-----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, PwOM/K9mIk6Uzmv+Jhc1jDkk5DX3+CBZ/9fZFQnI6BXpUsanayZJbMa0b3t6N3qM L/LNB8yGI7e5XNY7oQz05w== 0000950130-00-001931.txt : 20000407 0000950130-00-001931.hdr.sgml : 20000407 ACCESSION NUMBER: 0000950130-00-001931 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20000406 EFFECTIVENESS DATE: 20000406 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-47927 FILM NUMBER: 595185 BUSINESS ADDRESS: STREET 1: 1 MADISON AVE STREET 2: METROPOLITAN LIFE INSURANCE CO CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 1 MADISON AVENUE STREET 2: LAW DEPARTMENT AREA 7 G CITY: NEW YORK STATE: NY ZIP: 10010 485BPOS 1 METROPOLITAN SEPARATE ACCOUNT UL As filed with the Securities and Exchange Commission on April 6, 2000 Registration No. 33-47927 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- Form S-6 POST-EFFECTIVE AMENDMENT No. 11 To REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------------- Metropolitan Life Separate Account UL (Exact name of trust) Metropolitan Life Insurance Company (Name of depositor) 1 Madison Avenue New York, New York 10010 (Complete address of depositor's principal executive offices) ---------------- GARY A. BELLER, ESQ. Senior Executive Vice-President and General Counsel Metropolitan Life Insurance Company 1 Madison Avenue New York, New York 10010 (Name and complete address of agent for service) ---------------- Copies to: GARY O. COHEN, ESQ. and THOMAS C. LAUERMAN, ESQ. Freedman, Levy, Kroll & Simonds 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 ---------------- It is proposed that the filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2000 pursuant to paragraph (b) [_] on (date) pursuant to paragraph (a)(1) of Rule 485 [_] on (date), pursuant to paragraph (a) of Rule 485 This filing is made in reliance on Rule 6c-3 and 6e-3(T) under the Investment Company Act of 1940 to register an indefinite amount of interests in Metropolitan Life Separate Account UL which funds certain variable universal life insurance policies. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- METROPOLITAN LIFE SEPARATE ACCOUNT UL METROPOLITAN LIFE INSURANCE COMPANY Cross-Reference Table
Items of Captions in Prospectuses Form N-8B-2 ------------------------ - ----------- 1...................... Cover Page 2...................... SUMMARY; METLIFE 3...................... Inapplicable 4...................... SALES AND ADMINISTRATION OF THE POLICIES 5, 6, 7................ SEPARATE ACCOUNT UL; THE FUNDS 8...................... FINANCIAL STATEMENTS 9...................... Inapplicable 10(a)................... OTHER POLICY PROVISIONS; POLICY RIGHTS 10(b)................... OTHER POLICY PROVISIONS 10(c), 10(d)............ SUMMARY; POLICY BENEFITS; POLICY RIGHTS; PAYMENT AND ALLOCATION OF PREMIUMS; THE FIXED ACCOUNT; OTHER POLICY PROVISIONS 10(e)................... PAYMENT AND ALLOCATION OF PREMIUMS 10(f)................... VOTING RIGHTS 10(g)(1)-(3), 10(h)(1)- (3).................... RIGHTS WE RESERVE 10(g)(4), 10(h)(4)...... Inapplicable 10(i)................... POLICY BENEFITS; PAYMENT AND ALLOCATION OF PREMIUMS 11...................... SUMMARY; SEPARATE ACCOUNT UL; THE FUNDS 12(a)................... Cover Page 12(b), 12(e)............ Inapplicable 12(c), 12(d)............ SEPARATE ACCOUNT UL; THE FUNDS
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Items of Form N-8B-2 Captions in Prospectuses - ----------- ------------------------ 13(a), 13(b), 13(c), SUMMARY; CHARGES AND DEDUCTIONS; SEPARATE ACCOUNT 13(d)................... UL; THE FUNDS; POLICY BENEFITS 13(e).................... SALES AND ADMINISTRATION OF THE POLICIES 13(f), 13(g)............. Inapplicable 14....................... ISSUING OF A POLICY 15....................... PAYMENT AND ALLOCATION OF PREMIUMS 16....................... SEPARATE ACCOUNT UL; THE FUNDS 17(a), 17(b)............. Captions referenced under Items 10(c), 10(d), 10(e) and 10(i) above 17(c).................... Inapplicable 18(a), 18(c)............. SEPARATE ACCOUNT UL; THE FUNDS 18(b), 18(d)............. Inapplicable 19....................... SALES AND ADMINISTRATION OF THE POLICIES; VOTING RIGHTS; REPORTS 20(a), 20(b)............. RIGHTS WE RESERVE; SEPARATE ACCOUNT UL; THE FUNDS 20(c), 20(d), 20(e), 20(f)................... Inapplicable 21(a), 21(b)............. POLICY RIGHTS 21(c), 22................ Inapplicable 23....................... SALES AND ADMINISTRATION OF THE POLICIES 24....................... OTHER POLICY PROVISIONS 25....................... METLIFE 26....................... CHARGES AND DEDUCTIONS 27....................... METLIFE 28....................... MANAGEMENT 29....................... Inapplicable 30, 31, 32, 33, 34....... Inapplicable 35....................... GETTING MORE INFORMATION 36, 37................... Inapplicable
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Items of Form N-8B-2 Captions in Prospectuses - ----------- ------------------------ 38........................ SALES AND ADMINISTRATION OF THE POLICIES; DISTRIBU- TION OF THE POLICIES 39........................ SUMMARY--METLIFE; SALES AND ADMINISTRATION OF THE POLICIES 40(a)..................... Inapplicable 40(b)..................... SEPARATE ACCOUNT UL; THE FUNDS; CHARGES AND DEDUC- TIONS 41(a)..................... SUMMARY; METLIFE; SALES AND ADMINISTRATION OF THE POLICIES 41(b), 41(c), 42, 43...... Inapplicable 44(a)..................... SEPARATE ACCOUNT UL; THE FUNDS; POLICY BENEFITS 44(b)..................... Inapplicable 44(c)..................... CHARGES AND DEDUCTIONS 45........................ Inapplicable 46........................ Captions referenced under Item 44 above 47........................ Captions referenced under Items 10(c) and 16 above 48, 49.................... Inapplicable 50........................ SEPARATE ACCOUNT UL; THE FUNDS 51(a), 51(b).............. SUMMARY; METLIFE; POLICY BENEFITS; POLICY RIGHTS 51(c), 51(d), 51(e)....... Captions referenced under Item 10(i) above 51(f)..................... PAYMENT AND ALLOCATION OF PREMIUMS 51(g)..................... Captions referenced under Items 10(i) and 13 above 51(h), 51(j).............. Inapplicable 51(i)..................... SALES AND ADMINISTRATION OF THE POLICIES 52(a), 52(c).............. RIGHTS WE RESERVE 52(b), 52(d).............. Inapplicable 53(a)..................... FEDERAL TAX MATTERS 53(b), 54 through 58...... Inapplicable 59........................ FINANCIAL STATEMENTS
iii U L 2 0 0 1 PROSPECTUS FOR UL 2001, a Flexible Premium Multifunded Life Insurance Policy Issued by Metropolitan Life Insurance Company May 1, 2000 The Policy is designed to provide: .Life insurance coverage .Flexible premium payments .A choice among three death benefit options .A choice among different guaranteed minimum death benefit durations . Funding options for allocating premium payments to and transferring cash value among a fixed interest account and the following Metropolitan Life Separate Account UL investment divisions which invest in the corresponding portfolios of the Metropolitan Series Fund, Inc. and series of the New England Zenith Fund (each a "Fund"), subject to state approval. For convenience, both portfolios and the series are referred to as "Portfolios" in this Prospectus: Metropolitan Series Fund, Inc. Portfolios: Lehman Brothers(R) State Street Research Aggressive Growth Aggregate Bond Index Loomis Sayles High Yield Bond State Street Research Income Russell 2000 (R) Index State Street Research Diversified T. Rowe Price Small Cap Growth MetLife Stock Index State Street Research Aurora Small Harris Oakmark Large Cap Value Cap Value* T. Rowe Price Large Cap Growth Scudder Global Equity State Street Research Growth Morgan Stanley EAFE(R) Index Putnam Large Cap Growth* Putnam International Stock (formerly MetLife Mid Cap Stock Index* Santander International Stock) Neuberger Berman Partners Mid Cap Value Janus Mid Cap New England Zenith Fund Portfolios: Davis Venture Value* Loomis Sayles Small Cap* - ----- * Available on or about July 5, 2000. A word about risk: This Prospectus discusses the risks associated with purchasing the Policy. Other prospectuses discuss the risks associated with investment in the Fund described therein. These prospectuses are being provided to you in addition to this Prospectus because each of the Separate Account UL investment divisions named above invest solely in a corresponding "Portfolio" of a Fund. This Prospectus is not valid unless you also receive or have received current Fund prospectuses. The purchase of the Policy involves risk. You could lose money. You might have to pay additional amounts of premium to avoid losing the life insurance protection you purchased through a Policy. How to learn more: Before purchasing a Policy, read the information in this Prospectus and in each Fund prospectus. Keep these prospectuses for future reference. ----------- Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. This prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Any representation otherwise is a criminal offense. Interests in the Separate Account and the Fixed Account are not deposits or obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material.
Page in this Subject Prospectus ------- ---------- Summary......................................... 2 MetLife......................................... 6 Separate Account UL............................. 7 The Fixed Account............................... 8 The Funds....................................... 8 Issuing a Policy................................ 9 Policy Benefits................................. 9 Policy Rights................................... 15 Payment and Allocation of Premiums.............. 19 Charges and Deductions.......................... 21 Federal Tax Matters............................. 24 Showing Performance............................. 26 Rights We Reserve............................... 27 Other Policy Provisions......................... 27 Sales and Administration of the Policies........ 28 Voting Rights................................... 30 Reports......................................... 30 Illustration of Policy Benefits................. 31 Getting More Information........................ 31 Legal, Accounting, and Actuarial Matters........ 32 Management...................................... 33 Financial Statements............................
Summary This summary gives an overview of the Policy and is qualified by the more detailed information in the balance of this Prospectus and the Policy. MetLife issues the Policy. The Policy is designed to meet your changing life insurance needs. In addition to the base Policy, optional insurance benefits may also be added to your coverage. Premiums The Policy allows flexibility in making premium payments. There are certain minimum premium requirements to keep the Policy in force during the first Policy year and, if you wish, to keep the guaranteed minimum death benefit in effect. Other than these minimum premium payment requirements, the Policy will remain in force as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. Cash Value Your cash value in the Policy reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. MetLife doesn't guarantee the investment performance of the Separate Account UL investment divisions and you should consider your risk tolerance before selecting any of these funding options. 2 Transfers and Automated Investment Strategies You may transfer cash value among the funding options, subject to certain limits. You may also choose among five automated investment strategies: the Equity Generator SM, the Equalizer SM, the Allocator SM, the Rebalancer SM and the Index Selector SM. Specified Face Amount of Insurance Within certain limits, you may choose your specified face amount of insurance when the Policy is issued. You may also change the amount once in any 24 month period, subject to our rules and procedures. The Guaranteed Minimum Death Benefit Generally, you may choose, in your Policy application, a period of time during which your Policy will include a guaranteed minimum death benefit. If you choose a guarantee, you will need to pay minimum premium amounts in order to keep it in force. You may later cancel or reduce the length of the guarantee. Death Benefit Options Generally, you have a choice among three options. These range from an amount equal to the specified face amount to an amount equal to the specified face amount plus the policy cash value at the date of death. Surrenders, Partial Withdrawals and Loans Within certain limits, you may take partial withdrawals and loans from the Policy. You may also surrender your Policy for its cash surrender value. Tax Treatment In most cases, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Policy, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. If your Policy is a modified endowment contract, you will pay income taxes on loans and withdrawals to the extent of any gains (which is generally the excess of cash value over the premiums paid). In this case, an additional 10% tax may also apply. If the Policy is part of a collateral assignment equity split dollar arrangement with an employer, any increases in cash value that are not due to premium payments may be taxed annually. The death benefit may be subject to Federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. Table of Charges and Expenses This table shows the charges and expenses that you pay under your Policy. See "Charges and Deductions," below for more information about your Policy's charges:
Type of Charge or Expense Amount of Charge or Expense - --------------------------------------------------------------------- Charges we deduct from each premium payment Sales charge: 2.25% of each premium payment Charge for average expected state taxes attributable to premiums: 2% of each premium payment Charge for expected federal taxes attributable to premiums: 1.25% of each premium payment ---- Total Expense Charge: 5.50% of each premium payment
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Type of Charge or Expense Amount of Charge or Expense - -------------------------------------------------------------------------------- Monthly Deduction from your Policy's cash value/1/ Cost of term insurance charges: Amount varies depending on the specifics of your Policy/2/ Administration charge: First Policy year/3/: (a) $20 per month for insureds Age 25 and under (b) $30 per month for insureds Age 26- 40 (c) $35 per month for insureds Age 41 and over. Second and later Policy years: $10 per month unless you pay the Required Administrative Premium shown on page 3 of your Policy. If you pay these premiums, the monthly charge will be: (a) $5 per month for a specified face amount of $250,000 or more (b) $6 per month for a specified face amount between $100,000 and $249,999 (c) $7 per month for a specified face amount of less than $100,000. Mortality and expense risk charge: .075% of the cash value in the Separate Account on each monthly anniversary. We intend to (but, except for Policies issued in New York, do not guarantee that we will) reduce this charge after Policy year 10 to .05%. Underwriting charge: (applies only if $5 per month for the first twelve you request an increase in your months after the month you increase specified face amount) your specified face amount. Charge for optional benefits added by As specified in the form of each rider: rider. - -------------------------------------------------------------------------------- Surrender charge on certain transactions: Full surrender or termination of your The lesser of (a) 75% of one Federal Policy during its 1st year: Guideline Annual Premium/4/ or (b) the amount of premiums you have actually paid Full surrender or termination of your The lesser of (a) one Federal Policy during its 2nd year: Guideline Annual Premium or (b) the amount of all premiums you have actually paid Full surrender or termination of your 90% of one Federal Guideline Annual Policy during its 3rd through 15th Premium during Policy year 3, which year: percentage declines periodically until it is 0% during Policy years 16 and later./5/ (We also will deduct the amount of any surrender charge remaining for any specified face amount increase, as discussed immediately below.) Full surrender or termination of your An amount of surrender charge that we Policy during the 15 years after you compute on essentially the same basis have increased your policy's as if each such specified face amount specified face amount: increase had been a separate, newly issued UL 2001 Policy/6/ Reduction in specified face amount A pro-rata portion of the surrender (i.e. "partial" surrender): charge that would apply to a full surrender/7/ Partial withdrawals of up to 10% of No surrender charge the Policy's cash value/8/ each year: Partial withdrawal amounts in excess A pro-rata portion of the surrender of the 10% free withdrawal limit: charge that would apply to a full surrender/9/
- -------- /1/Charges for any insurance coverage provided by any riders you choose will be included as part of the monthly deduction. /2/See "Cost of Term Insurance" under "Charges and Deductions" for a more detailed discussion of factors affecting this charge. If you would like, we will provide you with an illustration of the impact of these and other charges under the Policy based on various assumptions. /3/We will deduct any amount of the first year's administration charges that remain unpaid at the time of any full surrender or other termination of your Policy during its first year. /4/The Federal Guideline Annual Premium is the amount of the level premium you would need to pay each year for your policy (for Death Benefit Option A and all riders), based on certain assumptions reflected below under "Charges and Deductions--Surrender Charge." /5/The precise timetable of how this percentage declines over this period is set forth below under "Charges and Deductions--Surrender Charge." Also, during each of these years, the surrender charge is subject to the further limitation that it will never exceed the then-applicable percentage multiplied by the sum of all premiums you have paid to date. /6/For this purpose, however, premiums paid after the date you apply for the increase will be assumed to be attributable to the original specified face amount and each specified amount increase in the manner reflected below under "Changes and Deductions--Surrender Charge." 4 /7/If there have been prior face amount increases, we take the reduction in face amount from each increase in reverse chronological order and then from the original specified amount. As we thus cancel each portion of specified face amount, we deduct the amount of any remaining surrender charge associated with that portion. /8/This limit applies as of the date of the requested withdrawal, which is aggregated for this purpose with all previous withdrawals during the same Policy year. /9/The amount deducted would be the same proportion of the full surrender charge as the excess withdrawal bears to the Policy's total cash value. If there have been prior face amount increases, this amount is assumed to represent the surrender charge attributable to the most recent increases in reverse chronological order and then to any remaining surrender charge on the Policy's original specified face amount. Fund Investment Management Fees and Direct Expenses The investment manager of each of the Funds receives an investment management fee. Each of the Funds also incurs direct expenses (see the Fund Prospectus and Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. The following sets forth the fees and expenses for each Portfolio, expressed as a percentage of average net assets, for the year ending 12/31/99 for all Portfolios of each Fund, except those Portfolios (referred to in footnote (h) to the table) to be introduced on or about July 5, 2000, for which estimates for the first year are used. The percentages in the table are before taking into account the expense reimbursements referred to in the footnotes that follow the table.
