-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OktvEim4s4RJQT/87RuiliSY5DedWR4HaAnqnyLhUnjJa9Hd2Vb+6c4PZMrL7wWV zwe7x4OmGf25pZzCXud4sg== 0000950135-08-001831.txt : 20091124 0000950135-08-001831.hdr.sgml : 20091124 20080317155635 ACCESSION NUMBER: 0000950135-08-001831 CONFORMED SUBMISSION TYPE: CORRESP PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20080317 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MetLife Investors USA Variable Life Account A CENTRAL INDEX KEY: 0001350943 IRS NUMBER: 540696644 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: CORRESP BUSINESS ADDRESS: STREET 1: 5 PARK PLAZA, SUITE 1900 CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 949-223-5680 MAIL ADDRESS: STREET 1: 5 PARK PLAZA, SUITE 1900 CITY: IRVINE STATE: CA ZIP: 92614 CORRESP 1 filename1.txt EQUITY ADVANTAGE VUL Flexible Premium Variable Life Insurance Policies Issued by MetLife Investors USA Variable Life Account A of MetLife Investors USA Insurance Company 5 Park Plaza, Suite 1900 Irvine, California 92614 (800) 989-3752 This prospectus offers individual flexible premium variable life insurance policies (the "Policies") issued by MetLife Investors USA Insurance Company ("MetLife Investors USA"). You allocate net premiums among the Investment Divisions of MetLife Investors USA Variable Life Account A (the "Separate Account"). Each Investment Division of the Separate Account invests in shares of one of the following "Portfolios": METROPOLITAN SERIES FUND, INC. BlackRock Aggressive Growth Portfolio BlackRock Bond Income Portfolio BlackRock Diversified Portfolio BlackRock Large Cap Value Portfolio BlackRock Legacy Large Cap Growth Portfolio BlackRock Strategic Value Portfolio Davis Venture Value Portfolio FI International Stock Portfolio FI Large Cap Portfolio FI Mid Cap Opportunities Portfolio FI Value Leaders Portfolio Franklin Templeton Small Cap Growth Portfolio Harris Oakmark Focused Value Portfolio Harris Oakmark Large Cap Value Portfolio Jennison Growth Portfolio Lehman Brothers(R) Aggregate Bond Index Portfolio Loomis Sayles Small Cap Portfolio MetLife Mid Cap Stock Index Portfolio MetLife Stock Index Portfolio MFS(R) Total Return Portfolio Morgan Stanley EAFE(R) Index Portfolio Neuberger Berman Mid Cap Value Portfolio Oppenheimer Global Equity Portfolio Russell 2000(R) Index Portfolio T. Rowe Price Large Cap Growth Portfolio T. Rowe Price Small Cap Growth Portfolio Western Asset Management Strategic Bond Opportunities Portfolio Western Asset Management U.S. Government Portfolio MetLife Conservative Allocation Portfolio MetLife Conservative to Moderate Allocation Portfolio MetLife Moderate Allocation Portfolio MetLife Moderate to Aggressive Allocation Portfolio MetLife Aggressive Allocation Portfolio MET INVESTORS SERIES TRUST BlackRock Large-Cap Core Portfolio Cyclical Growth and Income ETF Portfolio Cyclical Growth ETF Portfolio Harris Oakmark International Portfolio Janus Forty Portfolio Lazard Mid-Cap Portfolio Legg Mason Partners Aggressive Growth Portfolio Legg Mason Value Equity Portfolio Lord Abbett Bond Debenture Portfolio Met/AIM Small Cap Growth Portfolio MFS(R) Research International Portfolio Neuberger Berman Real Estate Portfolio Oppenheimer Capital Appreciation Portfolio PIMCO Inflation Protected Bond Portfolio PIMCO Total Return Portfolio RCM Technology Portfolio T. Rowe Price Mid-Cap Growth Portfolio AMERICAN FUNDS INSURANCE SERIES American Funds Bond Fund American Funds Global Small Capitalization Fund American Funds Growth Fund American Funds Growth-Income Fund You may also allocate net premiums to our Fixed Account. Special limits may apply to Fixed Account transfers and withdrawals. When we apply your initial premium to the Policy, depending on state law, you will either receive Separate Account performance immediately, or Fixed Account interest for 20 days before we then allocate your cash value to the Separate Account. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE POLICIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE PORTFOLIO PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM FOR REFERENCE. WE DO NOT GUARANTEE HOW ANY OF THE INVESTMENT DIVISIONS OR PORTFOLIOS WILL PERFORM. THE POLICIES AND THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. THERE MAY BE DIFFERENCES BETWEEN THE DESCRIPTION OF THE POLICY CONTAINED IN THIS PROSPECTUS AND THE POLICY ISSUED TO YOU DUE TO DIFFERENCES IN STATE LAW. YOU SHOULD READ THE POLICY CAREFULLY FOR ANY VARIATIONS IN YOUR STATE. APRIL 28, 2008 TABLE OF CONTENTS
PAGE ----- SUMMARY OF BENEFITS AND RISKS............................... A-4 Benefits of the Policy................................. A-4 Risks of the Policy.................................... A-5 Risks of the Portfolios................................ A-7 FEE TABLES.................................................. A-7 Transaction Fees....................................... A-7 Periodic Charges Other Than Portfolio Operating Expenses.............................................. A-9 Annual Portfolio Operating Expenses.................... A-12 HOW THE POLICY WORKS........................................ A-14 THE COMPANY, THE SEPARATE ACCOUNT AND THE PORTFOLIOS........ A-15 The Company............................................ A-15 The Separate Account................................... A-15 The Portfolios......................................... A-15 Share Classes of the Portfolios........................ A-18 Certain Payments We Receive with Regard to the Portfolios............................................ A-18 Selection of the Portfolios............................ A-19 Voting Rights.......................................... A-19 Rights Reserved by MetLife Investors USA............... A-20 THE POLICIES................................................ A-20 Purchasing a Policy.................................... A-20 Replacing Existing Insurance........................... A-20 Policy Owner and Beneficiary........................... A-21 24 Month Conversion Right.............................. A-21 PREMIUMS.................................................... A-21 Flexible Premiums...................................... A-21 Amount Provided for Investment under the Policy........ A-22 Right to Examine Policy................................ A-22 Allocation of Net Premiums............................. A-23 RECEIPT OF COMMUNICATIONS AND PAYMENTS AT METLIFE INVESTORS USA'S DESIGNATED OFFICE................................... A-23 Payment of Proceeds.................................... A-24 CASH VALUE.................................................. A-25 DEATH BENEFITS.............................................. A-25 Death Proceeds Payable................................. A-26 Change in Death Benefit Option......................... A-27 Increase in Face Amount................................ A-27 Reduction in Face Amount............................... A-27 SURRENDERS AND PARTIAL WITHDRAWALS.......................... A-28 Surrender.............................................. A-28 Partial Withdrawal..................................... A-28 TRANSFERS................................................... A-30 Transfer Option........................................ A-30 AUTOMATED INVESTMENT STRATEGIES............................. A-32
A-2
PAGE ----- LOANS....................................................... A-33 LAPSE AND REINSTATEMENT..................................... A-34 Lapse.................................................. A-34 Reinstatement.......................................... A-35 ADDITIONAL BENEFITS BY RIDER................................ A-35 THE FIXED ACCOUNT........................................... A-36 General Description.................................... A-36 Values and Benefits.................................... A-36 Policy Transactions.................................... A-36 CHARGES..................................................... A-37 Deductions from Premiums............................... A-38 Surrender Charge....................................... A-38 Partial Withdrawal Charge.............................. A-40 Transfer Charge........................................ A-40 Illustration of Benefits Charge........................ A-40 Monthly Deduction from Cash Value...................... A-40 Loan Interest Spread................................... A-42 Charges Against the Portfolios and the Investment Divisions of the Separate Account..................... A-42 TAX CONSIDERATIONS.......................................... A-42 Introduction........................................... A-42 Tax Status of the Policy............................... A-43 Tax Treatment of Policy Benefits....................... A-43 MetLife Investors USA's Income Taxes................... A-47 DISTRIBUTION OF THE POLICIES................................ A-47 LEGAL PROCEEDINGS........................................... A-49 RESTRICTIONS ON FINANCIAL TRANSACTIONS...................... A-49 FINANCIAL STATEMENTS........................................ A-49 GLOSSARY.................................................... A-50 APPENDIX A: GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST......................................... A-51 APPENDIX B: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND CASH SURRENDER VALUES.................................................... A-52
A-3 SUMMARY OF BENEFITS AND RISKS This summary describes the Policy's important benefits and risks. The sections in the prospectus following this summary discuss the Policy in more detail. THE GLOSSARY AT THE END OF THE PROSPECTUS DEFINES CERTAIN WORDS AND PHRASES USED IN THIS PROSPECTUS. BENEFITS OF THE POLICY DEATH PROCEEDS. The Policy is designed to provide insurance protection. Upon receipt of satisfactory proof of the death of the insured, we pay death proceeds to the beneficiary of the Policy. Death proceeds generally equal the death benefit on the date of the insured's death plus any additional insurance provided by rider, less any outstanding loan and accrued loan interest. CHOICE OF DEATH BENEFIT OPTION. You may choose among three death benefit options: -- a level death benefit that equals the Policy's face amount, -- a variable death benefit that equals the Policy's face amount plus the Policy's cash value, and -- a combination variable and level death benefit that equals the Policy's face amount plus the Policy's cash value until the insured attains age 65 and equals the Policy's face amount thereafter. The death benefit under any option could increase to satisfy Federal tax law requirements if the cash value reaches certain levels. After the first Policy year you may change your death benefit option, subject to our underwriting rules. A change in death benefit option may have tax consequences. PREMIUM FLEXIBILITY. You can make premium payments based on a schedule you determine, subject to some limits. You may change your payment schedule at any time or make a payment that does not correspond to your schedule. We can, however, limit or prohibit payments in some situations. RIGHT TO EXAMINE THE POLICY. During the first ten days following your receipt of the Policy (more in some states), you have the right to return the Policy to us. Depending on state law, we will refund the premiums you paid, or the Policy's cash value plus any charges that were deducted from the premiums you paid. INVESTMENT OPTIONS. You can allocate your net premiums and cash value among your choice of fifty-four Investment Divisions in the Separate Account, each of which corresponds to a mutual fund portfolio, or "Portfolio." The Portfolios available under the Policy include several common stock funds, including funds which invest primarily in foreign securities, as well as bond funds, balanced funds, asset allocation funds and funds that invest in exchange-traded funds. You may also allocate premiums and cash value to our Fixed Account which provides guarantees of interest and principal. You may change your allocation of future premiums at any time. PARTIAL WITHDRAWALS. You may withdraw cash surrender value from your Policy at any time after the first Policy anniversary. The minimum amount you may withdraw is $500 (less in some states). We reserve the right to limit partial withdrawals to no more than 90% of the Policy's cash surrender value. We may limit the number of partial withdrawals to 12 per Policy year or impose a processing charge of $25 for each partial withdrawal. Partial withdrawals may have tax consequences. TRANSFERS AND AUTOMATED INVESTMENT STRATEGIES. You may transfer your Policy's cash value among the Investment Divisions or between the Investment Divisions and the Fixed Account. The minimum amount you may transfer is $50, or if less, the total amount in the Investment Division or the Fixed Account. We may limit the number of transfers among the Investment Divisions and the Fixed Account to no more than four per Policy year. We may impose a processing charge of $25 for each transfer. We may also impose restrictions on "market timing" transfers. (See "Transfers" for additional information on such restrictions.) We offer five automated investment strategies that allow you to periodically transfer or reallocate your cash value among the Investment Divisions and the Fixed Account. (See "Automated Investment Strategies.") A-4 LOANS. You may borrow from the cash value of your Policy. The minimum amount you may borrow is $500. The maximum amount you may borrow is an amount equal to the Policy's cash value net of the Surrender Charge, reduced by monthly deductions and interest charges through the next Policy anniversary, increased by interest credits through the next Policy anniversary, less any existing Policy loans. We charge you a maximum annual interest rate of 4.0% for the first ten Policy years and 3.0% thereafter. We credit interest at an annual rate of at least 3.0% on amounts we hold as collateral to support your loan. Loans may have tax consequences. SURRENDERS. You may surrender the Policy for its cash surrender value at any time. Cash surrender value equals the cash value reduced by any Policy loan and accrued loan interest and by any applicable Surrender Charge. A surrender may have tax consequences. TAX BENEFITS. We anticipate that the Policy should be deemed to be a life insurance contract under Federal tax law. Accordingly, undistributed increases in cash value should not be taxable to you. As long as your Policy is not a modified endowment contract, partial withdrawals should be non-taxable until you have withdrawn an amount equal to your total investment in the Policy. Death benefits paid to your beneficiary should generally be free of Federal income tax. Death benefits may be subject to estate taxes. CONVERSION RIGHT. During the first two Policy years, you may convert the Policy to fixed benefit coverage by exchanging the Policy for a fixed benefit life insurance policy that we agree to, and that is issued by us or an affiliate that we name. We will make the exchange without evidence of insurability. SUPPLEMENTAL BENEFITS AND RIDERS. We offer a variety of riders that provide supplemental benefits under the Policy. We generally deduct any monthly charges for these riders as part of the Monthly Deduction. Your registered representative can help you determine whether any of these riders are suitable for you. These riders may not be available in all states. PERSONALIZED ILLUSTRATIONS. You will receive personalized illustrations in connection with the purchase of this Policy that reflect your own particular circumstances. These hypothetical illustrations may help you to understand the long-term effects of different levels of investment performance, the possibility of lapse, and the charges and deductions under the Policy. They will also help you to compare this Policy to other life insurance policies. The personalized illustrations are based on hypothetical rates of return and are not a representation or guarantee of investment returns or cash value. RISKS OF THE POLICY INVESTMENT RISK. If you invest your Policy's cash value in one or more of the Investment Divisions, then you will be subject to the risk that investment performance will be unfavorable and that your cash value will decrease. In addition, we deduct Policy fees and charges from your Policy's cash value, which can significantly reduce your Policy's cash value. During times of poor investment performance, this deduction will have an even greater impact on your Policy's cash value. It is possible to lose your full investment and your Policy could lapse without value, unless you pay additional premium. If you allocate cash value to the Fixed Account, then we credit such cash value with a declared rate of interest. You assume the risk that the rate may decrease, although it will never be lower than the guaranteed minimum annual effective rate of 3%. SURRENDER AND WITHDRAWAL RISKS. The Policies are designed to provide lifetime insurance protection. They are not offered primarily as an investment, and should not be used as a short-term savings vehicle. If you surrender the Policy within the first ten Policy years (11 in Florida) (or within the first ten Policy years (11 in Florida) following a face amount increase), you will be subject to a Surrender Charge as well as income tax on any gain that is distributed or deemed to be distributed from the Policy. You will also be subject to a Surrender Charge if you make a partial withdrawal from the Policy within the first ten Policy years (11 in Florida) (or the first ten Policy years (11 in Florida) following the face amount increase) if the partial withdrawal reduces the face amount (or the face amount increase). If you surrender the Policy in the first Policy year (or in the first year following a face amount increase) we will also deduct an amount equal to the remaining first year Policy Charges and Coverage Expense Charges. A-5 You should purchase the Policy only if you have the financial ability to keep it in force for a substantial period of time. You should not purchase the Policy if you intend to surrender all or part of the Policy's cash value in the near future. Even if you do not ask to surrender your Policy, surrender charges may play a role in determining whether your Policy will lapse (terminate without value), because surrender charges determine the cash surrender value, which is a measure we use to determine whether your Policy will enter the grace period (and possibly lapse). RISK OF LAPSE. Your Policy may lapse if you have paid an insufficient amount of premiums or if the investment experience of the Investment Divisions is poor. If your cash surrender value is not enough to pay the monthly deduction, your Policy may enter a 62-day grace period. We will notify you that the Policy will lapse unless you make a sufficient payment of additional premium during the grace period. Your Policy generally will not lapse if you pay certain required premium amounts and you are therefore protected by a Guaranteed Minimum Death Benefit. If your Policy does lapse, your insurance coverage will terminate, although you will be given an opportunity to reinstate it. Lapse of a Policy on which there is an outstanding loan may have adverse tax consequences. TAX RISKS. We anticipate that the Policy should be deemed to be a life insurance contract under Federal tax law. However, if your Policy is issued on a substandard basis, there is some risk that your Policy may not be treated as a life insurance contract under Federal tax law. If your Policy is not treated as a life insurance contract under Federal tax law, increases in the Policy's cash value will be taxed currently. Even if your Policy is treated as a life insurance contract for Federal tax purposes, it may become a modified endowment contract due to the payment of excess premiums or unnecessary premiums, due to a material change or due to a reduction in your death benefit. If your Policy becomes a modified endowment contract, surrenders, partial withdrawals and loans will be treated as a distribution of the earnings in the Policy and will be taxable as ordinary income to the extent thereof. In addition, if the Policy Owner is under age 59 1/2 at the time of the surrender, partial withdrawal or loan, the amount that is included in income will generally be subject to a 10% penalty tax. If the Policy is not a modified endowment contract, distributions generally will be treated first as a return of basis or investment in the contract and then as taxable income. Moreover, loans will generally not be treated as distributions, although the tax consequences of loans outstanding after the tenth Policy year are uncertain. Finally, neither distributions nor loans from a Policy that is not a modified endowment contract are subject to the 10% penalty tax. See "Tax Considerations." You should consult a qualified tax adviser for assistance in all Policy-related tax matters. LOAN RISKS. A Policy loan, whether or not repaid, will affect the cash value of your Policy over time because we subtract the amount of the loan from the Investment Divisions and/or Fixed Account as collateral, and hold it in our Loan Account. This loan collateral does not participate in the investment experience of the Investment Divisions or receive any higher current interest rate credited to the Fixed Account. We also reduce the amount we pay on the insured's death by the amount of any outstanding loan and accrued loan interest. Your Policy may lapse if your outstanding loan and accrued loan interest reduces the cash surrender value to zero. If you surrender your Policy or your Policy lapses while there is an outstanding loan, there will generally be Federal income tax payable on the amount by which loans and partial withdrawals exceed the premiums paid. Since loans and partial withdrawals reduce your Policy's cash value, any remaining cash value may be insufficient to pay the income tax due. LIMITATIONS ON CASH VALUE IN THE FIXED ACCOUNT. Transfers to and from the Fixed Account must generally be in amounts of $50 or more. Partial withdrawals from the Fixed Account must be in amounts of $500 or more. The total amount of transfers and withdrawals from the Fixed Account in a Policy year may generally not exceed the greater of 25% of the Policy's cash surrender value in the Fixed Account at the beginning of the year, or the maximum transfer amount for the preceding Policy year. We may also limit the number of transfers and partial withdrawals and may impose a processing charge for transfers and partial withdrawals. We are not currently imposing the maximum limit on transfers and withdrawals from the Fixed Account, but we reserve the right to do so. A-6 TAX LAW CHANGES. Tax laws, regulations, and interpretations have often been changed in the past and such changes continue to be proposed. To the extent that you purchase a Policy based on expected tax benefits, relative to other financial or investment products or strategies, there is no certainty that such advantages will always continue to exist. RISKS OF THE PORTFOLIOS A comprehensive discussion of the risks associated with each of the Portfolios can be found in the Portfolio prospectuses attached at the end of this prospectus. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS STATED INVESTMENT OBJECTIVE. FEE TABLES The following tables describe the fees and expenses that a Policy Owner will pay when buying, owning and surrendering the Policy. The first table describes the fees and expenses that a Policy Owner will pay at the time he or she buys the Policy, surrenders the Policy or transfers cash value among accounts. If the amount of a charge varies depending on the Policy Owner's or the insured's individual characteristics (such as age, sex, or risk class), the tables below show the minimum and maximum charges we assess under the Policy across the range of all possible individual characteristics, as well as the charges for a specified typical Policy Owner or insured. THESE CHARGES MAY NOT BE REPRESENTATIVE OF THE CHARGES YOU WILL ACTUALLY PAY UNDER THE POLICY. Your Policy's specifications page will indicate these charges as applicable to your Policy, and more detailed information concerning your charges is available on request from our Designated Office. Also, before you purchase the Policy, we will provide you personalized illustrations of your future benefits under the Policy based on the insured's age and risk class, the death benefit option, face amount, planned periodic premiums and riders requested. TRANSACTION FEES
- --------------------------------------------------------------------------------------------------- CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED MAXIMUM AMOUNT DEDUCTIBLE - --------------------------------------------------------------------------------------------------- Sales Charge Imposed On payment of premium 2.25% of premiums paid 2.25% of each premium on Premiums up to the Target paid Premium per Policy year(1) - --------------------------------------------------------------------------------------------------- Premium Tax Imposed On payment of premium 2.0% in all Policy 2.0% in all Policy years on Premiums years - --------------------------------------------------------------------------------------------------- Federal Tax Imposed On payment of premium 1.25% in all Policy 1.25% in all Policy years on Premiums years - ---------------------------------------------------------------------------------------------------
(1) The target premium varies based on individual characteristics, including the insured's issue age, risk class and except for unisex policies, sex. A-7
- --------------------------------------------------------------------------------------------------- CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED MAXIMUM AMOUNT DEDUCTIBLE - --------------------------------------------------------------------------------------------------- Surrender Charge(1) On surrender, lapse, or face amount reduction in the first ten Policy years (11 in FL) (and, with respect to a face amount increase, in the first ten Policy years (11 in FL) after the increase) Minimum and Maximum In Policy year 1, $3.75 In Policy year 1, $3.75 Charge to $38.25 per $1,000 of to $38.25 per $1,000 of base Policy face base Policy face amount(2) amount(2) Charge in the first $14.00 per $1,000 of $14.00 per $1,000 of base Policy year for a base Policy face amount Policy face amount male insured, age 35, in the preferred nonsmoker risk class with a base Policy face amount of $300,000 - --------------------------------------------------------------------------------------------------- Transfer Charge(3) On transfer of cash Not currently charged $25 for each transfer value among Investment Divisions and to and from the Fixed Account - --------------------------------------------------------------------------------------------------- Partial Withdrawal On partial withdrawal Not currently charged $25 for each partial Charge of cash value withdrawal(4) - --------------------------------------------------------------------------------------------------- Illustration of On provision of each Not currently charged $25 per illustration Benefits Charge illustration in excess of one per year - ---------------------------------------------------------------------------------------------------
(1) The Surrender Charge varies based on individual characteristics, including the insured's issue age, risk class, sex (except for unisex policies), smoker status, and the Policy's face amount. The Surrender Charge may not be representative of the charge that a particular Policy Owner would pay. You can obtain more information about the Surrender Charge and other charges that would apply for a particular insured by contacting your registered representative. (2) No Surrender Charge will apply on up to 10% of cash surrender value withdrawn each year. The Surrender Charge will remain level for one to three Policy years, and will then begin to decline on a monthly basis until it reaches zero in the last month of the tenth Policy year (11th in Florida). The Surrender Charge applies to requested face amount reductions as well as to face amount reductions resulting from a change in death benefit option. (3) The Portfolios in which the Investment Divisions invest may impose a redemption fee on shares held for a relatively short period. (4) If imposed, the partial withdrawal charge would be in addition to any Surrender Charge that is imposed. A-8 The next table describes the fees and expenses that a Policy Owner will pay periodically during the time that he or she owns the Policy, not including Portfolio fees and expenses. PERIODIC CHARGES OTHER THAN PORTFOLIO OPERATING EXPENSES
