative Financial Instruments and Risk Management; no issues were noted that led to a discontinuation of hedge accounting. FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of authoritative guidance related to derivatives and hedging: (i) interest rate swaps to convert fixed rate investments to floating rate investments and (ii) equity swaps to hedge the market price risk for common stock investments. For fair value hedges, the Company generally uses a qualitative assessment to assess hedge effectiveness, which matches the critical terms of the derivative with the underlying hedged item. For fair value hedges of equity investments, the Company uses regression analysis, which measures the correlation to the equity exposure being hedged. For fair value hedges, in which derivatives hedge the fair value of assets, changes in the fair value of derivatives are reflected in net investment gains and losses, together with changes in the fair value of the related hedged item. The Company's fair value hedges primarily hedge fixed maturity securities. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of the authoritative guidance related to derivatives and hedging: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities into fixed rate liabilities and (iii) interest rate swaps to hedge the interest rate risk associated with forecasted transactions. For cash flow hedges in which derivatives hedge the variability of cash flows related to variable rate available-for-sale securities and available-for- sale securities that are exposed to foreign exchange risk, the accounting treatment depends on the effectiveness of the hedge. To the extent the derivatives are effective in offsetting the variability of the hedged cash flows; changes in the derivatives' fair value will not be included in current earnings but are reported as changes in OCI. These changes in fair value will be included in net investment gains (losses) or net investment income of future periods when earnings are also affected by the variability of the hedged cash flows. For hedges of assets or liabilities that are subject to transaction gains and losses under the authoritative guidance related to foreign currency, the change in fair value relative to the change in spot rates during the reporting period is reclassified and reported with the transaction gain or loss of the asset or liability being hedged. To the extent these derivatives are not effective, changes in their fair values are immediately included in earnings in net investment gains (losses). The assessment of hedge effectiveness for cash flow hedges of interest rate risk excludes amounts relating to risks other than exposure to the benchmark interest rate. 12 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For cash flow hedges of interest rate risk, the Company uses either the short-cut method, if appropriate, or regression analysis to assess hedge effectiveness to changes in the benchmark interest rate. The change in variable cash flows method is used to measure hedge ineffectiveness when appropriate. For cash flow hedges, hedge accounting is discontinued when it is probable that a forecasted transaction will not occur. In these cases, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in OCI will be recognized immediately in net investment gains (losses). When the hedged forecasted transaction is no longer probable, but is reasonably possible, the accumulated gain or loss remains in OCI and will be recognized when the transaction affects net income; however, prospective hedge accounting for the transaction is terminated. In all other cash flow hedge situations in which hedge accounting is discontinued, the gains and losses that were accumulated in OCI will be recognized immediately in net investment gains (losses) and the derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current period net investment gains (losses). EMBEDDED DERIVATIVES The Company may enter into contracts that are not themselves derivative instruments but contain embedded derivatives. For each contract, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to those of the host contract and determines whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that 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 separated from the host contract and accounted for as a stand-alone derivative. Such embedded derivatives are recorded on the balance sheet at fair value and changes in their fair value are recorded currently in earnings. 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 fair value. For further information on the Company's derivative instruments and related hedged items and their effect on the Company's financial position, financial performance and cash flows see Note 12 -- Derivative Financial Instruments and Risk Management. POLICYHOLDERS' ACCOUNT BALANCES The Company's liability for policyholders' account balances represents the contract value that has accrued to the benefit of the policyholder as of the balance sheet date. This liability is generally equal to the accumulated account deposits, plus interest credited, less policyholder withdrawals and other charges assessed against the account balance. This liability also includes amounts that have been assessed to compensate the insurer for services to be performed over future periods, and the fair value of embedded derivatives in the above contracts (see Note 6 -- Policyholders' Liabilities). FUTURE POLICY BENEFITS The Company's liability for future policy benefits is primarily comprised of the present value of estimated future payments to or on behalf of policyholders, where the timing and amount of payment depends on policyholder mortality, less the present value of future net premiums. For non-participating traditional life insurance and annuity products, expected mortality and lapse or surrender are generally based on the Company's historical experience or standard industry tables including a provision for the risk of adverse deviation. Interest rate assumptions are based on factors such as market conditions and expected investment returns. 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. If experience is less favorable than assumed and future losses are projected under loss recognition testing, then 13 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) additional liabilities may be required, resulting in a charge to policyholder benefits and claims. The Company does not establish loss reserves until a loss has occurred. The Company's liability for future policy benefits also includes liabilities for guarantee benefits related to certain non-traditional long- duration life and annuity contracts, which are discussed more fully in Note 6 -- Policyholders' Liabilities. POLICY CLAIMS The Company's liability for policy claims includes a liability for unpaid claims and claim adjustment expenses. Unpaid claims and claim adjustment expenses include estimates of claims that the Company believes have been incurred but have not yet been reported as of the balance sheet date. DEBT Debt is generally carried at unpaid principal balance and is included in other liabilities in the accompanying Consolidated Balance Sheet. See Note 15 -- Fair Value Measurements for discussion on the fair value of debt. SEPARATE ACCOUNT ASSETS AND LIABILITIES The Company has separate accounts, some of which are registered with the Securities and Exchange Commission ("SEC") and others that are not registered with the SEC. The Company reports separately, as separate account assets and separate account 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 separate accounts have varying investment objectives, are segregated from the Company's general account and are maintained for the benefit of separate account policyholders. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. All separate account assets are stated at fair value. The separate account liabilities represent the policyholders' interest in the account, and include accumulated net investment income and realized and unrealized gains and losses on the assets. OTHER ASSETS AND OTHER LIABILITIES Other assets primarily consist of investment income due and accrued, receivables from affiliates and sales inducements. Other liabilities consist primarily of net deferred tax liabilities, collateral received on securities loaned and payables to affiliates. RECOGNITION OF INSURANCE INCOME AND RELATED EXPENSES Premiums from annuity policies with life contingencies and from whole and term life policies are recognized as income when due. The associated benefits and expenses are matched with income so as to result in the recognition of profits over the life of the contracts. This match is accomplished by providing for liabilities for future policy benefits (as discussed in Note 6 -- Policyholders' Liabilities) and the deferral and subsequent amortization of policy acquisition costs. Amounts received under deferred annuity and universal life type contracts are reported as deposits to policyholders' account balances (as discussed in Note 6 -- Policyholders' Liabilities). Revenues from these contracts consist of amounts assessed during the period for mortality and expense risk, policy administration and surrender charges, and are included as fee income in the accompanying Consolidated Statement of Income. In addition to fees, the Company earns investment income from the investment of policyholders' deposits in the 14 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's general account portfolio. Amounts previously assessed to compensate the Company for services to be performed over future periods are deferred and recognized into income over the period benefited, using the same assumptions and factors used to amortize DAC. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policyholders' account balances. Premiums for contracts with a single premium or a limited number of premium payments due over a significantly shorter period than the total period over which benefits are provided are recorded as income when due. Any excess profit is deferred and recognized as income in a constant relationship to insurance in- force and, for annuities, in relation to the amount of expected future benefit payments. Premiums, universal life fee income, benefits and expenses are stated net of reinsurance ceded. Estimated reinsurance ceding allowances are recognized over the life of the reinsured policies using assumptions consistent with those used to account for the underlying policies. Net revenue from reinsurance primarily represents the experience rated refund, amortization of the deferred gain and the reserve adjustment associated with the reinsurance business ceded to New York Life, as discussed in Note 10 -- Reinsurance. This net revenue adjustment excludes ceded universal life fees and ceded policyholder benefits, which are included on these respective lines in the accompanying Consolidated Statement of Income. FEDERAL INCOME TAXES Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year and any adjustments to such estimates from prior years. Deferred federal income tax assets and liabilities are recognized for expected future tax consequences of temporary differences between GAAP and taxable income. Temporary differences are identified and measured using a balance sheet approach whereby GAAP and tax balance sheets are compared. Deferred income taxes are generally recognized based on enacted tax rates and a valuation allowance is recorded if it is more likely than not that any portion of the deferred tax asset will not be realized. The authoritative guidance on income taxes requires an evaluation of the recoverability of deferred tax assets and establishment of a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance many factors are considered, including: (i) the nature of deferred tax assets and liabilities; (ii) whether they are ordinary or capital; (iii) in which tax jurisdictions they were generated and the timing of their reversal; (iv) taxable income in prior carry-back years as well as projected taxable earnings exclusive of reversing temporary differences and carryforwards; (v) the length of time that carryovers can be utilized in the various tax jurisdictions; (vi) any unique tax rules that would impact the utilization of the deferred tax assets; and (vii) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. The Company is a member of a group that files a consolidated federal income tax return with New York Life. The consolidated income tax liability is allocated among the members of the group in accordance with a tax allocation agreement. The tax allocation agreement provides that the Company is allocated its share of the consolidated tax provision or benefit, determined generally on a separate company basis, but may, where applicable, recognize the tax benefits of net operating losses or capital losses utilizable in the consolidated group. Intercompany tax balances are generally settled quarterly on an estimated basis with a final settlement within thirty days of the filing of the consolidated return. In accordance with the authoritative guidance related to income taxes, 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. The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit that is greater than fifty percent likely of being realized 15 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) upon settlement. Unrecognized tax benefits are included within other liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest and penalties related to tax uncertainties as income tax expense. CONTINGENCIES Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Regarding litigation, management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, includes these costs in the accrual. FAIR VALUE MEASUREMENTS For fair values of various assets and liabilities refer to Note 15 -- Fair Value Measurements. BUSINESS RISKS AND UNCERTAINTIES In periods of extreme volatility and disruptions in the securities and credit markets and under certain interest rate scenarios, the Company could be subject to disintermediation risk and/or reduction in net interest spread or profit margins. The Company's investment portfolio consists principally of fixed income securities as well as mortgage loans, policy loans, limited partnerships, limited liability corporations, preferred and common stocks and equity real estate. The fair value of the Company's investments varies depending on economic and market conditions and the interest rate environment. Furthermore, with respect to investments in mortgage loans, mortgage-backed securities and other securities subject to prepayment and/or call risk, significant changes in prevailing interest rates and/or geographic conditions may adversely affect the timing and amount of cash flows on these investments, as well as their related values. In addition, the amortization of market premium and accretion of market discount for mortgage-backed securities is based on historical experience and estimates of future payment experience on the underlying mortgage loans. Actual prepayment timing will differ from original estimates and may result in material adjustments to asset values and amortization or accretion recorded in future periods. Certain of these investments lack liquidity, such as privately placed fixed income securities, equity real estate and other limited partnership interests. The Company also holds certain investments in asset classes that are liquid but have been experiencing significant market fluctuations, such as mortgage-backed and other asset-backed securities. If the Company were to require significant amounts of cash on short notice in excess of cash on hand and its portfolio of liquid investments, the Company could have difficulty selling these investments in a timely manner, be forced to sell them for less than they otherwise would have been able to realize, or both. In periods of high or increasing interest rates, life insurance policy loans and surrenders and withdrawals may increase as policyholders seek investments with higher perceived returns. This could result in cash outflows requiring the Company to sell invested assets at a time when the prices of those assets are adversely affected by the increase in market interest rates, which could cause the Company to suffer realized investment losses. In addition, when interest rates rise, the Company may face competitive pressure to increase crediting rates on certain insurance and annuity contracts, and such changes may occur more quickly than corresponding changes to the rates earned on the Company's general account investments. During periods of low or declining interest rates, the Company is contractually obligated to credit a fixed minimum rate of interest on almost all of its life insurance and annuity policies. Should yields on new investments decline to levels below these guaranteed minimum rates for a long enough period, the Company may be required to credit interest to policyholders at a higher rate than the rate of return the Company earns on its portfolio of investments supporting those products, thus generating losses. 16 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Although management of the Company employs a number of asset/liability management strategies to minimize the effects of interest rate volatility, no guarantee can be given that it will be successful in managing the effects of such volatility. Issuers or borrowers whose securities or loans the Company holds, customers, trading counterparties, counterparties under swaps and other derivative contracts, reinsurers, clearing agents, exchanges, clearing houses and other financial intermediaries and guarantors may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons. In addition, the underlying collateral supporting the Company's structured securities, including mortgage-backed securities, may deteriorate or default causing these structured securities to incur losses. Weak equity market performance may adversely affect sales of variable products, cause potential purchasers of the Company's products to refrain from new or additional investments, and may cause current customers to surrender or redeem their current products and investments. Revenues of the Company's variable products are, to a large extent, based on fees related to the value of assets under management (except for its Elite Annuity product, where future revenue is based on adjusted premium payments). Consequently, poor equity market performance reduces fee revenues. The level of assets under management could also be negatively affected by withdrawals or redemptions. The Company issues certain variable products with various types of guaranteed minimum benefit features. The Company establishes reserves for the expected payments resulting from these features. The Company bears the risk that payments may be higher than expected as a result of significant, sustained downturns in the stock market. The Company also bears the risk that additional reserves may be required if partial surrender activity increases significantly for some annuity products during the period when account values are less than guaranteed amounts. The Risk-Based Capital, or RBC, ratio is the primary measure by which regulators evaluate the capital adequacy of the Company. RBC is determined by statutory rules that consider risks related to the type and quality of invested assets, insurance-related risks associated with the Company's products, interest rate risk and general business risks. Disruptions in the capital markets could increase equity and credit losses and reduce the Company's statutory surplus and RBC ratio. To the extent the Company's statutory capital resources are deemed to be insufficient to maintain a particular rating by one or more rating agencies, the Company may seek to improve its capital position, including through operational changes and potentially seeking capital from New York Life. THE COMPANY FACES SIGNIFICANT COMPETITION. The Company faces strong competition in its U.S. Life and RIS businesses. The Company's ability to compete is based on a number of factors, including product features, investment performance, service, price, distribution capabilities, scale, commission structure, name recognition and financial strength ratings. New York Life's career agency force is the primary means by which it distributes life insurance products. In order to continue increasing life insurance sales, the Company must retain and attract additional productive career agents. Rating agencies assign the Company financial strength/claims paying ability ratings, based on their evaluations of the Company's ability to meet its financial obligations. These ratings indicate a rating agency's view of an insurance company's ability to meet its obligations to its insured. In certain of the Company's markets, ratings are important competitive factors of insurance companies. Rating organizations continue to review the financial performance and condition of insurers, including the Company. A significant downgrade in the Company's ratings could materially and adversely affect its competitive position in the life insurance market and increase its cost of funds. 17 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REGULATORY DEVELOPMENTS IN THE MARKETS IN WHICH THE COMPANY OPERATES COULD AFFECT THE COMPANY'S BUSINESS. Although the federal government does not directly regulate the business of insurance, federal legislation and administrative policies in several areas, including pension regulation, financial services regulation and federal taxation, can significantly and adversely affect the insurance industry and the Company. There are a number of current or potential regulatory measures that may affect the insurance industry. The Company is unable to predict whether any changes will be made, whether any administrative or legislative proposals will be adopted in the future, or the effect, if any, such proposals would have on the Company. The attractiveness to the Company's customers of many of its products is due, in part, to favorable tax treatment. Current federal income tax laws generally permit the tax-deferred accumulation of earnings on the premiums paid by the holders of annuities and life insurance products. Taxes, if any, are payable generally on income attributable to a distribution under the contract for the year in which the distribution is made. Death benefits under life insurance contracts are received free of federal income tax. Changes to the favorable tax treatment may reduce the attractiveness of the Company's products to its customers. NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENTS In October 2010, the FASB issued guidance to address diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. Under the new guidance acquisition costs are to include only those costs that are directly related to the acquisition or renewal of insurance contracts by applying a model similar to the accounting for loan origination costs. An entity may defer incremental direct costs of contract acquisition that are incurred in transactions with independent third-parties or employees as well as the portion of employee compensation costs related to underwriting, policy issuance and processing, medical inspection and contract selling for successfully negotiated contracts. Additionally, an entity may capitalize as a deferred acquisition cost only those advertising costs meeting the capitalization criteria for direct-response advertising. This change is effective for fiscal years beginning after December 15, 2011 and interim periods within those years. Early adoption as of the beginning of a fiscal year is permitted. The guidance is to be applied prospectively upon the date of adoption, with retrospective application permitted, but not required. The Company will adopt this guidance effective January 1, 2012. The Company is currently assessing the impact of the guidance on the Company's consolidated financial position, results of operations, and financial statement disclosures. In July 2010, the FASB issued updated guidance that requires enhanced disclosures related to the allowance for credit losses and the credit quality of a company's financing receivable portfolio. The disclosures are effective for interim and annual reporting periods ending on or after December 15, 2011 for private companies. The Company has elected to early adopt this guidance and has provided the disclosures required by this guidance in Note 4 -- Investments. The disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning after December 15, 2010. In January 2011, the FASB deferred the disclosures required by this guidance related to troubled debt restructurings. The disclosures will be effective, and the Company will provide these disclosures, concurrent with the effective date of proposed guidance for determining what constitutes a troubled debt restructuring. In April 2010, the FASB issued guidance clarifying that an insurance entity should not consider any separate account interests in an investment held for the benefit of policyholders to be the insurer's interests, and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation, unless the separate account interests are held for a related party policyholder, whereby consolidation of such interests must be considered under applicable variable interest guidance. This guidance is effective for interim and annual reporting periods beginning after December 15, 2010 and retrospectively for all prior periods upon the date of adoption, with early adoption permitted. The Company's adoption of this guidance, effective 18 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) January 1, 2011, is not expected to have a material effect on the Company's consolidated financial position, results of operations and financial statement disclosures. In March 2010, the FASB issued updated guidance that amends and clarifies the accounting for credit derivatives embedded in interests in securitized financial assets. This new guidance eliminates the scope exception for embedded credit derivatives (except for those that are created solely by subordination) and provides new guidance on how the evaluation of embedded credit derivatives is to be performed. This new guidance is effective for the first interim reporting period beginning after June 15, 2010. The Company's adoption of this guidance effective July 1, 2010 did not have a material effect on the Company's consolidated financial position, results of operations and financial statement disclosures. In January 2010, the FASB issued updated guidance that requires new fair value disclosures about significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, sales, issuances, and settlements within the rollforward of Level 3 activity. Also, this updated fair value guidance clarifies the disclosure requirements about the level of disaggregation of asset classes and valuation techniques and inputs. This new guidance is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the rollforward of Level 3 activity, which are effective for interim and annual reporting periods beginning after December 15, 2010. The Company adopted the effective portions of this guidance on January 1, 2010. The required disclosures are provided in Note 15 -- Fair Value Measurements. In June 2009, the FASB issued authoritative guidance which changes the analysis required to determine whether or not an entity is a VIE. In addition, the guidance changes the determination of the primary beneficiary of a VIE from a quantitative to a qualitative model. Under the new qualitative model, the primary beneficiary must have both the ability to direct the activities of the VIE and the obligation to absorb either losses or gains that could be significant to the VIE. This guidance also changes when reassessment is needed, as well as requires enhanced disclosures, including the effects of a company's involvement with a VIE on its financial statements. This guidance is effective for interim and annual reporting periods beginning after November 15, 2009. In February 2010, the FASB issued updated guidance relative to VIEs which defers, except for disclosure requirements, the impact of this guidance for entities that (i) possess the attributes of an investment company, (ii) do not require the reporting entity to fund losses, and (iii) are not financing vehicles or entities that were formerly classified as qualified special purpose entities ("QSPE"). The Company's adoption of this guidance effective January 1, 2010 did not result in any transition adjustment. In June 2009, the FASB issued authoritative guidance which changes the accounting for transfers of financial assets, and is effective for transfers of financial assets occurring in interim and annual reporting periods beginning after November 15, 2009. It removes the concept of a QSPE from the guidance for transfers of financial assets and removes the exception from applying the guidance for consolidation of VIEs to QSPEs. It changes the criteria for achieving sale accounting when transferring a financial asset and changes the initial recognition of retained beneficial interests. The guidance also defines "participating interest" to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. The Company's adoption of this guidance effective January 1, 2010 did not have a material effect on the Company's consolidated financial position, results of operations and financial statement disclosures. In August 2009, the FASB issued authoritative guidance for the fair value measurement of liabilities. This guidance includes valuation techniques which may be used for measuring fair value when a quoted price in an active market for the identical liability is not available, which includes one or more of the following valuation techniques (i) quoted prices for identical liability when traded as an asset; (ii) quoted prices for similar liabilities or similar liabilities when traded as an asset, or (iii) another valuation technique that is consistent with the fair value principles within GAAP, such as the income or market approach. It also clarifies the adjustments to market inputs that are 19 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) appropriate for debt obligations that are restricted from being transferred to another obligor. This guidance is effective for the first reporting period beginning after issuance. The Company's adoption of this guidance effective December 31, 2009 did not have an impact on the Company's consolidated financial position or results of operations. In June 2009, the FASB issued authoritative guidance for, and on July 1, 2009 launched, the FASB's Accounting Standards Codification as the source of authoritative GAAP to be applied by non-governmental entities. The Codification is not intended to change GAAP but is a new structure which takes accounting pronouncements and organizes them by accounting topic. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company's adoption of this guidance effective for the interim reporting period ending September 30, 2009 impacts the way the Company references GAAP accounting standards in the financial statements but has no impact on the consolidated financial statements. In May 2009, the FASB issued authoritative guidance for subsequent events, which addresses the accounting for and disclosure of subsequent events not addressed in other applicable GAAP, including disclosure of the date through which subsequent events have been evaluated. The Company's adoption of this guidance, effective with the annual reporting period ended December 31, 2009, did not have a material effect on the Company's consolidated financial position or results of operations. The required disclosure of the date through which subsequent events have been evaluated is provided in Note 18 -- Subsequent Events. In April 2009, the FASB revised the authoritative guidance for the recognition and presentation of OTTI. This guidance amends 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. It requires that an OTTI be recognized in earnings for a fixed maturity security in an unrealized loss position 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 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 fair value below amortized cost. If neither of these two conditions exists, the difference between the amortized cost basis 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 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 ("non-credit loss") is recorded as other comprehensive income (loss). When an unrealized loss on a fixed maturity security is considered temporary, the Company continues to record the unrealized loss in other comprehensive income (loss) and not in earnings. There was no change for equity securities which, when an OTTI has occurred, continue to be impaired for the entire difference between the equity security's cost or amortized cost and its fair value with a corresponding charge to earnings. Prior to the adoption of the OTTI guidance, the Company recognized in earnings an OTTI for a fixed maturity security in an unrealized loss position unless it could assert that it had both the intent and ability to hold the fixed maturity security for a period of time sufficient to allow for a recovery of fair value to the security's amortized cost basis. Also, prior to the adoption of this guidance the entire difference between the fixed maturity security's amortized cost basis and its fair value was recognized in earnings if it was determined to have an OTTI. This guidance is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company early adopted this guidance effective January 1, 2009 which resulted in an increase of $48 million, net of related DAC, policyholder liability and tax adjustments, to retained earnings with a corresponding decrease to AOCI to reclassify the non-credit loss portion of previously recognized OTTI losses on fixed maturity securities held at January 1, 2009. 20 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 4 -- INVESTMENTS FIXED MATURITIES The amortized cost and estimated fair value of fixed maturity securities as of December 31, 2010 and 2009, by contractual maturity, is presented below (in millions). Expected maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call or prepayment penalties.