Total Total Manage- Other Annual Manage- Other Annual Portfolios ment Fee Expenses Expenses Portfolios ment Fee Expenses Expenses - ----------------------------------------------------------------------------------------------- Lehman Brothers(R) Aggregate Bond Index .25% .15% .40% Janus Mid Cap .67% .04% .71% - ----------------------------------------------------------------------------------------------- State Street Research State Street Research Aggressive Income .32% .06% .38% Growth(a) .70% .04% .74% - ----------------------------------------------------------------------------------------------- Loomis Sayles State Street Research High Yield Diversified(a) .43% .03% .46% Bond .70% .24% .94% - ----------------------------------------------------------------------------------------------- Russell 2000(R) MetLife Stock Index .25% .04% .29% Index(e) .25% .64% .89% - ----------------------------------------------------------------------------------------------- T. Rowe Price Harris Oakmark Large Cap Small Cap Value(a)(b) .75% .40% 1.15% Growth(a) .52% .09% .61% - ----------------------------------------------------------------------------------------------- Loomis Sayles T. Rowe Price Large Cap Small Growth(a)(b) .69% .62% 1.31% Cap(c)(f) .90% .10% 1.00% - ----------------------------------------------------------------------------------------------- State Street Research State Street Research Aurora Small Growth(a) .47% .04% .51% Cap Value(d) .85% .23% 1.08% - ----------------------------------------------------------------------------------------------- Scudder Davis Venture Value(c) .75% .06% .81% Global Equity .67% .20% .87% - ----------------------------------------------------------------------------------------------- Morgan Stanley Putnam Large Cap EAFE(R) Growth(d) .80% .59% 1.39% Index(g) .30% 1.47% 1.77% - ----------------------------------------------------------------------------------------------- Putnam MetLife Mid Cap Stock International Index(d) .25% .65% .90% Stock .90% .22% 1.12% - ----------------------------------------------------------------------------------------------- Neuberger Berman Partners Mid Cap Value(a)(b) .70% .48% 1.18%
- -------- (a) The Metropolitan Series Fund directed certain portfolio trades to brokers who paid a portion of the Fund's expenses. In addition, the Fund has entered into arrangements with its custodian whereby credits realized as a result of this practice were used to reduce a portion of each Portfolio's custodian fees. These expense reductions are reflected in the table following (g) below. (b) During 1999, we paid all expenses (other than management fees, brokerage commissions, taxes, interest, extraordinary and non-recurring expenses) (hereinafter "Expenses") in excess of .20% of the average net assets for each of these Portfolios. This subsidy ceases when each Portfolio's assets reaches $100 million or on November 8, 2000, whichever comes first. This expense reimbursement is reflected in the table following (g) below. It states our estimate of the effect of the anticipated reimbursement of expenses for the entire current year. 5 (c) New England Investment Management, Inc. ("NEIM") pays MetLife for providing administrative services. You do not bear these fees. NEIM absorbs the fees payable to MetLife. (d) These Portfolios will begin operations on or about July 5, 2000, except for the Putnam Large Cap Growth Portfolio which will begin operations on May 1, 2000, but will not be available until on or about July 5, 2000. We will pay all Expenses in excess of .20% of the average net assets for each of these Portfolios until each Portfolio's total assets reaches $100 million or until July 4, 2002, whichever comes first. Therefore, the expenses for these Portfolios will be lower than those indicated in the table above. The table following (g) below shows estimated first year expenses for these Portfolios after expense reimbursement. (e) We ceased subsidizing expenses for this Portfolio during 1999. The expense information in the above table has been restated to reflect current expenses as if they had been in effect all year. Beginning on February 22, 2000, we began to pay all Expenses in excess of .30% of the average net assets for the Russell 2000(R) Index Portfolio until the Portfolio's assets reach $200 million or until April 30, 2001, whichever comes first. This expense reimbursement is reflected in the table following (g) below and is stated as if it was in effect for the entire current year. (f) NEIM pays all expenses other than brokerage costs, interest, taxes or other extraordinary expenses in excess of 1.00% of the average net assets for this Portfolio. (g) We pay all Expenses in excess of .25% the average net assets for the Morgan Stanley EAFE(R) Index Portfolio until the Portfolio's assets reach $100 million, or until November 8, 2000, whichever comes first. After such date, MetLife will continue to pay all Expenses in excess of .40% of the Portfolio's average net assets until the Portfolio's assets reach $200 million, or until April 30, 2001, whichever comes first. These expense reimbursements are reflected in the table below. It states our estimate of the effect of these anticipated reimbursements of expenses for the entire current year.
Other Total Annual Other Total Annual Expenses Expenses Expenses Expenses After Expense After Expense After Expense After Expense Portfolio Reimbursement Reimbursement Portfolio Reimbursement Reimbursement - --------------------------------------------------------------------------------------------- Neuberger Berman Partners State Street Research Mid Cap Diversified .02% .45% Value .06% .76% - --------------------------------------------------------------------------------------------- State Street Research Harris Oakmark Large Cap Aggressive Value .19% .94% Growth .02% .72% - --------------------------------------------------------------------------------------------- Russell T. Rowe Price Large Cap 2000(R) Growth .24% .93% Index .30% .55% - --------------------------------------------------------------------------------------------- T. Rowe Price State Street Research Small Cap Growth .02% .49% Growth .09% .61% - --------------------------------------------------------------------------------------------- State Street Research Aurora Small Cap Putnam Large Cap Growth .20% 1.00% Value .20% 1.05% - --------------------------------------------------------------------------------------------- Morgan Stanley MetLife Mid Cap Stock EAFE(R) Index .20% .45% Index .36% .66%
Other Please refer to "Federal Tax Matters-Our taxation" and "Policy Benefits--Cash Value Transfers" for a description of certain charges that we currently do not impose but may impose in the future. MetLife Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. Headquartered in New York City, MetLife is a leading provider of insurance and financial services to a broad spectrum of individual and group customers. With approximately $420 billion of assets under management as of December 31, 1999 on a pro-forma basis, including the acquisition of GenAmerica Corp., MetLife provides individual insurance and investment products to approximately 9 million households in the United States. MetLife also provides group insurance and investment products to corporations and other institutions employing over 33 million employees and members. We have listed our directors and certain key officers under "Management", and our financial information under "Financial Statements", below. 6 Giving us requests, instructions or notifications Contacting us: [SIDEBAR: You can contact us at our Designated Office.] You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Designated Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Policy loan; changing your death benefit option; taking a partial withdrawal; surrendering your Policy; making transfer requests (including elections with respect to the automated investment strategies) or changing your premium allocations. Our Designated Office is our home office at 1 Madison Avenue, New York, NY 10010. We may name additional or alternate Designated Offices. If we do, we will notify you in writing. When your requests, instructions and notifications become effective: . Generally, requests, premium payments and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of the Valuation Period during which we receive them at our Designated Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) . A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. . A Valuation Date is: . Each day on which the New York Stock Exchange is open for trading. . Other days, if we think that there has been a sufficient degree of trading in a Fund's portfolio securities that the current net asset value of its shares might be materially affected. . Your Investment Start Date is the date the first net premium is applied to the Fixed Account and is the later of (A) the Date of Policy and (B) the Date of Receipt of your first premium payment. Your premium allocation instructions and transfer requests for investment in the separate account that you make in your Policy application, or within 20 days after your Investment Start Date, will take effect on the end of the first Valuation Date that is 20 days after your Investment Start Date. . The effective date of your Automated Investment Strategies will be that set forth in the strategy chosen. Separate Account UL We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Policy described in this Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"). The assets in the Separate Account legally belong to us, but they are held solely for the benefit of investors in the Separate Account and no one else, including our other creditors. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. 7 [SIDEBAR: Each Separate Account investment division invests in a corresponding Portfolio of a Fund.] The Separate Account has subdivisions, called "investment divisions." Each investment division invests its assets exclusively in shares of a corresponding Portfolio of a Fund. We can add new investment divisions to or eliminate investment divisions from the Separate Account. You can designate how you would like your net premiums and cash value to be allocated among the available investment divisions and our Fixed Account. Amounts you allocate to each investment division receive the investment experience of the investment division, and you bear this investment risk. The Fixed Account The Fixed Account is part of our general assets that are not in any legally- segregated separate accounts. Amounts in the Fixed Account are credited with interest at an effective annual rate of at least 3%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account and whether they were premium payments or transfers from the investment divisions. Any partial amounts we remove from the Fixed Account, (such as any portion of your Policy's monthly deduction that is allocable to the Fixed Account), will be taken from the most recently allocated amounts first. Any excess interest rate will be credited for at least 12 months before a new rate is credited. We can delay transfers, withdrawals, surrender and payment of Policy loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. [SIDEBAR: You should carefully review the investment objectives, strategies, and risks of each Fund's Portfolios, which are contained in each Fund prospectus you have also received.] The Funds Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the 1940 Act. Each Fund is divided into Portfolios, each of which represents a different class of stock in which a corresponding investment division of the Separate Account invests. You should read each Fund prospectus, which you have also received. They contain information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. They also contain information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. As of the end of each Valuation Period, we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of any of the following transactions that take effect at the end of the Valuation Period: . The allocation of net premiums to the Separate Account. . Dividends and distributions on Fund shares that are reinvested as of the dates paid (which reduces the value of each share of the Fund, increases the number of Fund shares outstanding, but has no affect on the cash value in the Separate Account). . Policy loans and loan repayments allocated to the Separate Account. . Transfers to and among investment divisions. . Withdrawals and surrenders taken from the Separate Account. 8 [SIDEBAR: We will issue a Policy to you as owner. You will have all the rights under the Policy, including the ability to name a new owner or contingent owner.] Issuing a Policy If you want to own a Policy, then you must complete an application, which must be received by the Designated Office. We reserve the right to reject an application for any reason permitted by law, and our acceptance of an application is subject to our underwriting rules. Generally, we will issue a Policy only for insureds that are age 80 or less (although we may decide to permit an insured that is older) that have provided evidence of insurability that we find acceptable. An "insured" is the person upon whose life we issue the Policy. You do not have to be the insured. For the purpose of computing the insured's age under the Policy, we start with the insured's age on the Date of Policy which is set forth in the Policy. Age under the Policy at any other time is then computed using that issue age and adding the number of full Policy years completed. The Date of Policy is usually the date the Policy application is approved. We use the Date of Policy to calculate the Policy years (and Policy months and monthly anniversaries). We may permit a Date of Policy that is earlier than the date the application is approved if there have been no material misrepresentations in the application (but not earlier than the date that the application is completed) in order to preserve a younger age for the insured. Your Date of Policy can also be the date the application is completed if you ask us and if we receive a payment of at least $2,500 with the application. Temporary insurance will be provided for up to 90 days from the date of the application, provided that we receive a payment equal to at least one "check-o- matic" payment and any necessary medical examination has been completed. Even if the insured hasn't completed the medical examination, there will be coverage if the insured dies from an accident within 30 days of the date of the application. The temporary insurance does not cover death by suicide. The temporary insurance provided is equal to the specified face amount applied for up to a maximum of $500,000. There will be no charge for the insurance protection under the temporary insurance. Insurance coverage under the Policy will begin at the time the Policy is delivered and any temporary insurance that is then in force will end. For coverage to be effective, the insured's health must be the same as stated in the application and, in most states, the insured must not have sought medical advice or treatment after the date of the application. As to when charges under this Policy begin, see "Charges Included in the Monthly Deduction." Policy Benefits Insurance Proceeds If the Policy is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the insured's date of death. We will pay this amount after we receive documents that we request as due proof of the insured's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the insured's lifetime. If no selection is made we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. The beneficiary has one year from the date the insurance proceeds are paid to change the selection from a single sum payment to an income plan, as long as we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. 9 The insurance proceeds equal: . The death benefit under the death benefit option, alternate death benefit or minimum guaranteed death benefit that is then in effect; plus . Any additional insurance proceeds provided by rider; minus . Any unpaid Policy loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. [SIDEBAR: The Policy generally offers a choice of three death benefit options.] Death Benefit Options Generally, you can choose among three options, although the choice may be limited based upon the insured's age. You select which option you want in the Policy application. The three options are: . Option A: The death benefit is a level amount and equals the specified face amount of the Policy. . Option B: The death benefit varies and equals the specified face amount of the Policy plus the cash value on the date of death. . Option C: The death benefit is one of two amounts and is available only if insured is age 60 or less when we issue the Policy: . The death benefit varies and equals the specified face amount plus the cash value on the date of death, until the insured is age 65 ("CI"). . At age 65, the death benefit becomes a level amount equal to the specified face amount under CI plus the cash value at the end of the Valuation Date immediately preceding the date on which the insured became age 65. This new amount then becomes the specified face amount ("CII"). There are issues that you should consider in choosing your death benefit option. For example, under Options B and CI, the cash value is added to the specified face amount. Therefore, the death benefit will generally be greater under these options than under Options A and CII, for Policies with the same specified face amount and premium payments. By the same token, the cost of insurance will generally be greater under Options B and CI than under Options A and CII. You can change your death benefit option after the second Policy year, and thereafter, once in any 12 month period provided that: . Your cash surrender value after the change would be enough to pay at least two monthly deductions. . The specified face amount continues to be no less than the minimum we allow after a decrease. . The total premiums you have paid do not exceed the then current maximum premium limitations permitted under Internal Revenue Service rules. . If the change is to C, the insured is age 60 or less. [SIDEBAR: You can generally change your death benefit option.] Any change will be effective on the monthly anniversary on or immediately following the Date of Receipt of the request. A change in death benefit will have the following effects on your specified face amount: . Change from A or CII to B or CI: The specified face amount will decrease to equal the death benefit less the cash value on the effective date of the change. 10 . Change from B or CI to A or CII: The specified face amount will increase to equal the death benefit plus the cash value of the Policy on the effective date of the change. . Change from B to CI or A to CII: The specified face amount will remain the same. Before you change your death benefit option you should consider the following: . If the term insurance portion of your death benefit changes, as it may with a change from A or CII to B or CI and vice versa, the term insurance charge will also change. This will affect your cash value and, in some cases, the death benefit levels. . The premium requirements for maintaining the guaranteed minimum death benefit may change, which could affect your ability to maintain it. . If your specified face amount changes because of the change in death benefit option, consider also the issues presented by changing your specified face amount that are described under "Specified Face Amount," below. These issues include the possibility: that your Policy would become a modified endowment contract; that you would receive a taxable distribution; of an increase or decrease in the monthly administration charge; and of changes in the maximum premium amounts that you can pay. Alternate Death Benefit In order to ensure that the Policy qualifies as life insurance under the federal income tax laws, the beneficiary will receive an alternate death benefit if it is greater than the amount that the beneficiary would have received under the death benefit option that you chose. The alternate death benefit is as follows: Age of Insured at Death 40 and 45 50 55 60 65 70 75 to 90 95 less % of Cash Value: * 250 215 185 150 130 120 115 105 100