- --------------------------------------------------------------------------------------------------- CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED MAXIMUM AMOUNT DEDUCTIBLE - --------------------------------------------------------------------------------------------------- Cost of Insurance(1) Minimum and Maximum Monthly $.01 to $83.33 per $.02 to $83.33 per $1,000 Charge $1,000 of net amount at of net amount at risk(2) risk(2) Charge in the first Monthly $.02 per $1,000 of net $.09 per $1,000 of net Policy year for a amount at risk amount at risk male insured, age 35, in the preferred nonsmoker risk class with a base Policy face amount of $300,000 - --------------------------------------------------------------------------------------------------- Policy Charge(3) Policy face amount Monthly $12 in Policy year 1 $12 in Policy year 1 less than $50,000 $9 in Policy years 2+ $9 in Policy years 2+ Policy face amount Monthly $15 in Policy year 1 $15 in Policy year 1 between $50,000 and $8 in Policy years 2+ $8 in Policy years 2+ $249,999 - --------------------------------------------------------------------------------------------------- Mortality and Expense Monthly .60% in Policy years .80% in Policy years 1-10 Risk Charge (annual 1-10 .35% in Policy years rate imposed on cash .35% in Policy years 11-19 value in the Separate 11-19 .20% in Policy years Account)(4) .20% in Policy years 20-29 20-29 .05% in Policy years 30+ .05% in Policy years 30+ - --------------------------------------------------------------------------------------------------- Coverage Expense Charge(5) Minimum and Monthly $.04 to $2.30 per $.04 to $2.30 per $1,000 Maximum Charge $1,000 of base Policy of base Policy face face amount in first amount eight Policy years(6) Charge for a male Monthly $.16 per $1,000 of base $.16 per $1,000 of base insured, age 35, in Policy face amount in Policy face amount the preferred first eight Policy nonsmoker risk class years(6) with a base Policy face amount of $300,000 - --------------------------------------------------------------------------------------------------- Loan Interest Annually (or on loan 1.00% of loan 1.00% of loan collateral Spread(7) termination, if collateral in Policy in Policy years 1-10 earlier) years 1-10 - ---------------------------------------------------------------------------------------------------
(1) The cost of insurance charge varies based on individual characteristics, including the Policy's face amount and the insured's age, risk class, and except for unisex policies, sex. The cost of insurance charge may not be representative of the charge that a particular Policy Owner would pay. You can obtain more information about the cost of insurance or other charges that would apply for a particular insured by contacting your registered representative. (2) The net amount at risk is the difference between the death benefit (generally discounted at the monthly equivalent of 3% per year) and the Policy's cash value. (3) No Policy Charge applies to Policies issued with face amounts equal to or greater than $250,000. If you surrender the Policy in the first Policy year, we will deduct from the surrender proceeds an amount equal to the Policy Charges due for the remainder of the first Policy year. (4) The Mortality and Expense Risk Charge depends on the Policy's net cash value. The percentages shown in the Current Amount Deducted column apply if the Policy's net cash value is less than an amount equal to five Target Premiums. The percentages decrease as the Policy's net cash value, measured as a multiple of Target Premiums, increases. If the Policy's net cash value is equal to or greater than five but less than ten Target Premiums, the charge is 0.55% in Policy years 1-10, 0.30% in Policy years 11-19, 0.15% in Policy years 20-29 and 0.05% thereafter. If the Policy's net cash value is equal to or greater than ten but less than 20 Target Premiums, the charge is 0.30% in Policy years 1-10, 0.15% in A-9 Policy years 11-19, 0.10% in Policy years 20-29 and 0.05% thereafter. If the Policy's net cash value is equal to 20 or more Target Premiums, the charge is 0.15% in Policy years 1-10, 0.10% in Policy years 11-19, and 0.05% thereafter. (5) If you surrender the Policy in the first Policy year (or in the first year following a face amount increase), we will deduct from the surrender proceeds an amount equal to the Coverage Expense Charges due for the remainder of the first Policy year (or the first year following the face amount increase). If the Policy's face amount is reduced in the first Policy year (or in the first year following a face amount increase), we will deduct from the cash value an amount equal to the Coverage Expense Charges due for the remainder of the first Policy year (or the first year following the face amount increase). (6) The Coverage Expense Charge is imposed in Policy years 1-8 and, with respect to a requested face amount increase, during the first eight years following the increase. (7) We charge interest on Policy loans at an effective rate of 4.0% per year in Policy years 1-10 and 3.0% thereafter. Cash value we hold as security for the loan ("loan collateral") earns interest at an effective rate of not less than 3% per year. The loan interest spread is the difference between these interest rates. CHARGES FOR OPTIONAL FEATURES (RIDERS):
- ---------------------------------------------------------------------------------------------------- CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED MAXIMUM AMOUNT DEDUCTIBLE - ---------------------------------------------------------------------------------------------------- Guaranteed Survivor Income Benefit Rider Minimum and Maximum Monthly $.01 to $1.08 per $.01 to $83.33 per $1,000 Charge $1,000 of Eligible of Eligible Death Benefit Death Benefit Charge for a male Monthly $.02 per $1,000 of $.02 per $1,000 of insured, age 35, in Eligible Death Benefit Eligible Death Benefit the preferred nonsmoker risk class with an Eligible Death Benefit of $ - ---------------------------------------------------------------------------------------------------- Children's Term Monthly $.40 per $1,000 of $.40 per $1,000 of rider Insurance Rider rider face amount face amount - ---------------------------------------------------------------------------------------------------- Waiver of Monthly Deduction Rider Minimum and Maximum Monthly $.00 to $61.44 per $100 $.00 to $61.44 per $100 Charge of Monthly Deduction of Monthly Deduction Charge in the first Monthly $6.30 per $100 of $6.30 per $100 of Monthly Policy year for a Monthly Deduction Deduction male insured, age 35, in the preferred nonsmoker risk class - ----------------------------------------------------------------------------------------------------
A-10
- --------------------------------------------------------------------------------------------------- CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED MAXIMUM AMOUNT DEDUCTIBLE - --------------------------------------------------------------------------------------------------- Waiver of Specified Premium Rider Minimum and Maximum Monthly $.00 to $21.75 per $100 $.00 to $21.75 per $100 Charge of Specified Premium of Specified Premium Charge in the first Monthly $3.00 per $100 of $3.00 per $100 of Policy year for a Specified Premium Specified Premium male insured, age 35, in the preferred nonsmoker risk class - --------------------------------------------------------------------------------------------------- Options to Purchase Additional Insurance Coverage Rider Minimum and Maximum Monthly $.02 to $.25 per $1,000 $.02 to $.25 per $1,000 Charge of Option amount of Option amount Charge for a male Monthly $.03 per $1,000 of $.03 per $1,000 of Option insured, age 35, in Option amount amount the preferred nonsmoker risk class - --------------------------------------------------------------------------------------------------- Option to Purchase Long Term Care Insurance Rider Minimum and Maximum Monthly $.20 to $1.88 per $10 $.20 to $1.88 per $10 of Charge of initial daily initial daily benefit benefit amount amount Charge for a male Monthly $.37 per $10 of initial $.37 per $10 of initial insured, age 35, in daily benefit amount daily benefit amount the preferred nonsmoker risk class - --------------------------------------------------------------------------------------------------- Accidental Death Benefit Rider Minimum and Maximum Monthly $.00 to $.34 per $1,000 $.00 to $83.33 per $1,000 Charge of rider face amount of rider face amount Charge in the first Monthly $.05 per $1,000 of $.08 per $1,000 of rider Policy year for a rider face amount face amount male insured, age 35, in the preferred nonsmoker risk class - --------------------------------------------------------------------------------------------------- Guaranteed Minimum Death Benefit Rider Minimum and Maximum Monthly $.01 to $.04 per $1,000 $.01 to $83.33 per $1,000 Charge of net amount at risk of net amount at risk Charge for a male Monthly $.01 per $1,000 of net $.01 per $1,000 of net insured, age 35, in amount at risk amount at risk the preferred nonsmoker risk class - --------------------------------------------------------------------------------------------------- Acceleration of Death At time of benefit Not currently charged One-time fee of $150 Benefit Rider payment - --------------------------------------------------------------------------------------------------- Overloan Protection At time of exercise One-time fee of 3.5% of One-time fee of 3.5% of Rider Policy cash value Policy cash value - ---------------------------------------------------------------------------------------------------
A-11 ANNUAL PORTFOLIO OPERATING EXPENSES The next table describes the Portfolio fees and expenses that a Policy Owner may pay periodically during the time that he or she owns the Policy. The table shows the minimum and maximum total operating expenses charged by the Portfolios for the fiscal year ended December 31, 2007. Expenses of the Portfolios may be higher or lower in the future. More detail concerning each Portfolio's fees and expenses is contained in the table that follows and in the prospectus for each Portfolio.
MINIMUM MAXIMUM ------- ------- Total Annual Eligible Fund Operating Expenses (expenses that are deducted from Eligible Fund assets, including management fees, distribution (12b-1) fees and other expenses)......................................... % %
The following table describes the annual operating expenses for each Portfolio for the year ended December 31, 2007, before and after any applicable contractual fee waivers and expense reimbursements: ANNUAL OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
ACQUIRED GROSS TOTAL FEE WAIVERS NET TOTAL MANAGEMENT OTHER 12B-1 PORTFOLIO FEES ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES AND EXPENSES EXPENSES REIMBURSEMENTS EXPENSES(1) ---------- -------- ----- -------------- ----------- -------------- ----------- METROPOLITAN SERIES FUND, INC. (CLASS A SHARES) BlackRock Aggressive Growth Portfolio.......................... BlackRock Bond Income Portfolio...... BlackRock Diversified Portfolio...... BlackRock Large Cap Value Portfolio.......................... BlackRock Legacy Large Cap Growth Portfolio.......................... BlackRock Strategic Value Portfolio.......................... Davis Venture Value Portfolio........ FI International Stock Portfolio..... FI Large Cap Portfolio............... FI Mid Cap Opportunities Portfolio... FI Value Leaders Portfolio........... Franklin Templeton Small Cap Growth Portfolio.......................... Harris Oakmark Focused Value Portfolio.......................... Harris Oakmark Large Cap Value Portfolio.......................... Jennison Growth Portfolio............ Lehman Brothers Aggregate Bond Index Portfolio.......................... Loomis Sayles Small Cap Portfolio.... MetLife Mid Cap Stock Index Portfolio.......................... MetLife Stock Index Portfolio........ MFS Total Return Portfolio........... Morgan Stanley EAFE Index Portfolio.......................... Neuberger Berman Mid Cap Value Portfolio.......................... Oppenheimer Global Equity Portfolio.......................... Russell 2000 Index Portfolio......... T. Rowe Price Large Cap Growth Portfolio.......................... T. Rowe Price Small Cap Growth Portfolio.......................... Western Asset Management Strategic Bond Opportunities Portfolio....... Western Asset Management U.S. Government Portfolio............... MetLife Conservative Allocation Portfolio..........................
A-12
ACQUIRED GROSS TOTAL FEE WAIVERS NET TOTAL MANAGEMENT OTHER 12B-1 PORTFOLIO FEES ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES AND EXPENSES EXPENSES REIMBURSEMENTS EXPENSES(1) ---------- -------- ----- -------------- ----------- -------------- ----------- MetLife Conservative to Moderate Allocation Portfolio............... MetLife Moderate Allocation Portfolio.......................... MetLife Moderate to Aggressive Allocation Portfolio............... MetLife Aggressive Allocation Portfolio.......................... MET INVESTORS SERIES TRUST (CLASS A SHARES) BlackRock Large-Cap Core Portfolio... Cyclical Growth and Income ETF Portfolio.......................... Cyclical Growth ETF Portfolio........ Harris Oakmark International Portfolio.......................... Janus Forty Portfolio................ Lazard Mid-Cap Portfolio............. Legg Mason Partners Aggressive Growth Portfolio.......................... Legg Mason Value Equity Portfolio.... Lord Abbett Bond Debenture Portfolio.......................... Met/AIM Small Cap Growth Portfolio... MFS Research International Portfolio.......................... Neuberger Berman Real Estate Portfolio.......................... Oppenheimer Capital Appreciation Portfolio.......................... PIMCO Inflation Protected Bond Portfolio.......................... PIMCO Total Return Portfolio......... RCM Technology Portfolio............. T. Rowe Price Mid-Cap Growth Portfolio.......................... AMERICAN FUNDS INSURANCE SERIES (CLASS 2 SHARES) American Funds Bond Fund............. American Funds Global Small Capitalization Fund................ American Funds Growth Fund........... American Funds Growth-Income Fund....
The fee and expense information regarding the Portfolios was provided by those Portfolios. The American Funds Insurance Series is not affiliated with MetLife Investors USA Insurance Company. For information concerning compensation paid for the sale of the Policies, see "Distribution of the Policies." A-13 HOW THE POLICY WORKS [FLOW CHART] PREMIUM PAYMENTS - - Flexible - - Planned premium options - - Guaranteed Minimum Death Benefit premium (5-year, 20-year, or to age 65) CHARGES FROM PREMIUM PAYMENTS - - Sales Load: 2.25% up to Target Premium per Policy year (maximum 2.25% on all premiums) - - Premium Tax Charge: 2.0% - - Charge for Federal Taxes: 1.25% CASH VALUES - - Net premium payments invested in your choice of Portfolio investments (after an initial period in the Fixed Account in return of premium states) or the Fixed Account - - The cash value reflects investment experience, interest, premium payments, policy charges and any distributions from the Policy - - We do not guarantee the cash value invested in the Portfolios - - Any earnings you accumulate are generally free of any current income taxes - - You may change the allocation of future net premiums at any time. You may transfer funds among Investment Divisions (and to the Fixed Account). Currently we do not limit the number of Investment Division transfers you can make in a Policy year (subject to restrictions we impose on "market timing" transfers). - - We reserve the right to impose a $25 charge on each partial withdrawal and on each Investment Division transfer (including a transfer between an Investment Division and the Fixed Account) - - We may limit the amount of transfers from (and in some cases to) the Fixed Account LOANS - - You may borrow your cash value - - Loan interest charge is 4.0% in Policy years 1-10 and 3.0% thereafter. - - We transfer loaned funds out of the Fixed Account and the Investment Divisions into the Loan Account where we credit them with not less than 3.0% interest. RETIREMENT BENEFITS - - Fixed settlement options are available for policy proceeds DEATH BENEFIT - - Level, Variable and combined Level/Variable Death Benefit Options - - Guaranteed not to be less than face amount (less any loan and loan interest) if the Guaranteed Minimum Death Benefit is in effect. - - On or after age 121, under Options A and C, equal to the greater of (1) the face amount of the Policy as of the insured's age 121; and (2) the Policy's cash value. Under Option B, the face amount of the Policy as of the insured's age 121, plus the Policy's cash value. - - Generally income tax free to named beneficiary; may be subject to estate tax. DAILY DEDUCTIONS FROM ASSETS OF THE SEPARATE ACCOUNT - - Investment advisory fees and other expenses are deducted from the Portfolio values BEGINNING OF MONTH CHARGES - - We deduct the cost of insurance protection (reflecting any substandard risk rating) from the cash value each month - - Any Rider Charges - - Policy Charge: $15.00 per month first year and $8.00 per month thereafter for Policies issued with face amounts of $50,000 and greater; but less than $250,000; $12.00 per month first year and $9.00 per month thereafter for Policies issued with face amounts of less than $50,000 - - Coverage Expense Charge: Monthly charge imposed on base Policy face amount that applies during the first eight Policy years or during the first eight years following a face amount increase (in all years on a guaranteed basis). - - Mortality and Expense Risk Charge applied against the cash value in the Separate Account at a maximum annual rate of .80% in Policy years 1-10; .35% in Policy years 11-19; .20% in Policy years 20-29; and .05% thereafter SURRENDER CHARGE - - Applies on lapse, surrender, face amount reduction, or partial withdrawal or change in death benefit option that results in face reduction in first ten Policy years (or in first ten Policy years following a face amount increase). Maximum charge applies in first three Policy years. After the third Policy year, charge decreases monthly over the remaining years of the surrender charge period. LIVING BENEFITS - - If policyholder has elected and qualified for benefits for disability and becomes totally disabled, we will waive the monthly deduction or a specified amount of monthly premium during the period of disability up to certain limits. - - You may surrender the Policy at any time for its cash surrender value - - Deferred income taxes, including taxes on certain amounts borrowed, become payable upon surrender or lapse - - Grace period for lapsing with no value is 62 days from the first date in which Monthly Deduction was not paid due to insufficient cash value - - Subject to our rules, you may reinstate a lapsed Policy within three years of date of lapse if it has not been surrendered A-14 THE COMPANY, THE SEPARATE ACCOUNT AND THE PORTFOLIOS THE COMPANY MetLife Investors USA Insurance Company is an indirect wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our principal office is located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MetLife Investors USA is licensed to sell life insurance in all states (except New York), the District of Columbia and Puerto Rico. We are obligated to pay all benefits under the Policies. THE SEPARATE ACCOUNT MetLife Investors USA Variable Life Account A is the funding vehicle for the Policies and other variable life insurance policies that we issue. Income and realized and unrealized capital gains and losses of the Separate Account are credited to the Separate Account without regard to any of our other income or capital gains or losses. Although we own the assets of the Separate Account, applicable law provides that the portion of the Separate Account assets equal to the reserves and other liabilities of the Separate Account may not be charged with liabilities that arise out of any other business we conduct. This means that the assets of the Separate Account are not available to meet the claims of our general creditors, and may only be used to support the cash values of the variable life insurance policies issued by the Separate Account. Death benefits in excess of Policy cash value are paid from our general account. Death benefits paid from the general account are subject to the claims-paying ability of MetLife Investors USA. THE PORTFOLIOS Each Investment Division of the Separate Account invests in a corresponding Portfolio. Each Portfolio is part of an open-end management investment company, more commonly known as a mutual fund, that serves as an investment vehicle for variable life insurance and variable annuity separate accounts of various insurance companies. The mutual funds that offer the Portfolios are the Metropolitan Series Fund, Inc., the Met Investors Series Trust and the American Funds Insurance Series. Each of these mutual funds has an investment adviser responsible for overall management of the fund. Some investment advisers have contracted with sub-advisers to make the day-to-day investment decisions for the Portfolios. The adviser, sub-adviser and investment objective of each Portfolio are as follows: METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- BlackRock Aggressive Growth BlackRock Advisors, Inc. Maximum capital appreciation. Portfolio BlackRock Bond Income BlackRock Advisors, Inc. A competitive total return Portfolio primarily from investing in fixed-income securities. BlackRock Diversified BlackRock Advisors, Inc. High total return while attempting Portfolio to limit investment risk and preserve capital. BlackRock Large Cap Value BlackRock Advisors, Inc. Long-term growth of capital. Portfolio BlackRock Legacy Large Cap BlackRock Advisors, Inc. Long-term growth of capital. Growth Portfolio BlackRock Strategic Value BlackRock Advisors, Inc. High total return, consisting Portfolio principally of capital appreciation. Davis Venture Value Davis Selected Advisers, Growth of capital. Portfolio L.P.(1) FI International Stock Fidelity Management & Long-term growth of capital. Portfolio Research Company
A-15
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- FI Large Cap Portfolio Fidelity Management & Long-term growth of capital. Research Company FI Mid Cap Opportunities Fidelity Management & Long-term growth of capital. Portfolio Research Company FI Value Leaders Portfolio Fidelity Management & Long-term growth of capital. Research Company Franklin Templeton Small Cap Franklin Advisers, Inc. Long-term capital growth. Growth Portfolio Harris Oakmark Focused Value Harris Associates L.P. Long-term capital appreciation. Portfolio Harris Oakmark Large Cap Harris Associates L.P. Long-term capital appreciation. Value Portfolio Jennison Growth Portfolio Jennison Associates LLC Long-term growth of capital. Lehman Brothers Aggregate Metropolitan Life Insurance To equal the performance of the Bond Index Portfolio Company Lehman Brothers Aggregate Bond Index. Loomis Sayles Small Cap Loomis, Sayles & Company, Long-term capital growth from Portfolio L.P. investments in common stocks or other equity securities. MetLife Mid Cap Stock Index Metropolitan Life Insurance To equal the performance of the Portfolio Company Standard & Poor's MidCap 400 Composite Stock Price Index. MetLife Stock Index Metropolitan Life Insurance To equal the performance of the Portfolio Company Standard & Poor's 500 Composite Stock Price Index. MFS Total Return Portfolio Massachusetts Financial Favorable total return through Services Company investment in a diversified portfolio. Morgan Stanley EAFE Index Metropolitan Life Insurance To equal the performance of the Portfolio Company MSCI EAFE Index. Neuberger Berman Mid Cap Neuberger Berman Management Capital growth. Value Portfolio Inc. Oppenheimer Global Equity OppenheimerFunds, Inc. Capital appreciation. Portfolio Russell 2000 Index Portfolio Metropolitan Life Insurance To equal the return of the Russell Company 2000 Index. T. Rowe Price Large Cap T. Rowe Price Associates, Long-term growth of capital and, Growth Portfolio Inc. secondarily, dividend income. T. Rowe Price Small Cap T. Rowe Price Associates, Long-term capital growth. Growth Portfolio Inc. Western Asset Management Western Asset Management To maximize total return Strategic Bond Company consistent with preservation of Opportunities Portfolio capital. Western Asset Management Western Asset Management To maximize total return U.S. Government Portfolio Company consistent with preservation of capital and maintenance of liquidity. MetLife Conservative N/A A high level of current income, Allocation Portfolio with growth of capital as a secondary objective.
A-16
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- MetLife Conservative to N/A A high total return in the form of Moderate Allocation income and growth of capital, with Portfolio a greater emphasis on income. MetLife Moderate Allocation N/A A balance between a high level of Portfolio current income and growth of capital, with a greater emphasis on growth of capital. MetLife Moderate to N/A Growth of capital. Aggressive Allocation Portfolio MetLife Aggressive N/A Growth of capital. Allocation Portfolio
MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- BlackRock Large-Cap Core BlackRock Advisors, Inc. Long-term capital growth. Portfolio Cyclical Growth and Income Gallatin Asset Management, Growth of capital and income. ETF Portfolio Inc. Cyclical Growth ETF Gallatin Asset Management, Growth of capital. Portfolio Inc. Harris Oakmark International Harris Associates L.P. Long-term capital appreciation. Portfolio Janus Forty Portfolio Janus Capital Management LLC Capital appreciation. Lazard Mid-Cap Portfolio Lazard Asset Management LLC Long-term capital appreciation. Legg Mason Partners ClearBridge Advisors, LLC Long-term growth of capital. Aggressive Growth Portfolio Legg Mason Value Equity Legg Mason Capital Long-term growth of capital. Portfolio Management, Inc. Lord Abbett Bond Debenture Lord, Abbett & Co. LLC High current income and the Portfolio opportunity for capital appreciation to produce a high total return. Met/AIM Small Cap Growth A I M Capital Management, Long-term growth of capital. Portfolio Inc. MFS Research International Massachusetts Financial Capital appreciation. Portfolio Services Company Neuberger Berman Real Estate Neuberger Berman Management Total return through investment in Portfolio Inc. real estate securities, emphasizing both capital appreciation and current income. Oppenheimer Capital OppenheimerFunds, Inc. Capital appreciation. Appreciation Portfolio PIMCO Inflation Protected Pacific Investment Maximum real return, consistent Bond Portfolio Management Company LLC with preservation of capital and prudent investment management. PIMCO Total Return Portfolio Pacific Investment Maximum total return, consistent Management Company LLC with the preservation of capital and prudent investment management.
A-17
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- RCM Technology Portfolio RCM Capital Management LLC Capital appreciation; no consideration is given to income. T. Rowe Price Mid-Cap Growth T. Rowe Price Associates, Long-term growth of capital. Portfolio Inc.