2010 2009 ------------------- ------------------- AMORTIZED FAIR AMORTIZED FAIR AVAILABLE-FOR-SALE COST VALUE COST VALUE ------------------ --------- ------- --------- ------- Due in one year or less.................. $ 2,609 $ 2,665 $ 1,754 $ 1,788 Due after one year through five years.... 14,651 15,456 13,799 14,367 Due after five years through ten years... 12,127 12,903 11,712 12,045 Due after ten years...................... 5,548 5,855 5,057 5,141 Mortgage and asset-backed securities: U.S. Government or U.S. Government agency.............................. 1,187 1,243 816 835 Other mortgage-backed securities....... 22,169 22,535 20,835 20,163 Other asset-backed securities.......... 3,703 3,711 2,957 2,899 Redeemable preferred securities.......... 6 6 9 10 ------- ------- ------- ------- TOTAL AVAILABLE-FOR-SALE............... $62,000 $64,374 $56,939 $57,248 ======= ======= ======= =======
At December 31, 2010 and 2009, the distribution of gross unrealized gains and losses on investments in fixed maturities were as follows (in millions):
2010 ---------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED ESTIMATED OTTI IN AVAILABLE-FOR-SALE COST GAINS LOSSES FAIR VALUE AOCI(1) ------------------ --------- ---------- ---------- ---------- ------- U.S. Treasury and U.S. Government Corporations and agencies...... $ 2,886 $ 83 $ 23 $ 2,946 $ -- U.S. Agencies, state and municipal...................... 1,217 32 17 1,232 -- Foreign governments.............. 750 79 1 828 -- U.S. Corporate................... 24,389 1,562 107 25,844 -- Foreign corporate................ 6,880 437 45 7,272 -- Residential mortgage-backed securities..................... 17,291 590 499 17,382 (146) Commercial mortgage-backed securities..................... 4,878 300 25 5,153 -- Asset-backed securities(2)....... 3,703 71 63 3,711 (12) Redeemable preferred securities.. 6 -- -- 6 -- ------- ------ ---- ------- ----- TOTAL AVAILABLE-FOR-SALE....... $62,000 $3,154 $780 $64,374 $(158) ======= ====== ==== ======= =====
21 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 ---------------------------------------------------------- AMORTIZED UNREALIZED UNREALIZED ESTIMATED OTTI IN AVAILABLE-FOR-SALE COST GAINS LOSSES FAIR VALUE AOCI(1) ------------------ --------- ---------- ---------- ---------- ------- U.S. Treasury and U.S. Government Corporations and agencies...... $ 3,035 $ 33 $ 69 $ 2,999 $ -- U.S. Agencies, state and municipal...................... 715 19 9 725 -- Foreign governments.............. 731 55 4 782 -- U.S. Corporate................... 22,584 1,021 256 23,349 -- Foreign corporate................ 6,073 305 57 6,321 -- Residential mortgage-backed securities..................... 15,765 350 857 15,258 (205) Commercial mortgage-backed securities..................... 5,070 93 258 4,905 (5) Asset-backed securities(2)....... 2,957 54 112 2,899 (8) Redeemable preferred securities.. 9 1 -- 10 -- ------- ------ ------ ------- ----- TOTAL AVAILABLE-FOR-SALE....... $56,939 $1,931 $1,622 $57,248 $(218) ======= ====== ====== ======= =====
-------- (1) Represents the amount of OTTI losses in AOCI, which were not included in earnings pursuant to authoritative guidance. Amount excludes $7 million and $39 million of net unrealized gains on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date for the years ended December 31, 2010 and 2009, respectively. (2) Includes auto loans, credit cards, education loans and other asset types. At December 31, 2010 and 2009, the Company had outstanding contractual obligations to acquire additional private placement securities amounting to $280 million and $313 million, respectively. The Company accrues interest income on fixed maturity securities to the extent it is deemed collectible and the security continues to perform under its original contractual terms. In the event collectability of interest is uncertain, accrual of interest income will cease and income will be recorded when and if received. Investments in fixed maturity securities that have been non-income producing for the last twelve months totaled $1 million and $2 million at December 31, 2010 and 2009, respectively. These investments have been deemed other-than-temporarily impaired. EQUITY SECURITIES -- UNAFFILIATED At December 31, 2010 and 2009, the distribution of gross unrealized gains and losses on available-for-sale equity securities were as follows (in millions):
UNREALIZED UNREALIZED ESTIMATED COST GAINS LOSSES FAIR VALUE ---- ---------- ---------- ---------- 2010....................................... $13 $11 $ 1 $23 2009....................................... $36 $ 9 $-- $45
MORTGAGE LOANS The Company's mortgage loan investments are diversified by property type, location and borrower and are collateralized by the related property. 22 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2010 and 2009, contractual commitments to extend credit under commercial and residential mortgage loan agreements amounted to $125 million and $161 million, respectively, at fixed and floating interest rates ranging from 2.08% to 6.22% in 2010, and fixed and floating interest rates ranging from 3.92% to 7.13% in 2009. These commitments are diversified by property type and geographic region. The Company accrues interest income on problem loans to the extent it is deemed collectible and the loan continues to perform under its original or restructured contractual terms. Interest income on impaired loans is recognized on a cash basis. Cash payments on loans in the process of foreclosure are treated as a return of principal. At December 31, 2010 and 2009, the distribution of the mortgage loan portfolio by property type and geographic region was as follows (in millions):
2010 2009 ---------------- ---------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL -------- ----- -------- ----- PROPERTY TYPE: Office buildings............................ $1,853 31.9% $1,736 30.0% Retail facilities........................... 1,217 21.0% 1,182 20.5% Industrial.................................. 1,185 20.4% 1,111 19.2% Apartment buildings......................... 938 16.2% 853 14.8% Residential................................. 563 9.7% 840 14.5% Other....................................... 49 0.8% 57 1.0% ------ ----- ------ ----- TOTAL.................................... $5,805 100.0% $5,779 100.0% ====== ===== ====== ===== GEOGRAPHIC REGION: South Atlantic.............................. $1,516 26.1% $1,410 24.4% Central..................................... 1,499 25.8% 1,511 26.1% Pacific..................................... 1,381 23.8% 1,386 24.0% Middle Atlantic............................. 1,154 19.9% 1,176 20.4% New England................................. 255 4.4% 296 5.1% ------ ----- ------ ----- TOTAL.................................... $5,805 100.0% $5,779 100.0% ====== ===== ====== =====
The Company monitors the aging of its mortgage loans receivable on a monthly basis to determine delinquencies. As of December 31, 2010, an analysis of the aging of the principal balances, excluding the 23 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) allowance for credit losses, that are past due and the mortgage loans on non- accrual status and ninety days past-due and still accruing were as follows (in millions):
RECORDED TOTAL MORTGAGE LOANS > NON-ACCRUAL 30-59 60-89 90 DAYS TOTAL MORTGAGE 90 DAYS MORTGAGE DAYS DAYS AND OVER PAST DUE CURRENT LOANS ACCRUING LOANS ----- ----- -------- -------- ------- -------- ---------------- ----------- PROPERTY TYPE: Office buildings...... $-- $-- $-- $-- $1,865 $1,865 $-- $-- Retail facilities..... -- -- -- -- 1,225 1,225 -- -- Industrial............ -- -- -- -- 1,193 1,193 -- -- Apartment buildings... -- -- -- -- 947 947 -- -- Residential........... -- -- 9 9 562 571 -- 9 Other................. -- -- -- -- 50 50 -- -- --- --- --- --- ------ ------ --- --- TOTAL.............. $-- $-- $ 9 $ 9 $5,842 $5,851 $-- $ 9 === === === === ====== ====== === ===
As discussed in Note 2 -- Significant Accounting Policies, the Company establishes a specific reserve when it is probable that the Company will be unable to collect all amounts due under the contractual terms of the loan agreements and a general reserve for probable incurred but not specifically identified losses. The activity in the mortgage loan specific and general reserves for the year ended December 31, 2010, is summarized below (in millions):
ALLOWANCE FOR CREDIT LOSSES: RESIDENTIAL COMMERCIAL TOTAL ---------------------------- ----------- ---------- ------ Beginning balance............................... $ 10 $ 44 $ 54 Charge-offs................................... (1) 8 7 Recoveries.................................... (1) (14) (15) ---- ------ ------ Ending Balance.................................. $ 8 $ 38 $ 46 ==== ====== ====== ENDING BALANCE Individually evaluated for impairment (specific).................................... $ 3 $ 4 $ 7 Collectively evaluated for impairment (general)..................................... $ 5 $ 34 $ 39 MORTGAGE LOANS: Ending balance (recorded investment): Individually evaluated for impairment (specific).................................... $ 11 $ 36 $ 47 Collectively evaluated for impairment (general)..................................... $560 $5,244 $5,804
As of December 31, 2009 and 2008, the allowance for credit losses was $54 million and $13 million, respectively. For the year ended December 31, 2009, the provision for credit losses was $43 million and direct write-downs were $2 million. For the year ended December 31, 2008, the provision for credit losses was $4 million and there were no direct write-downs. The Company closely monitors commercial mortgage loans with the potential for impairment by considering a number of factors. These factors include, but are not limited to, LTV, asset performance such as debt service coverage ratio, lease rollovers, income/expense hurdles, major tenant or borrower issues, the economic climate and catastrophic events. Mortgage loans with the potential for impairment take priority in receiving an appraisal. Residential mortgage loans that are sixty or more days delinquent are also monitored for potential impairment, whereby an appraisal of the underlying asset is obtained. 24 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As mentioned above, the Company uses LTV as one of the key mortgage loan indicators to assess credit quality and to assist in identifying problem loans. As of December 31, 2010, LTVs on the Company's mortgage loans are as follows (in millions):
------------------------------------------------------------------------------------------------------------ OFFICE RETAIL APARTMENT BUILDINGS FACILITIES INDUSTRIAL BUILDINGS RESIDENTIAL OTHER TOTAL --------- ---------- ---------- --------- ----------- ----- ------ above 95%................... $ 25 $ -- $ 11 $ 34 $ 4 $-- $ 74 91% to 95%.................. 49 21 18 78 2 -- 168 81% to 90%.................. 274 89 352 109 7 28 859 71% to 80%.................. 198 154 129 252 41 -- 774 below 70%................... 1,307 953 675 465 509 21 3,930 ------ ------ ------ ---- ---- --- ------ Total..................... $1,853 $1,217 $1,185 $938 $563 $49 $5,805 ====== ====== ====== ==== ==== === ======
As of December 31, 2010, impaired commercial and residential mortgage loans were $32 million and $7 million, respectively. Further information on impaired mortgage loans is provided below (in millions):
RECORDED UNPAID PRINCIPAL RELATED AVERAGE RECORDED INTEREST INCOME INVESTMENT BALANCE ALLOWANCE INVESTMENT RECOGNIZED ---------- ---------------- --------- ---------------- --------------- WITH RELATED ALLOWANCE: Office Buildings.......... $ 6 $ 7 $ 1 $36 $* Apartment Building........ 15 17 2 15 1 Residential............... 7 11 4 8 * Industrial................ 11 11 -- 11 1 --- --- --- --- -- Total.................. $39 $46 $ 7 $70 $2 === === === === == Commercial................ $32 $35 $ 3 $62 $2 === === === === == Residential............... $ 7 $11 $ 4 $ 8 * === === === === ==
-------- * Amounts less than $1 million At December 31, 2010, the Company did not have any impaired loans without a related allowance. The Company did not have any loan modifications in 2010 and 2009. INVESTMENTS IN AFFILIATES
2010 2009 ------ ---- New York Life Short Term Fund.............................. $ 509 $968 Madison Capital Funding LLC Loan Agreement................. 533 -- Other...................................................... 5 5 ------ ---- TOTAL INVESTMENTS IN AFFILIATES.......................... $1,047 $973 ====== ====
The New York Life Short Term Fund ("STIF") was formed by New York Life to improve short-term returns through greater flexibility to choose attractive maturities and enhanced portfolio diversification. The STIF is a pooled fund managed by New York Life Investment Management LLC ("NYL Investments"), an indirect wholly owned subsidiary of New York Life, where all participants are subsidiaries of New York Life. The Madison Capital Funding LLC ("MCF") Loan Agreement represents a revolving loan agreement the Company entered into with MCF. Refer to Note 14 -- Related Party Transactions for further discussion. 25 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other is related to promissory notes from MCF. Refer to Note 14 -- Related Party Transactions for further discussion. OTHER INVESTMENTS The components of other investments as of December 31, 2010 and 2009 were as follows (in millions):
2010 2009 ------ ------ Limited partnerships/Limited liability companies.......... $ 526 $ 312 Collateralized third-party loans.......................... 273 351 Derivatives............................................... 211 230 Investment, at fair value, of consolidated investment company................................................. -- 137 Other invested assets..................................... 70 16 ------ ------ TOTAL OTHER INVESTMENTS................................. $1,080 $1,046 ====== ======
Net unrealized investment losses on limited partnerships and limited liability companies that do not apply specialized industry company accounting aggregated $1 million and $2 million for the years ended December 31, 2010 and 2009, respectively, and were recorded as a component of AOCI in the accompanying Consolidated Balance Sheet. The investment, at fair value, of a consolidated investment company consists primarily of fixed maturities. This investment was liquidated in 2010. Collateralized third-party loans are senior secured commercial loans, and are typically collateralized by all assets of the borrower. The Company's collateralized third-party loans, before loss reserve, amounted to $291 million and $368 million at December 31, 2010 and 2009, respectively. The Company establishes a loss reserve for specifically impaired loans and assigns internal risk ratings for the remainder of the portfolio on which it assesses a general loss reserve (see Note 2 -- Significant Accounting Policies for further details). The loss reserve was $18 million and $17 million for the years ended December 31, 2010 and 2009, respectively. Unfunded commitments on limited partnerships, limited liability companies and collateralized third-party loans amounted to $225 million and $181 million at December 31, 2010 and 2009, respectively. There was no accumulated depreciation on real estate for December 31 2010 or 2009. Depreciation expense for the year ended December 31, 2010 was less than $1 million, and was recorded as a component of net investment income in the accompanying Consolidated Statement of Income. There was no depreciation expense for the year ended December 31, 2009. Depreciation expense for the year ended December 31, 2008 totaled less than $1 million. VIES Consolidated VIE At December 31, 2010 and 2009, the Company included assets of $45 million and $52 million, respectively in the accompanying Consolidated Balance Sheet, as a result of consolidating a VIE for which it was determined to be the primary beneficiary. The Company performed a qualitative analysis to determine if the Company has (i) the power to direct the activities of the VIE that most significantly impact the economic performance of the entity and (ii) the obligation to absorb losses of or the right to receive benefits from the entity that could be potentially significant to the VIE. In reviewing the deal documents including trust agreements, limited partnership agreements and purchase agreements, the Company determined that they are the primary beneficiary of one structured investment. 26 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) This VIE consists of a trust established for purchasing receivables from the U.S. Department of Energy related to Energy Savings Performance Contracts and issuing certificates representing the right to those receivables. The following table reflects (in millions) the carrying amount and balance sheet classification of the assets and liabilities of the consolidated VIE. The Company has a 98.66% interest in this VIE; however, the creditors do not have recourse to the Company in excess of the assets contained within the VIE.