- -------- *For the ages not listed, the percentage decreases by a ratable portion for each full year. [SIDEBAR: The Policy offers a guaranteed minimum death benefit.] Guaranteed Minimum Death Benefit You can choose to have a guaranteed minimum death benefit for one of several specified periods of time, if you meet certain requirements. Generally, the amount of guaranteed minimum death benefit equals the specified face amount of insurance, plus any additional death benefits provided by rider. Availability may be restricted in your state or by the insured's rating class, however. There is no additional charge for the guarantee, but in order to keep the guarantee in effect, you will need to pay certain minimum premiums, which vary based on many factors (see "Premiums" below). We test the Policy on each monthly anniversary or upon the Policy's lapse date (depending on state requirements)--the "testing date"--to make sure that you have paid the minimum premiums required to keep the guarantee for the duration you chose. If you haven't made the minimum premium payments, we will tell you and give you 61 days from the testing date to make any additional payment to keep the guarantee at the then current duration. If we do not receive the required payment, we will reduce the duration of the guarantee to one that the premiums you have paid would support and that would have been available to you. If no shorter duration is available to you, we will terminate the guarantee. A duration cannot be reactivated, once we terminate it. 11 Each duration for the guaranteed minimum death benefit has its own premium requirement that supports it. The longer the duration, the greater the premiums required. At issue, we will look at the premium you plan to pay and give you which ever duration that premium supports. You can reduce the duration by reducing the premiums paid to an amount that will only support a shorter duration. A duration cannot be increased by subsequently paying additional premiums nor can a duration be reinstated once it is terminated. The durations for the guaranteed minimum death benefit are*: . For the first five Policy years. . To age 65, but only if the insured is age 60 or less when the Policy is issued. . To age 75, but only if the insured is age 70 or less when the Policy is issued. . To age 85, but only if the insured is age 80 or less when the Policy is issued. - -------- *For Policies issued in New York, the guaranteed minimum death benefit guarantees payment of the specified face amount of insurance only (and not any rider benefits), and the options for the duration of the guarantee are generally: (i) for the first five Policy years; (ii) to age 55 (available only if the insured was between age 18 and age 50 on the date the Policy was issued) or for the first 20 Policy years (if the insured was less than age 18 on the date the Policy was issued); or (iii) to age 65 (available only if the insured was between age 18 and age 60 on the date the Policy was issued) or to age 60 (if the insured was less than age 18 on the date the Policy was issued). For Policies issued in Massachusetts and New Jersey (when approved), the only available duration of the guaranteed minimum death benefit is the first five Policy years. It is possible that other states may, in the future, require similar variations in the durations that are available. Specified Face Amount The specified face amount is the basic amount of insurance specified in your Policy. The Minimum Initial Specified Face amount is the smallest amount of specified face amount for which a Policy may be issued. Currently these amounts are generally: . $100,000 for insureds in the preferred rate class . $50,000 for most other insureds . $25,000 for certain insureds over age 59. . $250,000 for most Policies distributed through broker-dealers not affiliated with us. [SIDEBAR: You can generally increase or decrease your Policy's specified face amount.] Generally, you may change your specified face amount after the second Policy year, and thereafter, once in any 24 month period, as long as the insured is age 79 or under. Any change will be effective on: (a) the monthly anniversary on or next following the Date of Receipt of your request; or (b) if we require evidence of insurability, the date we approve your request. You are permitted to decrease the specified face amount to as low as $25,000 except that no reduction may decrease the specified face amount below the Minimum Initial Specified Face Amount during the first five Policy years or one half that amount thereafter. The lowest available specified face amount requirements also apply to decreases that result from partial withdrawals or changes in death benefit option. If there have been previous specified face amount increases, any decreases in specified face amount will be made in the following order: (i) the specified face amount provided by the most recent increase; (ii) the next most recent increases successively; and (iii) the initial specified face amount. 12 You may increase the specified face amount only if: (a) the guaranteed minimum death benefit is in effect; or (b) the cash surrender value after the change is large enough to cover at least two monthly deductions based on your most recent cost of term insurance charge. Generally, the minimum specified face amount increase is $5,000 ($10,000 for Policies issued in New York). Any increase will require that we receive additional evidence of insurability that is satisfactory to us. We will also impose an underwriting charge. Before you change your specified face amount you should consider the following: . The term insurance portion of your death benefit will likely change and so will the term insurance charge. This will affect the insurance charges, cash value and, in some cases, death benefit levels. . Reducing your specified face amount in the first 15 Policy years may result in our returning an amount to you which could then be taxed on an income first basis. . We will deduct a portion of any applicable surrender charge at the time of any decrease in specified face amount, other than a decrease resulting automatically from a partial withdrawal or from a death benefit option change. . We will establish an additional amount of surrender charge at the time of any increase in the specified face amount, other than an increase resulting automatically from a change of death benefit option. . The premium requirements for maintaining the guaranteed minimum death benefit will change, which could affect your ability to maintain it. . The amount of additional premiums that the tax laws permit you to pay into your Policy may increase or decrease. The additional amount you can pay without causing your Policy to be a modified endowment contract for tax purposes may also increase or decrease. . In some circumstances, the Policy could become a modified endowment contract. . The monthly administration charge may change. Cash Value [SIDEBAR: Your Policy is designed to accumulate cash value.] Your Policy's cash value equals: . The Fixed Account cash value, plus . The Policy Loan Account cash value, plus . The Separate Account cash value. Your Policy's cash surrender value equals your cash value minus: . Any outstanding Policy loans (plus accrued interest); . Any surrender charges; and . The administration charge for any full Policy month remaining in the first Policy year. The Separate Account cash value allocated to each investment division is calculated as follows: . 20 days after your Investment Start Date, we will allocate your cash value among the investment divisions as you requested your net premiums to be allocated in your application. 13 . Thereafter, at the end of each Valuation Period the cash value in an investment division will equal: . The cash value in the investment division at the beginning of the Valuation Period; plus . All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus . All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus . The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus . The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the portfolio during the period. The net investment return could in the future be reduced by a charge for taxes that we have the right to impose. Benefit at Final Date The Final Date is the Policy anniversary on which the insured is Age 95. We will allow you to extend that date, however, where permitted by state law. If the insured is living on the Final Date, we will pay you the cash value of the Policy, reduced by any outstanding loans (plus accrued interest). You can receive the cash value in a single sum, in an account that earns interest, or under an available income plan. Optional Benefits Added By Rider You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. Each rider contains important information, including limits and conditions that apply to the benefits. If you decide to purchase any of the riders, you should carefully review their provisions to be sure if the benefit is something that you want. You should also consider: . The effects on the premium requirements for maintaining the guaranteed minimum death benefit, which could affect your ability to maintain it. . That the addition of certain riders can restrict your ability to exercise certain rights under the Policy. . That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Policy terminates because of poor investment performance or any other reason, the riders generally will also terminate. . The tax consequences. You should also consult with your tax advisor before purchasing one of the riders. 14 Generally, we currently make the following benefits available by rider: . Disability Waiver of Premium Benefit/1/ .Children's Term Insurance Benefit - ------------------------------------------------------------------------------- . Disability Waiver of Monthly Deduction .Spouse Term Insurance Benefit Benefit/2/ - ------------------------------------------------------------------------------- . Accidental Death Benefit .Accelerated Death Benefit/3/
- -------- /1/This rider is designed for owners who seek to build cash value or maintain the guaranteed minimum death benefit during a period of disability. In order to qualify for this rider, you must maintain a premium level equal to that required under the rider. Otherwise, the rider will operate like the Disability Waiver of Monthly Deduction benefit rider, which in some cases could increase the cost of the rider. The selected premium level will not necessarily be sufficient to keep the Policy in force to the Final Date. Therefore, the Policy could terminate, unless a guaranteed minimum death benefit is in effect. If your Policy was issued in New York and your Policy includes this rider, you may not add any other rider. /2/An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Policy's termination. For this reason, it may be advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /3/Payment under this rider may affect eligibility for benefits under state or federal law. [SIDEBAR: Generally, you can receive the Policy's insurance proceeds, amounts payable at the Final Date or amounts paid upon surrender under an income plan instead of in a lump sum.] Income Plans Before you purchase an income plan you should consider: . The tax consequences associated with the Policy proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax adviser about tax consequences. . That your Policy will terminate at the time you purchase an income plan and you will receive a new contract, which describes the terms of the income plan. You should carefully review the terms of the new contract, because it contains important information about the terms and conditions of the income plan. . That these plans do not have a variable investment return. Generally, we currently make the following income plans available: . Interest income .Installment Income for a Stated Period - ---------------------------------------------------------------------------- . Installment Income for a Stated . Single Life Income--Guaranteed Amount Payment Period - ---------------------------------------------------------------------------- . Joint and Survivor Life Income .Single Life Income--Guaranteed Return
Policy Rights Cash Value Transfers [SIDEBAR: You can transfer your cash value among the investment divisions and the Fixed Account at any time beginning 20 days after the Investment Start Date.] The minimum amount you may transfer is $50 or, if less, the total amount in an investment option. You may make transfers at any time, but we do reserve the right to limit transfers to four per Policy year and to limit transfers from the Fixed Account to one each year on the Policy anniversary date. We do not currently charge for transfers, but we do reserve the right to charge up to $25 per transfer, except for transfers under the Automated Investment Strategies. Currently, transfers are not taxable transactions. Each Fund may restrict or refuse purchases or redemptions of shares in their Portfolios as a result of certain market timing activities. You should read each Fund's prospectus for more details. 15 We reserve the right to refuse to accept any transaction request where the request would tend to disrupt the administration of the Policies or is not in the best interest of Policy owners or the Separate Account. . Automated Investment Strategies: You can choose one of five currently available strategies. You can also change or cancel your choice at any time. . Equity Generator: allows you to transfer an amount equal to the interest earned in the Fixed Account in any Policy month equal to at least $20 to the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. The transfer will be made at the beginning of the Policy month following the Policy month in which the interest was earned. . Equalizer: allows you to periodically equalize amounts in your Fixed Account and either the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. We currently make equalization each quarter. We will terminate this strategy if you make a transfer out of the investment division or the Fixed Account that isn't part of the strategy. You may then reelect the Equalizer on your next Policy anniversary. . Rebalancer: allows you to periodically redistribute amounts in the Fixed Account and investment divisions in the same proportion that the net premiums are then being allocated. We currently make the redistribution each quarter. . Allocator: allows you to systematically transfer money from the Fixed Account to any investment division(s). You must have enough cash value in the Fixed Account to enable the election to be in effect for three months. The election can be to transfer each month: . A specific amount until the cash value in the Fixed Account is exhausted, . A specific amount for a specific number of months, or . Amounts in equal installments until the total amount you have requested has been transferred. . 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, 100% of your cash value will be allocated among the Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, MetLife Stock Index, Russell 2000 Index and MetLife Mid Cap Stock Index (available on or about July 5, 2000) investment divisions and the Fixed Account. Each quarter we will redistribute amounts in the Fixed Account and investment divisions in the same proportion as you originally requested. We may, in the future, change the available models and allow you to allocate less than 100% to this strategy. Before electing this strategy, you should consider the fact that investment returns using this strategy may be more volatile than the other strategies. . Transfers by Telephone: We may, if permitted by state law, allow you to make transfer requests, changes to Automated Investment Strategies and allocations of future net premium by phone. We may also allow you to authorize your sales representative to make such requests. The following procedures apply: . We must have received your authorization in writing satisfactory to us, to act on instructions from any person that claims to be you or your 16 sales representative, as applicable, as long as that person follows our procedures. . We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. . All telephone calls will be recorded. . You will receive a written confirmation of any transaction. . Neither the Separate Account nor we will be liable for any loss, expense or cost arising out of a telephone request if we reasonably believed the request to be genuine. . You should contact our Designated Office with any questions regarding the procedures. Loan Privileges [SIDEBAR: You can borrow from us and use your Policy as security for the loan.] The amount of each loan must be: . At least $500. . No more than the cash surrender value less two monthly deductions (unless your Policy provides for a different amount required by state law) when added to all other outstanding Policy loans. As of your loan request's Date of Receipt, we will: . Remove an amount equal to the loan first from your cash value in the Fixed Account. If an additional amount is required, we will remove it from the cash value in the investment divisions of the Separate Account in the same proportion as your cash value is then allocated. . Transfer such cash value to the Policy loan account, where it will be credited with interest at the rate of 4% per year. At least once a year, we will transfer any interest earned in your Policy loan account to the Fixed Account and the investment divisions, according to the way that we allocate monthly deductions. . Charge you interest, which will accrue daily at a rate of 6% per year (which is the maximum rate we will ever charge). We currently intend to (but don't guarantee that we will) reduce this rate to 4.6% after the 10th Policy year. Your interest payments are due at the end of each Policy year and if you don't pay the amount within 31 days after it is due, we will treat it as a new Policy loan. Repaying your loans (plus accrued interest) is done by sending in payments at least equal to your voluntary planned periodic premium, or $50, if less. Any payments we receive while a loan (plus accrued interest) is outstanding, will be applied first to repaying the loan, and, if any amounts remain after repayment, they will be considered premium. Even though we will repay the loan with these payments, the resulting reduction in outstanding loans will have the same effect as premium payments for purpose of maintaining your guaranteed minimum death benefit. We will allocate your repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated. Before taking a Policy loan you should consider the following: . Interest payments on loans are generally not deductible for tax purposes. . Under certain situations, Policy loans could be considered taxable distributions. 