AMERICAN FUNDS INSURANCE SERIES ADVISER: CAPITAL RESEARCH AND MANAGEMENT COMPANY
ELIGIBLE FUND SUB-ADVISER INVESTMENT OBJECTIVE - ------------- ----------- -------------------- American Funds Bond Fund N/A Maximize current income and preserve capital by investing primarily in fixed-income securities. American Funds Global Small N/A Capital appreciation through Capitalization Fund stocks. American Funds Growth Fund N/A Capital appreciation through stocks. American Funds Growth-Income N/A Capital appreciation and income. Fund
- --------------- (1) Davis Selected Advisers, L.P. may also delegate any of its responsibilities to Davis Selected Advisers--NY, Inc., a wholly-owned subsidiary. FOR MORE INFORMATION REGARDING THE PORTFOLIOS AND THEIR INVESTMENT ADVISERS AND SUB-ADVISERS, SEE THE PORTFOLIO PROSPECTUSES ATTACHED AT THE END OF THIS PROSPECTUS AND THEIR STATEMENTS OF ADDITIONAL INFORMATION. The Portfolios' investment objectives may not be met. The investment objectives and policies of certain Portfolios are similar to the investment objectives and policies of other funds that may be managed by the same investment adviser or sub-adviser. The investment results of the Portfolios may be higher or lower than the results of these funds. There is no assurance, and no representation is made, that the investment results of any of the Portfolios will be comparable to the investment results of any other fund. SHARE CLASSES OF THE PORTFOLIOS The Portfolios offer various classes of shares, each of which has a different level of expenses. [Attached prospectuses] for the Portfolios may provide information for share classes that are not available through the Policy. When you consult the attached prospectus for any Portfolio, you should be careful to refer to only the information regarding the class of shares that is available through the Policy. For the Metropolitan Series Fund, Inc. and Met Investors Series Trust, we offer Class A shares only, and for the American Funds Insurance Series we offer Class 2 shares only. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE PORTFOLIOS An investment adviser (other than our affiliates MetLife Advisers, LLC and Met Investors Advisory, LLC) or subadviser of a Portfolio, or its affiliates, may make payments to us and/or certain of our affiliates. These payments may be used for a variety of purposes, including payment for expenses for certain administrative, marketing and support services with respect to the Policies and, in our role as intermediary, with respect to the Portfolios. We and our affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. Policy Owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the Portfolio prospectuses for more information). The amount of the payments we receive is based on a percentage of assets of the Portfolio attributable to the Policies and certain other variable insurance products that we and our affiliates issue. These percentages differ and some advisers or subadvisers (or other affiliates) may pay us more than others. These percentages currently range up to 0.50%. Additionally, an investment adviser or subadviser of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Policies and may pay us and/or certain of our affiliates amounts to participate in sales A-18 meetings. These amounts may be significant and may provide the adviser or subadviser (or their affiliate) with increased access to persons involved in the distribution of the Policies. We and/or certain of our affiliated insurance companies have joint ownership interests in our affiliated investment advisers MetLife Advisers, LLC and Met Investors Advisory, LLC, which are formed as "limited liability companies." Our ownership interests in MetLife Advisers, LLC and Met Investors Advisory, LLC entitle us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from the Portfolios. We will benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the advisers. (See "Fee Tables--Annual Portfolio Operating Expenses" for information on the management fees paid by the Portfolios and the Statement of Additional Information for the Portfolios for information on the management fees paid by the advisers to the subadvisers.) Certain Portfolios have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. A Portfolio's 12b-1 Plan, if any, is described in more detail in the Portfolio's prospectus. (See "Fee Tables--Annual Portfolio Expenses" and "Distribution of the Policies.") Any payments we receive pursuant to those 12b-1 Plans are paid to us or our Distributor. Payments under a Portfolio's 12b-1 Plan decrease the Portfolio's investment return. SELECTION OF THE PORTFOLIOS We select the Portfolios offered through the Policy based on several criteria, including asset class coverage, the strength of the adviser's or subadviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Portfolio's adviser or subadviser is one of our affiliates or whether the Portfolio, its adviser, its subadviser(s), or an affiliate will make payments to us or our affiliates. For additional information on these arrangements, see "Certain Payments We Receive with Regard to the Portfolios" above. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to Portfolios advised by our affiliates than those that are not, we may be more inclined to offer Portfolios advised by our affiliates in the variable insurance products we issue. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new premium payments and/or transfers of cash value if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from Policy Owners. WE DO NOT PROVIDE ANY INVESTMENT ADVICE AND DO NOT RECOMMEND OR ENDORSE ANY PARTICULAR PORTFOLIO. YOU BEAR THE RISK OF ANY DECLINE IN THE CASH VALUE OF YOUR POLICY RESULTING FROM THE PERFORMANCE OF THE PORTFOLIOS YOU HAVE CHOSEN. We make certain payments to American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series. (See "Distribution of the Policies.") VOTING RIGHTS We own the Portfolio shares held in the Separate Account and have the right to vote those shares at meetings of the Portfolio shareholders. However, to the extent required by Federal securities law, we will give you, as Policy Owner, the right to instruct us how to vote the shares that are attributable to your Policy. We will determine, as of the record date, if you are entitled to give voting instructions and the number of shares to which you have a right of instruction. If we do not receive timely instructions from you, we will vote your shares for, against, or withhold from voting on, any proposition in the same proportion as the shares held in that Investment Division for all policies for which we have received voting instructions. The effect of this proportional voting is that a small number of Policy Owners may control the outcome of a vote. We will vote Portfolio shares held by our general account (or any unregistered separate account for which voting privileges were not extended) in the same proportion as the total of (i) shares for which voting instructions were received and (ii) shares that are voted in proportion to such voting instructions. A-19 We may disregard voting instructions for changes in the investment policy, investment adviser or principal underwriter of a Portfolio if required by state insurance law, or if we (i) reasonably disapprove of the changes and (ii) in the case of a change in investment policy or investment adviser, make a good faith determination that the proposed change is prohibited by state authorities or inconsistent with an Investment Division's investment objectives. If we do disregard voting instructions, the next semi-annual report to Policy Owners will include a summary of that action and the reasons for it. RIGHTS RESERVED BY METLIFE INVESTORS USA We and our affiliates may change the voting procedures and vote Portfolio shares without Policy Owner instructions, if the securities laws change. We also reserve the right: (1) to add Investment Divisions; (2) to combine Investment Divisions; (3) to substitute shares of another registered open-end management investment company, which may have different fees and expenses, for shares of a Portfolio; (4) to substitute or close an Investment Division to allocations of premium payments or cash value or both, and to existing investments or the investment of future premiums, or both, for any class of Policy or Policy Owner, at any time in our sole discretion; (5) to operate the Separate Account as a management investment company under the Investment Company Act of 1940 or in any other form; (6) to deregister the Separate Account under the Investment Company Act of 1940; (7) to combine it with other Separate Accounts; and (8) to transfer assets supporting the Policies from one Investment Division to another or from the Separate Account to other Separate Accounts, or to transfer assets to our general account as permitted by applicable law. We will exercise these rights in accordance with applicable law, including approval of Policy Owners if required. We will notify you if exercise of any of these rights would result in a material change in the Separate Account or its investments. We will not make any changes without receiving any necessary approval of the SEC and applicable state insurance departments. We will notify you of any changes. THE POLICIES PURCHASING A POLICY To purchase a Policy, you must submit a completed application and an initial premium to us at our Designated Office. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") The minimum face amount for the base Policy is $50,000 unless we consent to a lower amount. For Policies acquired through a pension or profit sharing plan qualified under Section 401 of the Internal Revenue Code of 1986, the minimum face amount is $25,000. The Policies are available for insureds age 85 or younger. We can provide you with details as to our underwriting standards when you apply for a Policy. We reserve the right to modify our minimum face amount and underwriting requirements at any time. We must receive evidence of insurability that satisfies our underwriting standards before we will issue a Policy. We reserve the right to reject an application for any reason permitted by law. We offer other variable life insurance policies that have different death benefits, policy features, and optional programs. However, these other policies also have different charges that would affect your Investment Division performance and cash values. To obtain more information about these other policies, contact our Designated Office or your registered representative. REPLACING EXISTING INSURANCE It may not be in your best interest to surrender, lapse, change, or borrow from existing life insurance policies or annuity contracts in connection with the purchase of the Policy. You should compare your existing insurance and the Policy carefully. You should replace your existing insurance only when you determine that the Policy is better for you. You may have to pay a surrender charge on your existing insurance, and the Policy will impose a new surrender charge period. You should talk to your financial professional or tax adviser to make sure the exchange will be tax-free. If you surrender your existing policy for cash and then buy the Policy, you may have to pay a tax, including A-20 possibly a penalty tax, on the surrender. Because we may not issue the Policy until we have received an initial premium from your existing insurance company, the issuance of the Policy may be delayed. POLICY OWNER AND BENEFICIARY The Policy Owner is named in the application but may be changed from time to time. While the insured is living and the Policy is in force, the Policy Owner may exercise all the rights and options described in the Policy, subject to the terms of any beneficiary designation or assignment of the Policy. These rights include selecting and changing the beneficiary, changing the owner, changing the face amount of the Policy and assigning the Policy. At the death of the Policy Owner who is not the insured, his or her estate will become the Policy Owner unless a successor Policy Owner has been named. The Policy Owner's rights (except for rights to payment of benefits) terminate at the death of the insured. The beneficiary is also named in the application. You may change the beneficiary at any time before the death of the insured, unless the beneficiary designation is irrevocable. The beneficiary has no rights under the Policy until the death of the insured and must survive the insured in order to receive the death proceeds. If no named beneficiary survives the insured, we pay proceeds to the Policy Owner. A change of Policy Owner or beneficiary is subject to all payments made and actions taken by us under the Policy before we receive a signed change form. You can contact your registered representative or our Designated Office for the procedure to follow. You may assign (transfer) your rights in the Policy to someone else. An absolute assignment of the Policy is a change of Policy Owner and beneficiary to the assignee. A collateral assignment of the Policy does not change the Policy Owner or beneficiary, but their rights will be subject to the terms of the assignment. Assignments are subject to all payments made and actions taken by us under the Policy before we receive a signed copy of the assignment form. We are not responsible for determining whether or not an assignment is valid. Changing the Policy Owner or assigning the Policy may have tax consequences. (See "Tax Considerations" below.) 24 MONTH CONVERSION RIGHT GENERAL RIGHT. Generally, during the first two Policy years, you may convert the Policy to fixed benefit coverage by exchanging the Policy for a fixed benefit life insurance policy agreed to by us and issued by us or an affiliate that we name provided that you repay any Policy loans and loan interest, and the Policy has not lapsed. We make the exchange without evidence of insurability. The new policy will have the same base Policy face amount as that being exchanged. The new policy will have the same issue age, risk class and Policy Date as the variable life Policy had. Contact our Designated Office or your registered representative for more specific information about the 24 Month Conversion Right. The exchange may result in a cost or credit to you. On the exchange, you may need to make an immediate premium payment on the new policy in order to keep it in force. PREMIUMS FLEXIBLE PREMIUMS Subject to the limits described below, you choose the amount and frequency of premium payments. You select a Planned Premium schedule, which consists of a first-year premium amount and an amount for subsequent premium payments. This schedule appears in your Policy. YOUR PLANNED PREMIUMS WILL NOT NECESSARILY KEEP YOUR POLICY IN FORCE. You may skip Planned Premium payments or make additional payments. Additional payments could be subject to underwriting. No payment can be less than $50, except with our consent. You can pay Planned Premiums on an annual, semi-annual or quarterly schedule, or on a monthly schedule if payments are drawn directly from your checking account under our pre-authorized checking arrangement. We will send premium notices for annual, semi-annual or quarterly Planned Premiums. You may make payments by check or through our pre-authorized checking arrangement. You can change your Planned Premium schedule by sending your A-21 request to us at our Designated Office. You may not make premium payments on or after the Policy anniversary when the insured reaches age 121, except for premiums required during the grace period. If any payments under the Policy exceed the "7-pay limit" under Federal tax law, your Policy will become a modified endowment contract and you may have more adverse tax consequences with respect to certain distributions than would otherwise be the case if premium payments did not exceed the "7-pay limit." The amount of your "7-pay limit" is shown in your Policy illustration and in your annual Policy statement. If you make a payment that exceeds the "7-pay limit," we will notify you and give you an opportunity to receive a refund of the excess premium to prevent your Policy from becoming a modified endowment contract. (See "Tax Considerations.") In addition, if you have selected the guideline premium test, Federal tax law limits the amount of premiums that you can pay under the Policy. You need our consent if, because of tax law requirements, a payment would increase the Policy's death benefit by more than it would increase cash value. We may require evidence of insurability before accepting the payment. We allocate net payments to your Policy's Investment Divisions as of the date we receive the payments at our Designated Office (or at our Administrative Office in Tampa, Florida), if they are received before the close of regular trading on the New York Stock Exchange. Payments received after that time, or on a day that the New York Stock Exchange is not open, will be allocated to your Policy's Investment Divisions on the next day that the New York Stock Exchange is open. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") Under our current processing, we treat any payment received by us as a premium payment unless it is clearly marked as a loan repayment. AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY INVESTMENT START DATE. Your initial net premium receives Separate Account investment performance and/or Fixed Account interest as of the investment start date. The investment start date is the later of the Policy Date and the date we first receive a premium payment for the Policy at our Designated Office. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") PREMIUM WITH APPLICATION. If you make a premium payment with the application, unless you request otherwise, the Policy Date is the date the policy application is approved. Monthly Deductions begin on the Policy Date. You may only make one premium payment with the application. The minimum amount you must pay is set forth in the application. If we decline an application, we refund the premium payment made. If you make a premium payment with the application, we will cover the insured under a temporary insurance agreement beginning on the later of the date the application is signed or on the date of any required medical examination. (See "Death Benefits.") PREMIUM ON DELIVERY. If you pay the initial premium upon delivery of the Policy, unless you request otherwise, the Policy Date and the investment start date are the date your premium payment is received at our Designated Office. Monthly Deductions begin on the Policy Date. BACKDATING. We may sometimes backdate a Policy, if you request, by assigning a Policy Date earlier than the date the Policy application is approved. You may wish to backdate so that you can obtain lower cost of insurance rates, based on a younger insurance age. For a backdated Policy, you must also pay the minimum premiums due for the period between the Policy Date and the investment start date. As of the investment start date, we allocate the net premiums to the Policy, adjusted for monthly Policy charges. RIGHT TO EXAMINE POLICY You may cancel the Policy within ten days (more in some states) after you receive it. You may return the Policy to our Designated Office (see "Receipt of Communications and Payments at MetLife Investors USA's Designated Office") or your registered representative. Insurance coverage ends as soon as you return the Policy (determined by postmark, if the Policy is mailed). If you cancel the Policy, we refund any premiums paid, the Policy's cash value, or any other amount that is required by state insurance law. A-22 FOR POLICIES ISSUED IN CALIFORNIA. If you are age 60 or older, you may cancel the Policy within 30 days after you receive it. If you elected on the Policy application to allocate 100% of your initial net premium to the Fixed Account, we will generally refund the premiums you paid; if you elected to allocate your initial net premium to the Investment Divisions, we will refund the Policy's cash value. ALLOCATION OF NET PREMIUMS We allocate your initial net premium to the Investment Divisions and/or the Fixed Account as of the investment start date. In states that require a refund of premiums if you exercise the Right to Examine Policy provision, we will hold your initial net premium in the Fixed Account for twenty days, and then we make the allocation among the Investment Divisions as you choose. In states that require a return of cash value if you exercise the Right to Examine Policy provision, we allocate your initial net premium to the Investment Divisions when we receive it. You may allocate any whole percentage to an Investment Division. You make the initial premium allocation when you apply for a Policy. You can change the allocation of future premiums at any time thereafter. The change will be effective for premiums applied on or after the date when we receive your request. You may request the change by telephone, by written request or over the Internet. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") When we allocate net premiums to your Policy's Investment Divisions, we convert them into accumulation units of the Investment Divisions. We determine the number of accumulation units by dividing the dollar amount of the net premium by the accumulation unit value. For your initial premium, we use the accumulation unit value on the investment start date. For subsequent premiums, we use the accumulation unit value next determined after receipt of the payment. (See "Cash Value.") FOR POLICIES ISSUED IN CALIFORNIA. If you are age 60 or older and you allocate 100% of your initial net premium to the Fixed Account in order to receive a refund of premiums should you cancel the Policy during the Right to Examine Policy period, we will not automatically transfer your cash value or reallocate your future premiums to the Investment Divisions once the Right to Examine Policy period has ended. You must contact us to request a transfer or reallocation. RECEIPT OF COMMUNICATIONS AND PAYMENTS AT METLIFE INVESTORS USA'S DESIGNATED OFFICE We will treat your request for a Policy transaction, or your submission of a payment, as received by us if we receive a request conforming to our administrative procedures or a payment at our Designated Office before the close of regular trading on the New York Stock Exchange on that day (usually 4:00 p.m. Eastern Time). If we receive it after that time, or if the New York Stock Exchange is not open that day, then we will treat it as received on the next day when the New York Stock Exchange is open. These rules apply regardless of the reason we did not receive your request by the close of regular trading on the New York Stock Exchange--even if due to our delay (such as a delay in answering your telephone call). The Designated Office for various Policy transactions is as follows: Premium Payments MetLife Investors USA P.O. Box 371499 Pittsburgh, PA 15250-7499 Payment Inquiries and MetLife Investors USA Correspondence P.O. Box 30440 Tampa, FL 33630-3440 Beneficiary and Ownership MetLife Investors USA Changes P.O. Box 541 Warwick, RI 02887-0541 Surrenders, Loans, MetLife Investors USA Withdrawals and P.O. Box 543 Investment Division Transfers Warwick, RI 02887-0543
A-23 Cancellations (Right to Examine MetLife Investors USA Policy Period) Johnstown Compliance Resource Center Free Look Unit 500 Schoolhouse Road Johnstown, PA 15904 Death Claims MetLife Investors USA P.O. Box 353 Warwick, RI 02887-0353 Investment Division Transfers by (800) 200-2214 Telephone All Other Telephone (800) 388-4000 Transactions and Inquiries
You may request a cash value transfer or reallocation of future premiums by written request (which may be telecopied) to us, by telephoning us or over the Internet (subject to our restrictions on "market timing" transfers). To request a transfer or reallocation by telephone, you should contact your registered representative or contact us at 1-800-200-2214. To request a transfer over the Internet, you may log on to our website at www.metlife.com. We use reasonable procedures to confirm that instructions communicated by telephone, facsimile or Internet are genuine. Any telephone, facsimile or Internet instructions that we reasonably believe to be genuine are your responsibility, including losses arising from any errors in the communication of instructions. However, because telephone and Internet transactions may be available to anyone who provides certain information about you and your Policy, you should protect that information. We may not be able to verify that you are the person providing telephone or Internet instructions, or that you have authorized any such person to act for you. Telephone, facsimile, and computer systems (including the Internet) may not always be available. Any telephone, facsimile or computer system, whether it is yours, your service provider's, your registered representative's, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Designated Office. PAYMENT OF PROCEEDS We ordinarily pay any cash surrender value, loan value or death benefit proceeds from the Investment Divisions within seven days after we receive a request, or satisfactory proof of death of the insured (and any other information we need to pay the death proceeds). (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") However, we may delay payment (except when a loan is made to pay a premium to us) or transfers from the Investment Divisions: (i) if the New York Stock Exchange is closed for other than weekends or holidays, or if trading on the New York Stock Exchange is restricted as determined by the SEC, (ii) if the SEC by order permits postponement or determines that an emergency exists that makes payments or Investment Division transfers impractical, or (iii) at any other time when the Portfolios or the Separate Account have the legal right to suspend payment. We may withhold payment of surrender, withdrawal or loan proceeds if any portion of those proceeds would be derived from a Policy Owner's check that has not yet cleared (i.e., that could still be dishonored by your banking institution). We may use telephone, facsimile, Internet or other means of communications to verify that payment from the Policy Owner's check has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. Policy Owners may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. Unless otherwise requested, we may apply the Policy's death proceeds to our Total Control Account. We establish a Total Control Account at a banking institution at the time for payment. The Total Control Account is an interest-bearing checking account through which you have convenient and complete access to the proceeds, which are maintained in our general account or that of an affiliate. Interest is credited at an effective rate of 3% per year. A-24 CASH VALUE Your Policy's total cash value includes its cash value in the Separate Account and in the Fixed Account. If you have a Policy loan, the cash value also includes the amount we hold in the Loan Account as a result of the loan. The cash value reflects: -- net premium payments -- the net investment experience of the Policy's Investment Divisions -- interest credited to cash value in the Fixed Account -- interest credited to amounts held in the Loan Account for a Policy loan -- the death benefit option you choose -- Policy charges -- partial withdrawals -- transfers among the Investment Divisions and the Fixed Account. The Policy's total cash value in the Separate Account equals the number of accumulation units credited in each Investment Division multiplied by that Investment Division's accumulation unit value. We convert any premium, interest earned on loan cash value, or cash value allocated to an Investment Division into accumulation units of the Investment Division. Surrenders, partial withdrawals, Policy loans, transfers and charges deducted from the cash value reduce the number of accumulation units credited in an Investment Division. We determine the number of accumulation units by dividing the dollar amount of the transaction by the Investment Division's accumulation unit value next determined following the transaction. (In the case of an initial premium, we use the accumulation unit value on the investment start date). The accumulation unit value of an Investment Division depends on the net investment experience of its corresponding Portfolio and reflects fees and expenses of the Portfolio. We determine the accumulation unit value as of the close of regular trading on the New York Stock Exchange on each day that the Exchange is open for trading by multiplying the most recent accumulation unit value by the net investment factor ("NIF") for that day (see below). The NIF for an Investment Division reflects: -- the change in net asset value per share of the corresponding Portfolio (as of the close of regular trading on the Exchange) from its last value, -- the amount of dividends or other distributions from the Portfolio since the last determination of net asset value per share, and -- any deductions for taxes that we make from the Separate Account. The NIF can be greater or less than one. DEATH BENEFITS If the insured dies while the Policy is in force, we pay a death benefit to the beneficiary. Coverage under the Policy generally begins when you pay the initial premium. If you make a premium payment with the application, we will cover the insured under a temporary insurance agreement for a limited time that begins on the later of the date we receive the premium payment or the date of any required medical examination. Temporary coverage is not available for proposed insureds who have received medical treatment for, or been diagnosed as having, certain conditions or diseases specified in the temporary insurance agreement. The maximum temporary coverage is the lesser of the amount of insurance applied for and $1,000,000. These provisions vary in some states. DEATH BENEFIT OPTIONS. When you apply for a Policy, you must choose among three death benefit options. If you fail to select a death benefit option in the application, we will seek the required information from you. The Option A death benefit is equal to the face amount of the Policy. The Option A death benefit is fixed, subject to increases required by the Internal Revenue Code of 1986 (the "Code"). A-25 The Option B death benefit is equal to the face amount of the Policy, plus the Policy's cash value, if any. The Option B death benefit is also subject to increases required by the Code. The Option C death benefit (available if the insured is age 60 or younger) is equal to the face amount of the Policy