DECEMBER 31, ----------- 2010 2009 ---- ---- Cash......................................................... $ 4 $14 --- --- Other investments*........................................... 41 38 --- --- TOTAL ASSETS............................................... $45 $52 === === Other liabilities............................................ 5 14 --- --- TOTAL LIABILITIES.......................................... $ 5 $14 === ===
-------- * Included in Limited partnerships/Limited liability companies Unconsolidated VIEs In the normal course of its activities, the Company will invest in structured investments including VIEs for which it is not the sponsor. These structured investments typically invest in fixed income investments and are managed by third-parties and include asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Company's maximum exposure to loss on these structured investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has not provided financial or other support, other than its direct investment, to these structures. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not have the power to direct the activities that significantly impact the VIEs economic performance. The Company classifies these investments on its accompanying Consolidated Balance Sheet as fixed maturity securities, available-for-sale and trading and its maximum exposure to loss associated with these investments was $26,341 million and $23,103 million as of December 31, 2010 and December 31, 2009, respectively. In the normal course of its activities, the Company will invest in joint ventures, limited partnerships and limited liability companies. These investments include hedge funds, private equity funds and real estate related funds and may or may not be VIEs. The Company's maximum exposure to loss on these investments, both VIEs and non-VIEs, is limited to the amount of its investment. The Company has determined that it is not the primary beneficiary of these structures due to the fact that it does not have the power to direct the activities that significantly impact the entities economic performance. The Company classifies these investments on the accompanying Consolidated Balance Sheet as "other investments" and its maximum exposure to loss associated with these entities was $526 million and $312 million as of December 31, 2010 and December 31, 2009, respectively. These investments are subject to ongoing review for impairment and for events that may cause management to reconsider whether or not it is the primary beneficiary. The Company has no additional economic interest in these structures in the form of derivatives, related guarantees, credit enhancement or similar instruments and obligations. Creditors have no recourse against the Company in the event of default. The Company has unfunded commitments in joint ventures, limited partnerships and limited liability companies which are previously disclosed in Note 4 -- Investments. RESTRICTED ASSETS AND SPECIAL DEPOSITS Assets of $5 million and $13 million at December 31, 2010 and 2009, respectively, were on deposit with governmental authorities or trustees as required by certain state insurance laws and are included in available-for-sale fixed maturities in the accompanying Consolidated Balance Sheet. 27 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5 -- INVESTMENT INCOME AND INVESTMENT GAINS AND LOSSES The components of net investment income for the years ended December 31, 2010, 2009 and 2008 were as follows (in millions):
2010 2009 2008 ------ ------ ------ Fixed maturity securities........................... $3,171 $2,869 $2,458 Equity securities................................... 1 18 6 Mortgage loans...................................... 352 338 316 Policy loans........................................ 56 54 52 Other investments................................... 65 45 1 ------ ------ ------ Gross investment income........................... 3,645 3,324 2,833 Investment expenses................................. (78) (59) (78) ------ ------ ------ NET INVESTMENT INCOME............................. $3,567 $3,265 $2,755 ====== ====== ======
For the years ended December 31, 2010, 2009 and 2008, net investment losses were as follows (in millions):
2010 2009 2008 ----- ----- ----- Fixed maturity securities Total OTTI losses.................................. $(172) $(397) $(331) Portion of OTTI loss recognized in OCI............. 57 241 -- ----- ----- ----- Net OTTI losses on fixed maturities recognized in earnings........................................ (115) (156) (331) All other gains (losses)........................... 221 33 (73) ----- ----- ----- Fixed maturity securities, net....................... 106 (123) (404) Equity securities.................................... 5 98 (8) Mortgage loans....................................... (13) (52) (4) Derivative instruments............................... (109) 6 11 Other................................................ 20 (14) (1) ----- ----- ----- NET INVESTMENT LOSSES.............................. $ 9 $ (85) $(406) ===== ===== =====
The net gain on trading securities (both fixed maturity and equity securities) amounted to $5 million and $6 million for the years ended December 31, 2010 and 2009, respectively. For December 31, 2008, the net losses on fixed maturity trading securities amounted to $11 million. Realized gains on sales of available-for-sale fixed maturities were $270 million, $218 million and $131 million for the years ended December 31, 2010, 2009 and 2008, respectively; and realized losses were $53 million, $191 million and $193 million, respectively. Realized gains on sales of available-for-sale equity securities were $5 million, $173 million and $1 million for the years ended December 31, 2010, 2009 and 2008, respectively, and realized losses were less than $1 million, $71 million, and less than $1 million, respectively. Losses from OTTI on equity securities (included in net investment gains (losses) on equity securities above) were less than $1 million, $4 million and $9 million for the years ended December 31, 2010, 2009 and 2008, respectively. 28 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present the Company's gross unrealized losses and fair values for fixed maturities and equities, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position, at December 31, 2010 and 2009 (in millions):
2010 ---------------------------------------------------------------- GREATER THAN 12 LESS THAN 12 MONTHS MONTHS TOTAL ------------------- ------------------- -------------------- FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES ------ ---------- ------ ---------- ------- ---------- FIXED MATURITIES U.S. Treasury and U.S. Government corporations and agencies..................... $ 555 $ 22 $ 2 $ 1 $ 557 $ 23 U.S. agencies, state and municipal.................... 401 17 -- -- 401 17 Foreign governments............. 24 1 1 * 25 1 U.S. corporate.................. 2,212 70 508 37 2,720 107 Foreign corporate............... 819 35 120 10 939 45 Residential mortgage-backed securities................... 2,981 102 1,689 397 4,670 499 Commercial mortgage-backed securities................... 87 2 222 23 309 25 Asset-backed securities......... 650 6 227 57 877 63 ------ ---- ------ ---- ------- ---- TOTAL FIXED MATURITIES.......... 7,729 255 2,769 525 10,498 780 ------ ---- ------ ---- ------- ---- EQUITIES Common stock.................... 2 1 * * 2 1 ------ ---- ------ ---- ------- ---- TOTAL EQUITIES.................. 2 1 -- -- 2 1 ------ ---- ------ ---- ------- ---- TOTAL........................... $7,731 $256 $2,769 $525 $10,500 $781 ====== ==== ====== ==== ======= ====
29 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 ----------------------------------------------------------------- LESS THAN 12 GREATER THAN 12 MONTHS(1) MONTHS TOTAL -------------------- ------------------- -------------------- FAIR UNREALIZED FAIR UNREALIZED FAIR UNREALIZED VALUE LOSSES VALUE LOSSES VALUE LOSSES ------- ---------- ------ ---------- ------- ---------- FIXED MATURITIES U.S. Treasury and U.S. Government corporations and agencies.................... $ 1,880 $ 68 $ 13 $ 1 $ 1,893 $ 69 U.S. agencies, state and municipal................... 193 3 30 6 223 9 Foreign governments............ 61 1 18 3 79 4 U.S. corporate................. 2,918 57 2,677 199 5,595 256 Foreign corporate.............. 714 15 550 42 1,264 57 Residential mortgage-backed securities.................. 5,191 341 1,892 516 7,083 857 Commercial mortgage-backed securities.................. 548 12 2,087 246 2,635 258 Asset-backed securities........ 535 31 395 81 930 112 ------- ---- ------ ------ ------- ------ TOTAL FIXED MATURITIES......... 12,040 528 7,662 1,094 19,702 1,622 ------- ---- ------ ------ ------- ------ EQUITIES Common stock................... 3 * -- -- 3 * ------- ---- ------ ------ ------- ------ TOTAL EQUITIES................. 3 -- -- -- 3 -- ------- ---- ------ ------ ------- ------ TOTAL.......................... $12,043 $528 $7,662 $1,094 $19,705 $1,622 ======= ==== ====== ====== ======= ======
-------- * Unrealized loss is less than $1 million. (1) The aging of the unrealized losses as of December 31, 2009 was reset back to the date the security would have been first impaired by the adoption of new authoritative guidance. At December 31, 2010, the unrealized loss amount consisted of approximately 1,999 different fixed-maturity securities and 28 equity securities. At December 31, 2010, unrealized losses on investment grade fixed maturities were $414 million or 53% of the Company's total fixed maturity securities' unrealized losses. Investment grade is defined as a security having a credit rating from the National Association of Insurance Commissioners ("NAIC") of 1 or 2; a rating of Aaa, Aa, A or Baa from Moody's or a rating of AAA, AA, A or BBB from Standard & Poor's ("S&P"); or a comparable internal rating if an externally provided rating is not available. Unrealized losses on fixed maturity securities with a rating below investment grade represent $366 million or 47% of the Company's total fixed maturities unrealized losses at December 31, 2010. The amount of gross unrealized losses for fixed maturities where the fair value had declined by 20% or more of amortized cost totaled $357 million. The amount of time that each of these securities has continuously been 20% or more below the amortized cost consist of $42 million for 6 months or less, $18 million for greater than 6 months through 12 months and $297 million for greater than 12 months. In accordance with the Company's impairment policy, the Company performed quantitative and qualitative analysis to determine if the decline was temporary. For those securities where the decline was considered temporary, the Company did not take an impairment when it did not have the intent to sell the security or it was more likely than not that it would not be required to sell the security before its anticipated recovery. 30 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Corporate Bonds. U.S. Corporate securities with a fair value below 80% of the security's amortized cost totaled $17 million or 16% of the total unrealized losses on U.S. Corporate securities. Foreign corporate securities with a fair value below 80% of the security's amortized cost totaled $1 million or 3% of the total unrealized loss on foreign corporate securities. The overall improvement in the Company's fixed maturity investments generally reflects higher market prices, mainly due to credit spread tightening throughout the year. While the losses were spread across all industry sectors, the largest sectors with unrealized losses on securities with a fair value below 80% of the security's amortized cost include Finance ($7 million), Gaming and Real Estate Investment Trusts ("REITs") ($3 million each) and Utilities ($2 million). These securities are evaluated in accordance with the Company's impairment policy. Because the securities continue to meet their contractual payments and the Company did not have the intent to sell the security nor was it more likely than not that it would be required to sell the security before its anticipated recovery, the Company did not consider these investments to be other than temporarily impaired. Mortgage-Backed Securities. Residential mortgage-backed securities that were priced below 80% of the security's amortized cost represented $287 million or 57% of total unrealized losses on residential mortgage -- backed securities. Commercial mortgage-backed securities that were priced below 80% of the security's amortized cost represented $11 million or 44% of total unrealized losses on commercial mortgage-backed securities. The Company measures its mortgage-backed portfolio for impairments based on the security's credit rating and whether the security has an unrealized loss. For securities rated below AA at acquisition, when the fair value of the security is below amortized cost and there are negative changes in estimated future cash flows, the security is deemed other-than-temporarily impaired and a realized loss is recognized in net investments gains in the accompanying Consolidated Statement of Income. The Company also evaluates mortgage-backed securities for other- than-temporary impairments in accordance with its impairment policy using cash flow modeling techniques coupled with an evaluation of facts and circumstances. The Company did not have the intent to sell its investments nor was it more likely than not that it would be required to sell the investments before its anticipated recovery in value; therefore, the Company did not consider these investments to be other-than-temporarily impaired. Asset-Backed Securities. Similar to mortgage-backed securities, the Company measures its asset-backed portfolio for impairments based on the security's credit rating and whether the security has an unrealized loss. For securities rated below AA at acquisition, when the fair value of a security is below amortized cost and there are negative changes in estimated future cash flows, the security is deemed other-than-temporarily impaired and a realized loss is recognized in net investment gains in the accompanying Consolidated Statement of Income. The Company also evaluates asset-backed securities for other-than-temporary impairments based on facts and circumstances and in accordance with the Company's impairment policy. Asset-backed securities that were priced below 80% of the security's amortized cost represented $41 million or 65% of the total unrealized losses for asset-backed securities. The Company did not have the intent to sell its investments nor was it more likely than not that it would be required to sell the investments before recovery , therefore the Company did not consider these investments to be other than temporarily impaired. NET UNREALIZED INVESTMENT GAINS (LOSSES) Net unrealized investment gains (losses) on available-for-sale investments are included in the Consolidated Balance Sheet as a component of AOCI. Changes in these amounts include reclassification adjustments for prior period net unrealized gains (losses) that have been recognized as realized gains (losses) during the current year and are included in net investment gains (losses) in the accompanying Consolidated Statement of Income. 31 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of net unrealized investment gains (losses) reported in OCI at December 31, 2010, 2009 and 2008 are as follows (in millions):
2010 2009 2008 ------ ----- ------- Fixed maturity securities, available for sale-all other............................................. $2,525 $ 488 $(4,225) Fixed maturity securities on which an OTTI loss has been recognized................................... (151) (179) -- ------ ----- ------- Total fixed maturity securities................... 2,374 309 (4,225) Equity securities, available for sale............... 10 11 37 Derivatives designed as cash flow hedges............ (12) (10) 33 Other investments................................... 1 (2) (3) ------ ----- ------- Subtotal.......................................... 2,373 308 (4,158) Amounts recognized for: Policyholders' account balances and future policy benefits....................................... 14 4 (56) Other assets (sales inducements).................. (17) (5) 55 Deferred policy acquisition costs................. (832) (137) 871 Deferred taxes.................................... (538) (59) 1,151 ------ ----- ------- NET UNREALIZED GAINS (LOSSES) ON INVESTMENTS........ $1,000 $ 111 $(2,137) ====== ===== =======
32 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The net unrealized gains (losses) on fixed maturity securities for the years ended December 31, 2010, 2009 and 2008, are presented separately for amounts related to fixed maturity securities on which an OTTI loss has been recognized, and all other net unrealized investment gains and losses, are as follows (in millions): NET UNREALIZED INVESTMENT GAINS AND LOSSES ON FIXED MATURITY SECURITIES ON WHICH AN OTTI LOSS HAS BEEN RECOGNIZED
ACCUMULATED OTHER COMPREHENSIVE POLICYHOLDERS' DEFERRED INCOME (LOSS) ACCOUNT INCOME RELATED TO NET NET UNREALIZED DEFERRED BALANCES AND TAX UNREALIZED GAINS (LOSSES) DEFERRED POLICY SALES FUTURE POLICY (LIABILITY) INVESTMENT ON INVESTMENTS ACQUISITION COSTS INDUCEMENTS BENEFITS BENEFIT GAINS (LOSSES) -------------- ----------------- ----------- -------------- ----------- -------------- BALANCE, DECEMBER 31, 2008.. $ -- $-- $-- $-- $ -- $ -- Cumulative impact of the adoption of new authoritative guidance on January 1, 2009........... (17) 4 -- -- 5 (8) Net investment gains (losses) on investments arising during the period.................... (238) -- -- -- 83 (155) Reclassification adjustment for (gains) losses included in net income.... 253 -- -- -- (88) 165 Reclassification adjustment for OTTI losses excluded from net income(1)........ (177) -- -- -- 62 (115) Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and deferred sales inducements............... -- 63 2 -- (23) 42 Impact of net unrealized investment (gains) losses on future policy benefits.................. -- -- -- (2) 1 (1) ----- --- --- --- ---- ----- BALANCE, DECEMBER 31, 2009.. $(179) $67 $ 2 $(2) $ 40 $ (72) ===== === === === ==== ===== Net investment gains (losses) on investments arising during the period.................... 86 -- -- -- (30) 56 Reclassification adjustment for (gains) losses included in net income.... 18 -- -- -- (6) 12 Reclassification adjustment for OTTI losses excluded from net income(1)........ (76) -- -- -- 27 (49) Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and deferred sales inducements............... -- (4) (1) -- 1 (4) Impact of net unrealized investment (gains) losses on future policy benefits.................. -- -- -- (1) * (1) ----- --- --- --- ---- ----- BALANCE, DECEMBER 31, 2010.. $(151) $63 $ 1 $(3) $ 32 $ (58) ===== === === === ==== =====
-------- (*) Amounts less than $1 million (1) Represents "transfers in" related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss. 33 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ALL OTHER NET UNREALIZED INVESTMENT GAINS AND LOSSES IN AOCI
ACCUMULATED OTHER COMPREHENSIVE POLICYHOLDERS' DEFERRED INCOME (LOSS) ACCOUNT INCOME RELATED TO NET NET UNREALIZED DEFERRED BALANCES AND TAX UNREALIZED GAINS (LOSSES) DEFERRED POLICY SALES FUTURE POLICY (LIABILITY) INVESTMENT ON INVESTMENTS(1) ACQUISITION COSTS INDUCEMENTS BENEFITS BENEFIT GAINS (LOSSES) ----------------- ----------------- ----------- -------------- ----------- -------------- BALANCE, DECEMBER 31, 2007.................... $ 177 $ (41) $ 1 $ 9 $ (51) $ 95 Net investment gains (losses) on investments arising during the period.................. (4,100) -- -- -- 1,435 (2,665) Reclassification adjustment for (gains) losses included in net income.................. (235) -- -- -- 82 (153) Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and deferred sales inducements............. -- 912 54 -- (338) 628 Impact of net unrealized investment (gains) losses on future policy benefits................ -- -- -- (65) 23 (42) ------- ------- ---- ---- ------- ------- BALANCE, DECEMBER 31, 2008.................... (4,158) 871 55 (56) 1,151 (2,137) Cumulative impact of the adoption of new authoritative guidance on January 1, 2009...... (78) 17 1 (1) 21 (40) Net investment gains (losses) on investments arising during the period.................. 5,257 -- -- -- (1,840) 3,417 Reclassification adjustment for (gains) losses included in net income.................. (711) -- -- -- 249 (462) Reclassification adjustment for OTTI losses excluded from net income(2)............... 177 -- -- -- (62) 115 Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and deferred sales inducements............. -- (1,092) (63) -- 404 (751) Impact of net unrealized investment (gains) losses on future policy benefits................ -- -- -- 63 (22) 41 ------- ------- ---- ---- ------- -------
34 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCUMULATED OTHER COMPREHENSIVE POLICYHOLDERS' DEFERRED INCOME (LOSS) ACCOUNT INCOME RELATED TO NET NET UNREALIZED DEFERRED BALANCES AND TAX UNREALIZED GAINS (LOSSES) DEFERRED POLICY SALES FUTURE POLICY (LIABILITY) INVESTMENT ON INVESTMENTS(1) ACQUISITION COSTS INDUCEMENTS BENEFITS BENEFIT GAINS (LOSSES) ----------------- ----------------- ----------- -------------- ----------- -------------- BALANCE, DECEMBER 31, 2009.................... 487 (204) (7) 6 (99) 183 Net investment gains (losses) on investments arising during the period.................. 2,080 -- -- -- (728) 1,352 Reclassification adjustment for (gains) losses included in net income.................. (119) -- -- -- 42 (77) Reclassification adjustment for OTTI losses excluded from net income(2)............... 77 -- -- -- (27) 50 Impact of net unrealized investment (gains) losses on deferred policy acquisition costs and deferred sales inducements............. -- (692) (11) -- 246 (457) Impact of net unrealized investment (gains) losses on future policy benefits................ -- -- -- 11 (4) 7 ------- ------- ---- ---- ------- ------- BALANCE, DECEMBER 31, 2010.................... $ 2,525 $ (896) $(18) $ 17 $ (570) $ 1,058 ======= ======= ==== ==== ======= =======
-------- (1) Includes cash flow hedges. See Note 12 for information on cash flow hedges. (2) Represents "transfers out" related to the portion of OTTI losses recognized during the period that were not recognized in earnings for securities with no prior OTTI loss. The following rollforward provides a breakdown of the cumulative credit loss component of OTTI losses recognized in earnings of fixed maturity securities still held for which a portion of the loss was recognized in OCI (in millions):
2010 2009 ---- ---- BALANCE AT BEGINNING OF YEAR................................ $130 $ -- ADDITIONS Credit losses remaining in retained earnings related to the change in accounting principle..................... -- 47 Credit loss impairment recognized in the current period on securities previously not impaired..................... 50 24 Additional credit loss impairments recognized in the current period on securities previously impaired....... 29 68 REDUCTIONS Credit loss impairments previously recognized on securities which matured, were paid down, prepaid or sold during the period................................. 8 9 ---- ---- BALANCE AT END OF YEAR...................................... $201 $130 ==== ====
35 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6 -- POLICYHOLDERS' LIABILITIES POLICYHOLDERS' ACCOUNT BALANCES Policyholders' account balances at December 31, 2010 and 2009 were as follows (in millions):
2010 2009 ------- ------- Deferred annuities...................................... $37,677 $35,157 Universal life contracts................................ 21,642 19,893 Annuities certain....................................... 424 295 Supplementary contracts without life contingencies...... 357 338 Unearned revenue liability.............................. 334 350 Guaranteed minimum accumulation benefit................. 222 235 ------- ------- TOTAL POLICYHOLDERS' ACCOUNT BALANCES................. $60,656 $56,268 ======= =======
Policyholders' account balances on the above contracts are equal to cumulative deposits plus interest credited less withdrawals and less mortality and expense charges, where applicable. Unearned revenue liability represents amounts that have been assessed to compensate the insurer for services to be performed over future periods. The Guaranteed Minimum Accumulation Benefit ("GMAB") is the fair value of embedded derivatives on deferred annuity contracts. At December 31, 2010 and 2009, of the total policyholders' account balances of $60,656 million and $56,268 million, respectively, the total amounts related to policyholders' account balances that have surrender privileges were $59,814 million and $55,544 million, respectively. The amounts redeemable in cash by policyholders at December 31, 2010 and 2009 were $57,498 million and $53,300 million, respectively. The following table highlights the interest rate assumptions generally utilized in calculating policyholders' account balances, as well as certain withdrawal characteristics associated with these accounts at December 31, 2010:
PRODUCT INTEREST RATE WITHDRAWAL/SURRENDER CHARGES ------- --------------- ----------------------------------------------- Deferred annuities........ 1.00% to 10.00% Surrender charges 0% to 10% for up to 10 years. Annuities certain......... 0.50% to 5.00% No surrender or withdrawal charges. Universal life contracts.. 2.73% to 10.00% Various up to 19 years. Supplementary contracts without life contingencies........... 1.50% to 3.50% No surrender or withdrawal charges.
36 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FUTURE POLICY BENEFITS Future policy benefits at December 31, 2010 and 2009 were as follows (in millions):
2010 2009 ------ ------ Life insurance: Taiwan business -- 100% coinsured....................... $ 902 $ 775 Other life.............................................. 129 102 ------ ------ Total life insurance............................... 1,031 877 Individual and group payout annuities..................... 5,867 4,369 Other contract liabilities................................ 39 46 ------ ------ TOTAL FUTURE POLICY BENEFITS......................... $6,937 $5,292 ====== ======
Other than the 100% coinsured business, there were no amounts related to policies that have surrender privileges or amounts redeemable in cash by policyholders. The following table highlights the key assumptions generally utilized in the calculation of future policy benefit reserves at December 31, 2010:
PRODUCT MORTALITY INTEREST RATE ESTIMATION METHOD ------- --------------------- --------------------- --------------------- Life insurance: Based upon best 3.80% to 7.50% Net level premium Taiwan business -- estimates at time of reserve taking into 100% coinsured policy issuance with account death provision for adverse benefits, lapses and deviations ("PAD"). maintenance expenses with PAD. Individual and group payout Based upon best 3.94% to 9.50% Present value of annuities estimates at time of expected future policy issuance with payments at a rate PAD. expected at issue with PAD.