17 . If you surrender your Policy or if we terminate your Policy, or at the Final Date, any outstanding loan amounts (plus accrued interest) will be taxed as a distribution. (See "Federal Tax Matters--The Policy--Loans" below.) . A policy loan increases the chances of our terminating your policy due to insufficient cash value. Unless the guaranteed minimum death benefit is in effect, we will terminate your Policy with no value if: (A) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (B) we tell you of the insufficiency and you do not make a sufficient payment within 61 days of the monthly anniversary. . Your Policy's death benefit will be reduced by any unpaid loan (plus accrued interest). Surrender and Withdrawal Privileges [SIDEBAR: You can surrender your Policy for its cash surrender value.] We may ask you to return the Policy before we honor your request to surrender your Policy. You can choose to have the proceeds paid in a single sum, or under an income plan. If the insured dies after you surrender the Policy but before the end of the Policy month in which you surrendered the Policy, we will pay your beneficiary an amount equal to the difference between the Policy's death benefit and its cash value, computed as of the surrender date. You can make partial withdrawals at any time if: . The withdrawal would not result in a reduction in your specified face amount during the first 2 Policy years, as described under "Specified Face Amount" above. . The withdrawal would not result in the cash surrender value being less than sufficient to pay 2 monthly deductions. . The withdrawal is at least $500. . The withdrawal would not result in your specified face amount falling below the minimum allowable amount, as described under "Specified Face Amount," above. . The withdrawal would not result in total premiums paid exceeding the then current maximum premium limitation determined by the Internal Revenue Code rules. If you make a request for a partial withdrawal that is not permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Policy. We will deduct your withdrawal from the Fixed Account and the investment divisions in the same way we allocate the monthly deduction. Before surrendering your Policy or requesting a partial withdrawal you should consider the following: . Surrender charges may apply. . Amounts received may be taxable as income and, if your Policy is a modified endowment contract, subject to certain tax penalties. . Your Policy could become a modified endowment contract. . For partial withdrawals, your death benefit will decrease by the amount of the withdrawal (for options A and CI, your specified face amount will also decrease, generally by the amount of the withdrawal). . Any withdrawal that causes the specified face amount to decrease could cause an increase in the monthly administrative charge. 18 . In some cases you may be better off taking a Policy loan, rather than a partial withdrawal. Exchange Privilege If you decide that you no longer want to take advantage of the investment divisions in the Separate Account, you may transfer all of your money into the Fixed Account. There is currently no charge on transfers. Even if we do have a transfer charge in the future, such charge will never be imposed on a transfer of your entire cash value (or the cash value attributable to a specified face amount increase) to the Fixed Account within the first 24 Policy months (or within 24 Policy months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Policy cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy, which we make available. Third Party Requests Generally, we only accept requests for transactions or information from you. Therefore, we reserve the right not to process transactions requested on your behalf by your agent with a power of attorney or any other authorization. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Policy owners, and who simultaneously makes the same request or series of requests on behalf of other Policy owners. Payment and Allocation of Premiums Premiums Unless your Policy has a guaranteed minimum death benefit in effect, the payment of premiums won't guarantee that your Policy will remain in force. Rather, this depends on your Policy's cash surrender value. Paying Premiums [SIDEBAR: You can make voluntary planned periodic premium payments and unscheduled premium payments.] You can make premium payments, subject to certain limitations discussed below, through the: . Voluntary planned periodic premium schedule: You choose the schedule on your application. The schedule sets forth the amount of premiums, fixed payment intervals, and the period of time that you intend to pay premiums. The schedule can be: (A) annual; (B) semi-annual; (C) periodic automatic pre- authorized transfers from your checking account ( "check-o-matic"); (D) systematic through payment plans that your employer makes available; or (E) through another method to which we agree. You do not have to pay premiums in accordance with your voluntary planned period premium schedule. . Unscheduled premium payment option: You can make premium payments at any time. Paying Premiums to Maintain the Guaranteed Minimum Death Benefit You can pay certain levels of premiums that entitle you to a guaranteed minimum death benefit for a specified period of time. To keep the guarantee 19 [SIDEBAR: Net premiums are your premiums minus the charges deducted from your premiums.] you will need to pay these premium levels for the entire duration of the guarantee. We will test your Policy on each monthly anniversary or upon the Policy lapse date (depending on state requirements) to verify that you have paid the minimum premium (after taking into account partial withdrawals and outstanding Policy loans) to keep the guarantee in force. The level of premium to keep the guaranteed minimum death benefit in effect varies based on several factors including: . Duration of the guarantee (generally higher levels are required for longer durations). . Specified face amount (generally higher levels are required for higher amounts). . Smoking class and underwriting class (generally higher levels are required for classes that we consider to pose a greater mortality risk ). . Death benefit option (generally higher levels are required for death benefit options B and CI). . Except for Policies issued in New York, Policy riders (generally higher levels are required if you have riders in force). Maximum and Minimum Premium Payments . During the first Policy year you must pay an amount of premium that we call the minimum initial premium or we will terminate your Policy after the grace period. . After the first Policy year, your voluntary planned periodic payments must be at least: . $200 annually (except that some Policies distributed by certain brokers must be at least $2,500) . $100 semi-annually . $15 on a "check-o-matic" or other systematic payment schedule. . Unscheduled premium payments must be at least $250 each. . You may not pay premiums that exceed tax law premium limitations for life insurance policies. We will return any amounts that exceed these limits except that we will keep any amounts that are required to keep the Policy from terminating. We will let you make premium payments that would turn your Policy into a modified endowment contract, but we will tell you of this status in your annual statement, and if possible, we will tell you how to reverse the status. Allocating Net Premiums We will allocate your net premiums to the Fixed Account from the Investment Start Date until 20 days after such date. We will then allocate your cash value according to your net premium allocation instructions in your application. You can instruct us to allocate your net premiums among the Fixed Account and the investment divisions. The percentage of your net premium allocation into each of these investment options must be a minimum of 1% and in whole numbers. You can change your allocations (effective after the 20th day referred to above) at any time by giving us written notification at our Designated Office or in another manner that we permit. Policy Termination and Reinstatement Termination: We will terminate your Policy without any cash surrender value if: . The cash surrender value is less than the monthly deduction; 20 . No minimum guaranteed death benefit is in effect; and . We do not receive a sufficient premium payment within the 61-day grace period to cover two monthly deductions. We will mail you notice if any grace period starts. Reinstatement: Upon your request, we will reinstate your Policy (without reinstating the guaranteed minimum death benefit or any amounts in a Policy loan account), subject to certain terms and conditions that the Policy provides. We must receive your request within 3 years (or within a longer period if required by state law) after the end of the grace period and before the Final Date. You also must provide us: . A written application for reinstatement (the date we approve the application will be the effective date of the reinstatement). . Evidence of insurability that we find satisfactory. . An additional premium amount that the Policy prescribes for this purpose. Charges and Deductions The Policy charges compensate us for our expenses and risks. Any distinctions we make about the specific purposes of the different charges are imprecise, and we are free to keep and use our revenues or profits for any other purpose, including paying any of our costs and expenses in connection with the Policies. The following sets forth additional information about some (but not all) of the Policy charges. [SIDEBAR: Carefully review the "Table of Charges and Expenses" in the "Summary", which sets forth the charges that you pay under your Policy.] Charge for average expected state taxes attributable to premiums: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Premium taxes vary from state to state and currently range from 0 to 3.5%. Our charge approximates the average tax rate we expect to pay on premiums we receive from all states. Charges included in the Monthly Deduction: At issue, or within 30 days of any Policy anniversary, you can choose to have the monthly deduction taken from either: (a) the Fixed Account and each investment division in which you have cash value in the same proportion as your cash value is allocated among these options at the beginning of the policy month; or (b) if there is sufficient cash value, entirely from your Fixed Account. If no election is made or if amounts in the Fixed Account are insufficient, we will take the monthly deduction in accordance with (a). We deduct the monthly deductions as of each monthly anniversary beginning as of the Date of Policy. . Cost of term insurance: This charge varies monthly based on many factors. Each month, we determine the charge by multiplying your cost of insurance rates by the term insurance amount. . The term insurance amount is the death benefit at the beginning of the Policy month divided by a discount factor to account for an assumed return; minus the cash value at the beginning of the Policy month after deduction of all other applicable charges. Factors that affect the term insurance amount include the specified face amount, the cash value and the death benefit you choose (generally, the term insurance amount will be higher for options B and CI). . The term insurance rate is based on our expectations as to future experience, taking into account the insured's sex (if permitted by law), 21 age and rate class. The rates will never exceed the guaranteed rates, which are based on certain 1980 Commissioners Standard Ordinary Mortality Tables and the insured's sex, age and smoking status. Our current rates are lower than the maximums in most cases. We review our rates periodically and may adjust them, but we will apply the same rates to everyone who has had their Policy for the same amount of time and who is the same age, sex and rate class. As a general rule, the cost of insurance rate increases each year you own your Policy, as the insured's age increases. . Rate class relates to the level of mortality risk we assume with respect to an insured. It can be the standard rate class, or one that is higher or lower (and if the insured is 18 or older, we divide rate class by smoking status). The insured's rate class will affect your cost of term insurance. You can also have more than one rate class in effect, if the insured's rate class has changed and you change your specified face amount. A better rate class will lower the cost of term insurance on your entire Policy and a worse rate class will affect the portion of your cost of term insurance charge attributable to the specified face amount increase. . Administration charge: We make this monthly charge primarily to compensate us for expenses we incur in the administration of the Policy, and also, in the first year, our underwriting and start-up expenses. . Mortality and expense risk charge: We make this monthly charge primarily to compensate us for: . mortality risks that insureds may live for a shorter period than we expect; and . expense risks that our issuing and administrative expenses may be higher than we expect. If our estimates are correct, we will realize a profit from this charge, otherwise, we could incur a loss. Surrender charge [SIDEBAR: Your Policy sets forth the maximum surrender charges to which your cash value could be subject.] The method by which we calculate the surrender charges that apply under certain circumstances is complex, because they are based on several factors that are specific to your Policy. You can request a personalized illustration that will show you how this charge (along with other charges plus your loans and accrued interest) affect your cash surrender value. We have summarized the basic principles used to determine the surrender charges in the table that appears under "Summary--Table of Charges and Expenses." The discussion that follows gives additional detail on how we calculate surrender charges. In order to determine the Surrender Charge, we first determine the: . Surrender Charge Measure, which is: . For the first Policy year the lesser of: (A) actual cumulative premiums paid; and (B) the Maximum Surrender Charge Premium. . For the second Policy year and later Policy years, the lesser of: (A) actual cumulative premiums paid within the first two Policy years; and (B) the Maximum Surrender Charge Premium. 22 .Increase Surrender Charge Measure, which is: . For the first year following the increase, the lesser of: (A) the amount by which the actual cumulative premiums paid within twelve months following the date of the application for the specified face amount increase exceeds the sum of: (i) the Surrender Charge Measure for the first Policy year, plus (ii) the Increase Surrender Charge Measure for the first year following any prior increases; and (B) the Maximum Surrender Charge Premium at the time of the increase. . For the second Policy year and later following the increase, the lesser of: (A) the amount by which actual cumulative premiums paid within twenty- four months following the date of the application for the specified face amount increase exceeds the sum of: (i) the Surrender Charge Measure for the second Policy year, plus (ii) the Increase Surrender Charge Measure for the second year following any prior increases; and (B) the Maximum Surrender Charge Premium for the second Policy year following the increase. . Maximum Surrender Charge Premium, which is the amount determined at issue (or for a specified face amount increase, at the time of the increase) which will not exceed: . For the first Policy year, or the first year after the increase, 75% of the Smoker Federal Guideline Annual Premium for Death Benefit Option A and all riders at issue, or at the time of the increase, respectively; and . For the second Policy year and thereafter, or the second and later years after the increase, 100% of the Smoker Federal Guideline Annual Premium for Death Benefit Option A and all riders at issue or at the time of the increase. [SIDEBAR: There is no surrender charge on partial withdrawals of up to 10% of the Policy's Cash Value each year.] . Federal Guideline Annual Premium, which is the level annual amount of premium that you would need to pay through the Final Date of your Policy for the specified face amount of your Policy if we set your premiums both as to timing and amount, based on: . the 1980 Commissioners Standard Ordinary Mortality Tables; . net investment earnings at an annual effective rate of 4%; and . fees and charges as set forth in your Policy and Policy riders. This premium is based on the insured's age, sex, smoking status and rate class and is generally higher for older ages, for males, for smokers and for those in a higher rate class. Using the above determinations, we will then compute the full surrender charge by first locating the Policy year in the table below that contains the date as of which we are computing the charge. Then we multiply the indicated percentage by the then-applicable Surrender Charge Measure. This gives us the surrender charge for the initial specified face amount. We compute the surrender charge for each specified face amount increase that is then in effect by a similar method, except that we multiply the percentage for the actual year following the date of the increase by the Increase 23 Surrender Charge Measure for that increase. By totaling the surrender charge we compute for the original specified face amount with any that we compute for each specified face amount increase, we arrive at the full surrender charge.
Policy year (or actual year since Specified Face Amount 16 and Increase) 1 2 3 4 5 6* 7 8 9 10 11 12 13 14 15 later - ---------------------------------------------------------------------------------- % of Measure 100 100 90 80 70 60 54 48 42 36 30 24 18 12 6 0
