GMDB, GMIB AND NO LAPSE GUARANTEE FEATURES

6 Months Ended

Jun. 30, 2011

Gmdb Gmib And No Lapse Guarantee Features [Abstract]

GMDB GMIB AND NO LAPSE GUARANTEE FEATURES

6)       GMDB, GMIB AND NO LAPSE GUARANTEE FEATURES

A) Variable Annuity Contracts – GMDB and GMIB

MLOA has certain variable annuity contracts with GMDB and GMIB features in-force that guarantee one of the following:

• Return of Premium: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals);
• Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), or the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals);
• Roll-Up: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages; or
• Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit, which may include a five year or an annual reset.

The following table summarizes the GMDB and GMIB liabilities, before reinsurance ceded, reflected in the General Account in future policy benefits and other policyholders liabilities:

		GMDB		GMIB		Total
		(In Millions)
Balance at January 1, 2011		$	6	$	2	$	8
	Paid guarantee benefits		(1)		-		(1)
	Other changes in reserve		-		-		-
Balance at June 30, 2011		$	5	$	2	$	7
Balance at January 1, 2010		$	5	$	3	$	8
	Paid guarantee benefits		(1)		-		(1)
	Other changes in reserve		1		(1)		-
Balance at June 30, 2010		$	5	$	2	$	7

Related GMDB reinsurance ceded amounts were:

		Six Months Ended
		June 30,
		2011		2010
		(In Millions)
Balances, beginning of year		$	3	$	3
	Paid guarantee benefits		-		-
	Other changes in reserve		-		-
Balances, End of Period		$	3	$	3

The GMIB reinsurance contracts are considered derivatives and are reported at fair value.

The June 30, 2011 values for variable annuity contracts in-force on such date with GMDB and GMIB features are presented in the following table. For contracts with the GMDB feature, the net amount at risk in the event of death is the amount by which the GMDB benefits exceed related account values. For contracts with the GMIB feature, the net amount at risk in the event of annuitization is the amount by which the present value of the GMIB benefits exceeds related account values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. Since variable annuity contracts with GMDB guarantees may also offer GMIB guarantees in the same contract, the GMDB and GMIB amounts listed are not mutually exclusive:

			Return
			of
			Premium		Ratchet		Roll-Up		Combo		Total
			(Dollars In Millions)
GMDB:
	Account values invested in:
		General Account	$	123	$	181		N/A	$	27	$	331
		Separate Accounts	$	399	$	504		N/A	$	86	$	989
	Net amount at risk, gross		$	5	$	59		N/A	$	16	$	80
	Net amount at risk, net of
		amounts reinsured	$	5	$	52		N/A	$	1	$	58
	Average attained age
		of contractholders		64.8		65.1		N/A		65.0		65.0
	Percentage of contractholders
		over age 70		23.5%		23.1%		N/A		20.1%		23.1%
	Contractually specified
		interest rates		N/A		N/A		N/A		5.0%		5.0%
GMIB:
	Account values invested in:
		General Account		N/A		N/A	$	27		N/A	$	27
		Separate Accounts		N/A		N/A	$	86		N/A	$	86
	Net amount at risk, gross			N/A		N/A	$	2		N/A	$	2
	Net amount at risk, net of
		amounts reinsured		N/A		N/A	$	-		N/A	$	-
	Weighted average years remaining
		until annuitization		N/A		N/A		2.0		N/A		2.0
	Contractually specified
		interest rates		N/A		N/A		5.0%		N/A		5.0%

B) Separate Account Investments by Investment Category Underlying GMDB and GMIB Features

The total account values of variable annuity contracts with GMDB and GMIB features include amounts allocated to the guaranteed interest option which is part of the General Account and variable investment options that invest through Separate Accounts in variable insurance trusts. The following table presents the aggregate fair value of assets, by major investment category, held by Separate Accounts that support variable annuity contracts with GMDB and GMIB benefits and guarantees. The investment performance of the assets impacts the related account values and, consequently, the net amount of risk associated with the GMDB and GMIB benefits and guarantees. Since variable annuity contracts with GMDB benefits and guarantees may also offer GMIB benefits and guarantees in each contract, the GMDB and GMIB amounts listed are not mutually exclusive:

Investment in Variable Insurance Trust Mutual Funds
		June 30,			December 31,
		2011			2010
		(In Millions)
GMDB:
	Equity	$	833	$	878
	Fixed income		100		111
	Balanced		18		18
	Other		38		46
	Total	$	989	$	1,053
GMIB:
	Equity	$	68	$	73
	Fixed income		14		15
	Other		4		6
	Total	$	86	$	94

C) Variable and Interest-Sensitive Life Insurance Policies - No Lapse Guarantee

The no lapse guarantee feature contained in variable and interest-sensitive life insurance policies keeps them in force in situations where the policy value is not sufficient to cover monthly charges then due. The no lapse guarantee remains in effect so long as the policy meets a contractually specified premium funding test and certain other requirements. At both June 30, 2011 and December 31, 2010, MLOA had liabilities of $1 million for no lapse guarantees reflected in the General Account in Future policy benefits and other policyholders liabilities.