GUARANTEED MINIMUM BENEFITS At December 31, 2010 and 2009, the Company had variable contracts with guarantees. (Note that the Company's variable contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive). For guarantees of amounts in the event of death, the net amount at risk is defined as the current Guaranteed Minimum Death Benefit ("GMDB") in excess of the current account balance at the balance sheet date. For guarantees of accumulation balances, the net amount at risk is defined as GMAB minus the current account balance at the balance sheet date. VARIABLE ANNUITY CONTRACTS -- GMDB AND GMAB The Company issues certain variable annuity contracts with GMDB and GMAB features that guarantee either: a) Return of deposits: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals). b) Ratchet: the benefit is the greatest of the current account value, premiums paid (adjusted for withdrawals), or the highest account value on any contractually specified anniversary up to contractually specified ages (adjusted for withdrawals). 37 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table provides the account value, net amount at risk and average attained age of contract holders at December 31, 2010 and 2009 for GMDB and GMAB ($ in millions):
2010 --------------------------------------------------- RETURN OF NET DEPOSITS RATCHET --------------------------------- --------------- IN THE EVENT OF ACCUMULATION AT IN THE EVENT OF DEATH SPECIFIED DATE DEATH (GMDB) (GMAB) (GMDB) --------------- --------------- --------------- Account value........................... $5,737 $3,103 $12,165 Net amount at risk...................... $ 67 $ 62 $ 519 Average attained age of contract holders............................... 57 56 61
2009 --------------------------------------------------- RETURN OF NET DEPOSITS RATCHET --------------------------------- --------------- IN THE EVENT OF ACCUMULATION AT IN THE EVENT OF DEATH SPECIFIED DATE DEATH (GMDB) (GMAB) (GMDB) --------------- --------------- --------------- Account value........................... $4,552 $2,283 $11,342 Net amount at risk...................... $ 179 $ 172 $ 1,277 Average attained age of contract holders............................... 58 56 61
The following summarizes the liabilities for guarantees on variable contracts reflected in the general account in future policy benefits for GMDB and policyholders' account balances for GMAB in the accompanying Consolidated Balance Sheet (in millions):
GMDB GMAB TOTALS ---- ---- ------ Balance at January 1, 2008........................... $ 42 $ 72 $114 Incurred guarantee benefits........................ 33 244 277 Paid guarantee benefits............................ (10) -- (10) ---- ---- ---- Balance at December 31, 2008......................... 65 316 381 Incurred guarantee benefits........................ 1 (81) (80) Paid guarantee benefits............................ (22) -- (22) ---- ---- ---- Balance at December 31, 2009......................... 44 235 279 Incurred guarantee benefits........................ 5 (12) (7) Paid guarantee benefits............................ (11) (1) (12) ---- ---- ---- BALANCE AT DECEMBER 31, 2010......................... $ 38 $222 $260 ==== ==== ====
For GMABs, incurred guaranteed minimum benefits incorporate all changes in fair value other than amounts resulting from paid guarantee benefits. GMABs are considered to be embedded derivatives and are recognized at fair value through interest credited to policyholders' account balances in the accompanying Consolidated Statement of Income (refer to Note 15 -- Fair Value Measurements). The GMDB liability is determined each period end 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 in accordance with applicable guidance. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to increase in liabilities for future policy benefits in the accompanying Consolidated Statement of Income, if actual experience or other evidence suggests that earlier assumptions should be revised. 38 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following assumptions and methodology were used to determine the GMDB liability at December 31, 2010 and 2009: - Data used was 1,000 stochastically generated investment performance scenarios. - Mean investment performance assumption ranged from 5.42% to 6.73% for 2010 and 5.85% to 6.88% for 2009. - Volatility assumption ranged from 13.47% to 15.45% for 2010 and was 14.26% for 2009. - Mortality was assumed to be 91.00% of the A2000 table for 2010 and 2009. - Lapse rates vary by contract type and duration and range from 0.50% to 30.00%, with an average of 6.30% for 2010, and 0.50% to 30.00%, with an average of 6.10% for 2009. - Discount rates ranged from 6.69% to 7.25% for 2010 and 6.48% to 7.29% for 2009. The following table presents the aggregate fair value of assets at December 31, 2010 and 2009, by major investment fund options (including the general and separate account fund options), held by variable annuity products that are subject to GMDB and GMAB benefits and guarantees. Since variable contracts with GMDB guarantees may also offer GMAB guarantees in each contract, the GMDB and GMAB amounts listed are not mutually exclusive (in millions):
2010 2009 ---------------- ---------------- GMDB GMAB GMDB GMAB ------- ------ ------- ------ Separate account: Equity.................................... $ 8,523 $1,826 $ 7,383 $1,374 Fixed income.............................. 3,412 635 2,970 462 Balanced.................................. 2,427 463 2,007 287 General account............................. 3,540 179 3,534 160 ------- ------ ------- ------ TOTAL.................................. $17,902 $3,103 $15,894 $2,283 ======= ====== ======= ======
ADDITIONAL LIABILITY FOR INDIVIDUAL LIFE PRODUCTS Certain individual life products require additional liabilities for contracts with excess insurance benefit features. These excess insurance benefit features are generally those that result in profits in early years and losses in subsequent years. For the Company's individual life contracts, this requirement primarily affects universal life policies with cost of insurance charges that are significantly less than the expected mortality costs in the intermediate and later policy durations. Generally, the Company has separately defined an excess insurance benefit feature to exist when expected mortality exceeds all assessments. This insurance benefit feature is in addition to the base mortality feature, which the Company defines as expected mortality not in excess of assessments. The following table summarizes the liability for excess insurance benefit features reflected in the general account in future policy benefits at December 31, 2010, 2009 and 2008 (in millions):
2010 2009 2008 ---- ---- ---- Beginning balance........................................ $45 $41 $29 Net liability increase................................... 23 4 12 --- --- --- ENDING BALANCE........................................... $68 $45 $41 === === ===
39 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7 -- SEPARATE ACCOUNTS SEPARATE ACCOUNTS REGISTERED WITH THE SEC The Company maintains separate accounts, which are registered with the SEC, for its variable deferred annuity and variable life products with assets of $17,653 million and $15,307 million at December 31, 2010 and 2009, respectively. The assets of the registered separate accounts represent investments in shares of the MainStay VP Series Fund, Inc. managed by NYL Investments and other non- proprietary funds. SEPARATE ACCOUNTS NOT REGISTERED WITH THE SEC The Company also maintains separate accounts, which are not registered with the SEC, with assets of $1,106 million and $782 million at December 31, 2010 and 2009, respectively. The assets in these separate accounts are comprised of MainStay VP Series Fund, Inc. managed by NYL Investments, other non- proprietary funds and limited partnerships. See Note 6 -- Policyholders' Liabilities, for information regarding separate accounts with contractual guarantees for GMDB and GMAB. NOTE 8 -- DEFERRED POLICY ACQUISITION COSTS AND SALES INDUCEMENTS The following is an analysis of DAC for the years ended December 31, 2010, 2009 and 2008 (in millions):
2010 2009 2008 ------ ------- ------ Balance at beginning of year....................... $4,041 $ 4,667 $3,431 Current year additions........................... 640 715 673 Amortized during year............................ (557) (312) (349) ------ ------- ------ Balance at end of year before related adjustments................................... 4,124 5,070 3,755 Adjustment for change in unrealized investment (gains)/losses................................ (695) (1,029) 912 ------ ------- ------ BALANCE AT END OF YEAR........................... $3,429 $ 4,041 $4,667 ====== ======= ======
SALES INDUCEMENTS Changes in deferred sales inducements included in other assets in the accompanying Consolidated Balance Sheet for the years ended December 31, 2010, 2009 and 2008 are as follows (in millions):
2010 2009 2008 ---- ---- ---- Balance at beginning of year........................... $313 $331 $272 Current year additions............................... 103 64 64 Amortized during year................................ (50) (21) (59) ---- ---- ---- Balance at end of year before related adjustments.... 366 374 277 Adjustment for change in unrealized investment (gains)/losses.................................... (12) (61) 54 ---- ---- ---- BALANCE AT END OF YEAR............................... $354 $313 $331 ==== ==== ====
40 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 9 -- INCOME TAXES A summary of the components of the net total income tax expense (benefit) for the years ended December 31, 2010, 2009 and 2008, respectively, included in the accompanying Consolidated Statement of Income are as follows (in millions):
2010 2009 2008 ---- ---- ----- Current: Federal............................................. $133 $206 $(167) State and local..................................... 3 1 -- ---- ---- ----- 136 207 (167) Deferred: Federal............................................. 72 53 104 ---- ---- ----- TOTAL INCOME TAX EXPENSE (BENEFIT).................... $208 $260 $ (63) ==== ==== =====
Pursuant to the tax allocation agreement discussed in Note 2 -- Significant Accounting Policies, as of December 31, 2010 and 2009, the Company recorded a net income tax receivable (payable) from (to) New York Life of $37 million and ($183) million, included in other assets and other liabilities, respectively, in the accompanying Consolidated Balance Sheet. The Company's actual income tax expense for the years ended December 31, 2010, 2009 and 2008, respectively, differs from the expected amount computed by applying the U.S. statutory federal income tax rate of 35% for the following reasons:
2010 2009 2008 ---- ---- ----- Statutory federal income tax rate...................... 35.0% 35.0% 35.0% Tax exempt income...................................... (3.5)% (1.1)% 149.4% Uncertain tax position................................. (5.6)% 0.2% (7.5)% Investment credits..................................... (1.7)% (0.8)% 14.8% Other.................................................. 0.0% (0.5)% 4.5% ---- ---- ----- EFFECTIVE TAX RATE..................................... 24.2% 32.8% 196.2% ==== ==== =====
Deferred income taxes are generally recognized, based on enacted tax rates, when assets and liabilities have different values for financial statement and tax purposes. The Company's management has concluded that the deferred tax assets are more likely than not to be realized. Therefore, no valuation allowance has been provided. 41 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the net deferred tax liability reported in other liabilities in the accompanying Consolidated Balance Sheet as of December 31, 2010 and 2009, respectively, are as follows (in millions):
2010 2009 ------ ------ Deferred tax assets: Future policyholder benefits............................ $ 623 $ 696 Employee and agents benefits............................ 61 66 Other................................................... 11 12 ------ ------ Gross deferred tax assets............................ 695 774 ------ ------ Deferred tax liabilities: DAC..................................................... 928 1,146 Investments............................................. 787 97 Other................................................... 1 1 ------ ------ Gross deferred tax liabilities....................... 1,716 1,244 ------ ------ NET DEFERRED TAX LIABILITY......................... $1,021 $ 470 ====== ======
The Company has no net operating or capital loss carryforwards. The Company's federal income tax returns are routinely examined by the Internal Revenue Service ("IRS") and provisions are made in the financial statements in anticipation of the results of these audits. The IRS has completed audits through 2004 and is currently auditing tax years 2005 through 2007. There were no material effects on the Company's results of operations as a result of these audits. The Company believes that its recorded income tax liabilities are adequate for all open years. A reconciliation of the beginning and ending amount of unrecognized tax benefits at December 31, 2010, 2009 and 2008, respectively, are as follows (in millions):
TOTAL UNRECOGNIZED TAX BENEFITS ------------------ 2010 2009 2008 ---- ---- ---- BEGINNING OF PERIOD BALANCE............................ $117 $117 $107 Reductions for tax positions of prior years............ -- (9) (1) Additions for tax positions of current year............ 1 9 24 Settlements with tax authorities....................... (49) -- (13) ---- ---- ---- END OF PERIOD BALANCE.................................. $ 69 $117 $117 ==== ==== ====
As of December 31, 2010, the Company had unrecognized tax benefits that, if recognized, would impact the effective tax rate by less than $1 million. The Company's total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate as of December 31, 2009 and 2008, are $44 million and $42 million, respectively. Total interest expense associated with the liability for unrecognized tax benefits for the years ended December 31, 2010, 2009 and 2008, aggregated $3 million, $6 million and $7 million, respectively, and are included in income tax expense (benefit) in the accompanying Consolidated Statement of Income. At December 31, 2010, 2009 and 2008, the Company had $14 million, $31 million and $30 million, respectively, of accrued interest associated with the liability for unrecognized tax benefits, which are reported in the accompanying Consolidated Balance Sheet (included in other liabilities). The $17 million decrease from December 31, 2009 in accrued interest associated with the liability for unrecognized tax benefits is the result of an increase of $3 million of interest expense and a $20 million decrease resulting from IRS settlements. The $1 million increase from December 31, 42 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2008 in accrued interest associated with the liability for unrecognized tax benefits is the result of an increase of $6 million of interest expense and a $5 million decrease resulting from IRS settlements. The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months. NOTE 10 -- REINSURANCE The Company enters into reinsurance agreements in the normal course of its insurance business to reduce overall risk and to be able to issue life insurance policies in excess of its retention limits. Currently, the Company reinsures the mortality risk on new life insurance policies on a quota-share yearly renewable term basis for almost all products. The Company had typically retained 10% of each risk until 2005 when it began retaining larger shares on many products. The quota-share retained now ranges from 10% to 63% and most products are fully retained if the policy size is less than $1 million. Most of the reinsured business is on an automatic basis. Cases in excess of the Company's retention and certain substandard cases are reinsured facultatively. The Company does not have any individual life reinsurance agreements that do not transfer risk or contain risk-limiting features. The Company remains liable for reinsurance ceded if the reinsurer fails to meet its obligation on the business it has assumed. The Company periodically reviews the financial condition of its reinsurers and amounts recoverable in order to minimize its exposure to losses from reinsurer insolvencies. When necessary, an allowance is recorded for reinsurance the Company cannot collect. Three reinsurance companies account for approximately 78% and 76% of the reinsurance ceded to non-affiliates at December 31, 2010 and 2009, respectively. In December 2004, the Company reinsured 90% of a block of in-force life insurance business, consisting of Universal Life, Variable Universal Life ("VUL"), Target Life and Asset Preserver, with New York Life. The agreement used a combination of coinsurance with funds withheld for the fixed portion maintained in the general account and modified coinsurance ("MODCO") for the VUL policies in the Separate Accounts. Under both the MODCO and Funds Withheld treaties, the Company will retain the assets held in relation to the policyholders' account balances and separate account liabilities. An experience refund will be paid to the Company at the end of each quarterly accounting period for 100% of the profits in excess of $5 million per year. Under authoritative guidance related to derivatives and hedging, the Funds Withheld and the MODCO treaties, along with the experience rating refund represents an embedded derivative, which is required to be carried at fair value. The fair value of this embedded derivative approximated $48 million and $5 million at December 31, 2010 and 2009, respectively, and is included in amounts recoverable from reinsurer in the accompanying Consolidated Balance Sheet. The change in fair value of this embedded derivative was $43 million, ($4) million and $5 million for the years ended December 31, 2010, 2009 and 2008, respectively, and is included in net revenue from reinsurance in the accompanying Consolidated Statement of Income. In connection with the above described reinsurance agreement with New York Life, the Company recorded a deferred gain of $244 million, which includes the $25 million purchase price and $219 million of GAAP reserves recoverable from the reinsurer in excess of the funds withheld liability. For the years ended December 31, 2010, 2009 and 2008, $1 million, $32 million and $75 million, respectively, of the deferred gain was amortized and is included in net revenue from reinsurance in the accompanying Consolidated Statement of Income. The effect of this 43 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) affiliated reinsurance agreement for the years ended December 31, 2010, 2009 and 2008 was as follows (in millions):
2010 2009 2008 ------ ------ ------ Fees-universal life policies ceded.................. $ 293 $ 283 $ 305 Net revenue from reinsurance........................ $ 216 $ 143 $ 211 Policyholders' benefits ceded....................... $ 116 $ 132 $ 95 Amounts recoverable from reinsurer.................. $6,193 $5,909 $5,692 Amounts payable to reinsurer........................ $6,146 $5,905 $5,653 Other liabilities (deferred gain, net of amortization)..................................... $ 18 $ 19 $ 51
Effective July 1, 2002, the Company transferred the Taiwan branch's insurance book of business to an affiliated company, New York Life Insurance Taiwan Corporation ("NYLT"), an indirect wholly owned subsidiary of New York Life. The Company is jointly liable with NYLT for two years from the giving of notice to all obligees for all matured obligations and for two years after the maturity date of not-yet matured obligations. NYLT is also contractually liable, under indemnification provisions of the transaction, for any liabilities that may be asserted against the Company. The transfer of the branch's net assets was accounted for as a long-duration coinsurance transaction. Under this accounting treatment, the insurance related liabilities remain on the books of the Company and an offsetting reinsurance recoverable is established. Additionally, premiums and benefits associated with any business sold prior to July 1, 2002 are reflected in the Company's accompanying Consolidated Statement of Income. Accordingly, the Company recorded the following with respect to this transaction (in millions):
2010 2009 2008 ---- ---- ---- Amounts recoverable from reinsurer..................... $902 $775 $702 Premiums ceded......................................... $ 68 $ 68 $ 74 Benefits ceded......................................... $ 42 $ 32 $367
44 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The effects of all reinsurance for the years ended December 31, 2010, 2009 and 2008 were as follows (in millions):
2010 2009 2008 ------ ------ ------ Premiums: Direct............................................ $1,961 $1,865 $1,447 Assumed........................................... 2 2 2 Ceded............................................. (71) (70) (75) ------ ------ ------ Net premiums........................................ $1,892 $1,797 $1,374 ====== ====== ====== Fees-universal life and annuity policies ceded...... $ 572 $ 542 $ 539 Net revenue from reinsurance........................ $ 218 $ 145 $ 206 Policyholders' benefits ceded....................... $ 410 $ 384 $ 704 Increase in ceded liabilities for future policyholder benefits............................. $ 16 $ 15 $ 16 Amounts recoverable from reinsurer: Affiliated........................................ $7,095 $6,684 $6,394 Unaffiliated...................................... $ 255 $ 243 $ 210 Amounts payable to reinsurer: Affiliated........................................ $6,148 $5,906 $5,653 Unaffiliated...................................... $ 37 $ 35 $ 33 Other liabilities (deferred gain, net of amortization)..................................... $ 18 $ 19 $ 51
NOTE 11 -- DEBT Debt consisted of the following at December 31, 2010 and 2009 (in millions):
2010 2009 ---- ---- RECOURSE DEBT Payable to Capital Corporation............................. $10 $51 Other...................................................... 5 5 --- --- Total recourse debt..................................... 15 56 --- --- NON-RECOURSE DEBT Other...................................................... 5 14 --- --- Total non-recourse debt................................. 5 14 --- --- TOTAL DEBT................................................... $20 $70 === ===
RECOURSE DEBT At December 31, 2010 and 2009, the Company had an outstanding debt balance of $10 million and $51 million, respectively, with New York Life Capital Corporation ("Capital Corporation"), an indirect wholly owned subsidiary of New York Life. Refer to Note 14 -- Related Party Transactions. Other consists of a promissory note the Company issued on November 1, 2006, in the amount of $8 million at a fixed interest rate of 5.5% per annum in connection with the purchase of a membership interest in Aeolus Wind Power II LLC. The note calls for the Company to make quarterly payments of principal and interest with the first installment paid on January 31, 2007 and the final installment due on July 31, 2016. The note may not be prepaid in 45 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) whole or in part and there are no collateral requirements. The carrying amount of the note at December 31, 2010 and 2009 was $5 million. NON-RECOURSE DEBT At December 31, 2010 and 2009, the Company was required to consolidate one structured investment in which the Company is considered the primary beneficiary with an outstanding debt balance of $5 million and $14 million, respectively. Refer to Note 4 -- Investments. NOTE 12 -- DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company uses derivative financial instruments to manage interest rate, currency, market and credit risk. These derivative financial instruments include foreign exchange forward contracts; interest rate and equity options; interest rate, inflation, and credit default and currency swaps. The Company also uses written covered call options in order to generate income. The Company does not engage in derivative financial instrument transactions for speculative purposes. See Note 2 -- Significant Accounting Policies for a detailed discussion of the types of derivatives the Company enters into, the Company's objectives and strategies for using derivative instruments and how they are accounted for. The Company deals with highly rated counterparties and does not expect the counterparties to fail to meet their obligations under the contracts. The Company has controls in place to monitor credit exposures by limiting transactions with specific counterparties within specified dollar limits and assessing the creditworthiness of counterparties. The Company uses netting arrangements incorporated in master agreements with counterparties and adjusts transaction levels, when appropriate, to minimize risk. The Company's policy is to not offset the fair value amounts recognized for derivatives executed with the same counterparty under the same master netting agreements with the associated collateral. To further minimize risk, credit support annexes ("CSA") typically are negotiated as part of swap documentation entered into by the Company with counterparties. The CSA defines the terms under which collateral is transferred in order to mitigate credit risk arising from "in the money" derivative positions. The CSA requires that a derivative counterparty post collateral to secure that portion of its anticipated derivative obligation, taking into account netting arrangements, in excess of a specified threshold. Collateral received is typically invested in short-term investments. Those agreements also include credit contingent provisions whereby the threshold typically declines on a sliding scale with a decline in the counterparties' rating. In addition, certain of the Company's contracts contain provisions that require the Company to maintain a specific investment grade credit rating and if the Company's credit rating were to fall below that specified rating, the counterparty to the derivative instrument could request immediate payout or full collateralization. The Company does not have any derivative instruments with credit-risk-related contingent features that are in a net liability position with the counterparty as of December 31, 2010. The Company is exposed to credit-related losses in the event that a counterparty fails to perform its obligations under its contractual terms. For contracts with counterparties where no netting provisions are specified in the master agreements, in the event of default, credit exposure is defined as the fair value of contracts in a gain position at the reporting date, net of any collateral held under a CSA with that counterparty. Credit exposure to counterparties where a netting arrangement is in place, in the event of default, is defined as the net fair value, if positive, of all outstanding contracts with each specific counterparty, net of any collateral held under a CSA with that counterparty. As of December 31, 2010 and 2009, the Company held collateral for derivatives of $167 million and $153 million, respectively. Credit risk exposure in a net gain position, net of offsets and collateral, was $28 million and $58 million at December 31, 2010 and 2009, respectively. 46 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Notional or contractual amounts of derivative financial instruments provide a measure of involvement in these types of transactions and do not represent the amounts exchanged between the parties engaged in the transaction. The amounts exchanged are determined by reference to the notional amounts and other terms of the derivative financial instruments, which relate to interest rates, exchange rates or other financial indices. In September 2008, one of the Company's derivative counterparties, Lehman Brothers Special Financing Inc. ("Lehman Brothers"), filed for Chapter 11 bankruptcy. As a result, the Company terminated all derivative contracts with Lehman Brothers prior to their scheduled maturity dates. A gain of $5 million, which represents the effective portion of hedging contracts at the date they were de-designated, was recorded in AOCI. The gains will be reclassified into net investment losses in the accompanying Consolidated Statement of Income when the hedged forecasted transactions occur. At December 31, 2008 a gain from the ineffective portion of the hedge transactions of $2 million, along with the gain on contracts that did not qualify for hedge accounting of $3 million, resulted in an aggregate realized gain of $5 million in net investment losses in the accompanying Consolidated Statement of Income. The following table presents the notional amount, number of contracts and gross fair value of derivative instruments that are qualifying and designated as hedging instruments, by type of hedge designation, and those that are not designated as hedging instruments (excluding embedded derivatives) at December 31, 2010 and 2009 (in 47 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) millions, except for number of contracts). See Note 15 -- Fair Value Measurements for a discussion of valuation methods for derivative instruments.