*After the fifth year, the surrender charges will decrease each Policy month. We deduct any surrender charge that results from a partial withdrawal or specified face amount decrease from the same sources as we take the monthly deduction. If the cash value is insufficient, we reduce the amount we pay you. Because of the surrender charge, your Policy will probably not have any cash surrender value for at least the first Policy year unless you pay significantly more than the Minimum Initial Premium. Since the Surrender Charge Measure and Increase Surrender Charge Measure are capped at the end of the first two Policy years after issue, and after increase in specified face amount, respectively, you may be able to limit your surrender charges by limiting your premium payments to levels necessary to keep the Policy and the guaranteed minimum death benefit in effect. Federal Tax Matters The following is a brief summary of some tax rules that may apply to your Policy. You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy, especially before you make unscheduled premium payments, change your specified face amount, change your death benefit option, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the Policy. The Policy [SIDEBAR: You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy.] Insurance proceeds . Generally excludable from your beneficiary's gross income. . The proceeds may be subject to federal estate tax: (i) if paid to the insured's estate; or (ii) if paid to a different beneficiary if the insured possessed incidents of ownership at or within three years before death. . If you die before the insured, the value of your Policy (determined under IRS rules) is included in your estate and may be subject to federal estate tax. . Whether or not any federal estate tax is due is based on a number of factors including the estate size. Cash value (if your Policy is not a modified endowment contract) . You are generally not taxed on your cash value until you withdraw it, surrender your Policy or receive a distribution on the Final Date. In these cases, you are generally permitted to take withdrawals up to the amount of premiums paid without any tax consequences. However, withdrawals will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules apply in the first 15 Policy years, when a distribution may be subject to tax if there is a gain in your Policy (which is generally when your cash value exceeds the 24 cumulative premiums you paid). Finally, if your Policy is part of a collateral assignment equity split dollar arrangement, there is a risk that increases in cash value may be taxed annually. Loans . Loan amounts received will generally not be subject to income tax, unless your Policy is or becomes a modified endowment contract or terminates. . Interest on loans is generally not deductible. For businesses that own a Policy, at least part of the interest deduction unrelated to the Policy may be disallowed unless the insured is a 20% owner, officer, director or employee of the business. . If your Policy terminates (upon surrender, cancellation, lapse or the Final Date) while any Policy loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Policy distribution. Modified Endowment Contracts These contracts are life insurance contracts where the premiums paid during the first 7 years after the Policy is issued, or after a material change in the Policy, exceeds tax law limits referred to as the "7-pay test." Material changes in the Policy, include changes in the level of benefits and certain other changes to your Policy after the issue date. Reductions in benefits during a 7-pay period may cause your Policy to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. If your Policy is considered a modified endowment contract the following applies: . The death benefit will generally be income tax free to your beneficiary, as discussed above. . Amounts withdrawn or distributed before the insured's death, including loans, assignments and pledges, are (to the extent of any gains on your policy) treated as income first and subject to income tax. All modified endowment contracts you purchase from us and our affiliates during the same calendar year are treated as a single contract for purposes of determining the amount of any such income. . An additional 10% income tax generally applies to the taxable portion of the amounts received before age 59 1/2, except generally if you are disabled or the distribution is part of a series of substantially equal periodic payments. Diversification In order for your Policy to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Policy. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Policy owners of gains under their Policies. Changes to tax rules and interpretations Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Policy. These changes may take effect retroactively. 25 We reserve the right to amend the Policy in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: . Possible taxation of cash value transfers. . Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. . Possible limits on the number of investment funds available or the frequency of transfers among them. . Possible changes in the tax treatment of Policy benefits and rights. Our taxation In general ,we don't expect to incur federal, state or local taxes upon the earnings or realize capital gains attributable to the assets in the Separate Account relating to the Policies' cash surrender value. If we do incur such taxes, we reserve the right to charge the cash value allocated to the Separate Account for these taxes. Showing Performance We may advertise or otherwise show: . Investment division performance ranking and rating information as it compares among similar investments as compiled by independent organizations. . Comparisons of the investment divisions with performance of similar investments and appropriate indices. . Our insurance company ratings that are assigned by independent rating agencies and that are relevant when considering our ability to honor our guarantees. . Personalized illustrations based on historical Separate Account performance. UL I Exchange Program On or about July 1, 2000, owners of certain eligible UL I (flexible premium life insurance policies issued by Metlife and one of its affiliates) will be notified that they may exchange their existing policy for a UL 2001 Policy. The new UL 2001 Policy will have the same provisions as described in this Prospectus, except for the following: . The 5.5% sales charge that we deduct from each premium payment will be waived for the initial accumulation fund transfer into the UL 2001 Policy. . The surrender charges associated with the initial specified face amount of the UL 2001 Policy will apply only during the first five Policy years after the exchange. After that time, no surrender charges will be deducted. . The Disability Waiver of Premium Benefit (DWP) will not be available on the new UL 2001 Policy. . In the first Policy year after the exchange, a 25% commission rate will apply to any premium increase between the current billed premium for the old UL I policy and the actual premium received for the new UL 2001 Policy (or the maximum commissionable premium (MCP) for the new UL 2001 Policy, if less.) . If you choose to exercise your free look provision during the time period described below, we will reinstate your old UL I policy by transferring back without charge the entire initial accumulation fund. Any additional premiums paid to the new UL 2001 Policy will be refunded to you as described under "Free Look Period" below. 26 Rights We Reserve We reserve the right to make certain changes if we believe the changes are in the best interest of our Policy owners or would help carry out the purposes of the Policy. We will make these changes in the manner permitted by applicable law and only after getting any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: . Operating the Separate Account in any other form that is permitted by applicable law. . Changes to obtain or continue exemptions from the 1940 Act. . Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. . Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. . Changing the way we assess charges without exceeding the aggregate amount of the Policy's guaranteed maximum charges. . Making any necessary technical changes to the Policy to conform it to the changes we have made. Other Policy Provisions [SIDEBAR: Carefully review your Policy which contains a full discussion of all its provisions.] You should read your Policy for a full discussion of its provisions. The following is a brief discussion of some of the provisions that you should consider: Free Look Period You can return the Policy during this period. The period is the later of: . 10 days after you receive the Policy (unless state law requires your Policy to specify a longer specified period); and . 45 days after we receive Part A of the completed application. If you return your Policy, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. Incontestability We will not contest: . Your Policy after 2 Policy years from issue or reinstatement (excluding riders added later). . An increase in a death benefit after it has been in effect for two years. Suicide If the insured commits suicide within the first two Policy years (or another period required by state law), your beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the insured commits suicide within two years of such increase. 27 Age and Sex We will adjust benefits to reflect the correct age and sex of the insured, if this information isn't correct in the Policy application. Assignment and Change in Ownership You can assign your Policy as collateral if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Designated Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax adviser before making any change of ownership or other assignment. Payment and Deferment [SIDEBAR: Under certain situations, we may defer payments.] Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: . The New York Stock Exchange has an unscheduled closing. . There is an emergency so that we could not reasonably determine the investment experience of a Policy. . The Securities and Exchange Commission by order permits us do so for the protection of Policy owners (provided that the delay is permitted under New York State insurance law and regulations). . With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. . We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. We currently pay interest on the amount of insurance proceeds at 6% per year (or higher if state law requires) from the date of death until the date we pay the benefit. Dividends The Policy is "nonparticipating," which means it is not eligible for dividends from us and does not share in any distributions of our surplus. Sales and Administration of the Policies [SIDEBAR: We perform the sales and administrative services for the Policies.] We serve as the "principal underwriter," as defined in the 1940 Act, for the Policy and other variable life insurance and variable annuity contracts issued by our subsidiary and us. We are registered under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We are an investment manager to the Fund and may also provide advisory services to other clients. Bonding Our directors, officers and employees are bonded in the amount of $50,000,000, subject to a $5,000,000 deductible. Distributing the Policies We sell the Policies through licensed life insurance sales representatives: . Registered through us. . Registered through other broker-dealers, including a wholly owned subsidiary. 28 Commissions We pay commissions to representatives (or the broker-dealers through which they are registered) for the sale of our products. The commissions do not result in a charge against the Policy in addition to the charges already described elsewhere in this Prospectus. We paid no commissions in 1997 on the Policies, because the product was not sold before 1998. Commissions paid in 1998 and 1999 totaled $4,514,429 and $28,275,367.30, respectively. Maximum commissions are: . First Policy Year: . 50% of the lesser of : (A) Actual premiums paid in the first year; (B) The initial voluntary planned periodic premium for the first year; or (C) The annual premium necessary to keep the longest duration of the guaranteed minimum death benefit effective for a like Policy with Option A and the preferred nonsmoking rating class for standard risks (or the actual rating class for other risks) in place ("MCP"); or . 50% of actual premiums paid in the first year up to the MCP, if: (A) Actual premiums paid in the first year are equal to or greater than three times the MCP; and (B) The initial voluntary planned periodic premium for the first year is equal to or greater than one-half of the MCP; or . 50% of the lesser of : (A) the amount by which premiums paid in the first 12 months following the application to increase the specified face amount exceed the cumulative amount of premiums on which a 50% commission has previously been paid; or (B) the portion of (C) above, computed using the difference between the old and new specified face amounts and rating information of the insured at the time of the increase; plus . 3% of amounts not eligible for the above commission schedules. .Policy Years 2-4: 5% of premiums paid in the Policy year. . Policy Years 5-10: A servicing fee of 2% of premiums paid in the Policy year. . Policy Years 11 and later: A servicing fee of 1% of premiums paid in the Policy year. We also pay the sales manager of a sales representative employed by us an override commission based on many factors including the commissions paid to the representative who sold the Policy and to other representatives the sales manager supervises. There is a cap on commissions--a commission paid in any year will not exceed $40 per $1,000 current specified face amount. We may require all or part of the commissions to be returned to us if you do not continue your Policy for at least 2 years. 29 Voting Rights [SIDEBAR: You can give us voting instructions on shares of each Portfolio of a Fund that are attributed to your Policy. The Funds have shareholder meetings from time to time to, for example, elect directors and approve investment managers. We will vote the shares of each Portfolio that are attributed to your Policy based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Policy owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: . Your Policy's cash value in the corresponding investment division; by . The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Policy owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. Reports Generally, you will promptly receive statements confirming your significant transactions such as: . Change in specified face amount. . Change in death benefit options. . Changes in guarantees. . Transfers among investment divisions (including those through Automated Investment Strategies, which are confirmed quarterly). . Partial withdrawals. . Loan amounts you request. . Loan repayments and premium payments. If your premium payments are made through check-o-matic or another systematic payment method, we will not send you any confirmation in addition to the one you receive from your bank or employer. We will also send you an annual statement within 30 days after a Policy year that will summarize the year's transactions and include information on: . Deductions and charges. 30 . Status of the death benefit. . Cash and cash surrender values. . Amounts in the investment divisions and Fixed Account. . Status of Policy loans. . Automatic loans to pay interest. . Information on your modified endowment contract status (if applicable). We will also send you a Fund's annual and semi-annual reports to shareholders. Illustration of Policy Benefits [SIDEBAR: Personalized illustrations can help you understand how your Policy values can vary.] In order to help you understand how your Policy values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the insured under your Policy and such factors as the specified face amount, death benefit option, premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. Getting More Information We are regulated by the New York Insurance Department and periodically are examined by them. We are also subject to the laws and regulations of all the jurisdictions in which we do business and, if required, we have filed the Policy for approval in every jurisdiction in which the Policy is sold. The Policy and /or the guaranteed minimum death benefit may not be available in every jurisdiction. You should ask your sales representative whether the Policy is available in your jurisdiction. We file annual statements on our operations, including financial statements, with insurance departments of various jurisdictions so that they can review our solvency and compliance with applicable laws and regulations. You can review these statements which are available at the offices of the various insurance departments. This Prospectus is part of a registration statement that we filed with the Securities and Exchange Commission under the Securities Act of 1933. The registration statement includes additional information, amendments and exhibits. You can get this information from the Securities and Exchange Commission (a copying fee may apply) by visiting or writing to its Public Reference Room or using its Internet site at: . Securities and Exchange Commission Public Reference Room Washington, D.C. 20549 Call 1-800-SEC-0330 (for information about using the Public Reference Room) Internet site: http://www.sec.gov 31 Legal, Accounting and Actuarial Matters Christopher P. Nicholas, Associate General Counsel at MetLife, has passed upon the legality of the Policies. Messrs. Freedman, Levy Kroll & Simonds, Washington, D.C., have advised us on certain matters relating to the federal securities laws. Deloitte & Touche LLP, independent auditors, audited the financial statements included in this Prospectus, as stated in their reports appearing herein. The financial statements are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. Marian Zeldin, FSA, MAAA, Vice-President and Actuary of MetLife, has examined actuarial matters included in the registration statement, as stated in her opinion filed as an exhibit to the registration statement. 32 Management The present directors and the senior officers and secretary of MetLife are listed below, together with certain information concerning them: Directors, Officers-Directors