plus the Policy's cash value until the insured attains age 65, at which time we will increase the Policy's face amount by the amount of the Policy's cash value and thereafter the death benefit will remain level, at the increased face amount, subject to increases required by the Code. CHOICE OF TAX TEST. The Internal Revenue Code requires the Policy's death benefit to be not less than an amount defined in the Code. As a result, if the cash value grows to certain levels, the death benefit increases to satisfy tax law requirements. When you apply for your Policy, you select which tax test will apply to the death benefit. You will choose between: (1) the guideline premium test, and (2) the cash value accumulation test. The test you choose at issue cannot be changed. Under the GUIDELINE PREMIUM TEST, the death benefit will not be less than the cash value times the guideline premium factor. See Appendix A. Under the CASH VALUE ACCUMULATION TEST, the death benefit will not be less than the cash value times the net single premium factor set by the Code. Net single premium factors are based on the age, smoking status, risk class and sex of the insured at the time of the calculation. Sample net single premium factors appear in Appendix A. If cash value growth in the later Policy years is your main objective, the guideline premium test may be the appropriate choice because it does not require as high a death benefit as the cash value accumulation test, and therefore cost of insurance charges may be lower, once the Policy's death benefit is subject to increases required by the Code. If you select the cash value accumulation test, you can generally make a higher amount of premium payments for any given face amount, and a higher death benefit may result in the long term. If cash value growth in the early Policy years is your main objective, the cash value accumulation test may be the appropriate choice because it allows you to invest more premiums in the Policy for each dollar of death benefit. AGE 121. The death benefit payable under Option A or Option C on or after the insured's attained age 121 will be the greater of: -- the cash value on the date of death, or -- the face amount of the base Policy on the Policy anniversary at the insured's attained age 121. The death benefit payable under Option B on or after the insured's attained age 121 will be the face amount of the base Policy on the Policy anniversary at the insured's attained age 121, plus the cash value on the date of death. The tax consequences of keeping the Policy in force beyond the insured's attained age 121 are unclear. DEATH PROCEEDS PAYABLE The death proceeds we pay are equal to the death benefit on the date of the insured's death, reduced by any outstanding loan and accrued loan interest on that date. If death occurs during the grace period, we reduce the proceeds by the amount of unpaid Monthly Deductions. (See "Lapse and Reinstatement.") We increase the death proceeds (1) by any rider benefits payable and (2) by any cost of insurance charge made for a period beyond the date of death. Riders that can have an effect on the amount of death proceeds payable are the Accelerated Death Benefit Rider, the Accidental Death Benefit Rider and the Option to Purchase Additional Insurance Coverage Rider. (See "Additional Benefits by Rider.") We may adjust the death proceeds if the insured's age or sex was misstated in the application, if death results from the insured's suicide within two years (less in some states) from the Policy's date of issue, or if a rider limits the death benefit. SUICIDE. If the insured, while sane or insane, commits suicide within two years (or less, if required by state law) from the date of issue, the death benefit will be limited to premiums paid, less any partial withdrawals, less any A-26 loan and loan interest outstanding on the date of death. If the insured, while sane or insane, commits suicide within two years (or less, if required by state law) after the effective date of an increase in face amount, the death benefit for such increase may be limited to the Monthly Deductions for the increase. (Where required by state law, we determine the death benefit under this provision by using the greater of: the reserve of the insurance which is subject to the provision; and the amounts used to purchase the insurance which is subject to the provision.) CHANGE IN DEATH BENEFIT OPTION After the first Policy year you may change your death benefit option, subject to our underwriting rules, by written request to our Designated Office. The change will be effective on the monthly anniversary on or following the date we receive your request. We may require proof of insurability. A change in death benefit option may have tax consequences. If you change from Option A (or from Option C after the insured's attained age 65) to Option B (or to Option C on or before the insured's attained age 60), we reduce the Policy's face amount if necessary so that the death benefit is the same immediately before and after the change. A face amount reduction below $50,000 requires our consent. If we reduce the face amount, we will first reduce any prior increases in face amount that you applied for, in the reverse order in which the increases occurred, then any remaining initial face amount, and then any increase in face amount from a prior change in death benefit option, but not below the Policy minimum. A partial withdrawal of cash value may be necessary to meet Federal tax law limits on the amount of premiums that you can pay into the Policy. A Surrender Charge may apply to a Policy face amount reduction or partial withdrawal that reduces the face amount on a change from Option A (or from Option C after the insured's attained age 65) to Option B (or to Option C on or before the insured's attained age 60). (See "Surrender Charge.") In addition, if the face amount reduction occurs within 12 months after a face amount increase, we will deduct a proportionate part of the Coverage Expense Charges due with respect to the face amount increase for the remainder of the 12-month period. If you change from Option B (or from Option C on or before the insured's attained age 65) to Option A, we increase the Policy's face amount, if necessary, so that the death benefit is the same immediately before and after the change. This increase in face amount is not subject to the Coverage Expense Charge and will not be subject to any Surrender Charge. INCREASE IN FACE AMOUNT You may increase the Policy's face amount. We require satisfactory evidence of insurability, and the insured's attained age must be 85 or less. The minimum amount of increase permitted is $5,000. The increase is effective on the day we approve your request. Requests for face increases should be submitted to our Designated Office. An increase in face amount may have tax consequences. The face amount increase will have its own Target Premium, as well as its own Surrender Charge, current cost of insurance rates, Coverage Expense Charge and Right to Examine Policy and suicide and contestability periods as if it were a new Policy. (See "Surrender Charge", "Monthly Deduction from Cash Value", "Partial Withdrawal" and "Reduction in Face Amount.") When calculating the monthly cost of insurance charge, we attribute the Policy's cash value first to any remaining initial face amount (including any increase in face amount from a prior change in death benefit option), then to any face amount increases in the order in which they were issued, for purposes of determining the net amount at risk. We reserve the right to (i) restrict certain Policy changes, such as death benefit increases, or (ii) require the issuance of a new Policy in connection with such Policy changes if we deem it administratively necessary or prudent to do so in order to comply with applicable law, including applicable Federal income tax law. REDUCTION IN FACE AMOUNT After the first Policy year, you may reduce the face amount of your Policy without receiving a distribution of any Policy cash value. If you reduce the face amount of your Policy, we deduct any Surrender Charge that applies from the Policy's cash value in proportion to the amount of the face amount reduction. If the face amount of your Policy is A-27 reduced in the first year following a face amount increase, we will also deduct a proportionate part of the Coverage Expense Charges due for the remainder of the first year following the face amount increase. A face amount reduction will decrease the Policy's death benefit unless we are increasing the death benefit to satisfy Federal income tax laws, in which case a face amount reduction will not decrease the death benefit unless we deduct a Surrender Charge from the cash value. A reduction in face amount in this situation may not be advisable. The amount of any face reduction must be at least $5,000, and the face amount remaining after a reduction must meet our minimum face amount requirements for issue, except with our consent. If you choose to reduce your Policy's face amount, unless you request otherwise, we will first decrease any prior increases in base Policy face amount that you applied for, in the reverse order in which the increases occurred, then any remaining initial base Policy face amount, and then any increase in face amount from a prior change in death benefit option. A reduction in face amount reduces the Federal tax law limits on the amount of premiums that you can pay under the Policy under the guideline premium test. In these cases, a portion of the Policy's cash value may have to be paid to you to comply with Federal tax law. A face amount reduction takes effect as of the date we receive your request. You can contact your registered representative or the Designated Office for information on face amount reduction procedures. A reduction in the face amount of a Policy may create a modified endowment contract or have other adverse tax consequences. If you are contemplating a reduction in face amount, you should consult your tax adviser regarding the tax consequences of the transaction. (See "Tax Considerations.") SURRENDERS AND PARTIAL WITHDRAWALS SURRENDER You may surrender the Policy for its cash surrender value at any time while the insured is living. We determine the cash surrender value as of the date when we receive the surrender request. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") The cash surrender value equals the cash value reduced by any Policy loan and accrued interest and by any applicable Surrender Charge. (See "Surrender Charge.") If you surrender the Policy in the first Policy year (or in the first year following a face amount increase), we will also deduct an amount equal to the remaining first year Coverage Expense Charges and Policy Charges. You may apply all or part of the surrender proceeds to a payment option. Once a Policy is surrendered, all coverage and benefits cease and cannot be reinstated. A surrender may result in adverse tax consequences. (See "Tax Considerations" below.) The Policies are designed to be long-term investments. As a result, you should be aware that if you surrender your Policy in the first Policy year, the Surrender Charge is likely to exceed the cash value of your Policy and you will receive no proceeds upon surrender. PARTIAL WITHDRAWAL After the first Policy anniversary you may withdraw a portion of the Policy's cash surrender value. A partial withdrawal reduces the Policy's death benefit and may reduce the Policy's face amount if necessary so that the amount at risk under the Policy will not increase. A partial withdrawal may also reduce rider benefits. The minimum amount of a partial withdrawal request must be $500. We have the right to limit partial withdrawals to no more than 90% of the cash surrender value. In addition, a partial withdrawal will be limited by any restriction that we currently impose on withdrawals from the Fixed Account. (See "The Fixed Account.") Currently, we permit partial withdrawals equal to the lesser of 100% of the Policy's cash surrender value in the Separate Account as of the beginning of the year, or the maximum amount that can be withdrawn without causing the Policy's face amount to fall below the minimum permitted. (However, we may allow the face amount to fall below the minimum if the Policy has been in force for at least 15 years and the insured's A-28 attained age is greater than 55.) You may not make a partial withdrawal that would reduce your cash surrender value to less than the amount of two monthly deductions. We have the right to limit partial withdrawals to 12 per Policy year. Currently we do not limit the number of partial withdrawals. We reserve the right to impose a charge of $25 on each partial withdrawal. If a partial withdrawal reduces your Policy's face amount, the amount of the Surrender Charge that will be deducted from your cash value is an amount that is proportional to the amount of the face reduction. The amount deducted will reduce the remaining Surrender Charge payable under the Policy. No Surrender Charge will apply on up to 10% of the cash surrender value withdrawn each year, measured as a percentage of each withdrawal. EXAMPLE. The following example assumes that a Policy Owner withdraws, in the first month of the second Policy year, 20% of the cash surrender value of a Policy that has the following characteristics.
Face Amount:....................... $ 300,000 Death Benefit Option:.............. Option A -- Level Cash Value:........................ $ 11,718 Surrender Charge:.................. $ 4,200 ----------------- Cash Surrender Value:.............. $ 7,518 x 20% ----------------- Withdrawal Amount:................. $ 1,504
The first 10% of cash surrender value, or $752, can be withdrawn free of Surrender Charge. The remaining $752 withdrawn is subject to a portion of the Policy's Surrender Charge -- based on the ratio that such excess withdrawal amount bears to the Policy's face amount less the Surrender Charge, as shown in the formula below:
Withdrawal Amount in Surrender Charge x Excess of Free Withdrawal = Surrender Charge --------------------------------- Face Amount less Surrender Charge On Withdrawal $4,200 x $752 = $11 --------------------------------- $300,000 - $4,200
Because the Policy has a level death benefit, the withdrawal will cause a dollar for dollar reduction in the Policy's face amount, so that the cash value and the face amount will both be reduced by the $1,504 withdrawal and by the $11 Surrender Charge. The overall impact of the withdrawal on Policy values would therefore be as follows: The effect of the withdrawal on the Policy would be as follows:
Face Amount before Withdrawal............................... $300,000 Withdrawal................................................ - 1,504 Surrender Charge on Withdrawal............................ - 11 -------- Face Amount after Withdrawal................................ $298,485 Surrender Charge before Withdrawal.......................... $ 4,200 Surrender Charge on Withdrawal............................ - 11 -------- Surrender Charge after Withdrawal........................... $ 4,189 Cash Value before Withdrawal................................ $ 11,718 Withdrawal................................................ - 1,504 Surrender Charge on Withdrawal............................ - 11 -------- Cash Value after Withdrawal................................. $ 10,203 Surrender Charge after Withdrawal........................... -4,189 -------- Cash Surrender Value after Withdrawal....................... $ 6,014
A-29 If a partial withdrawal that reduces the Policy's face amount occurs within 12 months after a face amount increase, we will deduct a proportionate part of the Coverage Expense Charges due with respect to the face amount increase for the remainder of the 12-month period. Any face amount reduction resulting from a partial withdrawal will reduce the face amount in the following order: any prior increases in base Policy face amount that you applied for, in the reverse order in which the increases occurred; any remaining initial face amount; and then any face amount increases resulting from a change in death benefit option, down to the required minimum. A partial withdrawal reduces the cash value in the Investment Divisions of the Separate Account and the Fixed Account in the same proportion that the cash value in each bears to the Policy's total unloaned cash value. We determine the amount of cash surrender value paid upon a partial withdrawal as of the date when we receive a request. You can contact your registered representative or our Designated Office for information on partial withdrawal procedures. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") A reduction in the death benefit as a result of a partial withdrawal may create a modified endowment contract or have other adverse tax consequences. If you are contemplating a partial withdrawal, you should consult your tax adviser regarding the tax consequences. (See "Tax Considerations.") TRANSFERS TRANSFER OPTION You may transfer your Policy's cash value between and among the Investment Divisions and the Fixed Account. In states where we refund your premium if you exercise the Right to Examine Policy provision, your right to transfer begins 20 days after we apply your initial premium to the Policy. We reserve the right to limit transfers to four per Policy year. Currently we do not limit the number of transfers per Policy year. We reserve the right to make a charge of $25 per transfer. We treat all transfer requests made at the same time as a single request. The transfer is effective as of the date when we receive the transfer request, if the request is received before the close of regular trading on the New York Stock Exchange. Transfer requests received after that time, or on a day that the New York Stock Exchange is not open, will be effective on the next day that the New York Stock Exchange is open. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") For special rules regarding transfers involving the Fixed Account, see "The Fixed Account". Frequent requests from Policy Owners to transfer cash value may dilute the value of a Portfolio's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Portfolio and the reflection of that change in the Portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the underlying Portfolios and may disrupt portfolio management strategy, requiring a Portfolio to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Portfolios, which may in turn adversely affect Policy Owners and other persons who may have an interest in the Policies (e.g., beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Portfolios (i.e., the BlackRock Strategic Value Portfolio, FI International Stock Portfolio, Franklin Templeton Small Cap Growth Portfolio, Loomis Sayles Small Cap Portfolio, Morgan Stanley EAFE Index Portfolio, Oppenheimer Global Equity Portfolio, Russell 2000 Index Portfolio, Western Asset Management Strategic Bond Opportunities Portfolio, T. Rowe Price Small Cap Growth Portfolio, Harris Oakmark International Portfolio, Lord Abbett Bond Debenture Portfolio, Met/AIM Small Cap Growth Portfolio, MFS Research International Portfolio, and American Funds Global Small Capitalization Fund--the "Monitored Portfolios") and we monitor transfer activity in those Monitored Portfolios. In addition, as described below, we intend to treat all American Funds Insurance Series portfolios ("American Funds portfolios") as Monitored Portfolios. We employ various means to monitor transfer activity, such as examining the frequency and size of transfers into and out of the A-30 Monitored Portfolios within given periods of time. For example, we currently monitor transfer activity to determine if, for each category of international, small-cap, and high-yield Portfolios, in a 12-month period there were, (1) six or more transfers involving the given category; (2) cumulative gross transfers involving the given category that exceed the current cash value; and (3) two or more "round-trips" involving any Portfolio in the given category. A round-trip generally is defined as a transfer in followed by a transfer out within the next seven calendar days or a transfer out followed by a transfer in within the next seven calendar days, in either case subject to certain other criteria. We do not believe that other Portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Portfolios, we rely on the underlying Portfolios to bring any potential disruptive trading activity they identify to our attention for investigation on a case-by-case basis. We will also investigate other harmful transfer activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. AMERICAN FUNDS MONITORING POLICY. As a condition to making their portfolios available in our products, American Funds requires us to treat all American Funds portfolios as Monitored Portfolios under our current market timing and excessive trading policies and procedures. Further, American Funds requires us to impose additional specified monitoring criteria for all American Funds portfolios available under the Policy, regardless of the potential for arbitrage trading. We are required to monitor transfer activity in American Funds portfolios to determine if there were two or more transfers in followed by transfers out, in each case of a certain dollar amount or greater, in any 30- day period. A first violation of the American Funds monitoring policy will result in a written notice of violation; each additional violation will result in the imposition of a six-month restriction, during which period we will require all transfer requests to or from an American Funds portfolio to be submitted with an original signature. Further, as Monitored Portfolios, all American Funds portfolios also will be subject to our current market timing and excessive trading policies, procedures and restrictions (described below), and transfer restrictions may be imposed upon a violation of either monitoring policy. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other Policy Owners or other persons who have an interest in the Policies, we require all future transfer requests to or from any Monitored Portfolios or other identified Portfolios under that Policy to be submitted either (i) in writing with an original signature or (ii) by telephone prior to 10:00 a.m. Transfers made under an Automated Investment Strategy are not treated as transfers when we evaluate trading patterns for market timing. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Portfolios that we believe are susceptible to arbitrage trading or the determination of the transfer limits. Our ability to detect and/or restrict such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Policy Owners to avoid such detection. Our ability to restrict such transfer activity also may be limited by provisions of the Policy. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Policy Owners and other persons with interests in the Policies. We do not accommodate market timing in any Portfolio and there are no arrangements in place to permit any Policy Owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. The Portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares, and we reserve the right to enforce these policies and procedures. For example, Portfolios may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the Portfolios describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Portfolios, we have entered into a written agreement, as required by SEC regulation, with each Portfolio or its principal underwriter that obligates us to provide to the Portfolio promptly upon request certain information about the trading activity of individual Policy Owners, and to execute instructions from the Portfolio to restrict or prohibit further purchases or transfers by specific Policy Owners who violate the frequent trading policies established by the Portfolio. A-31 In addition, Policy Owners and other persons with interests in the Policies should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts funding variable insurance products. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance products and/or individual retirement plan participants. The omnibus nature of these orders may limit the Portfolios in their ability to apply their frequent trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, we cannot guarantee that the Portfolios (and thus Policy Owners) will not be harmed by transfer activity relating to other insurance companies and/or retirement plans that may invest in the Portfolios. If a Portfolio believes that an omnibus order reflects one or more transfer requests from Policy Owners engaged in disruptive trading activity, the Portfolio may reject the entire omnibus order. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single Policy Owner). You should read the Portfolio prospectuses for more details. AUTOMATED INVESTMENT STRATEGIES You can choose one of five automated investment strategies. You can change or cancel your choice at any time. EQUITY GENERATOR. The Equity Generator allows you to transfer the interest earned in the Fixed Account to any one of the Investment Divisions on each monthly anniversary. The interest earned in the month must be at least $20 in order for the transfer to take place. If less than $20 is earned, no transfer will occur, and the interest not transferred cannot be counted towards the next month's minimum. ALLOCATOR. The Allocator allows you to systematically transfer cash value from the Fixed Account or any one Investment Division (the "source fund") to any number of Investment Divisions. The transfers will take place on each monthly anniversary. You can choose to transfer a specified dollar amount (1) for a specified number of months, or (2) until the source fund is depleted. In either case, payments must continue for at least a three month period. ENHANCED DOLLAR COST AVERAGER. With the Enhanced Dollar Cost Averager, cash value is transferred from the EDCA fixed account to the Investment Divisions monthly. You elect the EDCA at issue and select the total dollar amount of cash value to be transferred. The cash value earmarked for the strategy is held in the EDCA fixed account where it is credited with a rate of interest that is higher than the Fixed Account's current crediting rate. The amount transferred each month to the Investment Divisions equals the total amount earmarked for the strategy divided by 12. REBALANCER. The Rebalancer allows your Policy's cash value to be automatically redistributed on a quarterly basis among the Investment Divisions and the Fixed Account in accordance with the allocation percentages you have selected. INDEX SELECTOR. The Index Selector allows you to choose one of five asset allocation models which are designed to correlate to various risk tolerance levels. Based on your selection, we allocate 100% of your cash value among the five Investment Divisions that invest in the five index Portfolios available under the Policy (the Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, MetLife Stock Index, MetLife Mid Cap Stock Index and Russell 2000 Index Portfolios) and the Fixed Account. On a quarterly basis, we will redistribute your cash value among these Investment Divisions and the Fixed Account in order to return your cash value to the original allocation percentages. If you change your allocation of net premiums the Index Selector strategy, including the rebalancing feature, will be terminated. These automated investment strategies allow you to take advantage of investment fluctuations, but none assures a profit nor protects against a loss. Because certain strategies involve continuous investment in securities A-32 regardless of fluctuating price levels of such securities, you should consider your financial ability to continue purchases through periods of fluctuating price levels. We reserve the right to modify or terminate any of the automated investment strategies for any reason, including, without limitation, a change in regulatory requirements applicable to such programs. For more information about the automated investment strategies, please contact your registered representative. LOANS YOU MAY BORROW FROM YOUR POLICY AT ANY TIME. The maximum amount you may borrow, calculated as of the date of the loan, is: -- the Policy's cash value, less -- any Policy loan balance, less -- loan interest due to the next Policy anniversary, less -- the most recent Monthly Deduction times the number of months to the next Policy anniversary, less -- any Surrender Charge, plus -- interest credited on the cash value at the guaranteed interest rate to the next Policy anniversary. The minimum loan amount is $500 (less in some states). We make the loan as of the date when we receive a loan request. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") You may increase your risk of lapse if you take a loan. You should contact our Designated Office or your registered representative for information on loan procedures. A Policy loan reduces the Policy's cash value in the Investment Divisions by the amount of the loan. A loan repayment increases the cash value in the Investment Divisions by the amount of the repayment. We attribute Policy loans to the Investment Divisions and the Fixed Account in proportion to the cash value in each. We transfer cash value equal to the amount of the loan from the Investment Divisions and the Fixed Account to the Loan Account (which is part of our general account). You may repay all or part of your loan at any time while the insured is still alive. When you make a loan repayment, we transfer an amount of cash value equal to the repayment from the Loan Account to the Divisions of the Separate Account and to the Fixed Account in proportion to the cash value in each. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") We guarantee that the interest rate charged on Policy loans will not be more than 4.0% per year in Policy years 1-10 and 3.0% per year thereafter. Policy loan interest is due and payable annually on each Policy anniversary. If not paid when due, we add the interest accrued to the loan amount, and we transfer an amount of cash value equal to the unpaid interest from the Investment Divisions and the Fixed Account to the Loan Account in the same manner as a new loan. Cash value in the Loan Account earns interest at not less than 3.0% per year and is transferred on each Policy anniversary to the Investment Divisions and to the Fixed Account in proportion to the cash value in each. The interest credited will also be transferred: (1) when you take a new loan; (2) when you make a full or partial loan repayment; and (3) when the Policy enters the grace period. The amount taken from the Policy's Investment Divisions as a result of a loan does not participate in the investment experience of the Investment Divisions. Therefore, loans can permanently affect the death benefit and cash value of the Policy, even if repaid. In addition, we reduce any proceeds payable under a Policy by the amount of any outstanding loan plus accrued interest. If a Policy loan is outstanding, it may be better to repay the loan than to pay a premium, because the payment is subject to sales and premium tax charges, and the loan repayment is not subject to charges. (See "Deductions from Premiums.") If you want us to treat a payment as a loan repayment, it should be clearly marked as such. A-33 A loan that is taken from, or secured by, a Policy may have tax consequences. Although the issue is not free from doubt, we believe that a loan from or secured by a Policy that is not classified as a modified endowment contract should generally not be treated as a taxable distribution. Nevertheless, the tax consequences associated with loans outstanding after the tenth Policy year are uncertain. A tax adviser should be consulted when considering a loan. LAPSE AND REINSTATEMENT LAPSE In general, in any month that your Policy's cash surrender value is not large enough to cover a Monthly Deduction, your Policy will be in default, and may lapse. However, you can prevent your Policy from lapsing, regardless of the amount of your cash surrender value, if the premiums you pay are sufficient to keep the Guaranteed Minimum Death Benefit ("GMDB") in effect. The base Policy offers, at no additional charge, a five-year GMDB, a 20-year GMDB and a GMDB that lasts until the insured's age 65. For an additional charge you can add a Policy rider at issue that provides a GMDB to age 85 or a GMDB to age 121. All Policies are issued with the five-year GMDB, which guarantees that the Policy will remain in force for at least five years if the required Guaranteed Minimum Death Benefit Monthly Premiums ("GMDB Monthly Premiums") are paid when due. The five-year GMDB Monthly Premium is set forth in your Policy. It is the minimum initial periodic premium you can pay into the Policy. The 20-year GMDB and the GMDB to age 65 are available to eligible Policy Owners and can be elected at issue. The GMDB Monthly Premium varies depending on the guarantee period, the insured's age, sex (except for unisex policies), smoking status and risk class, the Policy's face amount and the death benefit option chosen. The GMDB Monthly Premium may change in the event that any of the following events occur: an increase or decrease in the base Policy face amount; adding, deleting or changing a rider; a change in death benefit option or the insured's risk class; or a misstatement of the insured's age or sex in the Policy application. On each monthly anniversary we test the Policy to determine if the cumulative premiums you have paid, less any partial withdrawals or outstanding loans you have taken, equal or exceed the sum of the GMDB Monthly Premiums due to date for the GMDB you selected. If you meet this test, the GMDB you selected will be in effect. However, even if you have not elected the 20-year GMDB or the GMDB to age 65, if the amount of premiums you pay into the Policy for each Policy month since the Policy Date is sufficient to meet the requirements of the 20-year GMDB or the GMDB to age 65, in your third annual statement we will notify you that the applicable GMDB is in effect. Conversely, if you have elected the 20-year GMDB or the GMDB to age 65 and your premium payments are insufficient to satisfy the GMDB Monthly Premium requirements, we will notify you that your GMDB will be reduced to the five-year GMDB, the GMDB to age 65, or the 20-year GMDB, as applicable, unless you pay sufficient premiums within 62 days to meet the requirements of the GMDB you originally selected. If, during the first five Policy years, you fail to pay sufficient premiums to keep the five-year GMDB in effect, we will notify you that the GMDB will terminate within 62 days if you fail to pay the required Monthly Premiums. If the guarantee provided by the GMDB terminates, the Policy will continue in force for as long as there is cash surrender value sufficient to pay the Monthly Deduction. If the GMDB terminates, you may reinstate it within nine months provided the Policy remains in force. In order to reinstate the GMDB, you must pay sufficient premiums to satisfy the cumulative premium requirement for the applicable GMDB (five-year, 20-year or to age 65) at the time of reinstatement. If the GMDB is in effect and the Policy's cash surrender value is insufficient to cover the Monthly Deduction, the Policy will not lapse. We will take the Monthly Deduction from the Policy's cash value until the cash value has been reduced to zero. At that point, future Monthly Deductions will be waived for as long as the GMDB is in effect. If the GMDB is not in effect and the cash surrender value is insufficient to pay the Monthly Deduction, the Policy will enter a 62-day grace period during which you will have an opportunity to pay a premium sufficient to keep the Policy in force. The minimum amount you must pay is the lesser of three Monthly Deductions or, if applicable, the amount necessary to reinstate the GMDB. We will tell you the amount due. If you fail to pay this amount before the end of the grace period, the Policy will terminate. A-34 Your Policy may also lapse if Policy loans plus accrued interest exceed the Policy's cash value less the Surrender Charge. Your Policy may be protected against lapse in these circumstances if it has been in force for 15 years, the insured has attained age 75, and the other requirements of the Overloan Protection Rider have been met. If your Policy is not so protected, we will notify you that the Policy is going to terminate. The Policy terminates without value unless you make a sufficient payment within the later of 62 days from the monthly anniversary immediately before the date when the excess loan occurs or 31 days after we mail the notice. If the Policy lapses with a loan outstanding, adverse tax consequences may result. (See "Tax Considerations" below.) Some states may require a different grace period than that described above. Please read the grace period provision of your Policy for details. REINSTATEMENT If your Policy has lapsed, in most states you may reinstate it within three years after the date of lapse if the insured has not attained age 121. If more than three years have passed, you need our consent to reinstate. Reinstatement in all cases requires payment of certain charges described in the Policy and usually requires evidence of insurability that is satisfactory to us. If the Policy lapses and is reinstated during the first five Policy years, only the five-year GMDB will be reinstated. If the Policy lapses after the first five Policy years, the GMDB will terminate and cannot be reinstated. Under no circumstances can the GMDB provided by Policy rider be reinstated following a Policy lapse. If we deducted a Surrender Charge on lapse, we credit it back to the Policy's cash value on reinstatement. The Surrender Charge on the date of reinstatement is the same as it was on the date of lapse. When we determine the Surrender Charge and other charges except cost of insurance and the Policy loan interest rate, we do not count the amount of time that a Policy was lapsed. ADDITIONAL BENEFITS BY RIDER You can add additional benefits to the Policy by rider, subject to our underwriting and issuance standards. These additional benefits usually require an additional charge as part of the Monthly Deduction from cash value. The rider benefits available with the Policy provide fixed benefits that do not vary with the investment experience of the Separate Account. There is no limit on the number of riders you can add to your Policy. However, you may not elect both the Option to Purchase Long-Term Care Insurance Rider and the Options to Purchase Additional Insurance Coverage Rider, nor may you elect both the Waiver of Monthly Deduction Rider and the Waiver of Specified Premium Rider. The following riders, some of which have been described previously, are available: CHILDREN'S TERM INSURANCE RIDER, which provides term insurance on the lives of children of the insured. WAIVER OF MONTHLY DEDUCTION RIDER, which provides for waiver of Monthly Deductions in the event of the disability of the insured. WAIVER OF SPECIFIED PREMIUM RIDER, which provides for waiver of a specified amount of monthly premium in the event of the disability of the insured. (Not available in California.) OPTIONS TO PURCHASE ADDITIONAL INSURANCE COVERAGE RIDER, which allows the Owner to purchase additional coverage on the insured without providing evidence of insurability. OPTION TO PURCHASE LONG-TERM CARE INSURANCE RIDER, which allows the Owner to purchase long-term care coverage on the insured without providing evidence of insurability. (Not available in Connecticut, Florida or Virginia.) ACCELERATION OF DEATH BENEFIT RIDER, which allows a Policy Owner to accelerate payment of all or part of the Policy's death benefit if the insured is terminally ill. In calculating the Accelerated Death Benefit, we assume that death occurs one year from the date of claim and we discount the future death benefit using an interest rate not to exceed the greater of (1) the current yield on 90-day Treasury bills, and (2) the maximum policy loan interest rate under the Policy. The Policy Owner must accelerate at least $20,000, but not more than the greater of $250,000 or 10% of the death benefit. As an example, if a Policy Owner accelerated the death benefit of a Policy with a face A-35 amount of $1,000,000, the maximum amount that could be accelerated would be $250,000. Assuming an interest rate of 6%, the present value of the benefit would be $235,849. If we exercised our reserved right to impose a $150 processing fee, the benefit payable would be $235,849 less $150, or $235,699. (Not available in Pennsylvania or Puerto Rico.) GUARANTEED SURVIVOR INCOME BENEFIT RIDER, which provides the beneficiary with the option of exchanging the Policy's death benefit for enhanced monthly income payments for life. ACCIDENTAL DEATH BENEFIT, which provides for the payment of an additional death benefit in the event of the insured's death by accident. GUARANTEED MINIMUM DEATH BENEFIT RIDER, which provides for a guaranteed death benefit until the insured's age 85 or the insured's age 121. (Not currently available in Florida or Virginia.) OVERLOAN PROTECTION RIDER, which provides protection from Policy lapse due to an excess Policy loan. Not all riders may be available to you and riders in addition to those listed above may be made available. You should consult your registered representative regarding the availability of riders. THE FIXED ACCOUNT You may allocate net premiums and transfer cash value to the Fixed Account, which is part of MetLife Investors USA's general account. Because of exemptive and exclusionary provisions in the Federal securities laws, interests in the Fixed Account are not registered under the Securities Act of 1933. Neither the Fixed Account nor the general account is registered as an investment company under the Investment Company Act of 1940. Therefore, neither the Fixed Account, the general account nor any interests therein are generally subject to the provisions of these Acts, and the SEC does not review Fixed Account disclosure. This disclosure may, however, be subject to certain provisions of the Federal securities laws on the accuracy and completeness of prospectuses. GENERAL DESCRIPTION Our general account includes all of our assets except assets in the Separate Account or in our other separate accounts. We decide how to invest our general account assets. Fixed Account allocations do not share in the actual investment experience of the general account. Instead, we guarantee that the Fixed Account will credit interest at an annual effective rate of at least 3%. We may or may not credit interest at a higher rate. We declare the current interest rate for the Fixed Account periodically. The Fixed Account earns interest daily. VALUES AND BENEFITS Cash value in the Fixed Account increases from net premiums allocated and transfers to the Fixed Account and Fixed Account interest, and decreases from loans, partial withdrawals made from the Fixed Account, charges and transfers from the Fixed Account. We deduct charges from the Fixed Account and the Policy's Investment Divisions in proportion to the amount of cash value in each. (See "Monthly Deduction from Cash Value.") A Policy's total cash value includes cash value in the Separate Account, the Fixed Account, and any cash value held in the Loan Account due to a Policy loan. Cash value in the Fixed Account is included in the calculation of the Policy's death benefit in the same manner as the cash value in the Separate Account. (See "Death Benefits.") POLICY TRANSACTIONS Except as described below, the Fixed Account has the same rights and limitations regarding premium allocations, transfers, loans, surrenders and partial withdrawals as the Separate Account. The following special rules apply to the Fixed Account. Twenty days after we apply the initial premium to the Policy (less in some states) you may transfer cash value from the Fixed Account to the Separate Account. The amount of any transfer must be at least $50, unless the balance remaining would be less than $50, in which case you may withdraw or transfer the entire Fixed Account cash A-36 value. After the first Policy year you may withdraw cash value from the Fixed Account. The amount of any partial withdrawal, net of applicable Surrender Charges, must be at least $500. No amount may be withdrawn from the Fixed Account that would result in there being insufficient cash value to meet any Surrender Charges that would be payable immediately following the withdrawal upon the surrender of the remaining cash value in the Policy. We reserve the right to only allow transfers and withdrawals from the Fixed Account during the 30-day period that follows the Policy anniversary. The total amount of transfers and withdrawals in a Policy year may not exceed the greater of (a) 25% of the Policy's cash surrender value in the Fixed Account at the beginning of the Policy year, (b) the previous Policy year's maximum allowable withdrawal amount, and (c) 100% of the cash surrender value in the Fixed Account if withdrawing the greater of (a) and (b) would result in a Fixed Account balance of $50 or less. We are not currently imposing the maximum limit on transfers and withdrawals from the Fixed Account, but we reserve the right to do so. There is currently no transaction charge for partial withdrawals or transfers. We reserve the right to limit partial withdrawals to 12 and transfers to four in a Policy year and to impose a charge of $25 for each partial withdrawal or transfer. We may revoke or modify the privilege of transferring amounts to or from the Fixed Account at any time. Partial withdrawals will result in the imposition of any applicable Surrender Charges. Unless you request otherwise, a Policy loan reduces the Policy's cash value in the Investment Divisions and the Fixed Account proportionately. We allocate all loan repayments in the same proportion that the cash value in each Investment Division and the Fixed Account bears to the Policy's total unloaned cash value. The amount transferred from the Policy's Investment Divisions and the Fixed Account as a result of a loan earns interest at an effective rate of at least 3% per year, which we credit to the Policy's cash value in the Investment Divisions and the Fixed Account in proportion to the Policy's cash value in each on the day it is credited. We take partial withdrawals from the Policy's Investment Divisions and the Fixed Account in the same proportion that the cash value in each account bears to the Policy's total unloaned cash value. We can delay transfers, surrenders, withdrawals and Policy loans from the Fixed Account for up to six months (to the extent allowed by state insurance law). We will not delay loans to pay premiums on policies issued by us. CHARGES We make certain charges and deductions under the Policy. These charges and deductions compensate us for: (1) services and benefits we provide; (2) costs and expenses we incur; and (3) risks we assume. Services and benefits we provide: - the death benefit, cash, and loan benefits under the Policy - investment options, including premium allocations - administration of elective options - the distribution of reports to Policy Owners Costs and expenses we incur: - costs associated with processing and underwriting applications, and with issuing and administering the Policy (including any riders) - overhead and other expenses for providing services and benefits - sales and marketing expenses - other costs of doing business, such as collecting premiums, maintaining records, processing claims, effecting transactions, and paying federal, state, and local premium and other taxes and fees A-37 Risks we assume: - that the cost of insurance charges we may deduct are insufficient to meet our actual claims because the insureds die sooner than we estimate - that the cost of providing the services and benefits under the Policies exceed the charges we deduct The amount of a charge may not necessarily correspond to the costs of the services or benefits that are implied by the name of the charge or that are associated with the particular Policy. For example, the sales charge and Surrender Charge may not fully cover all of our sales and distribution expenses, and we may use proceeds from other charges, including the Mortality and Expense Risk Charge and the cost of insurance charge, to help cover those expenses. We may profit from certain Policy charges. DEDUCTIONS FROM PREMIUMS Prior to the allocation of a premium, we deduct a percentage of your premium payment. We credit the remaining amount (the net premium) to your cash value according to your allocation instructions. The deductions we make from each premium payment are the sales charge, the premium tax charge, and the federal tax charge. SALES CHARGE. We deduct a 2.25% sales charge from each premium payment. Currently, the sales charge is only deducted from premium payments that are less than or equal to the Target Premium. PREMIUM TAX CHARGE. We deduct 2.0% from each premium for premium taxes and administrative expenses. Premium taxes vary from state to state, but we deduct a flat 2.0%, which is based on an average of such taxes. Administrative expenses covered by this charge include those related to premium tax and certain other state filings. FEDERAL TAX CHARGE. We deduct 1.25% from each premium for our Federal income tax liability related to premiums. EXAMPLE: The following chart shows the net amount that we would allocate to the Policy assuming a premium payment of $4,000 (and a Target Premium of $2,000).
NET PREMIUM PREMIUM - ------- ------- $4,000 $4,000 - 175 (5.5% X $2,000) + (3.25% X $2,000) = total sales, premium ------- tax and Federal tax charges $3,825 Net Premium
SURRENDER CHARGE If, during the first ten Policy years, or during the first ten Policy years following a face amount increase, you surrender or lapse your Policy, reduce the face amount, or make a partial withdrawal or change in death benefit option that reduces the face amount, then we will deduct a Surrender Charge from the cash value. The maximum Surrender Charge is shown in your Policy. The Surrender Charge period is 11 years for policies issued in Florida. No Surrender Charge will apply on up to 10% of the cash surrender value withdrawn each year. The Surrender Charge depends on the face amount of your Policy and the issue age, sex (except for unisex policies), risk class and smoker status of the insured. The Surrender Charge will remain level for up to three Policy years, or for up to three years after a face amount increase, and will then decline on a monthly basis until it reaches zero at the end of the tenth Policy year (or the tenth year following the face amount increase). A-38 The table below shows the maximum Surrender Charge that applies (in all states except Florida) if the lapse, surrender or face amount reduction occurs at any time in the first Policy year, and in the last month of each Policy year thereafter.
FOR POLICIES WHICH THE MAXIMUM SURRENDER ARE SURRENDERED, CHARGE PER $1,000 LAPSED OR OF BASE POLICY REDUCED DURING FACE AMOUNT ------------------ --------------------- Entire Policy Year 1 $38.25 Last Month of Policy Year 2 35.81 3 32.56 4 31.74 5 29.84 6 27.13 7 24.42 8 18.99 9 9.50 10 0.00
The table below shows the maximum Surrender Charge that applies for Policies issued in Florida.
FOR POLICIES WHICH THE MAXIMUM SURRENDER ARE SURRENDERED, CHARGE PER $1,000 LAPSED OR OF BASE POLICY REDUCED DURING FACE AMOUNT ------------------ --------------------- Entire Policy Year 1 $38.25 Last Month of Policy Year 2 35.81 3 32.56 4 31.74 5 29.84 6 27.13 7 24.42 8 18.99 9 11.87 10 5.93 11 0.00
In the case of a face amount reduction or a partial withdrawal or change in death benefit option that results in a face amount reduction, we deduct any Surrender Charge that applies from the Policy's remaining cash value in an amount that is proportional to the amount of the Policy's face amount surrendered. (See "Reduction in Face Amount," "Partial Withdrawal" and "Change in Death Benefit Option.") If you surrender the Policy (or a face amount increase) in the first Policy year (or in the first year following the face amount increase) we will deduct from the surrender proceeds an amount equal to the remaining first year Coverage Expense Charges and Policy Charges. If you reduce the face amount of your Policy in the first year following a face amount increase, we will deduct from your cash value a proportionate amount of the remaining first year Coverage Expense Charges, based on the ratio of the face amount reduction to the Policy's original face amount. The Surrender Charge reduces the Policy's cash value in the Investment Divisions and the Fixed Account in proportion to the amount of the Policy's cash value in each. However, if you designate the accounts from which a partial withdrawal is to be taken, the charge will be deducted proportionately from the cash value of the designated accounts. A-39 PARTIAL WITHDRAWAL CHARGE We reserve the right to impose a processing charge on each partial withdrawal. If imposed, this charge would compensate us for administrative costs in generating the withdrawn payment and in making all calculations that may be required because of the partial withdrawal. TRANSFER CHARGE We reserve the right to impose a processing charge on each transfer between Investment Divisions or between an Investment Division and the Fixed Account to compensate us for the costs of processing these transfers. Transfers under one of our Automated Investment Strategies do not count as transfers for the purpose of assessing this charge. ILLUSTRATION OF BENEFITS CHARGE We reserve the right to impose a charge for each illustration of Policy benefits that you request in excess of one per year. If imposed, this charge would compensate us for the cost of preparing and delivering the illustration to you. MONTHLY DEDUCTION FROM CASH VALUE On the first day of each Policy month, starting with the Policy Date, we deduct the "Monthly Deduction" from your cash value. -- If your Policy is protected against lapse by a Guaranteed Minimum Death Benefit, we make the Monthly Deduction each month regardless of the amount of your cash surrender value. If your cash surrender value is insufficient to pay the Monthly Deduction in any month, your Policy will not lapse, but the shortfall will, in effect, cause your cash surrender value to have a negative balance. (See "Lapse and Reinstatement.") -- If a Guaranteed Minimum Death Benefit is not in effect, and the cash surrender value is not large enough to cover the entire Monthly Deduction, we will make the deduction to the extent cash value is available, but the Policy will be in default, and it may lapse. (See "Lapse and Reinstatement.") There is no Monthly Deduction on or after the Policy anniversary when the insured attains age 121. The Monthly Deduction reduces the cash value in each Investment Division and in the Fixed Account in proportion to the cash value in each. However, you may request that we charge the Monthly Deduction to a specific Investment Division or to the Fixed Account. If, in any month, the designated account has insufficient cash value to cover the Monthly Deduction, we will first reduce the designated account cash value to zero and then charge the remaining Monthly Deduction to all Investment Divisions and, if applicable, the Fixed Account, in proportion to the cash value in each. The Monthly Deduction includes the following charges: POLICY CHARGE. The Policy Charge is equal to $15.00 per month in the first Policy year and $8.00 per month thereafter. The Policy Charge is $12 per month in the first Policy year and $9 per month thereafter for Policies issued with face amounts of less than $50,000. No Policy Charge applies to Policies issued with face amounts equal to or greater than $250,000. The Policy Charge compensates us for administrative costs such as record keeping, processing death benefit claims and policy changes, preparing and mailing reports, and overhead costs. COVERAGE EXPENSE CHARGE. We impose a monthly charge for the costs of underwriting, issuing (including sales commissions), and administering the Policy or the face amount increase. The monthly charge is imposed on the base Policy face amount and varies by the base Policy's face amount and duration, and by the insured's issue age, smoking status, risk class (at the time the Policy or a face amount increase is issued), and, except for unisex Policies, the insured's sex. Currently, we only impose the Coverage Expense Charge during the first eight Policy years, and during the first eight years following a requested face amount increase. MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of providing insurance protection under your Policy. The cost of insurance charge for a Policy month is equal to the "amount at risk" under the Policy, multiplied by the cost of insurance rate for that Policy month. We determine the amount at risk on the first day of the A-40 Policy month. The amount at risk is the amount by which the death benefit (generally discounted at the monthly equivalent of 3% per year) exceeds the Policy's cash value. The amount at risk is affected by investment performance, loans, premium payments, fees and charges, partial withdrawals and face amount reductions. The guaranteed cost of insurance rates for a Policy depend on the insured's -- smoking status -- risk class -- attained age -- sex (if the Policy is sex-based). The current cost of insurance rates will depend on the above factors, plus -- the insured's age at issue (and at the time of any face amount increase) -- the Policy year (and the year of any face amount increase) -- the Policy's face amount. We guarantee that the rates for underwritten Policies will not be higher than rates based on -- the 2001 Commissioners Standard Ordinary Mortality Tables (the "2001 CSO Tables") with smoker/nonsmoker modifications, for Policies issued on non-juvenile insureds (age 18 and above at issue), adjusted for substandard ratings or flat extras, if applicable -- the 2001 CSO Aggregate Tables (Nonsmoker Tables for attained age 16 and older), for Policies issued on juvenile insureds (below age 18 at issue). The actual rates we use may be lower than the maximum rates, depending on our expectations about our future mortality and expense experience, lapse rates, taxes and investment earnings. We review the adequacy of our cost of insurance rates and other non-guaranteed charges periodically and may adjust them. Any change will apply prospectively. The risk classes we use are -- for Policies issued on non-juvenile insureds: preferred smoker, standard smoker, rated smoker, elite nonsmoker, preferred nonsmoker, standard nonsmoker, and rated nonsmoker. -- for Policies issued on juvenile insureds: standard and rated. Rated Policies have higher cost of insurance deductions. We base the guaranteed maximum mortality charges for substandard ratings on multiples of the 2001 CSO Tables. The following standard or better smoker and non-smoker classes are available for underwritten Policies: -- elite nonsmoker for Policies with face amounts of $250,000 or more where the issue age is 18 through 80; -- preferred smoker and preferred nonsmoker for Policies with face amounts of $100,000 or more where the issue age is 18 through 80; -- standard smoker and standard nonsmoker for Policies with face amounts of $50,000 or more ($25,000 for pension plans) where the issue age is 18 through 85. The elite nonsmoker class generally offers the best current cost of insurance rates, and the preferred classes generally offer better current cost of insurance rates than the standard classes. Cost of insurance rates are generally lower for nonsmokers than for smokers and generally lower for females than for males. Within a given risk class, cost of insurance rates are generally lower for insureds with lower issue ages. Where required by state law, and for Policies sold in connection with some employee benefit plans, cost of insurance rates (and Policy values and benefits) do not vary based on the sex of the insured. A-41 CHARGES FOR ADDITIONAL BENEFITS. We charge for the cost of any additional rider benefits as described in the rider form. MORTALITY AND EXPENSE RISK CHARGE. We impose a monthly charge for our mortality and expense risks. The mortality risk we assume is that insureds may live for shorter periods of time than we estimated. The expense risk is that our costs of issuing and administering the Policies may be more than we estimated. The charge is imposed on the cash value in the Separate Account, but the rate we charge is determined by the cash value in the Separate Account and the Fixed Account. The rate is determined on each monthly anniversary and varies based on the Policy year and the Policy's net cash value in relation to the Policy's Target Premium. As shown in the table below, the rate declines as the Policy's net cash value and the Policy years increase. The charge is guaranteed not to exceed 0.80% in Policy years 1-10, 0.35% in Policy years 11-19, 0.20% in Policy years 20-29 and 0.05% thereafter.