DECEMBER 31, 2010 DECEMBER 31, 2009 ---------------------------------------- ---------------------------------------- VOLUME FAIR VALUE(1) VOLUME FAIR VALUE(1) PRIMARY -------------------- ----------------- -------------------- ----------------- RISK NUMBER OF NUMBER OF EXPOSURE NOTIONAL CONTRACTS ASSET LIABILITY NOTIONAL CONTRACTS ASSET LIABILITY -------- -------- --------- ----- --------- -------- --------- ----- --------- DERIVATIVES DESIGNATED AS HEDGING: CASH FLOW HEDGES: Interest rate swaps........... Interest $ 37 2 $ 8 $-- $ 37 2 $ 6 $-- Currency swaps..... Currency 203 13 * 19 218 14 1 16 ------- --- ---- --- ------- --- ---- --- TOTAL DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS..... 240 15 8 19 255 16 7 16 ------- --- ---- --- ------- --- ---- --- DERIVATIVES NOT DESIGNATED AS HEDGING: Interest rate swaps........... Interest 249 37 13 9 292 42 18 7 Interest rate options......... Interest 17,760 56 58 -- 19,475 47 100 -- Swaptions.......... Interest 6,781 31 62 -- -- -- -- -- Corridor options... Interest 18,650 166 27 -- 20,725 184 74 -- Currency swaps..... Currency 72 3 1 3 -- -- -- -- Currency forwards.. Currency 34 12 1 * * 2 -- * Equity options..... Market 275 25 40 -- 844 35 31 -- Credit default swaps: Buy protection.. Credit 12 3 -- * 12 3 -- 1 Sell protection.... Credit 1 1 -- * 1 1 -- * Average call rate spread.......... Interest 17 2 -- 1 -- -- -- -- ------- --- ---- --- ------- --- ---- --- TOTAL DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS..... 43,851 336 202 13 41,349 314 223 8 ------- --- ---- --- ------- --- ---- --- ACCRUED INVESTMENT INCOME.......... -- -- -- -- -- -- * -- ------- --- ---- --- ------- --- ---- --- TOTAL DERIVATIVES.... $44,091 351 $210 $32 $41,604 330 $230 $24 ======= === ==== === ======= === ==== ===
-------- * Amounts are less than $1 million. (1) The estimated fair value of all derivatives in an asset position is reported within other investments, with the exception of accrued investment income, which is reported with investment income due and accrued in the accompanying Consolidated Balance Sheet, and the estimated fair value of all derivatives in a liability position, including investment income payable on derivatives, is reported within other liabilities in the accompanying Consolidated Balance Sheet. For 2010, accrued investment income on derivatives and investment income payable on derivatives was excluded from the above table. 48 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CASH FLOW HEDGES The following table presents the effects of derivatives in cash flow hedging relationships in the accompanying Consolidated Statement of Income and the Consolidated Statement of Stockholder's Equity for the years ended December 31, 2010, 2009 and 2008 (in millions):
AMOUNT OF AMOUNT OF AMOUNT OF GAIN (LOSS) GAIN (LOSS) GAIN (LOSS) RECOGNIZED IN RECLASSIFIED FROM RECLASSIFIED FROM OCI ON DERIVATIVE AOCI INTO NET INCOME AOCI INTO NET INCOME (EFFECTIVE PORTION)(1) (EFFECTIVE PORTION) (INEFFECTIVE PORTION) ---------------------- ------------------------- --------------------- NET NET INVESTMENT INVESTMENT LOSSES INCOME ---------- ---------- FOR THE YEAR ENDED 12/31/2010: Interest rate contracts........ $ 10 $ 8 $ 1 $-- Currency contracts............. (12) (7) (2) -- ---- --- ---- --- Total.......................... $ (2) $ 1 $ (1) $-- ==== === ==== === FOR THE YEAR ENDED 12/31/2009: Interest rate contracts........ $(20) $ 4 $ (1) $-- Currency contracts............. (32) -- (12) -- ---- --- ---- --- Total.......................... $(52) $ 4 $(13) $-- ==== === ==== === FOR THE YEAR ENDED 12/31/2008: Interest rate contracts........ $ 21 $-- $ -- $-- Currency contracts............. 24 -- 10 -- ---- --- ---- --- Total.......................... $ 45 $-- $ 10 $-- ==== === ==== ===
-------- (1) The amount of gain (loss) recognized in OCI is reported as a change in net unrealized investment gains (losses), a component of AOCI, in the accompanying Consolidated Statement of Stockholder's Equity. In 2010, there were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted under the authoritative guidance on derivatives and hedging. In December 31, 2009, the Company discontinued cash flow hedge accounting on an interest rate swap that was hedging the forecasted interest payments on an underlying interest only strip for which a $4 million impairment loss was taken on the underlying bond. The Company believes that it is no longer probable that all of the remaining forecasted cash flows will still occur due to credit concerns. Hedge accounting was discontinued and an offsetting gain of $4 million has been reclassified from AOCI into net investment losses in the accompanying Consolidated Statement of Income at December 31, 2009. There are no deferred gains or losses remaining in OCI after the reclassification. The swap will be carried at fair value with changes recognized in net investment losses. In 2008, there were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted under the authoritative guidance on derivatives and hedging. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments. 49 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Presented below is a roll forward of the components of AOCI, before taxes, related to cash flow hedges (in millions):
2010 2009 2008 ---- ---- ---- Balance, beginning of year.............................. $(10) $ 33 $ (2) (Losses) gains deferred in OCI on the effective portion of cash flow hedges................................... (2) (52) 45 Losses (gains) reclassified to net income............... -- 9 (10) ---- ---- ---- Balance, end of year.................................... $(12) $(10) $ 33 ==== ==== ====
For cash flow hedges, the estimated amount of existing losses that are reported in AOCI at December 31, 2010 related to periodic interest payments on assets and liabilities being hedged that is expected to be reclassified into earnings within the next 12 months is less than $1 million. DERIVATIVES NOT QUALIFYING OR DESIGNATED AS HEDGING INSTRUMENTS The Company has derivative instruments that are not designated or do not qualify for hedge accounting treatment. The following table provides the income statement classification and amount of gains and losses on derivative instruments not designated as hedging instruments for the years ended December 31, 2010, 2009 and 2008 (in millions):
AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME ON DERIVATIVES(1) ------------------- 2010 2009 2008 ----- ---- ---- Interest rate swaps.................................... $ (6) $ 13 $-- Swaptions.............................................. 11 -- -- Interest rate caps..................................... (55) 1 -- Currency swaps......................................... (2) -- -- Corridor options....................................... (47) 56 (30) Currency forwards...................................... 2 (1) -- Equity options......................................... (6) (53) 44 Futures................................................ (32) (16) -- Bond forwards.......................................... 25 -- -- Credit default swaps CDS -- buy protection................................ * (1) (1) CDS -- sell protection............................... * * (1) ----- ---- --- Total.................................................. $(110) $ (1) $12 ===== ==== ===
-------- * Recognized loss is less than $1 million. (1) The amount of gain (loss) is reported within net investment gains (losses) in the Consolidated Statement of Income. The Company enters into credit default swaps ("CDS") both to buy loss protection from, and sell loss protection to a counterparty in the event of default of a reference obligation or a reference pool of assets. The Company also sells CDS protection on a basket of U.S. securities and indexes in order to swap the credit risk from certain foreign denominated fixed maturities. The approximate term of these contracts ranges from three to ten years. At December 31, 2010, 2009 and 2008, the Company had four open contracts, for CDS at a notional amount of $13 million, with a negative fair value of less than $1 million, $1 million and $2 million, respectively. Realized 50 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) gains of less than $1 million, which includes realized gains of less than $1 million related to credit protection sold, were recorded for the year ended December 31, 2010. For the year ended December 31, 2009, realized losses of $1 million, which includes realized gains of less than $1 million related to credit protection sold, were recorded. For the year ended December 31, 2008, realized losses of $2 million, which includes realized losses of $1 million related to credit protection sold, were recorded. These amounts are reflected in net investment gains (losses) in the accompanying Consolidated Statement of Income. The maximum amount the Company would be required to pay under swaps in which credit protection was sold, assuming all referenced obligations default at a total loss without recoveries, would be $1 million for December 31, 2010, 2009 and 2008. The market value of swaps for credit protection sold was less than $1 million for December 31, 2010, 2009 and 2008. The Company posted collateral in the amount of $1 million, $2 million and $1 million for December 31, 2010, 2009 and 2008 respectively, on open positions for credit protection sold. EMBEDDED DERIVATIVES The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. As of December 31, 2010 and 2009, there were no embedded derivatives that could not be separated from their host contracts. The following table presents the fair value amounts of the Company's embedded derivatives at December 31, 2010 and 2009 (in millions):
FAIR VALUE ----------- BALANCE SHEET LOCATION 2010 2009 ----------------------------------- ---- ---- EMBEDDED DERIVATIVES IN ASSET HOST CONTRACTS: Other(1)................................. Amounts recoverable from reinsurers $ 48 $ 5 EMBEDDED DERIVATIVES IN LIABILITY HOST CONTRACTS: Guaranteed minimum accumulation benefits(1)............................ Policyholders' account balances $222 $235
-------- (1) For further information on these embedded derivatives refer to Note 15 -- Fair Value Measurements. The following table presents the changes in fair value related to embedded derivatives for the years ended December 31, 2010, 2009 and 2008 (in millions):
2010 2009 2008 ---- ---- ---- Net revenue from reinsurance............................ $ 43 $(4) $ 6 Interest credited to policyholders' account balances.... $(25) $90) $236
NOTE 13 -- COMMITMENTS AND CONTINGENCIES LITIGATION The Company is a defendant in individual and/or alleged class action suits arising from its agency sales force, insurance (including variable contracts registered under the federal securities law), investment, retail securities, and/or other operations, including actions involving retail sales practices. Most of these actions seek substantial or unspecified compensatory and punitive damages. The Company is also from time to time involved in various governmental, administrative, and investigative proceedings and inquiries. Notwithstanding the uncertain nature of litigation and regulatory inquiries, the outcome of which cannot be predicted, the Company believes that, after provisions made in the consolidated financial statements, the ultimate liability that could result from litigation and proceedings would not have a material adverse effect on the Company's 51 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) financial position; however, it is possible that settlements or adverse determinations in one or more actions or other proceedings in the future could have a material adverse effect on the Company's operating results for a given year. ASSESSMENTS Most of the jurisdictions in which the Company is licensed to transact business, require life insurers to participate in guaranty associations which are organized to pay contractual benefits pursuant to insurance policies issued by impaired, insolvent or failed life insurers. In the U.S. 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 line of business in which the impaired, insolvent or failed life insurer is engaged. Some states permit member insurers to recover assessments through full or partial premium tax offsets. The Company received notification of the insolvency of various life insurers. It is expected that these insolvencies will result in remaining guaranty fund assessments against the Company of approximately $39 million and $12 million which have been accrued in other liabilities in the accompanying Consolidated Balance Sheet for the years ended December 31, 2010 and 2009, respectively. GUARANTEES The Company, in the ordinary course of its business, has numerous agreements with respect to its related parties and other third-parties. In connection with such agreements there may be related commitments or contingent liabilities, which may take the form of guarantees. The Company believes the ultimate liability that could result from these guarantees would not have a material adverse effect on the Company's financial position. LOANED SECURITIES AND REPURCHASE AGREEMENTS The Company participates in a securities lending program for the purpose of enhancing income on certain securities held. At December 31, 2010 and 2009, $452 million and $449 million, respectively, of the Company's fixed maturity securities were on loan to others. Such assets reflect the extent of the Company's involvement in securities lending, not the Company's risk of loss. At December 31, 2010 and 2009, the Company recorded cash collateral received under these agreements $461 million, and established a corresponding liability for the same amount, which is included in other liabilities in the accompanying Consolidated Balance Sheet. The Company did not hold collateral in the form of securities at December 31, 2010 and 2009. The Company enters into agreements to purchase and resell securities, and agreements to sell and repurchase securities for the purpose of enhancing income on the securities portfolio. At December 31, 2010 and 2009, the Company had agreements to purchase and resell securities, which are reflected in the accompanying Consolidated Balance Sheet, totaling $146 million and $172 million at an average coupon rate of 0.19% and 0.01%, respectively. At December 31, 2010 and 2009, the Company had agreements to sell and repurchase securities, which are reflected in the accompanying Consolidated Balance Sheet, totaling $182 million and $535 million at an average coupon rate of 3.94% and 4.23%, respectively. LIENS Several commercial banks have customary security interests in certain assets of the Company to secure potential overdrafts and other liabilities of the Company that may arise under custody, securities lending and other banking agreements with such banks. 52 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14 -- RELATED PARTY TRANSACTIONS The Company has significant transactions with New York Life and its affiliates. Because of these relationships, it is possible that the terms of the transactions are not the same as those that would result from transactions among wholly unrelated parties. New York Life provides the Company with services and facilities for the sale of insurance and other activities related to the business of insurance. New York Life charges the Company for the identified costs associated with these services and facilities under the terms of an administrative service agreement between New York Life and the Company. Such costs, amounting to $723 million, $684 million and $668 million for the years ended December 31, 2010, 2009 and 2008, respectively, are reflected in operating expenses and net investment income in the accompanying Consolidated Statement of Income. In 2009, the Company received a $1 billion capital contribution in the form of cash of $877 million and fixed maturity securities having a fair value of $123 million, by New York Life. In 2008, the Company received a $1,218 million capital contribution in the form of securities and cash by New York Life. The securities consisted of unaffiliated common stock having a fair value of $902 million, and fixed maturities having a fair value of $301 million. Cash and receivables transferred amounted to $15 million. During 2009, the Company sold equity securities in the amount of $266 million to New York Life. The Company also purchased, primarily, fixed maturity and equity securities in the amount of $1,123 million from New York Life. The Company is a party to an affiliated group air transportation service agreement entered into with NYLIFE LLC, a direct wholly owned subsidiary of New York Life, in November 2004. Under the terms of the agreement the Company, in conjunction with certain specified affiliates, leases an aircraft from NYLIFE LLC. The aircraft is to be used by members of senior management and directors for business travel under certain circumstances. Personal use of the aircraft by employees and directors is not permitted. Costs associated with the lease are determined on a fully allocated basis and allotted to the parties based on usage. For the years ended December 31, 2010, 2009 and 2008, the Company's share of expenses associated with the lease of the aircraft was $1 million. The agreement expired in November 2009, with automatic one-year renewals, unless terminated earlier. The agreement was renewed for five years, until November 2014. The Company has entered into investment advisory and administrative services agreements with NYL Investments whereby NYL Investments provides investment advisory services to the Company. At December 31, 2010, 2009 and 2008, the total cost for these services amounted to $69 million, $53 million and $46 million, respectively, which are included in the costs of services billed by New York Life to the Company, as noted above. In addition, NYL Investments has an Investment Advisory Agreement with the Mainstay VP Series Fund, Inc. (the "Fund"), a registered investment company whose shares are sold to various separate accounts of the Company. NYL Investments, the administrator of the Fund, and the Company have entered into agreements regarding administrative services to be provided by the Company. Under the terms of the agreement, NYL Investments pays the Company administrative fees for providing services to the Fund. The Company recorded fee income from NYL Investments for the years ended December 31, 2010, 2009 and 2008 of $16 million, $13 million, and $15 million, respectively. At December 31, 2010 and 2009, the Company had a net liability of $241 million and $221 million, respectively, for the above-described services, which are included in other assets and other liabilities in the accompanying Consolidated Balance Sheet. The terms of the settlement generally require that these amounts be settled in cash within ninety days. The terms of the investment advisory agreements require payment ten days from receipt of bill. 53 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) To satisfy its obligations under certain structured settlement agreements with unaffiliated insurance companies, beneficiaries and other non-affiliated entities, the Company owns certain single premium annuities issued by New York Life. The carrying value of the annuity contracts is based upon the actuarially determined value of the obligations under the structured settlement contracts, which generally have some life contingent benefits. The obligations are based upon the actuarially determined present value of expected future payments. Interest rates used in establishing such obligations range from 4.42% to 7.81%. At December 31, 2010 and 2009, the carrying value of the interest in annuity contracts and the obligations under structured settlement agreements in the accompanying Consolidated Balance Sheet amounted to $5,454 million and $4,858 million, respectively. The Company has directed New York Life to make the payments under the annuity contracts directly to the payees under the structured settlement agreements. In addition, the Company has issued certain annuity contracts to New York Life in order that New York Life may satisfy its third-party obligations under certain structured settlement agreements. Interest rates used in establishing such obligations range from 5.84% to 6.14%. The Company has been directed by New York Life to make the payments under the annuity contracts directly to the beneficiaries under these structured settlement agreements. At December 31, 2010 and 2009, the amount of outstanding reserves on these contracts included in future policy benefits was $173 million and $176 million, respectively. The Company has a variable product distribution agreement with NYLIFE Distributors, an indirect wholly owned subsidiary of New York Life, granting NYLIFE Distributors the exclusive right to distribute, and be the principal underwriter of the Company's variable product policies. NYLIFE Distributors has an agreement with NYLIFE Securities, another indirect wholly owned subsidiary of New York Life, under which registered representatives of NYLIFE Securities solicit sales of these policies. In connection with this agreement, the Company incurred commission expense to NYLIFE Securities' registered representatives of $85 million, $65 million and $86 million, for the years ended December 31, 2010, 2009 and 2008, respectively. In addition, the Company entered into a service fee agreement with NYLIFE Securities effective July 1, 2008, as amended on July 1, 2009, whereby NYLIFE Securities charges the Company a fee for management and supervisory services rendered in connection with variable life and variable annuity sales and in- force business. For the years ended December 31, 2010, 2009 and 2008, the Company incurred an expense of $29 million, $28 million and $14 million, respectively, under this agreement. At December 31, 2010 and 2009, the Company recorded no payables to NYLIFE Securities under this agreement. The Company has a credit agreement with New York Life, dated April 1, 1999, wherein New York Life can borrow funds from the Company. The maximum amount available to New York Life is $490 million. No outstanding balance was due to the Company at December 31, 2010 and 2009. The Company also has a credit agreement with New York Life, dated September 30, 1993, under which the Company can borrow up to $490 million. During 2010, 2009 and 2008, the credit facility was not used, no interest was paid and no outstanding balance was due. On December 23, 2004, the Company entered into a credit agreement with Capital Corporation under which the Company can borrow up to $490 million. As of December 31, 2010 and 2009 there was $10 million and $51 million outstanding to Capital Corporation, respectively. Interest expense for 2010 and 2009 was less than $1 million. There was no interest expense for 2008. During August 2003, the Company transferred without recourse several private placement debt securities to MCF. MCF is an indirect wholly owned subsidiary of New York Life. MCF paid for the purchase price of the securities transferred by delivering to the Company promissory notes with terms identical to the securities transferred. At December 31, 2010 and 2009, the Company recorded a receivable from MCF, included in investments in affiliates in the accompanying Consolidated Balance Sheet, of $5 million. The Company received interest payments from MCF of less than $1 million for each of the years ended December 31, 2010, 2009 and 2008. 54 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has purchased from MCF participations in collateralized loans to third-parties underwritten by MCF. Under the participation agreements, the Company assumes the performance risk on these loans with no recourse against MCF. In 2010 the Company did not purchase any new loans only additional debt with existing loans. In 2009 the Company purchased certain loans from MCF with a total commitment amount of $73 million. At December 31, 2010, the Company held loans with a total commitment amount of $308 million of which $250 million had been funded and $58 million remained unfunded. At December 31, 2009, the Company held loans with a total commitment amount of $420 million of which $329 million had been funded and $91 million remained unfunded. These loans are reported in other investments in the accompanying Consolidated Balance Sheet. On April 30, 2010, the Company entered into a revolving loan agreement with MCF, effective as of January 1, 2010 (the "MCF Loan Agreement"). The MCF Loan Agreement establishes the terms under which the Company may provide funding to MCF for commitments to fund senior debt, subordinated debt and equity investments, each having different terms and conditions, in each case entered into on or after January 1, 2010. The principal amount provided to MCF cannot exceed 2.5% of the Company's statutory admitted assets as of December 31 of the prior year, provided that the total aggregate funding provided to or on behalf of MCF by New York Life and its affiliates will not exceed the lesser of $3.2 billion or 3% of New York Life's statutory admitted assets as of December 31 of the prior year. All outstanding advances made to MCF under the MCF Loan Agreement, together with unpaid interest or accrued return thereon will be due in full on July 1, 2015. At December 31, 2010, the outstanding balance of loans to MCF under the MCF Loan Agreement was $533 million. These loans are reported in investments in affiliates in the accompanying Consolidated Balance Sheet. During 2010, the Company received interest payments from MCF totaling $8 million, which are included in net investment income in the accompanying Consolidated Statement of Income. The Company has an arrangement with New York Life whereby a policyholder may convert a New York Life term policy or term rider to a Target Life policy issued by the Company, without any additional underwriting. As compensation for this arrangement, the Company recorded other income of $18 million, $17 million and $4 million for the years ended December 31, 2010, 2009 and 2008, respectively. The Company has an arrangement with NYLIFE Insurance Company of Arizona ("NYLAZ"), a wholly owned subsidiary of New York Life, whereby a policyholder may convert a NYLAZ term policy to a permanent cash value life insurance policy issued by the Company without any additional underwriting. As compensation for this arrangement, the Company recorded other income of $7 million, $6 million, and $2 million from NYLAZ for the years ended December 31, 2010, 2009 and 2008, respectively. The Company has issued various Corporate Owned Life Insurance policies to New York Life for the purpose of informally funding certain benefits for New York Life employees and agents. These policies were issued on the same basis as policies sold to unrelated customers. As of December 31, 2010 and 2009, the Company recorded liabilities of approximately $2,823 million and $2,601 million, respectively, which are included in policyholders' account balances and separate account liabilities in the accompanying Consolidated Balance Sheet. The Company has also issued various Corporate Owned Life Insurance policies to separate Voluntary Employees' Beneficiary Association (VEBA) trusts formed for the benefit of New York Life's retired employees and agents. These policies were issued on the same basis as policies sold to unrelated customers. As of December 31, 2010 and 2009, policyholders' account balances and separate account liabilities related to these policies aggregated $285 million and $270 million, respectively. The Company has an agreement with NYLINK Insurance Agency Incorporated ("NYLINK"), an indirect wholly owned subsidiary of New York Life, granting NYLINK the right to solicit applications for the Company's products through NYLINK's subagents. For the years ended December 31, 2010 and 2009, the Company recorded 55 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) commission and fee expense to NYLINK agents of $4 million. For the year ended December 31, 2008 the Company recorded commission and fee expense to NYLINK agents of $3 million. Effective December 31, 2004, the Company entered into a reinsurance agreement with New York Life (see Note 10 -- Reinsurance for more details). Effective July 1, 2002, the Company transferred its Taiwan branch insurance book of business to NYLT, which is accounted for as a long-duration coinsurance transaction (see Note 10 -- Reinsurance for more details). NOTE 15 -- FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance around fair value establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are based on the inputs to the valuation as follows: LEVEL 1 Fair value is based on unadjusted quoted prices for identical assets or liabilities in an active market. Active markets are defined as a market in which many transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. LEVEL 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active, or other model driven inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities and other market observable inputs. Valuations are generally obtained from third-party pricing services for identical or comparable assets or liabilities or through the use of valuation methodologies using observable market inputs. LEVEL 3 Instruments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management's own assumptions in pricing the asset or liability. Pricing may also be based upon broker quotes that do not represent an offer to transact. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models and other similar techniques. Non-binding broker quotes, which are utilized when pricing service information is not available, are reviewed for reasonableness based on the Company's understanding of the market and are generally considered Level 3. To the extent the internally developed valuations use significant unobservable inputs; they are classified as Level 3.