Principal Occupation & Positions and Offices Name Business Address with MetLife - ------------------------------------------------------------------------------------------------- Curtis H. Barnette Chairman and Chief Executive Officer Director Bethlehem Steel Corp. 1170 Eight Ave. -- Martin Tower 2118 Bethlehem, PA 18016 - ------------------------------------------------------------------------------------------------- Robert H. Benmosche Chairman of the Board, President and Chairman of the Board, President, Chief Executive Officer Chief Executive Officer and Director Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Gerald Clark Vice Chairman of the Board and Vice Chairman of the Board, Chief Investment Officer Chief Investment Officer and Director Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Joan Ganz Cooney Chairman, Executive Committee Director Children's Television Workshop One Lincoln Plaza New York, NY 10023 - ------------------------------------------------------------------------------------------------- Burton A. Dole, Jr. Retired Chairman, President and Director Chief Executive Officer Nellcor Puritan Bennett 2200 Faraday Ave. Carlsbad, CA 92008 - ------------------------------------------------------------------------------------------------- James R. Houghton Chairman of the Board Emeritus Director and Director Corning Incorporated 80 East Market Street, 2nd Floor Corning, NY 14830 - ------------------------------------------------------------------------------------------------- Harry P. Kamen Chairman and Director Chief Executive Officer (Retired) Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Helene L. Kaplan Of Counsel Director Skadden Arps, Slate, Meagher & Flom 919 Third Ave. New York, NY 10022 - ------------------------------------------------------------------------------------------------- Charles M. Leighton Retired Chairman and Director Chief Executive Officer CML Group, Inc. 524 Main Street Bolton, MA 01720 - ------------------------------------------------------------------------------------------------- Allen E. Murray Retired Chairman of the Board and Director Chief Executive Officer Mobil Corporation 375 Park Ave., Suite 2901 New York, NY 10152 - ------------------------------------------------------------------------------------------------- Stewart Nagler Vice Chairman of the Board and Vice Chairman of the Board and Chief Financial Officer Chief Financial Officer and Director Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010
33
Principal Occupation & Positions and Offices Name Business Address with MetLife - ------------------------------------------------------------------------------------- John J. Phelan, Jr. Retired Chairman and Director Chief Executive Officer New York Stock Exchange, Inc. P.O. Box 312 Mill Neck, NY 11765 - ------------------------------------------------------------------------------------- Hugh B. Price President and Chief Executive Officer Director National Urban League, Inc. 12 Wall Street New York, NY 10005 - ------------------------------------------------------------------------------------- Robert G. Schwartz Retired Chairman of the Board, Director President and Chief Executive Officer Metropolitan Life Insurance Company 200 Park Ave., Suite 5700 New York, NY 10166 - ------------------------------------------------------------------------------------- Ruth J. Simmons, Ph.D. President Director Smith College College Hall 20 Northhampton, MA 01063 - ------------------------------------------------------------------------------------- William C. Steere, Jr. Chairman of the Board and Director Chief Executive Officer Pfizer, Inc. 235 East 42nd Street New York, NY 10017
34
Name of Officer* Position with Metropolitan Life - ---------------------------------------------------------------------------------------- Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer - ---------------------------------------------------------------------------------------- Gerald Clark Vice Chairman of the Board, Chief Investment Officer and Director - ---------------------------------------------------------------------------------------- Stewart G. Nagler Vice Chairman of the Board, Chief Financial Officer and Director - ---------------------------------------------------------------------------------------- Gary A. Beller Senior Executive Vice-President and General Counsel - ---------------------------------------------------------------------------------------- James H. Benson President, Individual Business; Chairman, Chief Executive Officer and President, New England Life Insurance Company - ---------------------------------------------------------------------------------------- C. Robert Henrikson President, Institutional Business - ---------------------------------------------------------------------------------------- William J. Toppeta President, Client Services and Chief Administrative Officer - ---------------------------------------------------------------------------------------- Richard A. Liddy Senior Executive Vice-President - ---------------------------------------------------------------------------------------- Catherine A. Rein Senior Executive Vice-President; President and Chief Executive Officer, Metropolitan Property and Casualty Insurance Company - ---------------------------------------------------------------------------------------- John H. Tweedie Senior Executive Vice-President - ---------------------------------------------------------------------------------------- Lisa M. Weber Executive Vice-President - ---------------------------------------------------------------------------------------- Judy E. Weiss Executive Vice-President and Chief Actuary
- ------------ * The principal occupation of each officer, except for the following officers, during the last five years has been as an officer of Metropolitan Life or an affiliate thereof. Robert H. Benmosche has been an officer of Metropolitan Life since September, 1995; prior thereto, he was an Executive Vice- President of Paine Webber. Lisa Weber has been an officer of Metropolitan Life since March 16, 1998; prior thereto, she was a Director of Diversity Strategies and Development and an Associate Director of Human Resources of Paine Webber. The business address of each officer is 1 Madison Avenue, New York, New York 10010. 35 INDEPENDENT AUDITORS' REPORT To the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statements of assets and liabilities of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios of Metropolitan Life Separate Account UL (the "Separate Account") as of December 31, 1999, and the related statements (i) of operations for the year ended December 31, 1999 and of changes in net assets for the years ended December 31, 1999 and 1998 of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index and Russell 2000 Index Portfolios and (ii) of operations and of changes in net assets for the period May 3, 1999 (commencement of operations) to December 31, 1999 of Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and the depositor of the Separate Account. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios of Metropolitan Life Separate Account UL as of December 31, 1999 and the results of their operations and the changes in their net assets for the respective stated periods, in conformity with generally accepted accounting principles. We did not audit the financial statements for the Templeton Variable Products Series Fund, the Janus Aspen Series Fund and the Investco Investment Funds, Inc., of which the investment information for these funds is summarized in Note 5 to the financial statements. The financial statements for these funds were audited by other auditors. DELOITTE & TOUCHE LLP Tampa, Florida March 27, 2000 1 Metropolitan Life Separate Account UL STATEMENT OF ASSETS AND LIABILITIES At December 31, 1999
State Street State Street State Street State Street Research State Street Research Research Research Money Research Aggressive Growth Income Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (10,745,186 shares; cost $333,312,756)..... $420,566,549 -- -- -- -- State Street Research Income Portfolio (5,620,168 shares; cost $70,920,972)........... -- $65,643,563 -- -- -- State Street Research Money Market Portfolio (3,197,886 shares; cost $34,029,917)........... -- -- $33,075,729 -- -- State Street Research Diversified Portfolio (13,568,374 shares; cost $225,692,070)..... -- -- -- $247,894,193 -- State Street Research Aggressive Growth Portfolio (5,593,963 shares; cost $149,637,856).......... -- -- -- -- $215,087,902 MetLife Stock Index Portfolio (6,441,446 shares; cost $196,867,091)..... -- -- -- -- -- Santander International Stock Portfolio (3,175,743 shares ; cost $41,292,139)...... -- -- -- -- -- Loomis Sayles High Yield Bond Portfolio (541,135 shares; cost $5,032,558)............ -- -- -- -- -- Janus Mid Cap Portfolio (3,102,796 shares; cost $64,508,142)........... -- -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,043,071 shares; cost $24,804,658)........... -- -- -- -- -- Scudder Global Equity Portfolio (970,303 shares; cost $11,980,830)...... -- -- -- -- -- Harris Oakmark Large Cap Value Portfolio (33,250 shares; cost $310,760). -- -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (49,457 shares; cost $575,293). -- -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (96,515 shares; cost $1,121,477)............ -- -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (56,961 shares; cost $565,809). -- -- -- -- -- Morgan Stanley EAFE Index Portfolio (93,368 shares; cost $1,085,242)....... -- -- -- -- -- Russell 2000 Index Portfolio (36,094 shares; cost $410,863). -- -- -- -- -- Janus Large Cap Growth Portfolio (2,864 shares; cost $85,665).......... -- -- -- -- -- Invesco VIF High Yield Portfolio (280 shares; cost $3,233)........... -- -- -- -- -- Invesco VIF Industrial Income Portfolio (279 shares; cost $5,827)).......... -- -- -- -- -- Invesco VIF Realty Portfolio (200 shares; cost $1,500)........... -- -- -- -- -- Templeton International Stock (307 shares; cost $6,351)................ -- -- -- -- -- ------------ ----------- ----------- ------------ ------------ Total Investments....... 420,566,549 65,643,563 33,075,729 247,894,193 215,087,902 Cash and Accounts Receivable............. 20 0 0 0 0 ------------ ----------- ----------- ------------ ------------ Total Assets............ 420,566,569 65,643,563 33,075,729 247,894,193 215,087,902 LIABILITIES............. 898,400 12,123 2,247 191,488 417,916 ------------ ----------- ----------- ------------ ------------ NET ASSETS.............. $419,668,169 $65,631,440 $33,073,482 $247,702,705 $214,669,986 ============ =========== =========== ============ ============
See Notes to Financial Statements. 2
Loomis T. Rowe Harris Neuberger MetLife Santander Sayles Price Scudder Oakmark Berman Stock International High Yield Janus Small Cap Global Large Cap Partners Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ------------ ------------- ---------- ------------ ----------- ----------- --------- ------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $261,458,295 -- -- -- -- -- -- -- -- $44,047,550 -- -- -- -- -- -- -- -- $4,918,907 -- -- -- -- -- -- -- -- $113,376,167 -- -- -- -- -- -- -- -- $32,137,518 -- -- -- -- -- -- -- -- $14,467,210 -- -- -- -- -- -- -- -- $296,920 -- -- -- -- -- -- -- -- $592,005 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- 261,458,295 44,047,550 4,918,907 113,376,167 32,137,518 14,467,210 296,920 592,005 84,625 0 35,301 0 11,803 30,687 42,578 285 - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- 261,542,920 44,047,550 4,954,208 113,376,167 32,149,321 14,497,897 339,498 592,290 248,062 122,989 0 297,416 0 0 0 0 - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- $261,294,858 $43,924,561 $4,954,208 $113,078,751 $32,149,321 $14,497,897 $339,498 $592,290 ============ =========== ========== ============ =========== =========== ======== ========
3 Metropolitan Life Separate Account UL STATEMENT OF ASSETS AND LIABILITIES (Continued) At December 31, 1999
T. Rowe Lehman Morgan Price Brothers Stanley Russell Large Cap Aggregate EAFE 2000 Growth Bond Index Index Index Portfolio Portfolio Portfolio Portfolio ASSETS: ----------- ---------- ---------- --------- Investments at Value (Note 2A): State Street Research Growth Portfolio (10,745,186 shares; cost $333,312,756)..................... -- -- -- -- State Street Research Income Portfolio (5,620,168 shares; cost $70,920,972)...................... -- -- -- -- State Street Research Money Market Portfolio (3,197,886 shares; cost $34,029,917)...................... -- -- -- -- State Street Research Diversified Portfolio (13,568,374 shares; cost $225,692,070)..................... -- -- -- -- State Street Research Aggressive Growth Portfolio (5,593,963 shares; cost $149,637,856)........ -- -- -- -- MetLife Stock Index Portfolio (6,441,446 shares; cost $196,867,091)................ -- -- -- -- Santander International Stock Portfolio (3,175,743 shares ; cost $41,292,139)...................... -- -- -- -- Loomis Sayles High Yield Bond Portfolio (541,135 shares; cost $5,032,558)....................... -- -- -- -- Janus Mid Cap Portfolio (3,102,796 shares; cost $64,508,142)................. -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,043,071 shares; cost $24,804,658)...................... -- -- -- -- Scudder Global Equity Portfolio (970,303 shares; cost $11,980,830)................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (33,250 shares; cost $310,760)......................... -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (49,457 shares; cost $575,293).................... -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (96,515 shares; cost $1,121,477)....................... $1,294,264 -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (56,961 shares; cost $565,809).................... -- $538,275 -- -- Morgan Stanley EAFE Index Portfolio (93,368 shares; cost $1,085,242).................. -- -- $1,245,531 -- Russell 2000 Index Portfolio (36,094 shares; cost $410,863).... -- -- -- $451,900 Janus Large Cap Growth Portfolio (2,864 shares; cost $85,665)..................... -- -- -- -- Invesco VIF High Yield Portfolio (280 shares; cost $3,233)......... -- -- -- -- Invesco VIF Industrial Income Portfolio (279 shares; cost $5,827))..................... -- -- -- -- Invesco VIF Realty Portfolio (200 shares; cost $1,500).............. -- -- -- -- Templeton International Stock (307 shares; cost $6,351).............. -- -- -- -- ---------- -------- ---------- -------- Total Investments................. 1,294,264 538,275 1,245,531 451,900 Cash and Accounts Receivable....... 0 22,766 0 88 ---------- -------- ---------- -------- Total Assets...................... 1,294,264 561,041 1,245,531 451,988 LIABILITIES........................ 40,869 0 23,869 0 ---------- -------- ---------- -------- NET ASSETS......................... $1,253,395 $561,041 $1,221,662 $451,988 ========== ======== ========== ========
See Notes to Financial Statements. 4
Janus Invesco Invesco VIF Invesco Templeton Large Cap VIF Industrial VIF International Growth High Yield Income Realty Stock Portfolio Portfolio Portfolio Portfolio Portfolio Total - --------- ---------- ----------- --------- ------------- -------------- -- -- -- -- -- $ 420,566,549 -- -- -- -- -- 65,643,563 -- -- -- -- -- 33,075,729 -- -- -- -- -- 247,894,193 -- -- -- -- -- 215,087,902 -- -- -- -- -- 261,458,295 -- -- -- -- -- 44,047,550 -- -- -- -- -- 4,918,907 -- -- -- -- -- 113,376,167 -- -- -- -- -- 32,137,518 -- -- -- -- -- 14,467,210 -- -- -- -- -- 296,920 -- -- -- -- -- 592,005 -- -- -- -- -- 1,294,264 -- -- -- -- -- 538,275 -- -- -- -- -- 1,245,531 -- -- -- -- -- 451,900 $96,373 -- -- -- -- 96,373 -- $3,227 -- -- -- 3,227 -- -- $5,872 -- -- 5,872 -- -- -- $1,584 -- 1,584 -- -- -- -- $6,832 6,832 ------- ------ ------ ------ ------ -------------- 96,373 3,227 5,872 1,584 6,832 1,457,206,366 0 0 0 0 0 228,153 ------- ------ ------ ------ ------ -------------- 96,373 3,227 5,872 1,584 6,832 1,457,434,519 0 0 0 0 0 2,255,379 ------- ------ ------ ------ ------ -------------- $96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140 ======= ====== ====== ====== ====== ==============
5 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS
For the year ended December 31, 1999 ------------------------------------------------------------------ State Street State Street State Street State Street Research State Street Research Research Research Money Research Aggressive Growth Income Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME: Income: Dividends (Note 3)..... $44,038,080 $ 4,181,436 $1,538,117 $20,799,436 $ 4,466,938 Expenses: Mortality and expense charges (Note 4)...... 3,209,889 499,462 241,265 1,973,981 1,429,076 ----------- ----------- ---------- ----------- ----------- Net investment income (loss)................. 40,828,191 3,681,974 1,296,852 18,825,455 3,037,862 ----------- ----------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions........... 3,593,964 15,187 245,673 743,624 1,280,373 Change in unrealized appreciation (depreciation) of investments............ 16,515,105 (5,496,396) (275,023) (2,237,161) 47,914,985 ----------- ----------- ---------- ----------- ----------- Net realized and unrealized gain (loss) on investments......... 20,109,069 (5,481,209) (29,350) (1,493,537) 49,195,358 ----------- ----------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............. $60,937,260 $(1,799,235) $1,267,502 $17,331,918 $52,233,220 =========== =========== ========== =========== ===========
See Notes to Financial Statements. 6
- -------------------------------------------------------------------------------------------------- Loomis T. Rowe Harris Neuberger MetLife Santander Sayles Price Scudder Oakmark Berman Stock International High Yield Janus Small Cap Global Large Cap Partners Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ----------- ------------- ---------- ----------- ---------- ---------- --------- ------------- $12,076,347 $ 6,737,411 $ 384,074 $ 5,416,355 $ 0 $ 486,049 $ 2,973 $13,508 1,722,924 334,318 32,947 432,040 159,812 86,933 615 627 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 10,353,423 6,403,093 351,127 4,984,315 (159,812) 399,116 2,358 12,881 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 3,899,836 528,185 (159,077) 1,140,427 41,394 272,213 (5,489) 679 24,029,258 (1,137,521) 384,776 44,344,823 6,830,580 1,937,990 (13,841) 16,713 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 27,929,094 (609,336) 225,699 45,485,250 6,871,974 2,210,203 (19,330) 17,392 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- $38,282,517 $ 5,793,757 $ 576,826 $50,469,565 $6,712,162 $2,609,319 $(16,972) $30,273 =========== =========== ========= =========== ========== ========== ======== =======
7 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS (Continued)