- -------------------------------------------------------------------------------------------- CHARGE APPLIED TO CASH VALUE IN POLICY YEAR NET CASH VALUE SEPARATE ACCOUNT - -------------------------------------------------------------------------------------------- less than 5 target premiums 0.60% 5 but less than 10 target premiums 0.55% 1 - 10 10 but less than 20 target premiums 0.30% 20 target premiums or more 0.15% - -------------------------------------------------------------------------------------------- less than 5 target premiums 0.35% 5 but less than 10 target premiums 0.30% 11 - 19 10 but less than 20 target premiums 0.15% 20 target premiums or more 0.10% - -------------------------------------------------------------------------------------------- less than 5 target premiums 0.20% 5 but less than 10 target premiums 0.15% 20 - 29 10 but less than 20 target premiums 0.10% 20 target premiums or more 0.05% - -------------------------------------------------------------------------------------------- 30+ 0.05% - --------------------------------------------------------------------------------------------
LOAN INTEREST SPREAD We charge you interest on a loan at a maximum effective rate of 4.0% per year in Policy years 1-10 and 3.0% per year thereafter, compounded daily. We also credit interest on the amount we take from the Policy's accounts as a result of the loan at a minimum annual effective rate of 3% per year, compounded daily. As a result, the loan interest spread will never be more than 1.00%. CHARGES AGAINST THE PORTFOLIOS AND THE INVESTMENT DIVISIONS OF THE SEPARATE ACCOUNT CHARGES FOR INCOME TAXES. We currently do not charge the Separate Account for income taxes, but in the future we may make such a charge, if appropriate. We have the right to make a charge for any taxes imposed on the Policies in the future. (See "MetLife Investors USA's Income Taxes".) PORTFOLIO EXPENSES. There are daily charges against the Portfolio assets for investment advisory services and fund operating expenses. These are described in the Fee Table as well as in the attached Portfolio prospectuses. TAX CONSIDERATIONS INTRODUCTION The following summary provides a general description of the Federal income tax considerations associated with the Policy and does not purport to be complete or to cover all tax situations. This discussion is not intended as tax advice. Counsel or other competent tax advisers should be consulted for more complete information. This discussion is based upon our understanding of the present Federal income tax laws. No representation is made as to the A-42 likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service. IRS CIRCULAR 230 NOTICE: The tax information contained herein is not intended to (and cannot) be used by anyone to avoid IRS penalties. It is intended to support the sale of the Policy. The Policy Owner should seek tax advice based on the Policy Owner's particular circumstances from an independent tax adviser. TAX STATUS OF THE POLICY In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Policy must satisfy certain requirements which are set forth in the Internal Revenue Code. Guidance as to how these requirements are to be applied is limited. Nevertheless, we anticipate that the Policy should be deemed to be a life insurance contract under Federal tax law. However, if your Policy is issued on a substandard basis, there is additional uncertainty and some risk that your Policy will not be treated as a life insurance contract under Federal tax law. Moreover, if you elect the Acceleration of Death Benefit Rider, the tax qualification consequences associated with continuing the Policy after a distribution is made under the rider are unclear. We may take appropriate steps to bring the Policy into compliance with applicable requirements, and we reserve the right to restrict Policy transactions in order to do so. The insurance proceeds payable on the death of the insured will never be less than the minimum amount required for the Policy to be treated as life insurance under section 7702 of the Internal Revenue Code, as in effect on the date the Policy was issued. In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets. Although published guidance in this area does not address certain aspects of the Policies, we believe that the Owner of a Policy should not be treated as the owner of the Separate Account assets. We reserve the right to modify the Policies to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Policies from being treated as the owners of the underlying Separate Account assets. In addition, the Code requires that the investments of the Separate Account be "adequately diversified" in order for the Policies to be treated as life insurance contracts for Federal income tax purposes. It is intended that the Separate Account, through the Portfolios, will satisfy these diversification requirements. The following discussion assumes that the Policy will qualify as a life insurance contract for Federal income tax purposes. TAX TREATMENT OF POLICY BENEFITS IN GENERAL. We believe that the death benefit under a Policy should generally be excludible from the gross income of the beneficiary. Federal, state and local transfer, and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Policy Owner or beneficiary. A tax adviser should be consulted on these consequences. In the case of employer-owned life insurance as defined in Section 101(j), the amount of the death benefit excludable from gross income is limited to premiums paid unless the Policy falls within certain specified exceptions and a notice and consent requirement is satisfied before the Policy is issued. Certain specified exceptions are based on the status of an employee as highly compensated or recently employed. There are also exceptions for Policy proceeds paid to an employee's heirs. These exceptions only apply if proper notice is given to the insured employee and consent is received from the insured employee before the issuance of the Policy. These rules apply to Policies issued August 18, 2006 and later and also apply to policies issued before August 18, 2006 after a material increase in the death benefit or other material change. An IRS reporting requirement applies to employer-owned life insurance subject to these rules. Because these rules are complex and will affect the tax treatment of death benefits, it is advisable to consult tax counsel. The death benefit will also be taxable in the case of a transfer-for-value unless certain exceptions apply. Generally, the Policy Owner will not be deemed to be in constructive receipt of the Policy cash value until there is a distribution or a deemed distribution. When distributions from a Policy occur, or when loans are taken from or A-43 secured by a Policy, the tax consequences depend on whether the Policy is classified as a modified endowment contract ("MEC"). MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life insurance contracts are classified as modified endowment contracts, with less favorable income tax treatment than other life insurance contracts. Due to the Policy's flexibility with respect to premium payments and benefits, each Policy's circumstances will determine whether the Policy is a MEC. In general a Policy will be classified as a modified endowment contract if the amount of premiums paid into the Policy causes the Policy to fail the "7-pay test." A Policy will fail the 7-pay test if at any time in the first seven Policy years, the amount paid into the Policy exceeds the sum of the level premiums that would have been paid at that point under a Policy that provided for paid-up future benefits after the payment of seven level annual payments. If there is a reduction in the benefits under the Policy during the first seven Policy years, for example, as a result of a partial withdrawal, the 7-pay test will have to be reapplied as if the Policy had originally been issued at the reduced face amount. If there is a "material change" in the Policy's benefits or other terms, even after the first seven Policy years, the Policy may have to be retested as if it were a newly issued Policy. A material change can occur, for example, when there is an increase in the death benefit which is due to the payment of an unnecessary premium. Unnecessary premiums are premiums paid into the Policy which are not needed in order to provide a death benefit equal to the lowest death benefit that was payable in the first seven Policy years. To prevent your Policy from becoming a modified endowment contract, it may be necessary to limit premium payments or to limit reductions in benefits. A current or prospective Policy Owner should consult a tax adviser to determine whether a Policy transaction will cause the Policy to be classified as a modified endowment contract. DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as modified endowment contracts are subject to the following tax rules: (1) All distributions other than death benefits, including distributions upon surrender and withdrawals, from a modified endowment contract will be treated first as distributions of gain taxable as ordinary income and as tax-free recovery of the Policy Owner's investment in the Policy only after all gain has been distributed. (2) Loans taken from or secured by a Policy classified as a modified endowment contract are treated as distributions and taxed accordingly. (3) A 10 percent additional income tax is imposed on the amount subject to tax except where the distribution or loan is made when the Policy Owner has attained age 59 1/2 or is disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the Policy Owner or the joint lives (or joint life expectancies) of the Policy Owner and the Policy Owner's beneficiary or designated beneficiary. If a Policy becomes a modified endowment contract, distributions will be taxed as distributions from a modified endowment contract. In addition, distributions from a Policy within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a Policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that is not classified as a modified endowment contract are generally treated first as a recovery of the Policy Owner's investment in the Policy and only after the recovery of all investment in the Policy as taxable income. However, certain distributions which must be made in order to enable the Policy to continue to qualify as a life insurance contract for Federal income tax purposes if Policy benefits are reduced during the first 15 Policy years may be treated in whole or in part as ordinary income subject to tax. Loans from or secured by a Policy that is not a modified endowment contract are generally not treated as distributions. However, the tax consequences associated with Policy loans that are outstanding after the first ten Policy years are less clear and a tax adviser should be consulted about such loans. Finally, neither distributions from nor loans from or secured by a Policy that is not a modified endowment contract are subject to the 10 percent additional income tax. A-44 INVESTMENT IN THE POLICY. Your investment in the Policy is generally your aggregate premiums. When a distribution is taken from the Policy, your investment in the Policy is reduced by the amount of the distribution that is tax-free. POLICY LOANS. In general, interest on a Policy loan will not be deductible. If a Policy loan is outstanding when a Policy is canceled or lapses, the amount of the outstanding indebtedness will be added to the amount distributed and will be taxed accordingly. A loan may also be taxed when a Policy is exchanged. Before taking out a Policy loan, you should consult a tax adviser as to the tax consequences. MULTIPLE POLICIES. All modified endowment contracts that are issued by MetLife Investors USA (or its affiliates) to the same Policy Owner during any calendar year are treated as one modified endowment contract for purposes of determining the amount includible in the Policy Owner's income when a taxable distribution occurs. WITHHOLDING. To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipient's Federal income tax liability. Recipients can generally elect, however, not to have tax withheld from distributions. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS. Policy Owners that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Policy Owner's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding taxation with respect to a purchase of the Policy. ACCELERATION OF DEATH BENEFIT RIDER. We believe that payments received under the Acceleration of Death Benefit Rider should be fully excludable from the gross income of the beneficiary except in certain business contexts. However, you should consult a qualified tax adviser about the consequences of adding this rider to a Policy or requesting payment under this rider. ESTATE, GIFT AND GENERATION-SKIPPING TRANSFER TAXES. The transfer of the Policy or the designation of a beneficiary may have Federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes. When the insured dies, the death proceeds will generally be includable in the Policy Owner's estate for purposes of the Federal estate tax if the Policy Owner was the insured. If the Policy Owner was not the insured, the fair market value of the Policy would be included in the Policy Owner's estate upon the Policy Owner's death. The Policy would not be includable in the insured's estate if the insured neither retained incidents of ownership at death nor had given up ownership within three years before death. Moreover, under certain circumstances, the Internal Revenue Code may impose a "generation-skipping transfer tax" when all or part of a life insurance policy is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Policy Owner. Regulations issued under the Internal Revenue Code may require us to deduct the tax from your Policy, or from any applicable payment, and pay it directly to the IRS. Qualified tax advisers should be consulted concerning the estate and gift tax consequences of Policy ownership and distributions under Federal, state and local law. The individual situation of each Policy Owner or beneficiary will determine the extent, if any, to which Federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Policy proceeds will be treated for purposes of Federal, state and local estate, inheritance, generation-skipping and other taxes. The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the Federal estate tax and replaces it with a carryover basis income tax regime effective for estates of decedents dying after December 31, 2009. EGTRRA also repeals the generation-skipping transfer tax, but not the gift tax, for transfers made after December 31, 2009. EGTRRA contains a sunset provision, which essentially returns the Federal estate, gift and generation-skipping transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may not enact permanent repeal between now and then. During the period prior to 2010, EGTRRA provides for periodic decreases in the maximum estate tax rate coupled with periodic increases in the estate tax exemption. For 2006, the maximum estate tax rate is 46% and the A-45 maximum rate for 2007-2009 is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and $3,500,000 in 2009. The complexity of the new tax law, along with uncertainty as to how it might be modified in coming years, underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios. OTHER POLICY OWNER TAX MATTERS. The tax consequences of continuing the Policy beyond the insured's attained age 121 are unclear. You should consult a tax adviser if you intend to keep the Policy in force beyond the insured's attained age 121. If a trustee under a pension or profit-sharing plan, or similar deferred compensation arrangement, owns a Policy, the Federal, state and estate tax consequences could differ. The amounts of life insurance that may be purchased on behalf of a participant in a pension or profit-sharing plan are limited. Providing excessive life insurance coverage in a retirement plan will have adverse tax consequences. The inclusion of riders, such as waiver of premium riders, may also have adverse tax consequences. Therefore, it is important to discuss with your tax adviser the suitability of the Policy, including the suitability of coverage amounts and Policy riders, before any purchase by a retirement plan. Any proposed distribution or sale of a Policy by a retirement plan will also need to be discussed with a tax adviser. The current cost of insurance for the net amount at risk is treated as a "current fringe benefit" and must be included annually in the plan participant's gross income. If the plan participant dies while covered by the plan and the Policy proceeds are paid to the participant's beneficiary, then the excess of the death benefit over the cash value is not income taxable. However, the cash value will generally be taxable to the extent it exceeds the participant's cost basis in the Policy. Policies owned under these types of plans may be subject to restrictions under the Employee Retirement Income Security Act of 1974 ("ERISA"). You should consult a qualified adviser regarding ERISA. Department of Labor ("DOL") regulations impose requirements for participant loans under retirement plans covered by ERISA. Plan loans must also satisfy tax requirements to be treated as nontaxable. Plan loan requirements and provisions may differ from the Policy loan provisions. Failure of plan loans to comply with the requirements and provisions of the DOL regulations and of tax law may result in adverse tax consequences and/or adverse consequences under ERISA. Plan fiduciaries and participants should consult a qualified adviser before requesting a loan under a Policy held in connection with a retirement plan. Businesses can use the Policies in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances. If you are purchasing the Policy for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser. In recent years, moreover, Congress has adopted new rules relating to life insurance owned by businesses. Any business contemplating the purchase of a new Policy or a change in an existing Policy should consult a tax adviser. Ownership of the Policy by a corporation, trust or other non-natural person could jeopardize some (or all) of such entity's interest deduction under Internal Revenue Code Section 264, even where such entity's indebtedness is in no way connected to the Policy. In addition, under Section 264(f)(5), if a business (other than a sole proprietorship) is directly or indirectly a beneficiary of the Policy, the Policy could be treated as held by the business for purposes of the Section 264(f) entity-holder rules. Therefore, it would be advisable to consult with a qualified tax adviser before any non-natural person is made an owner or holder of the Policy, or before a business (other than a sole proprietorship) is made a beneficiary of the Policy. GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has issued guidance on split dollar insurance plans. A tax adviser should be consulted with respect to this guidance if you have purchased or are considering the purchase of a Policy for a split dollar insurance plan. If your Policy is part of an equity split dollar arrangement, there is a risk that some portion of the Policy cash value may be taxed prior to any Policy distribution. If your split dollar plan provides deferred compensation, recently enacted rules governing deferred compensation arrangements may apply. Failure to adhere to these rules will result in adverse tax consequences. Consult a tax adviser. A-46 In addition, the Sarbanes-Oxley Act of 2002 (the "Act"), which was signed into law on July 30, 2002, prohibits, with limited exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on U.S. exchanges, from extending, directly or indirectly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted to apply to split-dollar life insurance arrangements for directors and executive officers of such companies, since such arrangements can arguably be viewed as involving a loan from the employer for at least some purposes. Although the prohibition on loans generally took effect as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002. Any affected business contemplating the payment of a premium on an existing Policy or the purchase of a new Policy in connection with a split-dollar life insurance arrangement should consult legal counsel. ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income in the Policy or the proceeds of a Policy under the Federal corporate alternative minimum tax, if the Policy Owner is subject to that tax. POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Policy could change by legislation or otherwise. Consult a tax adviser with respect to legislative developments and their effect on the Policy. FOREIGN TAX CREDITS. To the extent permitted under Federal tax law, we may claim the benefit of certain foreign tax credits attributable to taxes paid by certain Portfolios to foreign jurisdictions. METLIFE INVESTORS USA'S INCOME TAXES Under current Federal income tax law, MetLife Investors USA is not taxed on the Separate Account's operations. Thus, currently we do not deduct a charge from the Separate Account for Federal income taxes. We reserve the right to charge the Separate Account for any future Federal income taxes we may incur. Under current laws in several states, we may incur state and local taxes (in addition to premium taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes. DISTRIBUTION OF THE POLICIES We have entered into a distribution agreement with our affiliate, MetLife Investors Distribution Company ("Distributor"), for the distribution of the Policies. We and Distributor have entered into selling agreements with other affiliated and unaffiliated broker-dealers ("selling firms") for the sale of the Policies through their registered representatives. Our affiliated broker-dealers are MetLife Securities, Inc. ("MSI"), New England Securities Corporation ("NES"), Tower Square Securities, Inc. and Walnut Street Securities, Inc. Distributor, MSI, NES and our other affiliated selling firms are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934 and are members of the Financial Industry Regulatory Authority ("FINRA"). More information about our affiliated selling firms and their registered persons is available at http://www.finra.com or by calling 1-800-298-9999. You can also obtain an investor brochure from FINRA describing its Public Disclosure Program. All selling firms receive commissions. A portion of the payments made to selling firms may be passed on their sales representatives in accordance with their internal compensation programs. Those programs may also include other types of cash and non-cash compensation and other benefits. MSI and NES sales representatives receive cash payments for the products they sell and service based on a "gross dealer concession" model. The cash payment is equal to a percentage of the gross dealer concession amount described below. The percentage is determined based on a formula that takes into consideration the amount of proprietary products the sales representative sells and services. Proprietary products are products issued by us or an affiliate. Because sales of proprietary products are a factor in determining the percentage of the gross dealer concession amount to which MSI and NES sales representative are entitled, these sales representatives have an incentive to favor sale of the Policy over similar products issued by non-affiliates. A-47 In the first Policy year, the gross dealer concession amount for the Policies is 117% of premiums paid up to the Commissionable Target Premium, and 5% of premiums paid in excess of the Commissionable Target Premium. In Policy years 2 through 10, the gross dealer concession amount is 8.0% of all premiums paid, and in Policy years 11 and thereafter the gross dealer concession amount is 2.0% of all premiums. Commissionable Target Premium is the Target Premium, as defined in the Glossary, plus the Target Premium associated with any riders added to the Policy. Sales representatives of affiliated selling firms and their managers may be eligible for various cash benefits that we may provide jointly with affiliated selling firms. Ask your sales representative for further information about what your sales representative and the selling firm for which he or she works may receive in connection with your purchase of the Policy. Sales representatives of our affiliates and their Managing Partners may also be eligible for cash compensation such as bonuses, equity awards (for example, stock options), training allowances, supplemental salary, payments based on a percentage of the Policy's cash value, financing arrangements, marketing support, medical and retirement benefits and other insurance and non-insurance benefits. The amount of this cash compensation is based primarily on the amount of proprietary products sold. Proprietary products are products issued by us and our affiliates. Sales representatives of certain affiliates must meet a minimum level of sales of proprietary products in order to maintain their agent status with the company and in order to be eligible for most of the cash compensation listed above. Managing Partners may be eligible for additional cash compensation based on the performance (with emphasis on the sale of proprietary products) of the sales representatives that the Managing Partner supervises. Managing Partners may pay a portion of their cash compensation to their sales representatives. Receipt of the cash compensation described above may provide our sales representatives and their Managing Partners, and the sales representatives and Managing Partners of our affiliates, with an incentive to favor the sale of the Policies over similar products issued by non-affiliates. Sales representatives and their Managing Partners (and the sales representatives and managers of our affiliates) are also eligible for various non-cash compensation programs that we offer such as conferences, trips, prizes, and awards. Other payments may be made for other services that do not directly involve the sale of the Policies. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. We and Distributor may enter into preferred distribution arrangements with selected selling firms under which we pay additional compensation, including marketing allowances, introduction fees, persistency payments, preferred status fees and industry conference fees. Marketing allowances are periodic payments to certain selling firms based on cumulative periodic (usually quarterly) sales of these variable insurance products. Introduction fees are payments to selling firms in connection with the addition of these variable products to the selling firm's line of investment products, including expenses relating to establishing the data communications systems necessary for the selling firm to offer, sell and administer these products. Persistency payments are periodic payments based on account and/or cash values of these variable insurance products. Preferred status fees are paid to obtain preferred treatment of these products in selling firms' marketing programs, which may include marketing services, participation in marketing meetings, listings in data resources and increased access to their sales representatives. Industry conference fees are amounts paid to cover in part the costs associated with sales conferences and educational seminars for selling firms' sales representatives. These preferred distribution arrangements are not offered to all selling firms. The terms of any particular agreement governing compensation may vary among selling firms and the amounts may be significant. We and Distributor have entered into preferred distribution arrangements with our affiliated broker-dealers, Walnut Street Securities Inc. and Tower Square Securities, Inc., and with the unaffiliated selling firms listed in the Statement of Additional Information. We and Distributor may enter into similar arrangements with our other affiliates MetLife Securities, Inc. and New England Securities Corporation. The prospect of receiving, or the receipt of, additional compensation as described above may provide selling firms or their representatives with an incentive to favor sales of the Policies over other variable insurance policies (or other investments) with respect to which the selling firm does not receive additional compensation, or lower levels of additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies. For more information about any such arrangements, ask your sales representative for further information about what A-48 your sales representative and the selling firm for which he or she works may receive in connection with your purchase of a Policy. We also pay amounts to Distributor that may be used for its operating and other expenses, including the following sales expenses: compensation and bonuses for Distributor's management team, advertising expenses, and other expenses of distributing the Policies. Distributor's management team may also be eligible for non-cash compensation items that we may provide jointly with Distributor. Non-cash items include conferences, seminars and trips (including travel, lodging and meals in connection therewith), entertainment, merchandise and similar items. We pay American Funds Distributors, Inc., principal underwriter for the American Funds Insurance Series, a percentage of all premiums allocated to the American Funds Bond Fund, the American Funds Global Small Capitalization Fund, the American Funds Growth Fund, and the American Funds Growth-Income Fund, for the services it provides in marketing the Funds' shares in connection with the Policies. Each of these Funds makes payments to Distributor under their distribution plans in consideration of services provided and expenses incurred by Distributor in distributing their shares. The payments to Distributor currently equal 0.25% of Separate Account assets invested in the particular Portfolio. (See "Fee Tables--Annual Portfolio Operating Expenses" and the Portfolio prospectuses.) Distributor may also receive brokerage commissions on securities transactions initiated by an investment adviser of a Portfolio. Commissions and other incentives or payments described above are not charged directly to Policy Owners or the Separate Account. We intend to recoup commissions and other sales expenses through fees and charges deducted under the Policy. The Statement of Additional Information contains additional information about the compensation paid for the sale of the Policies. LEGAL PROCEEDINGS In the ordinary course of business, MetLife Investors USA, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife Investors USA does not believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MetLife Investors Distribution Company to perform its contract with the Separate Account or of MetLife Investors USA to meet its obligations under the Policies. RESTRICTIONS ON FINANCIAL TRANSACTIONS Applicable laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to reject a premium payment and/or block or "freeze" your Policy. If these laws apply in a particular situation, we would not be allowed to process any request for withdrawals, surrenders, loans or death benefits, make transfers, or continue making payments under your death benefit option until instructions are received from the appropriate regulator. We also may be required to provide additional information about you or your Policy to government regulators. FINANCIAL STATEMENTS You may find the financial statements of MetLife Investors USA in the Statement of Additional Information. MetLife Investors USA's financial statements should be considered only as bearing on our ability to meet our obligations under the Policies. They should not be considered as bearing on the investment performance of the assets held in the Separate Account. A-49 GLOSSARY AGE. The age of an insured refers to the insured's age at his or her nearest birthday. ATTAINED AGE. The insured's issue age plus the number of completed Policy years. BASE POLICY. The Policy without riders. CASH SURRENDER VALUE. The amount you receive if you surrender the Policy. It is equal to the Policy's cash value reduced by any Surrender Charge that would apply on surrender and by any outstanding Policy loan and accrued interest. CASH VALUE. A Policy's cash value includes the amount of its cash value held in the Separate Account, the amount held in the Fixed Account and, if there is an outstanding Policy loan, the amount of its cash value held in the Loan Account. FIXED ACCOUNT. The Fixed Account is a part of our general account to which you may allocate net premiums. It provides guarantees of principal and interest. INVESTMENT DIVISION. A sub-account of the Separate Account that invests in shares of an open-ended management investment company or other pools of investment assets. INVESTMENT START DATE. This is the later of the Policy Date and the date we first receive a premium payment for the Policy. ISSUE AGE. The age of the insured as of his or her birthday nearest to the Policy Date. LOAN ACCOUNT. The account to which cash value from the Separate and/or Fixed Accounts is transferred when a Policy loan is taken. NET CASH VALUE. The Policy's cash value less any outstanding loans and accrued loan interest. PLANNED PREMIUM. The Planned Premium is the premium payment schedule you choose to help meet your future goals under the Policy. The Planned Premium consists of a first-year premium amount and an amount for premium payments in subsequent Policy years. It is subject to certain limits under the Policy. POLICY DATE. The date on which coverage under the Policy and Monthly Deductions begin. If you make a premium payment with the application, unless you request otherwise, the Policy Date is generally the date the Policy application is approved. If you choose to pay the initial premium upon delivery of the Policy, unless you request otherwise, the Policy Date is generally the date on which we receive your initial payment. PREMIUMS. Premiums include all payments under the Policy, whether a Planned Premium or an unscheduled payment. SEPARATE ACCOUNT. MetLife Investors USA Variable Life Account A, a separate account established by MetLife Investors USA to receive and invest premiums paid under the Policies and certain other variable life insurance policies, and to provide variable benefits. TARGET PREMIUM. We use the Target Premium to determine the amount of Mortality and Expense Risk Charge imposed on the Separate Account and the amount of Sales Charge imposed on premium payments. The Target Premium varies by issue age, sex, smoking status and any substandard rating of the insured and the Policy's base face amount. YOU. "You" refers to the Policy Owner. A-50 APPENDIX A GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST In order to meet the Internal Revenue Code's definition of life insurance, the Policies provide that the death benefit will not be less than what is required by the "guideline premium test" under Section 7702(a)(2) of the Internal Revenue Code, or the "cash value accumulation test" under Section 7702(a)(1) of the Internal Revenue Code, as selected by you when the Policy is issued. The test you choose at issue will be used for the life of the Policy. (See "Death Benefits.") For the guideline premium test, the table below shows the percentage of the Policy's cash value that is used to determine the death benefit.