56 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables represent the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 and 2009 (in millions):
2010 ------------------------------------------------------- QUOTED PRICES IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE IDENTICAL ASSETS INPUTS INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL ---------------- ----------- ------------ ------- Fixed maturities -- Available-for-sale: U. S. treasury agency and government guaranteed........................... $ $ 2,940 $ 6 $ 2,946 U.S. agencies, state and municipal...... -- 1,222 10 1,232 Foreign governments..................... -- 817 11 828 U.S. corporate.......................... -- 25,710 134 25,844 Foreign corporate....................... -- 7,190 82 7,272 Residential mortgage-backed securities.. -- 16,282 1,100 17,382 Commercial mortgage-backed securities... -- 5,150 3 5,153 Asset-backed securities................. -- 3,147 564 3,711 Redeemable preferred stock.............. -- 6 -- 6 ------- ------- ------ ------- Total fixed maturities -- Available-for- sale.................................... -- 62,464 1,910 64,374 ------- ------- ------ ------- Fixed maturities -- Trading Foreign governments..................... -- 1 -- 1 Asset-backed securities................. -- 76 19 95 ------- ------- ------ ------- Total fixed maturities -- Trading......... -- 77 19 96 ------- ------- ------ ------- Equity securities: Common stock............................ 15 -- 6 21 Non-redeemable preferred stock.......... -- 2 3 5 ------- ------- ------ ------- Total equity securities................... 15 2 9 26 ------- ------- ------ ------- Derivative assets (including embedded).... -- 211 -- 211 Securities purchased under agreements to resell.................................. -- 146 -- 146 Cash and cash equivalents................. 9 730 -- 739 Amounts recoverable from reinsurers....... -- -- 48 48 Separate account assets(1)................ 18,336 309 114 18,759 ------- ------- ------ ------- TOTAL ASSETS ACCOUNTED FOR AT FAIR VALUE ON A RECURRING BASIS................ $18,360 $63,939 $2,100 $84,399 ======= ======= ====== ======= Policyholders' account balances(2)........ -- -- 222 222 Derivative liabilities.................... -- 32 1 33 ------- ------- ------ ------- TOTAL LIABILITIES ACCOUNTED FOR AT FAIR VALUE ON A RECURRING BASIS................ $ -- $ 32 $ 223 $ 255 ======= ======= ====== =======
-------- (1) Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Balance Sheet in accordance with the Company's policy (see Note 2 -- Significant Accounting Policies). (2) Policyholders' account balances represent embedded derivatives bifurcated from host contracts. 57 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 ------------------------------------------------------- QUOTED PRICES IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE IDENTICAL ASSETS INPUTS INPUTS (LEVEL 1) (LEVEL 2) (LEVEL 3) TOTAL ---------------- ----------- ------------ ------- Fixed maturities -- Available-for-sale: U. S. treasury agency and government guaranteed........................... $ -- $ 2,991 $ 8 $ 2,999 U.S. agencies, state and municipal...... -- 725 -- 725 Foreign governments..................... -- 757 25 782 U.S. corporate.......................... -- 23,207 142 23,349 Foreign corporate....................... -- 5,993 328 6,321 Residential mortgage-backed securities.. -- 14,483 775 15,258 Commercial mortgage-backed securities... -- 4,879 26 4,905 Asset-backed securities................. -- 2,389 510 2,899 Redeemable preferred stock.............. -- 10 -- 10 ------- ------- ------ ------- Total fixed maturities -- Available-for- sale.................................... -- 55,434 1,814 57,248 ------- ------- ------ ------- Fixed maturities -- Trading............... -- 21 22 43 Equity securities: Common stock............................ 40 -- 4 44 Non-redeemable preferred stock.......... -- 3 -- 3 ------- ------- ------ ------- Total equity securities................... 40 3 4 47 ------- ------- ------ ------- Derivative assets (including embedded)(1)............................ -- 229 1 230 Securities purchased under agreements to resell.................................. -- 172 -- 172 Investment, at fair value, of consolidated investment company...................... -- 137 -- 137 Cash and cash equivalents................. 9 427 -- 436 Amounts recoverable from reinsurers....... -- -- 5 5 Separate account assets(2)................ 15,819 221 49 16,089 ------- ------- ------ ------- TOTAL ASSETS ACCOUNTED FOR AT FAIR VALUE ON A RECURRING BASIS.................... $15,868 $56,644 $1,895 $74,407 ======= ======= ====== ======= Policyholders' account balances(3)........ -- -- 235 235 Derivative liabilities.................... -- 24 -- 24 ------- ------- ------ ------- TOTAL LIABILITIES ACCOUNTED FOR AT FAIR VALUE ON A RECURRING BASIS.............. $ -- $ 24 $ 235 $ 259 ======= ======= ====== =======
-------- (1) Includes less than $1 million derivative investment income due and accrued. (2) Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Balance Sheet in accordance with the Company's policy (see Note 2 -- Significant Accounting Policies). (3) Policyholders' account balances represent embedded derivatives bifurcated from host contracts. 58 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) TRANSFERS BETWEEN LEVELS Transfers between levels may occur due to changes in valuation sources, or changes in the availability of market observable inputs, which generally are caused by changes in market conditions such as liquidity, trading volume or bid- ask spreads. The Company's policy is to assume the transfer occurs at the beginning of the period. TRANSFERS BETWEEN LEVELS 1 AND 2 Periodically the Company has transfers between Level 1 and Level 2 for assets and liabilities. During the twelve months ended December 31, 2010, transfers between Levels 1 and 2 were not significant. TRANSFERS INTO AND OUT OF LEVEL 3 The Company's basis for transferring assets and liabilities into and/or out of Level 3 is based on the changes in the observability of data. 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. During the year ended December 31, 2010, the Company transferred $270 million of securities into Level 3 consisting of fixed maturity available-for- sale securities and separate accounts assets. The transfers into Level 3 related to fixed maturity available-for-sale securities were primarily due to unobservable inputs utilized within valuation methodologies and the use of broker quotes (that could not be validated) when previously, information from third-party pricing services (that could be validated) was utilized. For the separate account assets, transfers into Level 3 are related to limited partnership investments that are restricted with respect to transfers or withdrawals. Transfers out of Level 3 of $630 million during the year ended December 31, 2010 was primarily due to significant increase in market activity, or one or more significant input(s) becoming observable for fixed maturity available-for- sale and trading securities. Net transfers into (out of) Level 3 for fixed maturity available-for-sale securities totaled ($909) million during the year ended December 31, 2009. For the year ended December 31, 2009, transfers out of Level 3 were primarily the result of observable inputs utilized within valuation methodologies and observable information from third party pricing services or internal models in place of previous broker quotes. Partially offsetting these transfers out of Level 3 were transfers into Level 3 due to the use of unobservable inputs in valuation methodologies as well as the utilization of broker quotes for certain assets. 59 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tables below present a reconciliation of all Level 3 assets and liabilities for the years ended December 31, 2010 and 2009 (in millions):
2010 --------------------------------------------------------------- U.S. TREASURY U.S. AGENCY AND AGENCIES, GOVERNMENT STATE AND FOREIGN U.S. FOREIGN GUARANTEED MUNICIPAL GOVERNMENTS CORPORATE CORPORATE ------------- --------- ----------- --------- --------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR....... $ 8 $-- $ 25 $142 $ 328 Total gains (losses) (realized/unrealized): Included in earnings Net investment gains (losses).................. -- -- -- (2) (13) Net investment income(1)..... -- -- -- -- -- Net revenue from reinsurance............... -- -- -- -- -- Interest credited to policyholders' account balances.................. -- -- -- -- -- Other comprehensive income..... 1 -- -- 5 (2) Purchases, sales, issuances and settlements.................... (3) 10 11 15 (75) Transfers into Level 3(2)......... -- -- -- 25 69 Transfers (out of) Level 3(2)..... -- -- (25) (51) (225) --- --- ---- ---- ----- FAIR VALUE, END OF YEAR............. $ 6 $10 $ 11 $134 $ 82 === === ==== ==== =====
RESIDENTIAL COMMERCIAL TOTA FIXED ASSET- MORTGAGE- MORTGAGE- MATURITIES- BACKED BACKED BACKED ASSET-BACKED AVAILABLE- SECURITIES- SECURITIES SECURITIES SECURITIES FOR-SALE TRADING ----------- ---------- ------------ ----------- ----------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR....... $ 775 $ 26 $ 510 $1,814 $22 Total gains (losses) (realized/unrealized): Included in earnings Net investment gains (losses).. -- -- (6) (21) -- Net investment income(1)....... 20 -- 2 22 -- Net revenue from reinsurance... -- -- -- -- -- Interest credited to policyholders' account balances..................... -- -- -- -- -- Other comprehensive income..... 23 4 30 61 -- Purchases, sales, issuances and settlements.................... 331 (23) 160 426 (1) Transfers into Level 3(2)......... 139 1 2 236 -- Transfers (out of) Level 3(2)..... (188) (5) (134) (628) (2) ------- ---- ----- ------ --- FAIR VALUE, END OF YEAR............. $ 1,100 $ 3 $ 564 $1,910 $19 ======= ==== ===== ====== ===
60 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2010 ----------------------------------------------------------- NON- DERIVATIVE AMOUNTS REDEEMABLE TOTAL ASSETS RECOVERABLE COMMON PREFERRED EQUITY (INCLUDING FROM STOCK STOCK SECURITIES EMBEDDED) REINSURERS ------ ---------- ---------- ---------- ----------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR......... $ 4 $-- $ 4 $ 1 $ 5 Total gains (losses) (realized/unrealized): Included in earnings Net investment gains (losses).. 2 -- 2 -- -- Net investment income(1)....... -- -- -- -- -- Net revenue from reinsurance... -- -- -- -- 43 Interest credited to policyholders' account balances.................... -- -- -- -- Other comprehensive income....... (1) 3 2 (1) -- Purchases, sales, issuances and settlements...................... 1 -- 1 -- -- Transfers into Level 3(2)........... -- -- -- -- -- Transfers (out of) Level 3(2)....... -- -- -- -- -- --- --- --- --- ---- FAIR VALUE, END OF YEAR............... $ 6 $ 3 $ 9 $-- $ 48 === === === === ====
SEPARATE POLICYHOLDERS' ACCOUNT TOTAL ACCOUNT DERIVATIVE TOTAL ASSETS ASSETS BALANCES LIABILITIES LIABILITIES -------- ------ -------------- ----------- ----------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR.......... $ 49 $1,895 $ 235 $-- $235 Total gains (losses) (realized/unrealized): Included in earnings Net investment gains (losses)... -- (19) -- 1 1 Net investment income(1)........ -- 22 -- -- -- Net revenue from reinsurance.... -- 43 -- -- -- Interest credited to policyholders' account balances..................... -- -- (25) -- -- Other comprehensive income........ 4 66 -- -- -- Purchases, sales, issuances and settlements....................... 27 453 12 -- 12 Transfers into Level 3(2)............ 34 270 -- -- -- Transfers (out of) Level 3(2)........ -- (630) -- -- -- ---- ------ ----- --- ---- FAIR VALUE, END OF YEAR................ $114 $2,100 $ 222 $ 1 $223 ==== ====== ===== === ====
-------- (1) Net investment income (loss) includes amortization of discount and premium on fixed maturity securities. (2) Transfers into (out of) Level 3 are reported at the value as of beginning of the year in which the transfer occurred. 61 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 --------------------------------------------------------------- U.S. TREASURY U.S. AGENCY AND AGENCIES, GOVERNMENT STATE AND FOREIGN U.S. FOREIGN GUARANTEED MUNICIPAL GOVERNMENTS CORPORATE CORPORATE ------------- --------- ----------- --------- --------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR....... $ 5 $ 3 $ 9 $ 300 $ 328 Total gains (losses) (realized/unrealized): Included in earnings Net investment (losses) gains..................... -- -- -- (11) (12) Net investment income(1)..... -- -- -- -- -- Net revenue from reinsurance............... -- -- -- -- -- Interest credited to policyholders' account balances.................. -- -- -- -- -- Other comprehensive income..... (1) -- -- 40 47 Purchases, sales, issuances and settlements.................... 9 -- 25 (39) 118 Transfers into (out of) Level 3(2)........................... (5) (3) (9) (148) (153) --- --- --- ----- ----- FAIR VALUE, END OF YEAR............. $ 8 $-- $25 $ 142 $ 328 === === === ===== =====
RESIDENTIAL COMMERCIAL FIXED MORTGAGE- MORTGAGE- ASSET- MATURITY BACKED BACKED BACKED TRADING COMMON SECURITIES SECURITIES SECURITIES SECURITIES STOCK ----------- ---------- ---------- ---------- ------ CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR.......... $ 609 $13 $ 503 $36 $ 1 Total gains (losses) (realized/unrealized): Included in earnings Net investment (losses) gains... 1 1 2 (3) -- Net investment income(1)........ -- -- 1 3 -- Net revenue from reinsurance.... -- -- -- -- -- Interest credited to policyholders' account balances..................... -- -- -- -- -- Other comprehensive income........ 1 -- (6) -- 2 Purchases, sales, issuances and settlements....................... 578 3 188 (7) 2 Transfers into (out of) Level 3(2)... (414) 9 (178) (7) (1) ----- --- ----- --- --- FAIR VALUE, END OF YEAR................ $ 775 $26 $ 510 $22 $ 4 ===== === ===== === ===
62 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 -------------------------------------------- AMOUNTS RECOVERABLE SEPARATE DERIVATIVE FROM ACCOUNT TOTAL ASSETS REINSURERS ASSETS ASSETS ---------- ----------- -------- ------ CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR.................. $ 4 $ 9 $ 151 $1,971 Total gains (losses) (realized/unrealized): Included in earnings Net investment (losses) gains........... -- -- (2) (24) Net investment income(1)................ -- -- -- 4 Net revenue from reinsurance............ -- (4) -- (4) Interest credited to policyholders' account balances..................... -- -- -- -- Other comprehensive income................ (3) -- -- 80 Purchases, sales, issuances and settlements.. -- -- (100) 777 Transfers into (out of) Level 3(2)........... -- -- -- (909) --- --- ----- ------ FAIR VALUE, END OF YEAR........................ $ 1 $ 5 $ 49 $1,895 === === ===== ======
POLICYHOLDERS' ACCOUNT TOTAL BALANCES LIABILITIES -------------- ----------- CHANGES IN FAIR VALUE OF LEVEL 3 ASSETS AND LIABILITIES FAIR VALUE, BEGINNING OF YEAR............................... $316 $316 Total gains (losses) (realized/unrealized): Included in earnings Net investment (losses) gains........................ -- -- Net investment income(1)............................. -- -- Net revenue from reinsurance......................... -- -- Interest credited to policyholders' account balances.......................................... (90) (90) Other comprehensive income............................. -- -- Purchases, sales, issuances and settlements............... 9 9 Transfers into (out of) Level 3(2)........................ -- -- ---- ---- FAIR VALUE, END OF YEAR..................................... $235 $235 ==== ====
-------- (1) Net investment income (loss) includes amortization of discount and premium on fixed maturities. (2) Transfers into (out of) Level 3 are reported at the value as of beginning of the year in which the transfer occurred. 63 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tables below include the unrealized gains or losses for the years ended December 31, 2010 and 2009 by category for Level 3 assets and liabilities still held at December 31, 2010 and 2009 (in millions):
2010 ----------------------------------------------------------------- U.S. TREASURY, RESIDENTIAL COMMERCIAL AGENCY AND MORTGAGE- MORTGAGE- GOVERNMENT U.S. FOREIGN BACKED BACKED GUARANTEED CORPORATE CORPORATE SECURITIES SECURITIES -------------- --------- --------- ----------- ---------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses).................. $-- $-- $(20) $ 1 $-- Net investment income........ -- -- -- 18 -- Net revenue from reinsurance............... -- -- -- -- -- Interest credited to policyholders' account balances.................. -- -- -- -- -- Other comprehensive gains/(losses)............... 1 4 5 22 (1) --- --- ---- --- --- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES).......................... $ 1 $ 4 $(15) $41 $(1) === === ==== === ===
NON- AMOUNTS ASSET- REDEEMABLE RECOVERABLE BACKED COMMON PREFERRED FROM SECURITIES STOCK STOCK REINSURERS ---------- ------ ---------- ----------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses).......... $(6) $ 2 $-- $-- Net investment income.................. 1 -- -- -- Net revenue from reinsurance........... -- -- -- 43 Interest credited to policyholders' account balances....................... -- -- -- -- Other comprehensive gains/(losses)....... 24 -- 3 -- --- --- --- --- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES)..... $19 $ 2 $ 3 $43 === === === ===
64 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2010 ------------------------------------------------- SEPARATE POLICYHOLDERS' ACCOUNT TOTAL ACCOUNT TOTAL ASSETS(1) ASSETS BALANCES LIABILITIES --------- ------ -------------- ----------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses)............ $-- $(23) $ -- $ -- Net investment income.................... -- 19 -- -- Net revenue from reinsurance............. -- 43 -- -- Interest credited to policyholders' account balances...................... -- -- (16) (16) Other comprehensive gains/(losses)......... 4 62 -- -- --- ---- ---- ---- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES)....... $ 4 $101 $(16) $(16) === ==== ==== ====
-------- (1) The net investment gains (losses) included for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Balance Sheet in accordance with the Company's policy (see Note 2 -- Significant Accounting Policies).
2009 ----------------------------------------------------------------- U.S. TREASURY, RESIDENTIAL AGENCY AND MORTGAGE- ASSET- GOVERNMENT U.S. FOREIGN BACKED BACKED GUARANTEED CORPORATE CORPORATE SECURITIES SECURITIES -------------- --------- --------- ----------- ---------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses)................... $-- $-- $-- $-- $ -- Net investment income......... -- -- -- -- 1 Net revenue from reinsurance.. -- -- -- -- -- Interest credited to policyholders' account balances................... -- -- -- -- -- Other comprehensive gains/(losses)................ (1) 19 47 1 (18) --- --- --- --- ---- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES)........................... $(1) $19 $47 $ 1 $(17) === === === === ====
65 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2009 ---------------------------------------------- FIXED AMOUNTS MATURITY RECOVERABLE COMMON DERIVATIVE TRADING FROM STOCK ASSETS SECURITIES REINSURERS ------ ---------- ---------- ----------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses).......... $-- $-- $(4) $-- Net investment income.................. -- -- 6 -- Net revenue from reinsurance........... -- -- -- (4) Interest credited to policyholders' account balances....................... -- -- -- -- Other comprehensive gains/(losses)....... 2 (3) -- -- --- --- --- --- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES)..... $ 2 $(3) $ 2 $(4) === === === ===
SEPARATE POLICYHOLDERS' ACCOUNT TOTAL ACCOUNT TOTAL ASSETS ASSETS BALANCES LIABILITIES -------- ------ -------------- ----------- UNREALIZED GAINS (LOSSES) RELATING TO LEVEL 3 ASSETS STILL HELD EARNINGS : Total gains (losses) (realized/unrealized) Included in earnings: Net investment gains (losses)............ $41 $37 $ -- $ -- Net investment income.................... -- 7 -- -- Net revenue from reinsurance............. -- (4) -- -- Interest credited to policyholders' account balances...................... -- -- (79) (79) Other comprehensive gains/(losses)......... -- 47 -- -- --- --- ---- ---- TOTAL CHANGE IN UNREALIZED GAINS (LOSSES)....... $41 $87 $(79) $(79) === === ==== ====
-------- (1) The net investment gains (losses) included for separate account assets are offset by an equal amount for separate account liabilities, which results in a net zero impact on net income for the Company. Separate account liabilities are not included above, as they are reported at contract value in the accompanying Consolidated Balance Sheet in accordance with the Company's policy (see Note 2 -- Significant Accounting Policies). DETERMINATION OF FAIR VALUES The Company has an established and well-documented process for determining fair value. Security pricing is applied using a hierarchy approach whereby publicly available prices are first sought from third-party pricing services, the remaining un-priced securities are submitted to independent brokers for prices and lastly securities are priced using an internal pricing model. The Company performs various analyses to ascertain that the prices represent fair value. Examples of procedures performed include, but are not limited to, initial and on-going review of third-party pricing services' methodologies, back testing recent trades and monitoring of trading volumes, new issuance activity and other market activities. 66 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For Level 1 investments, valuations are generally based on observable inputs that reflect quoted prices for identical assets in active markets. The fair value for Level 2 and Level 3 valuations are generally based on a combination of the market and income approach. The market approach generally utilizes market transaction data for the same or similar instruments, while the income approach involves determining fair values from discounted cash flow methodologies. The following represents a summary of significant valuation techniques for assets and liabilities used to determine fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy. LEVEL 1 MEASUREMENTS EQUITY SECURITIES These securities are comprised of certain exchange traded U.S. and foreign common stock. Valuation of these securities is based on unadjusted quoted prices in active markets that are readily and regularly available. SEPARATE ACCOUNT ASSETS These assets are comprised of actively traded open-ended mutual funds with a daily NAV and equity securities. The NAV can be observed by redemption and subscription transactions between third-parties, or may be obtained from fund managers. Equity securities are generally traded on an exchange. LEVEL 2 MEASUREMENTS FIXED MATURITY AVAILABLE-FOR-SALE AND TRADING SECURITIES The fair value of fixed maturity securities is obtained from third-party pricing services and internal pricing models. Vendors generally use a discounted cash-flow model or a market approach. Typical inputs used by these pricing sources include, but are not limited to: benchmark yields, reported trades, issuer spreads, bids, offers, benchmark securities, estimated cash flows and prepayment speeds, which the Company has determined are observable prices. If the price received from third-party pricing services does not appear to reflect market activity, the Company may challenge the price. Where the vendor updates the price to be consistent with the market observations, the security remains a Level 2. Private placement securities are primarily priced by internally developed discounted cash flow models. These models use observable inputs with a discount rate based off spreads of comparable public bond issues, adjusted for liquidity, rating and maturity. The Company assigns a credit rating for the private placement based upon internal analysis. The liquidity premium is based upon observable transactions, while the maturity and rating adjustments are based upon data obtained from Bloomberg. While the Company generally considers the public bond spreads, which are based on vendor prices, to be observable inputs, an evaluation is made of the similarities of private placements with the public bonds to determine whether the spreads utilized would be considered observable inputs for the private placement being valued. Examples of procedures performed include, but are not limited to, initial and on-going review of third-party pricing services' methodologies, review of pricing statistics and trends, back testing recent trades and monitoring of trading volumes, new issuance activity and other market activities. For certain private placements, which are below investment grade and not part of the Bloomberg data, the adjustments for maturity rating and liquidity are calculated by the analyst. If the impact of the liquidity adjustment is not significant to the overall value of the security, it is classified as Level 2. 67 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For certain short-term investments, amortized cost is used as the best estimate of fair value. EQUITY SECURITIES These securities are valued using the market approach in which market quotes are available but are not considered actively traded. Valuations are based principally on observable inputs including quoted prices in markets that are not considered active. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL Due to the short-term nature (generally one month) of this investment, the asset's carrying value approximates fair value. DERIVATIVE ASSETS AND LIABILITIES The fair value of these derivative instruments is generally derived through valuation models, which utilize observable market data. The market factors which have the most significant impact on the fair value of these instruments are U.S. swap rates and the exchange value of the U.S. dollar. Over-the-counter ("OTC") derivatives are privately negotiated financial contracts. OTC derivatives are valued using models based on actively quoted or observable market input values from external market data providers, third-party pricing vendors and/or recent trading activity. The selection of a particular model depends upon the contractual terms of, and specific risks inherent in the instrument, as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation model inputs include contractual terms, market prices, yield curves, credit curves, and for options such as caps, floors and swaptions, measures of volatility. For OTC derivatives that trade in liquid markets, such as currency forwards, swaps and options, model inputs are observable in the market for substantially the full term and can be verified. Valuations of OTC derivatives are adjusted for non-performance risk. The Company uses default estimates implied by CDS spreads on senior obligations of the counterparty in order to provide an objective basis for such estimates. When in a liability position, the Company uses its own medium term note spread to estimate the default rate. The non-performance risk adjustment is applied only to the uncollateralized portion of the OTC derivative assets and liabilities. OTC derivative contracts are executed under master netting arrangements with counterparties with a CSA, which is a bilateral ratings-sensitive agreement that requires collateral postings at established credit threshold levels. These agreements protect the interests of the Company and its counterparties should either party suffer a credit-rating deterioration. The vast majority of the Company's derivative agreements are with highly rated major international financial institutions. CASH EQUIVALENTS These include treasury bills, commercial paper and other highly liquid instruments. These instruments are generally not traded in active markets, however their fair value is based on observable inputs. The prices are either from a pricing vendor or amortized cost is used as the best estimate of fair value. SEPARATE ACCOUNT ASSETS These are investments primarily related to investments in privately placed corporate bonds, mortgage-backed securities, commercial mortgages and equities, as well as publicly traded investment grade corporate bonds, high-yield bonds and treasury bonds. These separate account assets are valued and assigned within the fair value hierarchy, consistent with the methodologies described herein for similar financial instruments held within the general account of the Company. 68 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LEVEL 3 MEASUREMENTS FIXED MATURITY AVAILABLE-FOR-SALE AND TRADING SECURITIES The valuation techniques for most Level 3 fixed maturity securities are generally the same as those described in Level 2, however, if the investments are less liquid or are lightly traded, there is generally less observable market data, and therefore these investments will be classified as Level 3. Circumstances where observable market data is not available may include events such as market illiquidity and credit events related to the security. In addition, certain securities are priced based upon internal valuations using significant unobservable inputs. If the price received from third-party pricing services does not appear to reflect market activity, the Company may challenge the price. For securities which go through this formal price challenge process, if the vendor does not update the price, a non-binding broker quote, another vendor price or current methodology is used to support the fair value instead. The Company also uses non-binding broker quotes to fair value certain bonds, when the Company is unable to obtain prices from third-party vendors. Private placement securities where adjustments for liquidity are considered significant to the overall price are classified as Level 3. EQUITY SECURITIES These securities include equity investments with privately held entities, including a government organization, where the prices are derived from internal valuations or the Company's private placement models since the securities are not actively traded in an active market. SEPARATE ACCOUNT ASSETS Separate account assets are primarily related to limited partnership investments that are restricted with respect to transfer or withdrawals. The limited partnerships are valued based on the latest NAV received if applicable, or an estimate of fair value provided by the investment manager. POLICYHOLDERS' ACCOUNT BALANCES Policyholders' account balances consist of embedded derivatives bifurcated from host contracts. Included are the embedded derivatives for GMAB contracts. The fair values of GMAB liabilities are calculated as the present value of future expected payments to customers less the present value of assessed rider fees attributable to the embedded derivative feature. The expected cash flows are discounted using the swap rate plus a spread based upon the Company's medium term notes. The spread reflects the market's perception of the Company's non- performance risk. Since there is no observable active market for the transfer of these obligations, the valuations are calculated using internally developed models. Significant inputs to these models include capital market assumptions, such as interest rate, equity market and implied volatility assumptions, as well as various policyholder behavior assumptions that are actuarially determined, including lapse rates, benefit utilization rates, mortality rates and withdrawal rates. These assumptions are reviewed at least annually, and updated based upon historical experience. Since many of the assumptions utilized are unobservable and are considered to be significant inputs to the liability valuation, the liability included in policyholders' account balances has been reflected within Level 3 in the fair value hierarchy. NON-RECURRING FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a non-recurring basis include mortgage loans, which are described in detail below. 69 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table represents certain assets measured at estimated fair value during the period and still held as of December 31, 2010 (in millions):