For the year ended December 31, 1999 ---------------------------------------- T. Rowe Lehman Morgan Price Brothers Stanley Russell Large Cap Aggregate EAFE 2000 Growth Bond Index Index Index Portfolio Portfolio Portfolio Portfolio --------- ---------- --------- --------- INVESTMENT INCOME: Income: Dividends (Note 3).................. $ 5,264 $ 24,999 $ 15,956 $13,398 Expenses: Mortality and expense charges (Note 4)................................. 4,482 2,156 4,919 1,131 -------- -------- -------- ------- Net investment income (loss)......... 782 22,843 11,037 12,267 -------- -------- -------- ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions............... 2,027 (1,189) 92,428 10,610 Change in unrealized appreciation (depreciation) of investments....... 172,687 (27,533) 160,288 41,036 -------- -------- -------- ------- Net realized and unrealized gain (loss) on investments............... 174,714 (28,722) 252,716 51,646 -------- -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS..................... $175,496 $ (5,879) $263,753 $63,913 ======== ======== ======== =======
See Notes to Financial Statements. 8
For the period May 3, 1999 to December 31, 1999 - ------------------------------------------------------------- Janus Invesco Invesco VIF Invesco Templeton Large Cap VIF Industrial VIF International Growth High Yield Income Realty Stock Portfolio Portfolio Portfolio Portfolio Portfolio Total - ----------- ------------ ----------- --------- ------------- ------------ $ 0 $ 0 $ 0 $ 0 $ 0 $100,200,341 61 0 0 1 5 10,136,644 ------- --- --- --- ---- ------------ (61) 0 0 (1) (5) 90,063,697 ------- --- --- --- ---- ------------ 79 0 0 0 32 11,700,976 10,708 (6) 45 84 481 133,172,078 ------- --- --- --- ---- ------------ 10,787 (6) 45 84 513 144,873,054 ------- --- --- --- ---- ------------ $10,726 $(6) $45 $83 $508 $234,936,751 ======= === === === ==== ============
9 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS
State Street Research State Street Research State Street Research Growth Portfolio Income Portfolio Money Market Portfolio -------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 40,828,191 $ 27,785,410 $ 3,681,974 $ 3,877,871 $ 1,296,852 $ 1,022,138 Net realized gain (loss) from security transactions.......... 3,593,964 1,828,922 15,187 239,248 245,673 139,583 Change in unrealized appreciation (depreciation) of investments........... 16,515,105 38,462,367 (5,496,396) (12,424) (275,023) (384,125) ------------ ------------ ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations............ 60,937,260 68,076,699 (1,799,235) 4,104,695 1,267,502 777,596 ------------ ------------ ----------- ----------- ------------ ------------ From capital transactions: Net premiums........... 76,267,713 68,697,236 15,797,917 13,501,414 35,768,800 28,800,532 Redemptions............ (15,563,840) (9,651,413) (1,719,595) (1,455,088) (296,905) (292,311) Net portfolio transfers............. 3,590,588 462,907 2,922,342 2,032,607 (23,898,442) (12,984,969) Other net transfers.... (38,125,701) (33,909,522) (6,009,960) (5,444,551) (2,027,635) (2,036,921) ------------ ------------ ----------- ----------- ------------ ------------ Net increase in net assets from capital transactions.......... 26,168,760 25,599,208 10,990,704 8,634,382 9,545,818 13,486,331 ------------ ------------ ----------- ----------- ------------ ------------ NET CHANGE IN NET ASSETS................. 87,106,020 93,675,907 9,191,469 12,739,077 10,813,320 14,263,927 NET ASSETS--BEGINNING OF YEAR................... 332,562,149 238,886,242 56,439,971 43,700,894 22,260,162 7,996,235 ------------ ------------ ----------- ----------- ------------ ------------ NET ASSETS--END OF YEAR. $419,668,169 $332,562,149 $65,631,440 $56,439,971 $ 33,073,482 $ 22,260,162 ============ ============ =========== =========== ============ ============
See Notes to Financial Statements. 10
State Street Research State Street Research Aggressive Growth MetLife Santander Diversified Portfolio Portfolio Stock Index Portfolio International Stock Portfolio - -------------------------- -------------------------- -------------------------- ------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 1999 1998 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- $ 18,825,455 $ 17,838,146 $ 3,037,862 $ 7,473,609 $ 10,353,423 $ 5,466,190 $ 6,403,093 $ 119,967 743,624 522,086 1,280,373 390,678 3,899,836 2,060,324 528,185 251,518 (2,237,161) 12,721,568 47,914,985 9,316,026 24,029,258 21,573,004 (1,137,521) 5,740,557 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 17,331,918 31,081,800 52,233,220 17,180,313 38,282,517 29,099,518 5,793,757 6,112,042 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 54,466,186 48,746,380 41,977,555 48,080,744 80,432,444 59,343,787 8,765,614 10,224,172 (8,542,813) (5,712,146) (6,935,090) (4,373,459) (5,037,136) (2,361,734) (1,805,287) (1,153,624) 2,267,794 2,809,643 (8,586,687) (6,687,894) 20,459,060 9,729,932 (1,507,125) (2,377,311) (26,640,820) (23,504,994) (18,101,172) (18,773,580) (31,708,703) (23,041,439) (3,575,131) (3,678,501) - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 21,550,347 22,338,883 8,354,606 18,245,811 64,145,665 43,670,546 1,878,071 3,014,736 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 38,882,265 53,420,683 60,587,826 35,426,124 102,428,182 72,770,064 7,671,828 9,126,778 208,820,440 155,399,757 154,082,160 118,656,036 158,866,676 86,096,612 36,252,733 27,125,955 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- $247,702,705 $208,820,440 $214,669,986 $154,082,160 $261,294,858 $158,866,676 $ 43,924,561 $ 36,252,733 ============ ============ ============ ============ ============ ============ ============== ==============
11 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
T. Rowe Price Loomis Sayles Janus Small Cap Growth High Yield Bond Portfolio Mid Cap Portfolio Portfolio ------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 351,127 $ 241,444 $ 4,984,315 $ 9,561 $ (159,812) $ (71,325) Net realized gain (loss) from security transactions.......... (159,077) (15,746) 1,140,427 178,428 41,394 (14,908) Change in unrealized appreciation (depreciation) of investments........... 384,776 (428,334) 44,344,823 4,299,801 6,830,580 455,213 ---------- ---------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations............ 576,826 (202,636) 50,469,565 4,487,790 6,712,162 368,980 ---------- ---------- ------------ ----------- ----------- ----------- From capital transactions: Net premiums........... 1,766,270 1,559,975 31,140,404 13,796,446 10,707,741 8,413,079 Redemptions............ (387,694) (29,635) (1,283,943) (179,560) (556,621) (87,656) Net portfolio transfers............. 1,046,383 180,422 24,344,237 4,280,509 5,288,531 3,021,876 Other net transfers.... (587,488) (451,340) (12,718,059) (5,121,876) (3,307,953) (2,968,930) ---------- ---------- ------------ ----------- ----------- ----------- Net increase in net assets from capital transactions.......... 1,837,471 1,259,422 41,482,639 12,775,519 12,131,698 8,378,369 ---------- ---------- ------------ ----------- ----------- ----------- NET CHANGE IN NET ASSETS................. 2,414,297 1,056,786 91,952,204 17,263,309 18,843,860 8,747,349 NET ASSETS--BEGINNING OF YEAR................... 2,539,911 1,483,125 21,126,547 3,863,238 13,305,461 4,558,112 ---------- ---------- ------------ ----------- ----------- ----------- NET ASSETS--END OF YEAR. $4,954,208 $2,539,911 $113,078,751 $21,126,547 $32,149,321 $13,305,461 ========== ========== ============ =========== =========== ===========
See Notes to Financial Statements. 12
Scudder Harris Oakmark Neuberger Berman Partners T. Rowe Price Global Equity Portfolio Large Cap Value Portfolio Mid Cap Value Portfolio Large Cap Growth Portfolio ---------------------------- --------------------------- --------------------------- --------------------------- For the Period For the Period For the Period For the Year For the Year For the Year November 9, For the Year November 9, For the Year November 9, Ended Ended Ended 1998 to Ended 1998 to Ended 1998 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ -------------- ------------ -------------- ------------ -------------- $ 399,116 $ 82,316 $ 2,358 $ 0 $ 12,881 $ 0 $ 782 $ 0 272,213 35,936 (5,489) 0 679 0 2,027 0 1,937,990 556,946 (13,841) 0 16,713 0 172,687 0 ----------- ----------- -------- --- -------- --- ---------- --- 2,609,319 675,198 (16,972) 0 30,273 0 175,496 0 ----------- ----------- -------- --- -------- --- ---------- --- 4,574,226 3,660,518 125,384 0 162,181 0 141,433 0 (541,665) (44,451) (8,780) 0 0 0 0 0 985,125 2,251,711 224,137 0 433,203 0 1,037,195 0 (1,431,966) (1,263,459) 15,729 0 (33,367) 0 (100,729) 0 ----------- ----------- -------- --- -------- --- ---------- --- 3,585,720 4,604,319 356,470 0 562,017 0 1,077,899 0 ----------- ----------- -------- --- -------- --- ---------- --- 6,195,039 5,279,517 339,498 0 592,290 0 1,253,395 0 8,302,858 3,023,341 0 0 0 0 0 0 ----------- ----------- -------- --- -------- --- ---------- --- $14,497,897 $ 8,302,858 $339,498 $ 0 $592,290 $ 0 $1,253,395 $ 0 =========== =========== ======== === ======== === ========== ===
13 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Lehman Brothers Aggregate Morgan Stanley Russell 2000 Bond Index Portfolio EAFE Index Portfolio Index Portfolio --------------------------- --------------------------- --------------------------- For the Period For the Period For the Period For the Year November 9, For the Year November 9, For the Year November 9, Ended 1998 to Ended 1998 to Ended 1998 to December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ -------------- ------------ -------------- ------------ -------------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 22,843 $ 0 $ 11,037 $ 0 $ 12,267 $ 0 Net realized gain (loss) from security transactions.......... (1,189) 0 92,428 0 10,610 0 Change in unrealized appreciation (depreciation) of investments........... (27,533) 0 160,288 0 41,036 0 -------- --- ---------- --- -------- --- Net increase (decrease) in net assets from operations............ (5,879) 0 263,753 0 63,913 0 -------- --- ---------- --- -------- --- From capital transactions: Net premiums........... 93,732 0 139,276 0 214,532 0 Redemptions............ (1,012) 0 (1,812) 0 (1,472) 0 Net portfolio transfers............. 484,526 0 862,477 0 219,845 0 Other net transfers.... (10,326) 0 (42,032) 0 (44,830) 0 -------- --- ---------- --- -------- --- Net increase in net assets from capital transactions.......... 566,920 0 957,909 0 388,075 0 -------- --- ---------- --- -------- --- NET CHANGE IN NET ASSETS................. 561,041 0 1,221,662 0 451,988 0 NET ASSETS--BEGINNING OF YEAR................... 0 0 0 0 0 0 -------- --- ---------- --- -------- --- NET ASSETS--END OF YEAR. $561,041 $ 0 $1,221,662 $ 0 $451,988 $ 0 ======== === ========== === ======== ===
See Notes to Financial Statements. 14
Invesco VIF Invesco VIF Templeton Janus Large Cap High Yield Industrial Income Invesco VIF International Growth Portfolio Portfolio Portfolio Realty Portfolio Stock Portfolio TOTAL - ---------------- -------------- ----------------- ---------------- --------------- ------------------------------ For the Period For the Period For the Period For the Period For the Period For the Year For the Year May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1999 1999 1999 1999 1999 1998 - ---------------- -------------- ----------------- ---------------- --------------- -------------- -------------- $ (61) $ 0 $ 0 $ (1) $ (5) $ 90,063,697 $ 63,845,327 79 0 0 0 32 11,700,976 5,616,069 10,708 (6) 45 84 481 133,172,078 92,300,599 ------- ------ ------ ------ ------ -------------- -------------- 10,726 (6) 45 83 508 234,936,751 161,761,995 ------- ------ ------ ------ ------ -------------- -------------- 99 0 0 0 1,166 362,542,673 304,824,283 0 0 0 0 0 (42,683,665) (25,341,077) 86,070 3,236 5,802 1,524 5,208 30,275,029 2,719,433 (522) (3) 25 (23) (50) (144,450,716) (120,195,113) ------- ------ ------ ------ ------ -------------- -------------- 85,647 3,233 5,827 1,501 6,324 205,683,321 162,007,526 ------- ------ ------ ------ ------ -------------- -------------- 96,373 3,227 5,872 1,584 6,832 440,620,072 323,769,521 0 0 0 0 0 1,014,559,068 690,789,547 ------- ------ ------ ------ ------ -------------- -------------- $96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140 $1,014,559,068 ======= ====== ====== ====== ====== ============== ==============
15 Metropolitan Life Separate Account UL NOTES TO FINANCIAL STATEMENTS December 31, 1999 1.BUSINESS Metropolitan Life Separate Account UL (the "Separate Account") is a multi- division unit investment trust registered under the Investment Company Act of 1940. The five divisions are ULII, IVUL, GVUL, UL2001 and VAI. The Separate Account presently consists of twenty-two investment portfolios used to support variable universal life insurance policies. The assets in each portfolio are invested in shares of the corresponding portfolio of the Metropolitan Series Fund, Inc., the Janus Aspen Series Fund, the Invesco Variable Investment Funds, Inc. and the Templeton Variable Products Series Fund (the "Funds"). Each portfolio has varying investment objectives relative to growth of capital and income. The Separate Account was formed by Metropolitan Life Insurance Company ("Metropolitan Life"), on December 13, 1988 and registered as a unit investment trust on January 5, 1990. The assets of the Separate Account are the property of Metropolitan Life. On May 3, 1999, operations commenced for the five new investment portfolios added to the Separate Account on that date: the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio, the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio and the Templeton International Stock Portfolio. On November 9, 1998, operations commenced for the six new investment portfolios added to the Separate Account on that date: the Harris Oakmark Large Cap Value Portfolio, the Neuberger Berman Partners Mid Cap Value Portfolio, the T. Rowe Price Large Cap Growth Portfolio, the Lehman Brothers Aggregate Bond Index Portfolio, the Morgan Stanley EAFE Index Portfolio and the Russell 2000 Index Portfolio. 2.SIGNIFICANT ACCOUNTING POLICIES A.Valuation of Investments Investments in shares of the Funds are valued at the reported net asset values of the respective portfolios. A summary of investments of the twenty-two designated portfolios of the Funds in which the five investment divisions of the Separate Account invest as of December 31, 1999 is included as Note 5. B.Security Transactions Purchases and sales are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. C.Federal Income Taxes In the opinion of counsel of Metropolitan Life, the Separate Account will be treated as a part of Metropolitan Life and its operations, and the Separate Account will not be taxed as a "regulated investment company" under existing law. Metropolitan Life is taxed as a life insurance company. The policies permit Metropolitan Life to charge against the Separate Account any taxes or reserve for taxes, attributable to the maintenance or operation of the Separate Account. Metropolitan Life is not currently charging any federal income taxes against the Separate Account arising from the earnings of realized capital gains attributable to the Separate Account. Such charges may be imposed in future years depending on market fluctuations and transactions involving the Separate Account. D.Net Premiums Metropolitan Life deducts a sales load and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In certain policies, Metropolitan Life also deducts a Federal income tax charge before amounts are allocated to the Separate Account. The Federal income tax charge is imposed on certain policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. 16 NOTES TO FINANCIAL STATEMENTS--(Continued) 3.DIVIDENDS On May 4, 1999 and December 16, 1999, the Metropolitan Series Fund, Inc. declared dividends for all shareholders of record on May 7, 1999 and December 21, 1999 respectively. The amount of dividends received by the Separate Account was $100,200,341. The dividends were paid to Metropolitan Life on May 11, 1999 and December 22, 1999, respectively, and were immediately reinvested in additional shares of the portfolios in which the investment divisions invest. As a result of this reinvestment, the number of shares of the Metropolitan Series Fund, Inc. held by each of the sixteen investment portfolios increased by the following: State Street Research Growth Portfolio, 1,168,696 shares; State Street Research Income Portfolio, 357,372 shares; State Street Research Money Market Portfolio, 148,919 shares; State Street Research Diversified Portfolio, 1,161,405 shares; State Street Research Aggressive Growth Portfolio, 126,713 shares; MetLife Stock Index Portfolio, 307,335 shares; Santander International Stock Portfolio, 495,499 shares; Loomis Sayles High Yield Bond Portfolio, 42,345 shares; Janus Mid Cap Portfolio, 164,544 shares; Scudder Global Equity Portfolio, 34,867 shares; Harris Oakmark Large Cap Value Portfolio, 343 shares; Neuberger Berman Partners Mid Cap Value Portfolio, 1,185 shares; T. Rowe Price Large Cap Growth Portfolio, 410 shares; Lehman Brothers Aggregate Bond Index Portfolio, 2,648 shares; Morgan Stanley EAFE Index Portfolio, 1,260 shares and Russell 2000 Index Portfolio, 1,133 shares. No dividends were received by the T. Rowe Price Small Cap Growth Portfolio, the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio, the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio or the Templeton International Stock Portfolio. 4.EXPENSES For assets in the Separate Account that support certain policies, Metropolitan Life applies a charge against the assets attributable to the Separate Account for the mortality and expense risks assumed by Metropolitan Life. This charge varies by policy type but will be higher than an effective annual rate of .90% of the average daily value of the net assets of the monthly anniversary value of the net assets in the Separate Account attributable to such policies. 17 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999 Investment information, summarized by investment type and industry sector, for each portfolio in which the Separate Account invests is presented below: Metropolitan Series Fund, Inc.