AGE OF AGE OF INSURED AT START OF PERCENTAGE OF INSURED AT START OF PERCENTAGE OF THE POLICY YEAR CASH VALUE THE POLICY YEAR CASH VALUE - ------------------- ------------- ------------------- ------------- 0 through 40 250 61 128 41 243 62 126 42 236 63 124 43 229 64 122 44 222 65 120 45 215 66 119 46 209 67 118 47 203 68 117 48 197 69 116 49 191 70 115 50 185 71 113 51 178 72 111 52 171 73 109 53 164 74 107 54 157 75 through 90 105 55 150 91 104 56 146 92 103 57 142 93 102 58 138 94 through 121 101 59 134 60 130
For the cash value accumulation test, sample net single premium factors for selected ages of male and female insureds, in a standard or better nonsmoker risk class, are listed below.
NET SINGLE PREMIUM FACTOR ------------------- AGE MALE FEMALE - --- -------- -------- 30.......................................................... 5.82979 6.59918 40.......................................................... 4.11359 4.63373 50.......................................................... 2.93292 3.28706 60.......................................................... 2.14246 2.40697 70.......................................................... 1.64028 1.82665 80.......................................................... 1.32530 1.44515 90.......................................................... 1.15724 1.22113 100......................................................... 1.08417 1.10646 120......................................................... 1.02597 1.02597
A-51 APPENDIX B ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND CASH SURRENDER VALUES The tables in Appendix B illustrate the way the Policies work, based on assumptions about investment returns and the insured's characteristics. They show how the death benefit, cash surrender value and cash value could vary over an extended period of time assuming hypothetical gross rates of return (i.e., investment income and capital gains and losses, realized or unrealized) for the Separate Account equal to constant after tax annual rates of 0%, 6% and 10%. The tables are based on a face amount of $300,000 for a male aged 35. The insured is assumed to be in the preferred nonsmoker risk class. The tables assume no rider benefits and assume that no allocations are made to the Fixed Account. Values are first given based on current Policy charges and then based on guaranteed Policy charges. (See "Charges.") Illustrations show the Option A death benefit. Policy values would be different (either higher or lower) from the illustrated amounts in certain circumstances. For example, illustrated amounts would be different where actual gross rates of return averaged 0%, 6% or 10%, but: (i) the rates of return varied above and below these averages during the period, (ii) premiums were paid in other amounts or at other than annual intervals, or (iii) cash values were allocated differently among individual Investment Divisions with varying rates of return. They would also differ if a Policy loan or partial withdrawal were made during the period of time illustrated, if the insured were female or in another risk classification, or if the Policies were issued at unisex rates. For example, as a result of variations in actual returns, additional premium payments beyond those illustrated may be necessary to maintain the Policy in force for the periods shown or to realize the Policy values shown, even if the average rate of return is achieved. The death benefits, cash surrender values and cash values shown in the tables reflect: (i) deductions from premiums for the sales charge, premium tax and federal tax charge; and (ii) a Monthly Deduction (consisting of a Policy Charge, a Coverage Expense Charge, a Mortality and Expense Risk Charge, and a charge for the cost of insurance) from the cash value on the first day of each Policy month. The cash surrender values reflect a Surrender Charge deducted from the cash value upon surrender, face reduction or lapse during the first ten Policy years. (See "Charges.") The illustrations reflect an arithmetic average of the gross investment advisory fees and operating expenses of the Portfolios, at an annual rate of 1.01% of the average daily net assets of the Portfolios. This average does not reflect expense subsidies by the investment advisers of certain Portfolios. The gross rates of return used in the illustrations do not reflect the deductions of the charges and expenses of the Portfolios. Taking account of the average investment advisory fee and operating expenses of the Portfolios, the gross annual rates of return of 0%, 6% and 10% correspond to net investment experience at constant annual rates of -1.00%, 4.93% and 8.89%, respectively. If you request, we will furnish a personalized illustration reflecting the proposed insured's age, sex, risk class, and the face amount or premium payment schedule requested. Because these and other assumptions will differ, the values shown in the personalized illustrations can differ very substantially from those shown in the tables. Therefore, you should carefully review the information that accompanies any personalized illustration. That information will disclose all the assumptions on which the personalized illustration is based. Where applicable, we will also furnish on request a personalized illustration for a Policy which is not affected by the sex of the insured. You should contact your registered representative to request a personalized illustration. A-52 MALE ISSUE AGE 35 $ ANNUAL PREMIUM FOR PREFERRED NONSMOKER RISK CLASS $300,000 FACE AMOUNT OPTION A DEATH BENEFIT THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL END OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF POLICY -------------------------------- ------------------------------- ------------------------------- YEAR 0% 6% 10% 0% 6% 10% 0% 6% 10% - ------ -- -- --- -- -- --- -- -- --- 1 2 3 4 5 6 7 8 9 10 15 20 25 30 35 40 45 50 55 60 65
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT EXPERIENCE OF THE POLICY'S INVESTMENT DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 10% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY METLIFE INVESTORS USA OR THE PORTFOLIOS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-53 MALE ISSUE AGE 35 $ ANNUAL PREMIUM FOR PREFERRED NONSMOKER RISK CLASS $300,000 FACE AMOUNT OPTION A DEATH BENEFIT THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL END OF RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF POLICY -------------------------------- ------------------------------ ------------------------------ YEAR 0% 6% 10% 0% 6% 10% 0% 6% 10% - ------ -- -- --- -- -- --- -- -- --- 1 2 3 4 5 6 7 8 9 10 15 20 25 30 35 40 45 50 55 60 65
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT EXPERIENCE OF THE POLICY'S INVESTMENT DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 10% OVER A PERIOD OF YEARS, BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN BE MADE BY METLIFE INVESTORS USA OR THE PORTFOLIOS THAT THOSE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-54 Additional information about the Policy and the Separate Account can be found in the Statement of Additional Information, which is available online at our website www.metlife.com. You may also obtain a copy of the Statement of Additional Information, without charge, by calling 1-800-200-2214 or by e-mailing us at . You may also obtain, without charge, a personalized illustration of death benefits, cash surrender values and cash values by calling your registered representative. For Investment Division transfers and premium reallocations, call 1-800-200-2214. For current information about your Policy values, to change or update Policy information such as your billing address, billing mode, beneficiary or ownership, for information about other Policy transactions, and to ask questions about your Policy, you may call our TeleService Center at 1-800-388-4000. This prospectus incorporates by reference all of the information contained in the Statement of Additional Information, which is legally part of this prospectus. Information about the Policy and the Separate Account, including the Statement of Additional Information, is available for viewing and copying at the SEC's Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling the SEC at 202-551-8090. The Statement of Additional Information, reports and other information about the Separate Account are available on the SEC Internet site at www.sec.gov. Copies of this information may be obtained upon payment of a duplicating fee, by writing to the SEC's Public Reference Section at 100 F Street, NE, Washington, DC 20549-0102. File No. 811-21851 METLIFE INVESTORS USA INSURANCE COMPANY 5 PARK PLAZA, SUITE 1900 IRVINE, CA 92614 RECEIPT This is to acknowledge receipt of an Equity Advantage VUL Prospectus dated April 28, 2008. This Variable Life Insurance Policy is offered by MetLife Investors USA Insurance Company. - ----------------------------------------------------- ----------------------------------------------------- (Date) (Client's Signature)
EQUITY ADVANTAGE VUL FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES METLIFE INVESTORS USA VARIABLE LIFE ACCOUNT A ISSUED BY METLIFE INVESTORS USA INSURANCE COMPANY STATEMENT OF ADDITIONAL INFORMATION (PART B) APRIL 28, 2008 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the Prospectus dated April 28, 2008 and should be read in conjunction therewith. A copy of the Prospectus may be obtained by writing to MetLife Investors USA Insurance Company, 5 Park Plaza, Suite 1900, Irvine, CA 92614. SAI-1 TABLE OF CONTENTS
PAGE ------- GENERAL INFORMATION AND HISTORY............................. SAI-3 The Company............................................... SAI-3 The Separate Account...................................... SAI-3 DISTRIBUTION OF THE POLICIES................................ SAI-3 ADDITIONAL INFORMATION ABOUT THE OPERATION OF THE POLICIES.................................................. SAI-3 Payment of Proceeds....................................... SAI-3 Payment Options........................................... SAI-3 ADDITIONAL INFORMATION ABOUT CHARGES........................ SAI-4 Group or Sponsored Arrangements........................... SAI-4 LOANS....................................................... POTENTIAL CONFLICTS OF INTEREST............................. SAI-4 LIMITS TO METLIFE INVESTORS USA'S RIGHT TO CHALLENGE THE POLICY.................................................... SAI-5 MISSTATEMENT OF AGE OR SEX.................................. SAI-5 REPORTS..................................................... SAI-5 PERSONALIZED ILLUSTRATIONS.................................. SAI-5 PERFORMANCE DATA............................................ SAI-6 INVESTMENT ADVICE........................................... SAI-6 REGISTRATION STATEMENT...................................... SAI-8 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM............... SAI-8 EXPERTS..................................................... SAI-8 FINANCIAL STATEMENTS........................................ F-1
SAI-2 GENERAL INFORMATION AND HISTORY THE COMPANY MetLife Investors USA Insurance Company is a stock life insurance company founded on September 13, 1960 and organized under the laws of the State of Delaware. Our principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, California 92614. MetLife Investors USA is authorized to transact the business of life insurance, including annuities, and is currently licensed to do business in all states (except New York) and the District of Columbia. MetLife Investors USA is an indirect, wholly-owned subsidiary of MetLife, Inc., a publicly-traded company. MetLife, Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and institutional customers. THE SEPARATE ACCOUNT We established the Separate Account as a separate investment account on November 15, 2005 under Delaware law. The Separate Account is the funding vehicle for the Policies, and other variable life insurance policies that we issue. These other policies impose different costs, and provide different benefits, from the Policies. The Separate Account meets the definition of a "separate account" under Federal securities laws, and is registered with the Securities and Exchange Commission (the "SEC") as a unit investment trust under the Investment Company Act of 1940. Registration with the SEC does not involve SEC supervision of the Separate Account's management or investments. However, the Delaware Insurance Commissioner regulates MetLife Investors USA and the Separate Account, which are also subject to the insurance laws and regulations where the Policies are sold. DISTRIBUTION OF THE POLICIES The Policies are offered to the public on a continuous basis. We anticipate continuing to offer the Policies, but reserve the right to discontinue the offering. Our affiliate, MetLife Investors Distribution Company, 5 Park Plaza, Suite 1900, Irvine, California 92614, ("Distributor") serves as principal underwriter for the Policies. Distributor is a Missouri corporation organized in 2000. Distributor is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as well as with the securities commissions in the states in which it operates, and is a member of NASD, Inc. Distributor is not a member of the Securities Investor Protection Corporation. Distributor may enter into selling agreements with other broker-dealers ("selling firms") and compensate them for their services. Distributor passes through commissions it receives to selling firms for their sales and does not retain any portion of it in return for its services as distributor for the Policies. Under the distribution arrangement, we pay the following sales expenses: sales representative training allowances; deferred compensation and insurance benefits of registered persons; advertising expenses; and all other expenses of distributing the Policies. ADDITIONAL INFORMATION ABOUT THE OPERATION OF THE POLICIES PAYMENT OF PROCEEDS We may withhold payment of surrender or loan proceeds if those proceeds are coming from a Policy Owner's check, or from a premium transaction under our pre-authorized checking arrangement, which has not yet cleared. We may also delay payment while we consider whether to contest the Policy. We pay interest on the death benefit proceeds from the date they become payable to the date we pay them. Normally we promptly make payments of cash value, or of any loan value available, from cash value in the Fixed Account. However, we may delay those payments for up to six months. We pay interest in accordance with state insurance law requirements on delayed payments. PAYMENT OPTIONS We pay the Policy's death benefit and cash surrender value in one sum unless you or the payee choose a payment option for all or part of the proceeds. You can choose a combination of payment options. You can make, SAI-3 change or revoke the selection of payee or payment option before the death of the insured. You can contact your registered representative or our Designated Office for the procedure to follow. (See "Receipt of Communications and Payments at MetLife Investors USA's Designated Office.") The payment options available are fixed benefit options only and are not affected by the investment experience of the Separate Account. Once payments under an option begin, withdrawal rights may be restricted. Even if the death benefit under the Policy is excludible from income, payments under Payment Options may not be excludible in full. This is because earnings on the death benefit after the insured's death are taxable and payments under the Payment Options generally include such earnings. You should consult a tax adviser as to the tax treatment of payments under Payment Options. The following payment options are available: (i) SINGLE LIFE INCOME. We pay proceeds in equal monthly installments for the life of the payee. (ii) SINGLE LIFE INCOME -- 10-YEAR GUARANTEED PAYMENT PERIOD. We pay proceeds in equal monthly installments during the life of the payee, with a guaranteed payment period of 10 years. (iii) JOINT AND SURVIVOR LIFE INCOME. We pay proceeds in equal monthly installments (a) while either of two payees is living, or (b) while either of the two payees is living, but for at least 10 years. ADDITIONAL INFORMATION ABOUT CHARGES GROUP OR SPONSORED ARRANGEMENTS We may issue the Policies to group or sponsored arrangements, as well as on an individual basis. A "group arrangement" includes a situation where a trustee, employer or similar entity purchases individual Policies covering a group of individuals. Examples of such arrangements are non-qualified deferred compensation plans. A "sponsored arrangement" includes a situation where an employer or an association permits group solicitation of its employees or members for the purchase of individual Policies. We may waive, reduce or vary any Policy charges under Policies sold to a group or sponsored arrangement. We may also raise the interest rate credited to loaned amounts under these Policies. The amount of the variations and our eligibility rules may change from time to time. In general, they reflect cost savings over time that we anticipate for Policies sold to the eligible group or sponsored arrangements and relate to objective factors such as the size of the group, its stability, the purpose of the funding arrangement and characteristics of the group members. Consult your registered representative for any variations that may be available and appropriate for your case. The United States Supreme Court has ruled that insurance policies with values and benefits that vary with the sex of the insured may not be used to fund certain employee benefit programs. Therefore, we offer Policies that do not vary based on the sex of the insured to certain employee benefit programs. We recommend that employers consult an attorney before offering or purchasing the Policies in connection with an employee benefit program. POTENTIAL CONFLICTS OF INTEREST The Portfolios' Boards of Trustees monitor events to identify conflicts that may arise from the sale of Portfolio shares to variable life and variable annuity separate accounts of affiliated and, if applicable, unaffiliated insurance companies and qualified plans. Conflicts could result from changes in state insurance law or Federal income tax law, changes in investment management of a Portfolio, or differences in voting instructions given by variable life and variable annuity contract owners and qualified plans, if applicable. If there is a material conflict, the Board of Trustees will determine what action should be taken, including the removal of the affected Portfolios from the Separate Account, if necessary. If we believe any Portfolio action is insufficient, we will consider taking other action to protect Policy Owners. There could, however, be unavoidable delays or interruptions of operations of the Separate Account that we may be unable to remedy. SAI-4 LIMITS TO METLIFE INVESTORS USA'S RIGHT TO CHALLENGE THE POLICY Generally, we can challenge the validity of your Policy or a rider during the insured's lifetime for two years (or less, if required by state law) from the date of issue, based on misrepresentations made in the application. We can challenge the portion of the death benefit resulting from an underwritten premium payment for two years during the insured's lifetime from receipt of the premium payment. However, if the insured dies within two years of the date of issue, we can challenge all or part of the Policy at any time based on misrepresentations in the application. We can challenge an increase in face amount, with regard to material misstatements concerning such increase, for two years during the insured's lifetime from its effective date. MISSTATEMENT OF AGE OR SEX If we determine during the first Policy year that there was a misstatement of age or sex in the application, the Policy values and charges will be recalculated from the issue date based on the correct information. If, after the first Policy year, we determine that the application misstates the insured's age or sex, the Policy's death benefit is the amount that the most recent Monthly Deduction which was made would provide, based on the insured's correct age and, if the Policy is sex-based, correct sex. REPORTS We will send you an annual statement showing your Policy's death benefit, cash value and any outstanding Policy loan principal. We will also confirm Policy loans, account transfers, lapses, surrenders and other Policy transactions when they occur. You will be sent periodic reports containing the financial statements of the Portfolios. PERSONALIZED ILLUSTRATIONS We may provide personalized illustrations showing how the Policies work based on assumptions about investment returns and the Policy Owner's and/or insured's characteristics. The illustrations are intended to show how the death benefit, cash surrender value, and cash value could vary over an extended period of time assuming hypothetical gross rates of return (i.e., investment income and capital gains and losses, realized or unrealized) for the Separate Account equal to specified constant after-tax rates of return. One of the gross rates of return will be 0%. Gross rates of return do not reflect the deduction of any charges and expenses. The illustrations will be based on specified assumptions, such as face amount, premium payments, insured, risk class, and death benefit option. Illustrations will disclose the specific assumptions upon which they are based. Values will be given based on guaranteed mortality and expense risk and other charges and may also be based on current mortality and expense risk and other charges. The illustrated death benefit, cash surrender value, and cash value for a hypothetical Policy would be different, either higher or lower, from the amounts shown in the illustration if the actual gross rates of return averaged the gross rates of return upon which the illustration is based, but varied above and below the average during the period, or if premiums were paid in other amounts or at other than annual intervals. For example, as a result of variations in actual returns, additional premium payments beyond those illustrated may be necessary to maintain the Policy in force for the period shown or to realize the Policy values shown in particular illustrations even if the average rate of return is realized. Illustrations may also show the internal rate of return on the cash surrender value and the death benefit. The internal rate of return on the cash surrender value is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the cash surrender value of the Policy. The internal rate of return on the death benefit is equivalent to an interest rate (after taxes) at which an amount equal to the illustrated premiums could have been invested outside the Policy to arrive at the death benefit of the Policy. Illustrations may also show values based on the historical performance of the Investment Divisions. We reserve the right to impose a $25 fee for each illustration that you request in excess of one per year. SAI-5 PERFORMANCE DATA We may provide information concerning the historical investment experience of the Investment Divisions, including average annual net rates of return for periods of one, three, five, and ten years, as well as average annual net rates of return and total net rates of return since inception of the Portfolios. These net rates of return represent past performance and are not an indication of future performance. Insurance, sales, premium tax, mortality and expense risk and coverage expense charges, which can significantly reduce the return to the Policy Owner, are not reflected in these rates. The rates of return reflect only the fees and expenses of the underlying Portfolios. The net rates of return show performance from the inception of the Portfolios, which in some instances, may precede the inception date of the corresponding Investment Division. INVESTMENT ADVICE The Separate Account invests in the Portfolios of the Metropolitan Series Fund, Inc. ("Met Series Fund"), the Met Investors Series Trust, and other unaffiliated open-end management investment companies that serve as investment vehicles for variable life and variable annuity separate accounts. MetLife Advisers, LLC ("MetLife Advisers") and Met Investors Advisory LLC ("Met Investors Advisory"), as the advisers to the Met Series Fund and the Met Investors Series Trust, respectively, may, from time to time, replace the sub-adviser of a Portfolio with a new sub-adviser. A number of sub-adviser changes have been made with respect to the Portfolios in which the Separate Account invests. MetLife Advisers (formerly known as New England Investment Management, Inc. which was formerly known as TNE Advisers, Inc.) became the investment adviser to the Portfolios of the Met Series Fund on May 1, 2001. Prior to May 1, 2001, Metropolitan Life Insurance Company was the investment adviser for all Portfolios of the Met Series Fund. MetLife Advisers was also the investment adviser to each of the Series of the New England Zenith Fund ("Zenith Fund") until May 1, 2003, the date on which each Series became a Portfolio of the Met Series Fund. MetLife Advisers had been the adviser to all Series of the Zenith Fund since 1994, with the following exceptions: in the case of the Back Bay Advisors Bond Income Series (currently, the BlackRock Bond Income Portfolio), the Westpeak Value Growth Series (currently, the FI Value Leaders Portfolio), the Loomis Sayles Small Cap Series and the Loomis Sayles Avanti Growth Series (currently, the Harris Oakmark Focused Value Portfolio), MetLife Advisers became the adviser on May 1, 1995. Met Investors Advisory (formerly known as Met Investors Advisory Corp. which was formerly known as Security First Investment Management) became the investment adviser for the Portfolios of the Met Investors Series Trust on February 12, 2001. The following is the sub-adviser history of the Met Series Fund Portfolios that, prior to May 1, 2003, were Series of the Zenith Fund: The sub-adviser of the FI Value Leaders Portfolio (formerly, the FI Structured Equity Portfolio which was formerly the Westpeak Growth and Income Series which was formerly the Westpeak Value Growth Series) was Westpeak Investment Advisors, L.P. until May 1, 2002, when Fidelity Management & Research Company became the sub-adviser. The sub-adviser to the BlackRock Bond Income Portfolio (formerly, the State Street Research Bond Income Portfolio which was formerly the Back Bay Advisors Bond Income Series) was Back Bay Advisors, L.P. until July 1, 2001, when State Street Research & Management Company became the sub-adviser; BlackRock Advisors, Inc. became the sub-adviser to these Portfolios on January 31, 2005. The sub-adviser to the MFS Total Return Portfolio (formerly, the Back Bay Advisors Managed Series) was Back Bay Advisors, L.P. until July 1, 2001 when Massachusetts Financial Services Company became the sub-adviser. The sub-adviser to the Harris Oakmark Focused Value Portfolio (formerly, the Harris Oakmark Mid Cap Value Series which was formerly the Goldman Sachs Midcap Value Series which was formerly the Loomis Sayles Avanti Growth Series) was Loomis, Sayles and Company, L.P. until May 1, 1998, when Goldman Sachs Asset Management, a separate operating division of Goldman Sachs & Co., became the sub-adviser; Harris Associates L.P. became the sub-adviser on May 1, 2000. The sub-adviser to the Balanced Portfolio (formerly, the Loomis Sayles Balanced Series) was Loomis, Sayles and Company, L.P. until May 1, 2000, when Wellington Management Company, LLP became the sub-adviser. On or about April 30, 2004, the Balanced Portfolio merged with and into the MFS Total Return Portfolio and the Balanced SAI-6 Portfolio ceased to exist. The sub-advisor to the Westpeak Stock Index