FAIR VALUE MEASUREMENT AS OF DECEMBER 31, 2010 ----------------------------------- LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ------- ------- ------- ----- Mortgage loans.................................. $-- $-- $(39) $(39)
FAIR VALUE MEASUREMENT AS OF DECEMBER 31, 2009 ----------------------------------- LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ------- ------- ------- ----- Mortgage loans.................................. $-- $-- $(40) $(40)
The impaired mortgage loans presented above were written down to their estimated fair values at the date the impairments were recognized. Estimated fair values for impaired 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 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. FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS Authoritative guidance related to financial instruments requires disclosure of fair value information of financial instruments whether or not fair value is recognized in the Consolidated Balance Sheet, for which it is practicable to estimate fair value. The carrying value and estimated fair value of instruments not otherwise disclosed in Notes 4, 11 and 13 of Notes to the Consolidated Financial Statements at December 31, 2010 and 2009 are presented below (in millions):
2010 2009 ------------------------- ------------------------- CARRYING ESTIMATED FAIR CARRYING ESTIMATED FAIR VALUE VALUE VALUE VALUE -------- -------------- -------- -------------- ASSETS Mortgage loans............................. $ 5,805 $ 6,143 $ 5,779 $ 5,688 Collateralized third-party loans........... $ 273 $ 290 $ 351 $ 384 LIABILITIES Policyholders' account balances -- Investment contracts......... $34,703 $35,005 $32,042 $32,469 Debt....................................... $ 20 $ 20 $ 70 $ 70 Collateral received on securities lending and repurchase agreements................ $ 461 $ 461 $ 461 $ 461 ------- ------- ------- -------
MORTGAGE LOANS Fair value is determined by discounting the projected cash flow for each loan to determine the current net present value. The discount rate used approximates the current rate for new mortgages with comparable characteristics and similar remaining maturities. COLLATERALIZED THIRD-PARTY LOANS The estimated fair value for the loan portfolio is based on prevailing interest rate spreads in the market. Fair value was calculated by discounting future cash flows using prevailing interest rates on similar loans. 70 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) POLICYHOLDERS' ACCOUNT BALANCES -- INVESTMENT CONTRACTS This includes supplementary contracts without life contingencies and other deposit type contracts where account value approximates fair value. For fixed deferred annuities, fair value is based upon a stochastic valuation using risk neutral assumptions for financial variables and Company specific assumptions for lapses, mortality and expenses. The cash flows were discounted using the yield on the Company's medium term notes. For funding agreements backing medium term notes, fair values were based on available market prices for the notes. For annuity certain liabilities, fair values are estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. DEBT The carrying amount of the Company's non-recourse debt and other debt approximates fair value. COLLATERAL RECEIVED ON SECURITIES LENDING AND REPURCHASE AGREEMENTS The carrying value of the liability approximates fair value since these borrowings are generally short-term in nature. NOTE 16 -- SUPPLEMENTAL CASH FLOW INFORMATION Income taxes (paid) received were ($356) million, $63 million and ($14) million during 2010, 2009 and 2008, respectively. Total interest paid was $14 million, $13 million and $15 million during 2010, 2009 and 2008, respectively. NON-CASH TRANSACTIONS There was a non-cash capital contribution transaction of $123 million in fixed maturities for the year ended December 31, 2009. There was a non-cash capital contribution transaction of $1,207 million for the year ended December 31, 2008. The capital contributed consisted of $902 million in equity securities, $301 million in fixed maturity securities and $4 million in other assets. Other non-cash investing transactions were $134 million for the year ended December 31, 2010, primarily related to transfers between other invested assets, fixed maturity securities and mortgage loans. Other non-cash investing transactions were $6 million for the year ended December 31, 2009 which was related to transfers between mortgage loans and real estate. There were no other non-cash investing transactions for the year ended December 31, 2008. NOTE 17 -- STATUTORY FINANCIAL INFORMATION The NAIC Accounting Practices and Procedures Manual ("NAIC SAP") has been adopted as a component of prescribed or permitted practices by the state of Delaware. Prescribed statutory accounting practices include state laws and regulations. Permitted statutory accounting practices encompass accounting practices that are not prescribed; such practices differ from state to state, may differ from company to company within a state, and may change in the future. The state of Delaware has adopted all prescribed accounting practices found in NAIC SAP. The Company has one permitted practice related to certain separate account assets that are valued at book value instead of market value. 71 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (A WHOLLY OWNED SUBSIDIARY OF NEW YORK LIFE INSURANCE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of the Company's statutory surplus at December 31, 2010 and 2009 between NAIC SAP and practices prescribed or permitted by the Department is shown below (in millions):
2010 2009 ------ ------ Statutory Surplus, Delaware Basis......................... $5,424 $4,998 State prescribed or permitted practices: Presenting Universal Life and Variable Universal Life Separate Accounts at book value......................... 124 21 ------ ------ Statutory Surplus, NAIC SAP............................... $5,548 $5,019 ====== ======
Statutory net income (loss) for the years ended December 31, 2010, 2009 and 2008 was $562 million, $225 million and ($387) million, respectively. The Company is restricted as to the amounts it may pay as dividends to New York Life. Under Delaware Insurance Law, dividends on capital stock can be distributed only out of earned surplus. Furthermore, without prior approval of the Delaware Insurance Commissioner, dividends cannot be declared or distributed which exceed the greater of ten percent of the Company's surplus or one hundred percent of net gain from operations. The Company did not pay or declare a dividend to its sole shareholder, New York Life at December 31, 2010 or 2009. As of December 31, 2010, the amount of available and accumulated funds derived from earned surplus from which the Company can pay dividends is $1,618 million. The maximum amount of dividends that may be paid in 2011 without prior approval is $540 million. NOTE 18 -- SUBSEQUENT EVENTS As of March 16, 2011, the date the financial statements were available to be issued, there have been no events occurring subsequent to the close of the Company's books or accounts for the accompanying consolidated financial statements that would have a material effect on the financial condition of the Company. 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of New York Life Insurance and Annuity Corporation: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholder's equity and of cash flow present fairly, in all material respects, the financial position of New York Life Insurance and Annuity Corporation and its subsidiaries (the "Company") at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As disclosed in Note 14 to the consolidated financial statements, the Company has significant transactions with New York Life Insurance Company and its affiliates. Because of these relationships, it is possible that the terms of the transactions are not the same as those that would result from transactions among wholly unrelated parties. As described in Note 3 to the consolidated financial statements, the Company changed its method of accounting for other-than-temporary impairments of fixed maturity investments in 2009. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP New York, New York March 16, 2011 73 PART C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS a. Financial Statements. To be filed by amendment. b. Exhibits. (1) Resolution of the Board of Directors of New York Life Insurance and Annuity Corporation ("NYLIAC") authorizing the establishment of the Separate Account - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (1) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), Filed 7/3/03 and incorporated herein by reference. (2) Not applicable. (3)(a) Distribution Agreement between NYLIFE Securities Inc. and NYLIAC - Previously filed as Exhibit (3)(a) to Post-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 2-86084), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (3)(a) to Post-Effective Amendment No. 4 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 033-64410), filed 4/25/97 and incorporated herein by reference. (3)(b) Distribution Agreement dated August 2, 1995, between NYLIFE Distributors, Inc. and NYLIAC-Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit(3)(b) to Post-Effective Amendment No. 1 on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 4/18/96 and incorporated herein by reference. (3)(c) Distribution and Underwriting Agreement, dated April 27, 2006, between New York Life Insurance and Annuity Corporation and NYLIFE Distributors LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit(c)(3) to Post-Effective Amendment No. 16 on Form N-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-48300), filed 8/15/06 and incorporated herein by reference. (4)(a) Enhanced Spousal Continuance Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(b) to Post-Effective Amendment No. 4 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 333-80535), filed 7/13/01 and incorporated herein by reference. (4)(b) Specimen Policy for New York Life Flexible Premium Variable Annuity II (No. ICC11 - P110) - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(b) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (4)(c) Annual Death Benefit Reset Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(c) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), filed 7/3/03 and incorporated herein by reference. (4)(d) Enhanced Beneficiary Benefit Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(d) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), filed 7/3/03 and incorporated herein by reference. (4)(e) Unemployment Benefit Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(f) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), filed 7/3/03 and incorporated herein by reference. (4)(f) UPromise Account Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(g) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), filed 7/3/03 and incorporated herein by reference. (4)(g) Living Needs Benefit Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(h) to the Initial Registration Statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV (File No. 333-106806), filed 7/3/03 and incorporated herein by reference. (4)(h) Breakpoint Credit Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(j) to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-156019), filed 12/9/08 and incorporated herein by reference. (4)(i) Living Needs Benefit/Unemployment Rider - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (4)(c) to Post-Effective Amendment No. 17 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 333-80535), filed 4/14/10 and incorporated herein by reference. (5)(a) Application for policies for New York Life Premier Plus, New York Life Premier Variable Annuities and Flexible Premium Variable Annuity II (No. 210-594) - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (5)(a) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-IV(File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (6)(a) Certificate of Incorporation of NYLIAC - Previously filed as Exhibit (6)(a) to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 2-86083), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(a) to the initial registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 7/3/96 and incorporated herein by reference. (6)(b)(1) By-Laws of NYLIAC - Previously filed as Exhibit (6)(b) to the registration statement on Form S-6 for NYLIAC MFA Separate Account-I (File No. 2-86083), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to the initial registration statement on Form S-6 for NYLIAC Corporate C-1 Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 7/3/96 and incorporated herein by reference. (6)(b)(2) Amendments to By-Laws of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (6)(b) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 333-39157), filed 4/3/98 and incorporated herein by reference. (7) Contract of Reinsurance between Connecticut General Life Insurance Company/Cigna Reinsurance and NYLIAC - Previously filed as Exhibit (7) to Registrant's Post-Effective Amendment No. 1 on Form N-4 (File No. 33-87382), filed 4/18/96 and incorporated herein by reference. (8)(a) Stock Sale Agreement between NYLIAC and MainStay VP Series Fund, Inc. (formerly New York Life MFA Series Fund, Inc.) - Previously filed as Exhibit (8)(a) to Pre-Effective Amendment No. 1 to the registration statement on Form N-1 for New York Life MFA Series Fund, Inc. (File No. 2-86082), re-filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(a) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 1/2/97 and incorporated herein by reference. (8)(b) Participation Agreement among Acacia Capital Corporation, Calvert Asset Management Company, Inc. and NYLIAC, as amended - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(1) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 1/2/97 and incorporated herein by reference. (8)(c) Participation Agreement among The Alger American Fund, Fred Alger and Company, Incorporated and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(2) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 1/2/97 and incorporated herein by reference. (8)(d) Participation Agreement between Janus Aspen Series and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(3) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 1/2/97 and incorporated herein by reference. (8)(e) Participation Agreement among Morgan Stanley Universal Funds, Inc., Morgan Stanley Asset Management Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(b)(4) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-07617), filed 1/2/97 and incorporated herein by reference. (8)(f) Amended and Restated Participation Agreement among Variable Insurance Products Funds, Fidelity Distributors Corporation and NYLIAC, as amended, dated November 23, 2009 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(f) to Post-Effective Amendment No. 24 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/13/10 and incorporated herein by reference. C-2 (8)(g) Form of Participation Agreement among T. Rowe Price Equity Series, Inc., T. Rowe Price Associates, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17CFR 232.102(e) as Exhibit (8)(h) to Post-Effective Amendment No. 7 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 33-53342), filed 4/16/98 and incorporated herein by reference. (8)(h) Form of Participation Agreement among Van Eck Worldwide Insurance Trust, Van Eck Associates Corporation and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(i) to Post-Effective Amendment No. 7 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 33-53342), filed 4/16/98 and incorporated herein by reference. (8)(i) Form of Participation Agreement among MFS Variable Insurance Trust, Massachusetts Financial Services Company and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(j) to Post-Effective Amendment No. 7 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 33-53342), filed 4/16/98 and incorporated herein by reference. (8)(j) Form of Participation Agreement among Dreyfus Investment Portfolios, The Dreyfus Corporation, Dreyfus Service Corporation and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(r) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference. (8)(k) Form of Substitution Agreement among NYLIAC, MainStay Management LLC, and New York Life Investment Management LLC - Previously filed in accordance with Regulation S-T, 17CFR 232.102(e) as Exhibit (9)(s) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life-Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference. (8)(l) Amendment dated 9/27/02 to Stock Sale Agreement dated 6/4/93 between NYLIAC and MainStay VP Series Fund, Inc. - Previously filed in accordance with Regulation S-T, 17CFR 232.102(e) as Exhibit (8)(n) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 4/9/03 and incorporated herein by reference. (8)(m) 12b-1 Plan Services Agreement for the Service Class Shares of MainStay VP Series Fund, Inc. between NYLIFE Distributors LLC and NYLIAC dated 12/22/05 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(x) to Post-Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/10/06 and incorporated herein by reference. (8)(n) Form of Class S Service Agreement between Fred Alger & Company and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(p) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(o) Form of Distribution Agreement between Dreyfus Service Corporation and NYLIAC dated as of 2/24/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(q) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(p) Form of Service Contract between Fidelity Distributors Corporation and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(r) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(q) Form of Distribution and Shareholder Services Agreement between Janus Distributors LLC and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(s) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(r) Form of Fund Participation Agreement (Service Shares) between Janus Aspen Series and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(t) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(s) Form of Participation Agreement by and among MFS Variable Insurance Trust, Massachusetts Financial Services Company and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(u) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(t) Form of Administrative Service Agreement between Morgan Stanley & Co. Incorporated and NYLIAC dated 4/30/03 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(v) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(u) Form of Supplement for Distribution Services Agreement between T. Rowe Price Investment Services, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(x) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(v) Form of Participation Agreement among Neuberger Berman Advisers Management Trust, Neuberger Berman Management Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (9)(q) to Pre-Effective Amendment No. 1 to the registration statement on Form S-6 for NYLIAC Variable Universal Life-Separate Account-I (File No. 333-57210), filed 6/4/01 and incorporated herein by reference. (8)(w) Form of Distribution and Administrative Services Agreement, Class S Shares, between Neuberger Berman Management, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(w) to Post-Effective Amendment No. 19 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-III (File No. 033-87382), filed 5/14/03 and incorporated herein by reference. (8)(x) Form of Participation Agreement between Victory Variable Insurance Funds, BISYS Fund Services Limited Partnership, Victory Capital Management, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(p) to Post-Effective Amendment No. 16 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/5/04 and incorporated herein by reference. (8)(y) Form of Distribution and Service Agreement, Class A Shares, between BISYS Fund Services Limited Partnership and NYLIFE Securities Inc.- Previously filed in accordance with Regulation S-T 17 CFR 232.102(e) as Exhibit (8)(q) to Post-Effective Amendment No. 16 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/5/04 and incorporated herein by reference. 8(z) Form of Participation Agreement among Liberty Variable Investment Trust, Columbia Funds Distributor, Inc. and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(a)(a) to Post-Effective Amendment No. 4 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-106806), filed 10/25/04 and incorporated herein by reference. 8(a)(a) Form of Participation agreement among Royce Capital Fund, Royce & Associates, LLC and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (h)(19) to Post-Effective Amendment No. 10 to the registration statement on Form N-6 for NYLIAC Corporate Sponsored Variable Universal Life Separate Account - I (File No. 333-48300), filed 6/24/04 and incorporated herein by reference. 8(b)(b) Administrative Services Letter of Agreement between Columbia Funds Distributor, Inc. and NYLIAC-Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(u) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/12/05 and incorporated herein by reference. 8(c)(c) Form of Administrative Services Agreement by and between Royce & Associates, LLC and NYLIAC-Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(u) to Post-Effective Amendment No. 18 to the registration statement on Form N-4 for NYLIAC NVA Separate Account-I (File No. 033-53342), filed 4/12/05 and incorporated herein by reference. (8)(d)(d) Form of Administrative and Shareholder Services Letter of Agreement dated 1/15/98 between Van Eck Worldwide Insurance Trust and NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (i)(9) to Post-Effective Amendment No. 11 to the registration statement on Form N-4 for NYLIAC Variable Universal Life Separate Account - I (File No. 333-79309), filed 9/13/05 and incorporated herein by reference. (8)(e)(e) Administrative Services Agreement between New York Life Investment Management LLC and NYLIAC dated 1/1/05 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(w) to Post-Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - I (File No. 033-53342), filed 4/10/06 and incorporated herein by reference. (8)(f)(f) Participation Agreement among New York Life Insurance and Annuity Corporation, MainStay VP Series Fund, Inc., and New York Life Investment Management LLC dated 10/7/04 - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(y) to Post-Effective Amendment No. 20 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account I (File No. 033-53342), filed 4/10/06 and incorporated herein by reference. (8)(g)(g) Form of Participation Agreement among NYLIAC, PIMCO Variable Insurance Trust and PIMCO Advisors Distributors LLC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) ad Exhibit (h)(17) to Post-Effective Amendment No. 9 to the registration statement on Form N-6 for NYLIAC, Corporate Sponsored Variable Universal Life Separate Account-I (File No. 333-48300), filed 4/14/04 and incorporated herein by reference. (8)(h)(h) Form of PIMCO Services Agreement For Advisor Class Shares of PIMCO Variable Insurance Trust, dated as of January 14, 2010, between NYLIAC and Pacific Investment Management Company LLC- Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (8)(z) to Post-Effective Amendment No. 24 to the registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account-I (File No. 033-53342), filed 4/13/10 and incorporated herein by reference. (9)(a) Opinion and Consent of Thomas F. English, Esq. - Filed herewith. (10)(a) Consent of PricewaterhouseCoopers LLP - Filed herewith. (10)(b) Powers of Attorney for Christopher O. Blunt, Director and Executive Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(b) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(c) Powers of Attorney for Frank M. Boccio, Director and Executive Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(c) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(d) Powers of Attorney for Stephen P. Fisher, Director of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(d) to Post-Effective Amendment No. 19 to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(e) Powers of Attorney for John T. Fleurant, Director of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(e) to Post-Effective Amendment No. 19 to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(f) Powers of Attorney for Robert M. Gardner, Vice President and Controller (Principal Accounting Officer) of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(f) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV(File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(g) Powers of Attorney for Solomon Goldfinger, Director and Senior Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(g) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(h) Powers of Attorney for Michael J. Gordon, Director and Senior Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(h) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(i) Powers of Attorney for Steven D. Lash, Director and Senior Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(i) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(j) Powers of Attorney for Theodore A. Mathas, Chairman and President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(j) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(k) Powers of Attorney for Mark W. Pfaff, Director and Executive Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(k) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(l) Powers of Attorney for Arthur H. Seter, Director and Senior Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(l) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(m) Powers of Attorney for Michael E. Sproule, Director, Executive Vice President and Chief Financial Officer of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(m) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(n) Powers of Attorney for Joel M. Steinberg, Director and Senior Vice President of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(n) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (10)(o) Powers of Attorney for Susan A. Thrope, Director of NYLIAC - Previously filed in accordance with Regulation S-T, 17 CFR 232.102(e) as Exhibit (10)(o) to the initial registration statement on Form N-4 for NYLIAC Variable Annuity Separate Account - IV (File No. 333-172044), filed 2/3/11 and incorporated herein by reference. (11) Not applicable. (12) Not applicable. C-3 ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR The principal business address of each director and officer of NYLIAC is 51 Madison Avenue, New York, NY 10010.
Name: Title: ----- ------ Theodore A. Mathas Chairman and President Christopher O. Blunt Director, Executive Vice President Frank M. Boccio Director and Executive Vice President Mark W. Pfaff Director and Executive Vice President Michael E. Sproule Director, Executive Vice President and Chief Financial Officer Solomon Goldfinger Director, Senior Vice President and Senior Advisor Michael J. Gordon Director and Senior Vice President Steven D. Lash Director and Senior Vice President Arthur H. Seter Director, Senior Vice President and Chief Investment Officer Joel M. Steinberg Director, Senior Vice President and Chief Actuary Stephen P. Fisher Director John T. Fleurant Director Susan A. Thrope Director John Y. Kim Executive Vice President - CEO and President of New York Life Investments Patricia Barbari Senior Vice President Scott L. Berlin Senior Vice President Tony H. Elavia Senior Vice President Thomas F. English Senior Vice President & Chief Legal Officer Robert J. Hebron Senior Vice President Angela T. Kyle Senior Vice President Barbara McInerney Senior Vice President & Chief Compliance Officer Anthony Malloy Senior Vice President Gary J. Miller Senior Vice President Michael M. Oleske Senior Vice President and Chief Tax Counsel Frank J. Ollari Senior Vice President Paul T. Pasteris Senior Vice President Gerard A. Rocchi Senior Vice President Eileen T. Slevin Senior Vice President and Chief Information Officer Mark W. Talgo Senior Vice President Joseph Bennett First Vice President Stephen A. Bloom First Vice President and Chief Underwriter Minas C. Joannides First Vice President and Chief Medical Director Michael J. Oliviero First Vice President - Tax Angelo J. Scialabba First Vice President Thomas J. Troeller First Vice President and Actuary Richard J. Witterschein First Vice President and Treasurer Stephen Abramo Vice President Nikhil A. Advani Vice President Mitchell P. Ascione Vice President David Boyle Vice President Craig L. DeSanto Vice President and Actuary Robert M. Gardner Vice President and Controller Robert J. Hynes Vice President Michael P. Lackey Vice President Catherine A. Marrion Vice President and Secretary Corey B. Multer Vice President Marijo F. Murphy Vice President Nicholas Pasyanos Vice President and Actuary Linda M. Reimer Vice President and Associate Legal Officer Andrew N. Reiss Vice President - National Sales Manager Michelle D. Richter Vice President Janis C. Rubin Vice President Irwin Silber Vice President and Actuary George E. Silos Vice President and Actuary Teresa A. Turner Vice President Robin M. Wagner Vice President
C-4 ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT The Depositor, NYLIAC, is a wholly-owned subsidiary of New York Life Insurance Company ("New York Life"). The Registrant is a segregated asset account of NYLIAC. The following chart indicates persons presumed to be controlled by New York Life(+), unless otherwise indicated. Subsidiaries of other subsidiaries are indented accordingly, and ownership is 100% unless otherwise indicated.
Jurisdiction of Percent of Voting Name Organization Securities Owned Eclipse Funds Inc.(1) Maryland ICAP Funds Inc. Maryland Eclipse Funds(1) Massachusetts The MainStay Funds(1) Massachusetts MainStay VP Series Fund, Inc.(1)(2) Maryland MainStay Funds Trust Delaware New York Life Insurance and Annuity Corporation Delaware Pacific Square Investments LLC Delaware 29 Park Investments No. 2 Limited Cayman Islands NYLIFE LLC Delaware Eagle Strategies LLC Delaware
-------- (1) Registered investment company as to which New York Life and/or its subsidiaries perform one or more of the following services: investment management, administrative, distribution, transfer agency and underwriting services. It is not a subsidiary of New York Life and is included for informational purposes only. (2) New York Life Investment Management LLC serves as investment adviser to this entity, the shares of which are held of record by separate accounts of NYLIAC. New York Life disclaims any beneficial ownership and control of this entity. New York Life and NYLIAC as depositors of said separate accounts have agreed to vote their shares as to matters covered in the proxy statement in accordance with voting instructions received from holders of variable annuity and variable life insurance policies at the shareholders meeting of this entity. It is not a subsidiary of New York Life, but is included here for informational purposes only. -------- (+) By including the indicated corporations in this list, New York Life is not stating or admitting that said corporations are under its actual control; rather, these corporations are listed here to ensure full compliance with the requirements of this Form N-4. C-5
Jurisdiction of Percent of Voting Name Organization Securities Owned (NYLIFE LLC subsidiaries cont.) New York Life Capital Corporation Delaware NYL Management Limited United Kingdom NYLUK I Company United Kingdom NYLUK II Company United Kingdom Gresham Mortgage United Kingdom W Construction Company United Kingdom WUT United Kingdom WIM (AIM) United Kingdom New York Life Trust Company New York NYL Executive Benefits LLC Delaware
C-6
Jurisdiction of Percent of Voting Name Organization Securities Owned (NYLIFE LLC subsidiaries cont.) NYLIFE Securities LLC Delaware NYLINK Insurance Agency Incorporated Delaware
C-7
Jurisdiction of Percent of Voting Name Organization Securities Owned New York Life Investment Management Holdings LLC Delaware NYLCAP Holdings Mauritius Jacob Ballas Capital India PVT. Ltd. Mauritius 24.66% NYLIM Service Company LLC Delaware NYLCAP Manager LLC Delaware New York Life Capital Partners, LLC Delaware New York Life Capital Partners, L.P. Delaware New York Life Capital Partners II, LLC Delaware New York Life Capital Partners II, L.P. Delaware New York Life Capital Partners III GenPar GP, LLC Delaware New York Life Capital Partners III GenPar, LP Delaware New York Life Capital Partners III, LP Delaware NYLCAP III RBG Corp. Delaware New York Life Capital Partners III-A, LP Delaware NYLCAP III-A RBG Corp. Delaware New York Life Capital Partners IV GenPar GP, LLC Delaware New York Life Capital Partners IV GenPar, LP Delaware New York Life Capital Partners IV, LP Delaware New York Life Capital Partners IV-A, LP Delaware NYLCAP 2010 Co-Invest GenPar GP, LLC Delaware NYLCAP 2010 Co-Invest GenPar L.P. Delaware NYLCAP 2010 Co-Invest L.P. Delaware NYLCAP 2010 Co-Invest ECI Blocker Holdco A L.P. Delaware NYLCAP 2010 Co-Invest ECI Blocker A L.P. Delaware NYLCAP 2010 Co-Invest ECI Blocker Holdco B L.P. Delaware NYLCAP 2010 Co-Invest ECI Blocker B L.P. Delaware NYLIM Mezzanine GenPar GP, LLC Delaware NYLIM Mezzanine GenPar, LP Delaware New York Life Investment Management Mezzanine Partners, LP Delaware NYLIM Mezzanine Luxco S.a.r.l. Luxembourg NYLIM Mezzanine Partners Parallel Fund, LP Delaware NYLIM Mezzanine Partners II GenPar, GP, LLC Delaware NYLIM Mezzanine Partners II, AIV, L.P. Delaware NYLIM Mezzanine Partners II, AIV, INC. Delaware NYLIM Mezzanine Offshore Partners II, LP Cayman Islands NYLIM Mezzanine Partners II, GenPar, LP Delaware New York Life Investment Management Mezzanine Delaware Partners II, LP NYLIM Mezzanine II Luxco S.a.r.l. Luxembourg NYLIM Mezzanine Partners II Parallel Fund, LP Delaware NYLIM Mezzanine II Parallel Luxco S.a.r.l. Luxembourg NYLIM Mezzanine Partners II AIV Splitter, LP Delaware NYLCAP Canada GenPar Inc. Canada NYLCAP Select Manager Canada Fund, LP Canada NYLCAP India Funding LLC Delaware NYLIM-JB Asset Management Co. LLC Mauritius 24.66% New York Life Investment Management India Fund II, LLC Mauritius New York Life Investment Management India Fund Mauritius (FVCI) II, LLC NYLCAP Select Manager GenPar GP, LLC Delaware NYLCAP Select Manager GenPar, LP Delaware NYLCAP Select Manager Fund, LP Delaware NYLCAP Select Manager Cayman Fund, LP Cayman Islands NYLIM-JB Asset Management Co. (Mauritius) LLC Mauritius 24.6% New York Life Investment Management India Fund II, LLC Mauritius 24.6% New York Life Investment Management India Fund (FVCI) II, LLC Mauritius 24.6% NYLCAP India Funding III LLC Delaware NYLIM-JB Asset Management Co. III LLC Mauritius 24.66% NYLIM Jacob Ballas India Fund III LLC Mauritius NYLIM Jacob Ballas Capital India Mauritius (FVCI) III LLC NYLIM Jacob Ballas India (FII) III LLC Mauritius NYLCAP Mezzanine Partners III GenPar GP, LLC Delaware NYLCAP Mezzanine Partners III GenPar, LP Delaware 44.16% NYLCAP Mezzanine Partners III, LP Delaware NYLCAP Mezzanine III Luxco S.a.r.l. Luxembourg NYLCAP Mezzanine Offshore Partners III, LP Cayman Islands MacKay Shields LLC Delaware MacKay Shields Core Plus Opportunities Fund GP LLC Delaware MacKay Shields Core Plus Opportunities Fund LP Delaware MacKay Municipal Managers Opportunities GP LLC Delaware MacKay Municipal Opportunities Master Fund, L.P. Delaware Mariner Municipal Opportunities Fund, L.P. Delaware MacKay Municipal Managers Credit Opportunities GP LLC Delaware MacKay Municipal Credit Opportunities Master Fund, L.P. Delaware Mariner Municipal Credit Opportunities Fund, L.P. Delaware MacKay Shields High Yield Active Core Fund GP LLC Delaware MacKay Shields High Yield Active Core Fund LP Delaware MacKay Shields Credit Strategy Fund Ltd. Cayman Islands MacKay Shields Defensive Bond Arbitrage Fund Ltd. Bermuda 40.13% MacKay Shields Core Plus Opportunities Fund Ltd. Cayman Islands MacKay Shields Credit Strategy Partners LP Delaware MacKay Shields General Partner (L/S) LLC Delaware MacKay Shields Long/Short Fund LP Delaware MacKay Shields Long/Short Fund (Master) LP Delaware MacKay Shields Long/Short Fund (QP) LP Delaware MacKay Shields Long/Short Fund (Offshore) LP Cayman Islands NYLIFE Distributors LLC Delaware New York Life Investment Management LLC Delaware New York Life Investment Management (U.K.) Limited United Kingdom NYLIM GP, LLC Delaware NYLIM Large Cap Enhanced Index Fund p.l.c. Ireland NYLIM Fund II GP, LLC Delaware NYLIM Real Estate Mezzanine Fund II, LP Delaware NYLIM-TND, LLC Delaware NYLIM-CN, LLC Delaware NYLIM-DCM, LLC Delaware NYLIM-MM, LLC Delaware DCM-N, LLC Delaware 80% DCM Warehouse Series A, LLC Delaware DCM Warehouse Series One, LLC Delaware Sixteen West Savannah, LLC Indiana Metropolis I Perm, LLC Delaware Metropolis II Construction, LLC Delaware CLV Holding, LLC Indiana Current at Lee Vista, LLC Florida 75% Streets Las Vegas, LLC Arizona 90% NYLIM Re Mezzanine Fund II Investment Corporation Delaware Albany Hills Holding, LLC Delaware Joplin Holding, LLC Delaware Joplin Properties LLC Missouri 50% NYLIM-JP LLC Delaware Jefferson at Maritime Holding, L.P. Delaware Jefferson at Maritime GP, LLC Delaware Jefferson at Maritime, L.P. Delaware NYLIM Repurchase Mezzanine Subsidiary LLC Delaware Kimball Woods LLC Delaware 50% NYLIM U.S. Core Equity Market Neutral Fund GP, LLC Delaware NYLIM-GCR Fund I LLC Delaware 50% NYLIM-GCR Fund I 2002 L.P. Delaware 50% WFHG GP, LLC Delaware 50% Workforce Housing Fund I-2007 LP Delaware Madison Capital Funding LLC Delaware MCF Co-Investment GP, LLC Delaware MCF Co-Investment GP, LP Delaware Madison Capital Funding Co-Investment Fund, LP Delaware MCF Fund I LLC Delaware MCF Capital Management LLC Delaware OFS Capital WM, LLC Delaware McMorgan & Company LLC Delaware Madison Square Investors LLC Delaware Madison Square Investors Asian Equity Market Neutral Master Fund Ltd. Cayman Is. Madison Square Investors Large-Cap Enhanced Index Fund GP, LLC Delaware Madison Square Investors Large-Cap Enhanced Index Fund L.P. Delaware Madison Square Investors Asian Equity Market Neutral Fund GP, LLC Delaware NYLIM Real Estate Inc. Delaware Private Advisors L.L.C. Delaware 60% Private Advisors Small Company Buyout Fund IV, LP Delaware New York Life Investments International Limited Ireland NYLIFE Insurance Company of Arizona Arizona New York Life International, LLC Delaware HSBC New York Life Seguros de Retiro (Argentina) S.A. Argentina 40% HSBC New York Life Seguros de Vida (Argentina) S.A. Argentina 40% Maxima S.A. AFJP Argentina 40% New York Life Insurance Worldwide Limited Bermuda 95.98% New York Life Insurance Taiwan Corporation Taiwan NYL Cayman Holdings Ltd. Cayman Islands New York Life Worldwide Capital, LLC Delaware Fianzas Monterrey, S.A. Mexico 99.95% Operadora FMA, S.A. de C.V. Mexico 99.99% NYL-HK Capital Planning LLC Delaware NYLIFE Thailand, Inc. Delaware PMCC Ltd. Thailand 49% NYL Data Center Limited Thailand 99.97% Siam Commercial New York Life Insurance Public Company Thailand 47.33% Limited New York Life International India Fund (Mauritius) LLC Mauritius 92.97% SEAF Sichuan SME Investment Fund LLC Delaware 39.98% NYLI-VB Asset Management Co. (Mauritius) LLC Mauritius 90% New York Life International Holdings Limited Mauritius 95% Max New York Life Insurance Limited India 26% Seguros Monterrey New York Life, S.A. de C.V. Mexico 99.998% Administradora de Conductos SMNYL, S.A. de C.V. Mexico 99% Agencias de Distribution SMNYL, S.A. de C.V. Mexico 99% NYL Cayman Ltd. Cayman Islands Seward Lease Acquisition LLC Delaware 56.76% Silver Spring, LLC Delaware Silver Spring Associates, L.P. Pennsylvania Biris Holdings LLC Delaware NYL Wind Investments LLC Delaware New York Life Short Term Fund New York 29 Park Investments No. 1 Limited Cayman Islands SCP 2005-C21-002 LLC Delaware SCP 2005-C21-003 LLC Delaware SCP 2005-C21-006 LLC Delaware SCP 2005-C21-007 LLC Delaware SCP 2005-C21-008 LLC Delaware SCP 2005-C21-009 LLC Delaware SCP 2005-C21-017 LLC Delaware SCP 2005-C21-018 LLC Delaware SCP 2005-C21-021 LLC Delaware SCP 2005-C21-025 LLC Delaware SCP 2005-C21-031 LLC Delaware SCP 2005-C21-036 LLC Delaware SCP 2005-C21-041 LLC Delaware SCP 2005-C21-043 LLC Delaware SCP 2005-C21-044 LLC Delaware SCP 2005-C21-048 LLC Delaware SCP 2005-C21-061 LLC Delaware SCP 2005-C21-063 LLC Delaware SCP 2005-C21-067 LLC Delaware SCP 2005-C21-069 LLC Delaware SCP 2005-C21-070 LLC Delaware NYMH-Houston GP, LLC Delaware NYMH-Houston, L.P. Texas NYMH-Plano GP, LLC Delaware NYMH-Plano, L.P. Texas NYMH-Freeport GP, LLC Delaware NYMH-Freeport, L.P. Texas NYMH-Ennis GP, LLC Delaware NYMH-Ennis, L.P. Texas NYMH-San Antonio GP, LLC Delaware NYMH-San Antonio, L.P. Texas NYMH-Taylor GP, LLC Delaware NYMH-Taylor, L.P. Texas NYMH-Stephenville GP, LLC Delaware NYMH-Stephenville, L.P. Texas NYMH-Farmingdale, NY LLC Delaware NYMH-Attleboro MA, LLC Delaware NYLMDC-King of Prussia GP, LLC Delaware NYLMDC-King of Prussia Realty, LP Delaware NYLIFE Real Estate Holdings LLC Delaware Huntsville NYL LLC Delaware CC Acquisitions, LP Delaware Martingale Road LLC Delaware 71.4693% NYL Midwest Apartments LLC Delaware REEP-MF Verde NC LLC Delaware PTC Acquisitions, LLC Delaware
C-8 ITEM 27. NUMBER OF CONTRACT OWNERS As of the date of this filing, sales of the policies have not commenced. ITEM 28. INDEMNIFICATION The Officers and Directors of NYLIAC are indemnified pursuant to Section 141(f) of the General Corporation Law of the State of Delaware and under Section 8.01 of the By-Laws of New York Life Insurance and Annuity Corporation, as adopted on November 3, 1980 and amended on April 6, 1988 and on May 13, 1997. Section 8.01 of the NYLIAC By-Laws provide for indemnification as follows: 8.01 - LIMITATION OF LIABILITY: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES (a) LIMITATION OF LIABILITY FOR DIRECTORS - No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty of the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. (b) INDEMNIFICATION AND ADVANCEMENT OF EXPENSES OF DIRECTORS AND OFFICERS - Except to the extent expressly prohibited by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any director or officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against judgments, fines, amounts paid in settlement and reasonable expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Except to the extent expressly prohibited by the General Corporation Law of the State of Delaware, the Corporation shall indemnify any director or officer who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against reasonable expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; provided, that, no indemnification shall be made in respect of any action, suit or proceeding as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action, suit or proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. The Corporation shall advance to or promptly reimburse upon request reasonable expenses (including attorneys' fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Section 8.01; provided, however, that such director or officer shall cooperate in good faith with any request by the Corporation that common counsel be utilized by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. C-9 The indemnification of any person provided by this Section 8.01 shall continue after such person has ceased to be a director or officer of the Corporation and shall inure to the benefit of such person's heirs, executors, administrators or legal representative. The Corporation is authorized to enter into agreements with any of its directors, officers or employees extending rights to indemnification and advancement of expenses to any such person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of any such person pursuant to this Section 8.01. In case any provision in this Section 8.01 shall be determined at any time to be unenforceable in any respect, the other provisions hereof shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford indemnification and advancement of expenses to its directors and officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law. (c) DETERMINATION OF INDEMNIFICATION (i) DIRECTORS AND OFFICERS - Subject to the General Corporation Law of the State of Delaware, any indemnification of directors and officers shall be made by either (A) the Corporation's Board of Directors or (B) the Corporation's shareholders, upon a determination that such indemnification is proper in the circumstances. (ii) EMPLOYEES AND AGENTS - Subject to the General Corporation of the State of Delaware, the Corporation may indemnify persons who are or were employees (other than officers of the Corporation), agents, or independent contractors of the Corporation upon the advice of the Corporation's legal counsel and a determination by (A) the Corporation's Board of Directors or (B) the Corporation's shareholders, that such indemnification is proper in the circumstances. ITEM 29. PRINCIPAL UNDERWRITERS (a) Investment companies (other than the Registrant) for which NYLIFE Distributors LLC is currently acting as underwriter: NYLIAC Corporate Sponsored Variable Universal Life Separate Account-I NYLIAC Variable Universal Life Separate Account-I NYLIAC MFA Separate Account-I NYLIAC MFA Separate Account-II NYLIAC Variable Annuity Separate Account-I NYLIAC Variable Annuity Separate Account-II NYLIAC Variable Annuity Separate Account-III NYLIAC VLI Separate Account Eclipse Funds Mainstay Funds Mainstay VP Series Fund McMorgan Funds NYLIM Institutional Funds (b) Directors and Officers. The principal business address of each director and officer of NYLIFE Distributors LLC is 169 Lackawanna Avenue, Parsippany, New Jersey 07054. John Y. Kim Chief Executive Officer Stephen P. Fisher Manager, President and Chief Operating Officer Christopher O. Blunt Chairman and Executive Vice President, Retirement Income Security Penny Nelson Manager and Managing Director, Operations Drew E. Lawton Manager Robert J. Hebron Executive Vice President, AMN Executive Benefits and Retail Distribution John R. Meyer Executive Vice President, IAD and RIS Agency Distribution Thomas A. Clough Senior Managing Director, Retirement Plan Services Barbara McInerney Senior Managing Director, Compliance Daniel A. Andriola Managing Director and Controller Philip L. Gazzo Managing Director, Retirement Income Security Mark A. Gomez Managing Director and Chief Compliance Officer Joseph J. Henehan Managing Director, Retirement Plan Services Marguerite E. H. Morrison Managing Director and Secretary Rebekah M. Mueller Managing Director, Retirement Plan Services Mark S. Niziak Managing Director, Retirement Plan Services John J. O'Gara Managing Director, Life Distribution Bernadette Hoban Director, Retirement Income Security Linda M. Howard Director, Compliance and Anti-Money Laundering Officer Paula Taylor Director, Retirement Plan Services John Vaccaro Director, Compliance Albert W. Leier Vice President - Financial Operations and Treasurer David F. Boyle Vice President, Executive Benefits
C-10 (c) Commissions and Other Compensation
Name of New Underwriting Compensation on Principal Discounts and Redemption or Brokerage Underwriter Commissions Annuitization Commission Compensation ----------- ----------- ------------- ---------- ------------ NYLIFE Distributors Inc. -0- -0- -0- -0-
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS All accounts and records required to be maintained by Section 31(a) of the 1940 Act and the rules under it are maintained by NYLIAC at its home office, 51 Madison Avenue, Room 0150, New York, New York 10010; New York Life - Records Division, 110 Cokesbury Road, Lebanon, New Jersey 08833 and with Iron Mountain Records Management, Inc. at both 8 Neptune Drive, Poughkeepsie, New York 12601 and Route 9W South, Port Ewen, New York 12466-0477. ITEM 31. MANAGEMENT SERVICES - Not applicable. ITEM 32. UNDERTAKINGS - Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than 16 months old for so long as payments under the variable annuity contracts may be accepted; (b) to include either (1) as part of any application to purchase a contract offered by the prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) 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) 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. REPRESENTATION AS TO THE REASONABLENESS OF AGGREGATE FEES AND CHARGES New York Life Insurance and Annuity Corporation ("NYLIAC"), the sponsoring insurance company of NYLIAC Variable Annuity Separate Account-IV, hereby represents that the fees and charges deducted under the New York Life Flexible Premium Variable Annuity II Policies are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by NYLIAC. C-11 SECTION 403(b) REPRESENTATIONS Registrant represents that it is relying on a no-action letter dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, in connection with redeemability restrictions on Section 403(b) Policies, and that paragraphs numbered (1) through (4) of that letter will be complied with. C-12 SIGNATURES Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it has duly caused this Amendment to the Registration Statement to be signed on its behalf, in the City and State of New York on this 12th day of April 2011. NYLIAC VARIABLE ANNUITY SEPARATE ACCOUNT-IV (Registrant) By: /s/ Nikhil A. Advani ----------------------------- Nikhil A. Advani Vice President NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION (Depositor) By: /s/ Nikhil A. Advani ----------------------------- Nikhil A. Advani Vice President As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the date indicated: Christopher O. Blunt* Director Frank M. Boccio* Director Stephen P. Fisher* Director John T. Fleurant* Director Robert M. Gardner* Vice President and Controller (Principal Accounting Officer) Solomon Goldfinger* Director Michael J. Gordon* Director Steven D. Lash* Director Theodore A. Mathas* Chairman and President (Principal Executive Officer) Mark W. Pfaff* Director Arthur H. Seter* Director Michael E. Sproule* Director and Chief Financial Officer Joel M. Steinberg* Director Susan A. Thrope* Director By: /s/ Nikhil A. Advani ---------------------------------- Nikhil A. Advani Attorney-in-Fact April 12, 2011
* Pursuant to Powers of Attorney previously filed. EXHIBIT INDEX Exhibit Number Description (9) Opinion and consent of Thomas F. English, Esq. (10)(a) Consent of PricewaterhouseCoopers LLP