Series, which was replaced by the MetLife Stock Index Portfolio on April 27, 2001 and was formerly known as the Stock Index Series, was Back Bay Advisors, L.P. until August 1, 1993, when Westpeak Investment Advisors, L.P. became the sub-adviser. The sub-adviser to the BlackRock Legacy Large Cap Growth Portfolio (formerly, the State Street Research Large Cap Growth Portfolio which was formerly the Alger Equity Growth Portfolio) was Fred Alger Management, Inc. until May 1, 2004, when State Street Research & Management Company became the sub-adviser; BlackRock Advisors, Inc. became the sub-adviser on January 31, 2005. On or about April 30, 2004, the FI Mid Cap Opportunities Portfolio merged with and into the Janus Mid Cap Portfolio and immediately thereafter Fidelity Management & Research Company replaced Janus Capital Management LLC as the sub-adviser to the Portfolio, which then became known as the FI Mid Cap Opportunities Portfolio. On or about April 30, 2004, the MFS Research Managers Portfolio merged with and into the MFS Investors Trust Portfolio and the MFS Research Managers Portfolio ceased to exist. On or about May 1, 2006, the MFS Investors Trust Portfolio merged with and into the Legg Mason Value Equity Portfolio, a Portfolio of the Met Investors Series Trust, and the MFS Investors Trust Portfolio ceased to exist. The following is the sub-adviser history of the remaining Met Series Fund Portfolios: Metropolitan Life Insurance Company became the sub-adviser of the Lehman Brothers(R) Aggregate Bond Index Portfolio, the MetLife Stock Index Portfolio, the MetLife Mid Cap Stock Index Portfolio, the Morgan Stanley EAFE(R) Index Portfolio and the Russell 2000(R) Index Portfolio on May 1, 2001. The sub-adviser to the FI International Stock Portfolio (formerly, the Putnam International Stock Portfolio) was Putnam Investment Management, LLC until December 16, 2003 when Fidelity Management & Research Company became the sub-adviser. On December 1, 2000, the Putnam International Stock Portfolio replaced the Morgan Stanley International Magnum Equity Series (formerly the Draycott International Equity Series) of the Zenith Fund. The sub-adviser to the Morgan Stanley International Magnum Equity Series was Draycott Partners, Ltd. until May 1, 1997, when Morgan Stanley Asset Management Inc. became the sub-adviser. On April 28, 2003, the Janus Growth Portfolio, formerly a Portfolio of the Met Series Fund, merged with and into the Janus Aggressive Growth Portfolio of the Met Investors Series Trust. The sub-adviser to the BlackRock Aggressive Growth Portfolio (formerly, the State Street Research Aggressive Growth Portfolio), the BlackRock Strategic Value Portfolio (formerly, the State Street Research Aurora Portfolio), the BlackRock Diversified Portfolio (formerly, the State Street Research Diversified Portfolio), the BlackRock Investment Trust Portfolio (formerly, the State Street Research Investment Trust Portfolio), and the BlackRock Large Cap Value Portfolio (formerly, the State Street Research Large Cap Value Portfolio) was State Street Research & Management Company until January 31, 2005, when BlackRock Advisors, Inc. became the sub-adviser. The sub-adviser to the Oppenheimer Global Equity Portfolio (formerly, the Scudder Global Equity Portfolio) was Deutsche Investment Management Americas Inc. until May 1, 2005 when OppenheimerFunds, Inc. became the sub-adviser. On May 1, 2005, the Met/Putnam Voyager Portfolio (formerly, the Putnam Large Cap Growth Portfolio) merged with and into the Jennison Growth Portfolio and the Met/Putnam Voyager Portfolio ceased to exist. The sub-adviser to the Western Asset Management Strategic Bond Opportunities Portfolio and the Western Asset Management U.S. Government Portfolio (formerly, the Salomon Brothers Strategic Bond Opportunities Portfolio and the Salomon Brothers U.S. Government Portfolio, respectively) was Salomon Brothers Asset Management Inc. until May 1, 2006, when Western Asset Management Company became the sub-adviser to the Portfolios. The following is the sub-adviser history of the Met Investors Series Trust: The sub-adviser to the T. Rowe Price Mid-Cap Growth Portfolio (formerly, the MFS Mid Cap Growth Portfolio) was Massachusetts Financial Services Company until T. Rowe Price Associates, Inc. became the sub-adviser effective January 1, 2003. The sub-adviser to the Harris Oakmark International Portfolio (formerly, the State Street Research Concentrated International Portfolio) was State Street Research & Management Company until Harris Associates, L.P. became the sub-adviser effective January 1, 2003. The sub-adviser to the RCM Global Technology Portfolio (formerly, the PIMCO PEA Innovation Portfolio) was PEA Capital LLC until January 15, 2005 when RCM Capital Management LLC became the sub-adviser. The sub-adviser to the Lazard Mid-Cap Portfolio (formerly, the Met/AIM Mid Cap Core Equity Portfolio) was AIM Capital Management Inc. until December 19, 2005, when Lazard Asset Management LLC became the sub-adviser. SAI-7 REGISTRATION STATEMENT This Statement of Additional Information and the prospectus omit certain information contained in the Registration Statement which has been filed with the SEC. Copies of such additional information may be obtained from the SEC upon payment of the prescribed fee. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of MetLife Investors USA Insurance Company (the "Company") (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the fact that the Company changed its method of accounting for certain non-traditional long duration contracts and separate accounts in certain insurance products as required by new accounting guidance which became effective on January 1, 2004, and recorded the impact as a cumulative effect of changes in accounting principles. In addition, the Company changed its method of accounting for mandatorily redeemable preferred stock as required by new accounting guidance which was adopted as of January 1, 2004), included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. EXPERTS Paul L. LeClair, FSA, MAAA, Vice President of Metropolitan Life Insurance Company has examined actuarial matters included in the Registration Statement, as stated in his opinion filed as an exhibit to the Registration Statement. SAI-8 DRAFT MARCH 14, 2008 MARY E. THORNTON DIRECT LINE: 202.383.0698 Internet: mary.thornton@sablaw.com April __, 2008 VIA EDGAR TRANSMISSION Alison White, Esq. Office of Insurance Products Division of Investment Management Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Pre-Effective Amendments No. 2 to the Registration Statements on Form N-6 for Metropolitan Life Separate Account UL (File No. 333-147508) and MetLife Investors USA Variable Life Account A (File No. 333-147509) ------------------------------------------------------------------- Dear Ms. White: On behalf of Metropolitan Life Insurance Company ("MetLife") and MetLife Investors USA Insurance Company ("MLI") (together, the "Companies"), attached for your convenience is a courtesy copy of the prospectuses and statements of additional information included in the Pre-Effective Amendments No. 2 (the "Amendments") to the above captioned Registration Statements on Form N-6. The Amendments were filed with the Commission on April __, 2008. The attached copies have been marked to show changes from the original prospectuses and statements of additional information included in the initial Registration Statements. In the Amendments, the Companies have made changes in response to your comments, have included financial statements and all required exhibits, have updated certain information, and have made other stylistic and formatting changes. Also, we are providing responses to the comments in your letters dated January 14, 2008. For your convenience, we are providing a single response to both letters, inasmuch as the comments, Alison White, Esq. April __, 2008 Page 2 of 11 with the one exception noted below, were identical. Please note, however, that the comment number relates to the numbers set forth in your letter regarding Metropolitan Life Separate Account UL. Each of your comments is set forth below followed by the Companies' responses. As noted in the transmittal letter that accompanied the Amendments, the Companies and their principal underwriters are seeking acceleration of the effectiveness of these registration statements to April 28, 2008, or as soon thereafter as is reasonably practicable. (Copies of these acceleration requests are enclosed.) Any assistance you and the Staff can provide to the Companies to assist them in meeting this request would be very much appreciated. 1. General Comment Comment: Please confirm that the contract name on the front cover page of the prospectus will continue to be the same as the EDGAR class identifier associated with the contract. Response: The MetLife and MLI versions of the contracts will each be known as Equity Advantage VUL, and this name will appear on the front cover page of both prospectuses. To distinguish one from the other, however, the EDGAR class identifiers for the contracts are Equity Advantage VUL (MetLife) and Equity Advantage VUL (MLI). 2. Right to Examine Policy, pages 4 and 23-24 Comment: Please revise the disclosure to state that if a policy owner returns his policy during the free-look period, he will receive premiums paid or any amount required under state law if that amount is greater than the surrender value of the policy. Response: The disclosure in the MLI prospectus has been revised so that it exactly reflects prevailing state law (the disclosure in the MetLife prospectus reflects New York law and has not been changed). As revised, the disclosure now reads as follows: "Depending on state law, we will refund either the premiums you paid, or the Policy's cash value plus any charges that were deducted from the premiums you paid." The Companies note that Rule 6e-3(T) under the Investment Company Act of 1940 provides that an insurer is exempt from Section 27(f) so long as the insurer permits the contract owner to withdraw from the contract during a specified period (the "free look" period) and the insurer refunds to the contract owner cash value plus charges, "Provided, however, That if state law or the contract so require, the redeeming contractholder shall receive a refund of all Alison White, Esq. April __, 2008 Page 3 of 11 payments made for such contract." The Companies believe the fact that there is no "greater of" standard apparent in this rule is an indication that the Commission did not determine it is necessary to provide a "greater of" free look right to variable contract owners generally. It is worth noting that because the surrender charge is not imposed upon exercise of the free look right, it would be virtually impossible for the premiums paid to ever be less than the policy's "surrender value." 3. Tax Benefits, page 5 Comment: Please disclose that the death benefit may be subject to estate taxes. Response: The Companies have added the following sentence at the end of the Tax Benefits paragraph: "Death benefits may be subject to estate taxes." 4. Supplemental Benefits and Riders, pages 5 and 36 Comment: We note your statement that the riders may not be available in all states. Please note that any variations among the jurisdictions in which the policy is offered and sold should be disclosed in the prospectus. Response: Although this comment was provided in the letter regarding Metropolitan Life Separate Account UL, the language actually appears in the prospectus for the product to be issued by MLI. The MetLife version of the product will be sold only in New York and therefore the prospectus identifies only the riders that are available in that state. However, the MLI prospectus has been modified to identify all state variations of which MLI is currently aware. The Companies will update the prospectus disclosure to reflect any changes in the availability of riders in future annual post-effective amendments. 5. Transaction Fees, pages 7-8 Comment: a. Please add the policy re-issue/re-dating fee described at the top of page 42 to the table. Response: The Companies have determined not to impose a re-issue/re-dating fee under any circumstances. Therefore, all references to this fee have been deleted from the prospectuses. Alison White, Esq. April __, 2008 Page 4 of 11 Comment: b. Please make it clear that the Surrender Charge and the Partial Withdrawal Charge may be assessed simultaneously. Response: Although the Companies have reserved the right to impose a Partial Withdrawal Charge, they have no current intention of doing so. Nevertheless, the Companies have added the following footnote to the Fee Table: "If imposed, the Partial Withdrawal Charge would be in addition to any Surrender Charge that is imposed." 6. Cost of Insurance Charge, page 9 Comment: Please add a footnote describing the characteristics of an individual subject to the minimum COI fee and an individual subject to the maximum COI fee. Response: Form N-6 only requires that the Fee Table disclose the minimum and maximum COI fees and the COI fee applicable to a representative insured. The range of COI fees shown in the Fee Table reflects the universe of all possible insureds, which is determined by the minimum and maximum issue ages and the underwriting classes for the contract, as fully described in the prospectus. The Companies believe that the characteristics of the insureds at the upper and lower ends of the range would be so unique as to be of no practical value to a prospective purchaser. Moreover, given that this information is not required by the Form, the Companies respectfully submit that its inclusion is not warranted. 7. Policy Charge, pages 8-9 Comment: Please revise the table to show the maximum Policy Charge in years 2+ as $9, so that the disclosure is consistent with the disclosure on page 39. Response: Given that no contract owner would pay a Policy Charge of $15 in the first Policy year and $9 thereafter, the Companies have inserted two Policy Charge ranges in the Fee Table to accurately reflect what contract owners will pay. 8. Annual Portfolio Operating Expenses, pages 12-14 Comment: a. Please update the footnotes in this section. In this regard, please note that you may only reflect contractual expense reimbursements and waivers in the table if they extend a year beyond the date of the prospectus. Alison White, Esq. April __, 2008 Page 5 of 11 Response: The Companies have updated the footnotes. Comment: b. If any of the American Funds are feeder funds, please disclose this fact and confirm that the prospectuses for both the master and the feeder will be included with the contract prospectus. Response: The products will not offer any feeder funds. Comment: c. With respect to the fund of funds described in footnote (5) on page 13, please disclose in this section whether any of the underlying funds pays a 12b-1 fee to MetLife Investors USA Insurance Company or any of its affiliates. Response: The Companies have confirmed that no underlying fund pays a 12b-1 fee to MLI, MetLife, or any of their affiliates in connection with their investments in the funds of funds described in the prospectuses. 9. The Company, page 16 Comment: Please disclose to the staff whether there are any types of guarantees or support agreements with third parties to support the company's guarantees under the policy. Response: There are no guarantees or support agreements with third parties to support the Companies' guarantees under the policy, other than standard reinsurance agreements referenced in Part C of the registration statements. 10. Voting Rights, pages 20-21 Comment: Please disclose voting procedures and quorum requirements for votes held by the separate account (i.e., requesting approval to substitute underlying funds). Response: The Companies have fully described the voting rights that contract owners possess, and the procedures the Companies follow in soliciting voting instructions and casting votes, as provided under the Investment Company Act of 1940. The Companies intend that any substitutions of underlying funds would be effected solely on the basis of an SEC order. The Companies do not intend to effect any substitution of an underlying fund Alison White, Esq. April __, 2008 Page 6 of 11 that would require contract owner approval. Therefore, the Companies respectfully submit that adding disclosure regarding voting procedures and quorum requirements for votes seeking approval of underlying fund substitutions is not warranted. 11. Death Benefits, pages 26-29 Comment: Please specify which riders may impact the death benefit and include a cross-reference to their description in the prospectus. Response: Only three riders have any bearing on the death benefit (i.e., the Accelerated Death Benefit Rider, the Accidental Death Benefit Rider, and the Option to Purchase Additional Insurance Coverage Rider). The Companies have added the following disclosure to "Death Proceeds Payable": "Riders that can have an effect on the amount of death proceeds payable are the Accelerated Death Benefit Rider, the Accidental Death Benefit Rider and the Options to Purchase Additional Insurance Coverage Rider. (See "Additional Benefits by Rider.")" 12. Reduction in Face Amount, pages 28-29 Comment: If true, please disclose that a reduction in the face amount may be subject to a partial withdrawal fee. Response: A reduction in the face amount will not be subject to a partial withdrawal fee. 13. Surrenders and Partial Withdrawals, pages 29-30 Comment: a. Please include examples showing: (a) the calculation of cash surrender value for a contract surrendered during the first Policy year, including the impact of Surrender Charges, Coverage Expense Charges and Policy Charges; (b) the calculation of the death benefit, face amount and cash surrender value of a contract subject to a partial withdrawal during the second Policy year; (c) the calculation of a face amount reduction due to a partial withdrawal occurring 12 months after a face amount increase; and (d) the impact of a partial surrender on rider benefits. Alison White, Esq. April __, 2008 Page 7 of 11 Response: (a) The Contracts are designed to be long-term investments and the pricing of the product is based on the assumption the contract owners will hold their contracts long-term. Consequently, if a contract owner were to surrender his or her contract in the first Policy year, in almost every instance, the surrender charge alone would be greater than the contract's cash value, so that the cash surrender value would be zero. Under these circumstances, the Companies do not feel an example showing the calculation would be of any benefit to prospective purchasers. Instead, the Companies have inserted the following disclosure: "The Policies are designed to be long-term investments. As a result, you should be aware that if you surrender your Policy in the first Policy year, the Surrender Charge is likely to exceed the cash value of your Policy and you will receive no proceeds upon surrender." (b) The Companies have included an example showing the effect of taking a partial withdrawal of 20% of the Policy's cash surrender value in the second Policy year. The example is set forth in Appendix A attached. (c) The Companies believe that the likelihood of a face amount reduction due to a partial withdrawal occurring within 12 months of a face amount increase is so remote as to render an example of little value to a prospective purchaser. Therefore, the Companies would prefer not to include such an example. (d) A partial surrender will have no direct impact on rider benefits. Comment: b. Please disclose the impact of any riders on surrenders or partial withdrawals. Response: The Companies do not anticipate that riders would have any impact on surrenders or partial withdrawals. 14. American Funds Monitoring Policy, page 31 Comment: Please update the disclosure concerning the status of your ability to impose the American Funds' Monitoring Policy. Response: The Companies are now able to impose the American Funds' Monitoring Policy. The disclosure has been updated accordingly. 15. Portfolio Redemption Fees, page 31 Comment: Please disclose the potential that the portfolios will assess a redemption fee in a footnote to the Transaction Fees table. Alison White, Esq. April __, 2008 Page 8 of 11 Response: The Companies have added the following footnote: "The Portfolios in which the Investment Divisions invest may impose a redemption fee on shares held for a relatively short period." 16. Additional Benefits By Rider, pages 35-36 Comment: Please clarify at the beginning of this section whether any of the riders are mutually exclusive, how ma[n]y of the riders may be concurrently elected by a contract owner, and any negative consequences to having more than one rider in effect at the same time. Response: The Companies have added the following disclosure at the beginning of this section: "There is no limit on the number of riders you can add to your Policy. However, you may not elect both the Option to Purchase Long-Term Care Insurance Rider and the Options to Purchase Additional Insurance Coverage Rider, nor may you elect both the Waiver of Monthly Deduction Rider and the Waiver of Specified Premium Rider." In addition, the Companies do not believe there are any negative consequences to having more than one rider in effect at the same time. 17. Acceleration of Death Benefit Rider, p. 36 Comment: Please explain the concepts of discounting and present valuing in plain English and include an example of the calculation of the death benefit under the rider. In addition, please disclose the minimum and maximum interest rates you will use in determining the benefit. Response: The Companies have revised the disclosure as follows: ACCELERATION OF DEATH BENEFIT RIDER, which allows a Policy Owner to accelerate payment of all or part of the Policy's death benefit if the insured is terminally ill. In calculating the Accelerated Death Benefit, we assume that death occurs one year from the date of claim and we discount the future death benefit using an interest rate not to exceed the greater of (1) the current yield on 90-day Treasury bills, and (2) the maximum policy loan interest rate under the Policy. The Policy Owner must accelerate at least $20,000, but not more than the greater of $250,000 or 10% of Alison White, Esq. April __, 2008 Page 9 of 11 the death benefit. As an example, if a Policy Owner accelerated the death benefit of a Policy with a face amount of $1,000,000, the maximum amount that could be accelerated would be $250,000. Assuming an interest rate of 6%, the present value of the benefit would be $235,849. If we exercised our reserved right to impose a $150 processing fee, the benefit payable would be $235,849 less $150, or $235,699. (Not available in Pennsylvania or Puerto Rico.) 18. Surrender Charge, pages 38-39 Comment: Please specify what is provided in consideration for the Surrender Charge. In this regard, we note that the policy has a front-end load, as well as a surrender charge. Response: The prospectuses clearly describe on page A-[36] the services and benefits the Companies provide, the costs and expenses they incur, and the risks they assume in exchange for the charges and deductions they make under the contracts, including the Surrender Charge. The prospectuses further disclose that the amount of a charge may not necessarily correspond to the costs of the services and benefits implied by the name of the charge or that are associated with the particular policy. The Companies respectfully submit that this disclosure, in conjunction with the Companies' representations in the registration statements as to the reasonableness of its fees and charges, is adequate disclosure. 19. Personalized Illustrations, page SAI-5 Comment: Please state, as you do in the prospectus, that each illustration in excess of one per year may be subject to a $25 fee. Response: The Companies have added this disclosure to the Statements of Additional Information. Alison White, Esq. April __, 2008 Page 10 of 11 20. Tandy Comment Comment: We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filings reviewed by the staff to be certain that they have provided all information investors require for an informed decision. Since the fund and its management are in possession of all facts relating to the fund's disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. Notwithstanding our comments, in the event the fund requests acceleration of the effective date of the pending registration statement, it should furnish a letter, at the time of such request, acknowledging that - should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing; - the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the fund from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and - the fund may not assert this action as defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. In addition, please be advised that the Division of Enforcement has access to all information you provide to the staff of the Division of Investment Management in connection with our review of your filing or in response to our comments on your filing. We will consider a written request for acceleration of the effective date of the registration statement as a confirmation of the fact that those requesting acceleration are aware of their respective responsibilities. We will act on the request and, pursuant to delegated authority, grant acceleration of the effective date. Response: Each Company attached as correspondence with its Amendment a letter to the staff acknowledging the Tandy Comment (copies of the Companies' letters are attached herewith). Alison White, Esq. April __, 2008 Page 11 of 11 * * * We hope you find these responses satisfactory. If you have any questions or further comments, please call the undersigned at 202.383.0698. Sincerely, Mary E. Thornton cc: John E. Connolly, Jr., Esq. APPENDIX A - PARTIAL WITHDRAWAL EXAMPLES EXAMPLE. The following example assumes that a Policy Owner withdraws, in the first month of the second Policy year, 20% of the cash surrender value of a Policy that has the following characteristics. Face Amount: $300,000 Death Benefit Option Level (Option A) Cash Value: $ 11,718 Surrender Charge: $ 4,200 -------- Cash Surrender Value: $ 7,518 x 20% -------- Withdrawal Amount $ 1,504
The first 10% of cash surrender value, or $752, can be withdrawn free of surrender charge. The remaining $752 withdrawn is subject to a portion of the Policy's Surrender Charge--based on the ratio that such excess withdrawal amount bears to the Policy's face amount less the Surrender Charge, as shown in the formula below: Withdrawal Amount in Surrender Excess of Free Withdrawal Surrender Charge Charge x --------------------------------- = on Withdrawal Face Amount less Surrender Charge $752 $4,200 x ----------------- = $11 $300,000 - $4,200 Because the Policy has a level death benefit, the withdrawal will cause a dollar for dollar reduction in the Policy's face amount, so that the cash value and the face amount will both be reduced by the $1,504 withdrawal and by the $11 Surrender Charge. The overall impact of the withdrawal on Policy values would therefore be as follows: Face Amount before Withdrawal $ 300,000 Withdrawal - 1,504 Surrender Charge on Withdrawal - 11 --------- Face Amount after Withdrawal $ 298,485 Surrender Charge before Withdrawal $ 4,200 Surrender Charge on Withdrawal - 11 --------- Surrender Charge after Withdrawal $ 4,189 Cash Value before Withdrawal $ 11,718 Withdrawal - 1,504 Surrender Charge on Withdrawal - 11 ---------
Cash Value after Withdrawal $ 10,203 Surrender Charge after Withdrawal - 4,189 --------- Cash Surrender Value after Withdrawal $ 6,014
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