State Street State Street State Street State Street Research Research Research Research Growth Income Money Market Diversified Portfolio Portfolio Portfolio Portfolio -------------- ------------ ------------ -------------- Value Value Value Value (Note 2A) (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Banking................. $ 82,527,431 (2.3%) $ 37,290,000 (1.3%) Biotechnology........... 54,963,147 (1.5%) 24,690,597 (0.9%) Broadcasting............ 296,377,400 (8.2%) 133,419,212 (4.6%) Business Services....... 112,535,700 (3.1%) 50,496,775 (1.8%) Chemicals............... 76,861,100 (2.1%) 34,515,338 (1.2%) Computer Equipment & Service................ 256,218,167 (7.1%) 115,412,728 (4.0%) Consumer Products....... 41,549,200 (1.1%) 18,585,325 (0.6%) Drugs & Health Care..... 199,768,100 (5.5%) 89,658,175 (3.1%) Electrical Equipment.... 135,638,375 (3.7%) 61,141,725 (2.1%) Electronics............. 311,786,331 (8.6%) 139,112,337 (4.8%) Entertainment & Leisure. 69,260,925 (1.9%) 31,127,400 (1.1%) Financial Services...... 207,714,472 (5.7%) 93,083,836 (3.2%) Food & Beverages........ 68,059,775 (1.9%) 30,438,238 (1.1%) Household Products...... 115,271,300 (3.2%) 52,737,925 (1.8%) Insurance............... 122,153,209 (3.4%) 55,087,431 (1.9%) Liquor.................. 35,878,100 (1.0%) 16,110,094 (0.6%) Medical Equipment & Supply................. 64,919,375 (1.8%) 29,183,519 (1.0%) Multi-Industry.......... 157,590,888 (4.3%) 70,569,787 (2.5%) Office & Business Equipment.............. 100,591,019 (2.8%) 45,145,450 (1.6%) Oil..................... 78,019,820 (2.1%) 34,877,416 (1.2%) Oil & Gas Exploration... 10,186,600 (0.3%) 4,492,675 (0.2%) Oil-International....... 148,770,011 (4.1%) 66,566,008 (2.3%) Retail Trade............ 230,490,362 (6.4%) 103,622,031 (3.6%) Software................ 220,768,794 (6.1%) 99,297,338 (3.5%) Telecommunications Equipment & Services... 166,601,284 (4.6%) 74,851,353 (2.6%) Transportation-Trucking. 5 (0.0%) Utilities-Electric...... 29,997,175 (0.8%) 13,395,200 (0.5%) Utilities-Gas & Pipelines.............. 38,584,063 (1.1%) 17,426,063 (0.6%) Utilities-Telephone..... 103,491,375 (2.9%) 46,478,737 (1.6%) -------------- -------------- Total Common Stock...... 3,536,573,498 (97.6%) 1,588,812,718 (55.3%) -------------- -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Aerospace & Defense..... $ 3,129,248 (0.7%) 8,007,919 (0.3%) Asset Backed............ 13,145,137 (2.7%) 16,750,976 (0.6%) Automotive.............. 7,115,862 (1.5%) 14,621,369 (0.5%) Banking................. 5,120,913 (1.1%) Collateralized Mortgage Obligations............ 23,320,293 (4.9%) 45,392,738 (1.6%) Drugs & Health Care..... 2,903,965 (0.6%) 6,368,139 (0.2%) Electrical Equipment.... 5,032,173 (0.2%) Entertainment & Leisure. 4,307,188 (0.2%) Finance & Banking....... 19,467,181 (4.1%) 90,280,549 (3.1%) Financial Services...... 120,137,416 (25.1%) 305,430,425 (10.6%) Food & Beverages........ 9,895,519 (2.1%) 12,511,591 (0.4%) Healthcare Services..... 13,325,625 (2.8%) 28,557,900 (1.0%) Industrials............. 13,357,360 (2.8%) 58,750,359 (2.0%) Mortgage Related........ 11,533,851 (2.4%) 31,552,849 (1.1%) Newspapers.............. 9,744,055 (2.0%) 20,468,019 (0.7%) Pollution Control....... 1,760,000 (0.4%) 19,866,031 (0.7%) Restaurant.............. 3,089,555 (0.6%) 3,884,012 (0.1%) Retail Grocery.......... 7,162,867 (1.5%) 20,183,815 (0.7%) Telecommunications Equipment & Services... 14,952,575 (3.1%) 36,301,441 (1.3%) Utilities-Electric...... 23,188,403 (4.9%) 35,847,072 (1.3%) Utilities-Gas & Pipelines.............. 2,508,129 (0.5%) 6,344,091 (0.2%) ------------ -------------- Total Corporate Bonds... 304,857,954 (63.8%) 770,458,656 (26.8%) ------------ -------------- Federal Agency Obligations............ 33,244,644 (6.9%) 64,815,085 (2.3%) Federal Treasury Obligations............ 69,212,535 (14.5%) 254,049,569 (8.8%) Foreign Obligations..... 9,200,344 (1.9%) 23,045,630 (0.8%) State Agency Obligations............ 19,552,778 (4.1%) 46,617,831 (1.6%) Yankee Bonds............ 26,698,901 (5.6%) 63,191,720 (2.2%) ------------ -------------- Total Long-Term Debt Securities............. 462,767,156 (96.8%) 1,222,178,491 (42.5%) ------------ -------------- SHORT-TERM OBLIGATIONS Bankers' Acceptances.... $ 2,296,541 (4.5%) Commercial Paper........ 104,406,562 (2.9%) 4,153,120 (0.9%) 46,206,089 (89.6%) 40,162,565 (1.4%) Foreign Obligations..... 2,527,260 (4.9%) Repurchase Agreements... 906,000 (0.0%) -------------- ------------ ----------- -------------- Total Short-Term Obligations............ 105,312,562 (2.9%) 4,153,120 (0.9%) 51,029,890 (99.0%) 40,162,565 (1.4%) -------------- ------------ ----------- -------------- TOTAL INVESTMENTS....... 3,641,886,060 (100.5%) 466,920,276 (97.7%) 51,029,890 (99.0%) 2,851,153,774 (99.2%) Other Assets Less Liabilities............ (18,570,414) (-0.5%) 10,959,423 (2.3%) 515,101 (1.0%) 23,257,871 (0.8%) -------------- ------------ ----------- -------------- NET ASSETS.............. $3,623,315,646 (100.0%) $477,879,699 (100.0%) $51,544,991 (100.0%) $2,874,411,645 (100.0%) ============== ============ =========== ==============
18 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
State Street Research Santander MetLife Aggressive International Stock Index Growth Stock Portfolio Portfolio Portfolio -------------- -------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 42,520,747 (1.0%) Automotive............. 53,473,320 (1.3%) $ 24,293,875 (1.5%) $ 12,765,921 (4.0%) Banking................ 222,504,127 (5.3%) 11,599,213 (0.7%) 35,345,047 (11.1%) Biotechnology.......... 4,259,062 (0.1%) 24,580,406 (1.5%) Broadcasting........... 102,304,763 (2.4%) 113,538,148 (7.1%) Building & Construction.......... 12,908,642 (0.3%) 1,129,927 (0.4%) Business Services...... 52,283,928 (1.2%) 128,551,113 (8.0%) 6,578,957 (2.1%) Chemicals.............. 66,926,188 (1.6%) 5,668,625 (0.4%) 14,809,559 (4.7%) Computer Equipment & Service............... 344,503,286 (8.2%) 176,966,356 (11.1%) Construction Materials. 1,347,336 (0.0%) 4,145,142 (1.3%) Consumer Products...... 1,541,270 (0.0%) 15,105,475 (0.9%) 2,347,558 (0.7%) Consumer Services...... 1,546,791 (0.0%) 22,926,075 (1.4%) Containers & Glass..... 4,748,324 (0.1%) 1,276,864 (0.4%) Cosmetics.............. 4,566,110 (0.1%) Drugs & Health Care.... 269,559,821 (6.4%) 33,934,131 (2.1%) 15,475,094 (4.9%) Electrical Equipment... 198,603,236 (4.7%) 11,781,000 (0.7%) 11,051,542 (3.5%) Electronics............ 290,979,817 (6.9%) 205,642,403 (12.8%) 27,888,740 (8.8%) Entertainment & Leisure............... 31,589,263 (0.8%) 55,319,769 (3.5%) Financial Services..... 211,099,391 (5.0%) 15,565,562 (1.0%) 22,770,469 (7.2%) Food & Beverages....... 144,392,638 (3.4%) Forest Products & Paper................. 38,649,761 (0.9%) Healthcare Services.... 540,800 (0.0%) Homebuilders........... 1,209,419 (0.0%) 2,861,065 (0.9%) Hospital Management.... 11,657,934 (0.3%) Hotel & Motel.......... 6,028,073 (0.1%) 11,613,994 (0.7%) Household Appliances & Home Furnishings...... 4,477,880 (0.1%) 10,469,911 (3.3%) Household Products..... 95,206,866 (2.3%) Industrial Components & Material.............. 190,650 (0.0%) 4,141,955 (1.3%) Insurance.............. 123,792,495 (3.0%) 9,968,500 (3.1%) Liquor................. 6,651,963 (0.2%) Machinery.............. 24,637,034 (0.6%) 4,784,205 (1.5%) Medical Equipment & Supply................ 98,448,956 (2.3%) 15,930,200 (1.0%) 1,710,480 (0.5%) Metals-Aluminum........ 15,170,831 (0.4%) Metals-Gold............ 5,671,760 (0.1%) Metals-Non-Ferrous..... 2,318,173 (0.1%) 3,141,599 (1.0%) Metals-Steel & Iron.... 4,254,478 (0.1%) 10,929,924 (3.4%) Mining................. 3,046,177 (0.1%) Miscellaneous.......... 4,915,428 (0.1%) 4,099,931 (1.3%) Multi-Industry......... 53,514,408 (1.3%) 9,173,529 (2.9%) Newspapers............. 20,296,141 (0.5%) Office & Business Equipment............. 192,540,031 (4.6%) 43,779,375 (2.7%) 2,382,141 (0.8%) Oil.................... 3,253,848 (1.0%) Oil & Gas Exploration.. 4,313,126 (0.1%) 2,903,201 (0.9%) Oil-Domestic........... 26,869,426 (0.6%) Oil-Equipment & Services.............. 26,067,054 (0.6%) 10,873,000 (0.7%) 3,294,267 (1.0%) Oil-International...... 174,437,716 (4.2%) 6,183,861 (1.9%) Packaging.............. 618,375 (0.0%) Personal Care.......... 1,790,854 (0.6%) Photography............ 7,423,620 (0.2%) 3,030,146 (1.0%) Plastics............... 1,642,705 (0.5%) Pollution Control...... 4,170,830 (0.1%) Printing & Publishing.. 8,326,516 (0.2%) 21,786,212 (1.4%) 1,419,888 (0.4%) Real Estate............ 4,807,378 (1.5%) Restaurant............. 22,291,487 (0.5%) Retail Grocery......... 17,788,649 (0.4%) 1,661,126 (0.5%) Retail Trade........... 258,726,495 (6.2%) 176,908,418 (11.1%) 12,081,931 (3.8%) Software............... 306,073,513 (7.3%) 118,954,841 (7.4%) Technology............. 19,159,525 (1.2%) Telecommunications Equipment & Services.. 121,104,733 (2.9%) 154,558,970 (9.7%) 11,386,247 (3.6%) Textiles & Apparel..... 7,270,147 (0.2%) 8,983,463 (0.6%) Tires & Rubber......... 2,933,650 (0.1%) 1,029,788 (0.3%) Tobacco................ 20,221,865 (0.5%) 7,882,048 (2.5%) Toys & Amusements...... 3,146,864 (0.1%) 814,349 (0.3%) Transportation- Airlines.............. 9,225,687 (0.2%) 7,301,153 (2.3%) Transportation- Miscellaneous......... 3,557,910 (1.1%) Transportation- Railroad.............. 15,390,852 (0.4%) Transportation- Trucking.............. 525,406 (0.0%) Utilities-Electric..... 67,540,874 (1.6%) 9,663,975 (0.6%) Utilities-Gas & Pipelines............. 21,701,498 (0.5%) 13,129,119 (0.8%) 1,526,783 (0.5%) Utilities- Miscellaneous......... 1,420,319 (0.0%) Utilities-Telephone.... 306,347,545 (7.3%) 16,136,400 (1.0%) 15,549,318 (4.9%) -------------- -------------- ------------- Total Common Stock..... 4,208,813,565 (100.1%) 1,466,949,643 (91.6%) 310,364,861 (97.7%) -------------- -------------- -------------
19 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
State Street Research Santander MetLife Aggressive International Stock Index Growth Stock Portfolio Portfolio Portfolio (continued) (continued) (continued) -------------- -------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) PREFERRED STOCK Banking................ 2,290,901 (0.7%) Retail Trade........... 309,734 (0.1%) ------------ Total Preferred Stock.. 2,600,635 (0.8%) ------------ LONG-TERM DEBT SECURITIES Foreign Obligations.... 158,596 (0.0%) SHORT TERM OBLIGATIONS Commercial Paper....... 154,949,235 (9.7%) Repurchase Agreements.. 4,097,000 (1.3%) Federal Agency Obligations........... 1,206,498 (0.0%) -------------- -------------- ------------ TOTAL INVESTMENTS....... 4,210,020,063 (100.1%) 1,621,898,878 (101.3%) 317,221,092 (99.8%) Other Assets Less Liabilities............ (4,818,376) (-0.1%) (21,058,178) (-1.3%) 609,779 (0.2%) -------------- -------------- ------------ NET ASSETS.............. $4,205,201,687 (100.0%) $1,600,840,700 (100.0%) $317,830,871 (100.0%) ============== ============== ============
20 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Loomis Sayles High Yield Bond Portfolio -------------- Value (Note 2A) COMMON STOCK Banking............................................... $ 3,252 (0.0%) Forest Products & Paper............................... 1,625,767 (2.7%) Oil & Gas Exploration................................. 141,728 (0.2%) Oil-Equipment & Services.............................. 56,250 (0.1%) Real Estate........................................... 239,906 (0.4%) Restaurant............................................ 3,479 (0.0%) Utilities-Electric.................................... 20,632 (0.0%) ----------- Total Common Stock.................................... 2,091,014 (3.4%) ----------- PREFERRED STOCK Banking............................................... 8,549 (0.0%) Construction Materials................................ 129,844 (0.2%) Food & Beverages...................................... 29,250 (0.0%) Metals-Steel & Iron................................... 182,000 (0.3%) Oil & Gas Exploration................................. 267,750 (0.4%) Oil-Equipment & Services.............................. 281,685 (0.5%) Real Estate........................................... 175,650 (0.3%) Telecommunications Equipment & Services............... 1,400,884 (2.3%) Transportation-Shipping............................... 12,000 (0.0%) Utilities-Electric.................................... 300,459 (0.5%) Utilities-Telephone................................... 214,312 (0.4%) ----------- Total Preferred Stock................................. 3,002,383 (4.9%) ----------- LONG-TERM DEBT SECURITIES Convertible Bonds Automotive............................................ 380,625 (0.6%) Building & Construction............................... 81,500 (0.1%) Computer Equipment & Service.......................... 3,458,197 (5.6%) Drugs & Health Care................................... 1,967,862 (3.2%) Electronics........................................... 1,882,512 (3.1%) Entertainment & Leisure............................... 237,480 (0.4%) Foreign Obligations................................... 5,617,845 (9.1%) Healthcare Services................................... 297,375 (0.5%) Industrial Components & Material...................... 364,625 (0.6%) Industrials........................................... 692,775 (1.1%) Medical Equipment & Supply............................ 208,050 (0.3%) Oil & Gas Exploration................................. 150,000 (0.2%) Oil-Equipment & Services.............................. 1,094,043 (1.8%) Pollution Control..................................... 123,188 (0.2%) Real Estate........................................... 91,000 (0.2%) Restaurant............................................ 357,360 (0.6%) Retail Trade.......................................... 68,563 (0.1%) Telecommunications Equipment & Services............... 442,500 (0.7%) Transportation-Trucking............................... 129,600 (0.2%) ----------- Total Convertible Bonds............................... 17,645,100 (28.6%) ----------- Corporate Bonds Broadcasting.......................................... 1,687,875 (2.7%) Chemicals............................................. 292,740 (0.5%) Computer Equipment & Service.......................... 627,120 (1.0%) Food & Beverages...................................... 76,402 (0.1%) Healthcare Services................................... 976,095 (1.6%) Industrials........................................... 912,871 (1.5%) Oil & Gas Exploration................................. 988,687 (1.6%) Oil-Equipment & Services.............................. 3,231,875 (5.2%) Real Estate........................................... 409,937 (0.7%) Retail Trade.......................................... 452,163 (0.7%) Telecommunications Equipment & Services............... 5,659,875 (9.2%) Textiles & Apparel.................................... 333,506 (0.6%) Transportation........................................ 261,563 (0.4%) Transportation-Shipping............................... 626,800 (1.0%) Utilities-Electric.................................... 705,750 (1.2%) Utilities-Telephone................................... 493,000 (0.8%) ----------- Total Corporate Bonds................................. 17,736,259 (28.8%) ----------- Foreign Obligations................................... 11,987,615 (19.4%) Yankee Bonds.......................................... 6,418,660 (10.4%) ----------- Total Long-Term Debt Securities....................... 53,787,634 (87.2%) ----------- SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 884,000 (1.4%) ----------- TOTAL INVESTMENTS..................................... 59,765,031 (96.9%) Other Assets Less Liabilities......................... 1,936,338 (3.1%) ----------- NET ASSETS............................................ $61,701,369 (100.0%) ===========
21 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
T. Rowe Price Janus Small Cap Scudder Mid Cap Growth Global Equity Portfolio Portfolio Portfolio -------------- ------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 1,025,437 (0.4%) $ 2,654,542 (1.5%) Automotive............. 2,668,712 (1.0%) 389,527 (0.2%) Banking................ 2,779,701 (1.0%) 6,374,730 (3.7%) Biotechnology.......... $ 42,717,280 (2.2%) 1,622,128 (0.6%) 3,766,838 (2.2%) Broadcasting........... 182,450,383 (9.4%) 9,202,244 (3.4%) 4,670,099 (2.7%) Building & Construction.......... 1,147,375 (0.4%) 514,750 (0.3%) Business Services...... 152,634,350 (7.9%) 23,868,284 (8.9%) 2,358,915 (1.4%) Chemicals.............. 3,291,533 (1.2%) 10,906,382 (6.4%) Computer Equipment & Service............... 419,901,193 (21.7%) 24,709,494 (9.2%) 3,283,932 (1.9%) Construction & Mining Equipment............. 727,050 (0.3%) Construction Materials. 678,125 (0.3%) 2,484,832 (1.5%) Consumer Products...... 398,263 (0.1%) Drugs & Health Care.... 51,178,119 (2.6%) 16,126,810 (6.0%) 5,494,040 (3.2%) Education.............. 34,102,280 (1.8%) 3,104,162 (1.2%) Electrical Equipment... 5,424,125 (2.0%) 5,874,457 (3.4%) Electronics............ 255,169,133 (13.2%) 39,158,644 (14.5%) 13,213,361 (7.7%) Entertainment & Leisure............... 49,936,749 (2.6%) 5,588,944 (2.1%) Financial Services..... 6,797,057 (2.5%) 5,079,216 (3.0%) Food & Beverages....... 1,538,278 (0.6%) Forest Products & Paper................. 963,375 (0.6%) Healthcare Services.... 14,559,746 (0.8%) 702,625 (0.3%) 568,269 (0.3%) Hospital Management.... 500,656 (0.2%) Household Appliances & Home Furnishings...... 1,246,452 (0.7%) Industrial Components & Material.............. 856,794 (0.3%) Insurance.............. 2,260,759 (0.8%) 4,670,482 (2.7%) Lease Rental Obligations........... 1,193,456 (0.4%) Machinery.............. 151,599 (0.1%) Medical Equipment & Supply................ 14,836,617 (0.8%) 6,020,644 (2.2%) Metals-Gold............ 4,072,604 (2.4%) Metals-Non-Ferrous..... 4,677,775 (2.7%) Metals-Steel & Iron.... 6,605,028 (3.9%) Mining................. 1,744,481 (1.0%) Miscellaneous.......... 275,600 (0.1%) Multi-Industry......... 2,482,024 (1.4%) Newspapers............. 854,775 (0.3%) Office & Business Equipment............. 4,939,347 (1.8%) 5,639,675 (3.3%) Oil & Gas Exploration.. 932,512 (0.3%) 683,750 (0.4%) Oil-Domestic........... 3,765,288 (2.2%) Oil-Equipment & Services.............. 2,943,681 (1.1%) 1,531,040 (0.9%) Oil-International...... 3,368,984 (2.0%) Photography............ 1,244,309 (0.5%) Pollution Control...... 969,891 (0.4%) Real Estate............ 2,692,804 (1.0%) 2,179,844 (1.3%) Restaurant............. 1,091,461 (0.1%) 4,051,256 (1.5%) Retail Grocery......... 1,830,483 (0.7%) Retail Trade........... 13,244,333 (0.7%) 13,945,028 (5.2%) 1,396,008 (0.8%) Software............... 124,501,640 (6.4%) 31,128,170 (11.5%) 7,143,207 (4.2%) Telecommunications Equipment & Services.. 473,207,570 (24.5%) 23,235,061 (8.6%) 12,333,669 (7.2%) Textiles & Apparel..... 2,968,687 (1.1%) 575,629 (0.3%) Tobacco................ 212,694 (0.1%) Toys & Amusements...... 478,400 (0.2%) Transportation- Airlines.............. 1,232,378 (0.5%) 2,112,781 (1.2%) Transportation- Railroad.............. 824,988 (0.3%) 5,090,951 (3.0%) Transportation- Trucking.............. 940,175 (0.3%) Utilities-Electric..... 7,734,478 (4.5%) Utilities-Gas & Pipelines............. 1,606,375 (0.9%) Utilities-Telephone.... 91,101,795 (4.7%) 1,916,966 (0.7%) 8,137,388 (4.7%) -------------- ------------ ------------ Total Common Stock..... 1,920,632,649 (99.4%) 258,795,811 (96.0%) 157,759,471 (91.9%) -------------- ------------ ------------ SHORT-TERM OBLIGATIONS Commercial Paper....... 44,688,825 (2.3%) Foreign Obligations.... 5,218,413 (3.0%) Repurchase Agreements.. 1,914,000 (0.1%) 6,468,000 (3.8%) -------------- ------------ Total Short-Term Obligations........... 46,602,825 (2.4%) 11,686,413 (6.8%) -------------- ------------ LONG-TERM DEBT SECURITIES Participating Loan Notes................. 420,065 (0.2%) Federal Treasury Obligations........... 195,140 (0.1%) SHORT-TERM OBLIGATIONS Regulated Investment Companies............. 12,572,104 (4.7%) -------------- ------------ ------------ TOTAL INVESTMENTS....... 1,967,235,474 (101.8%) 271,563,055 (100.8%) 169,865,949 (98.9%) Other Assets Less Liabilities............ (35,438,420) (-1.8%) (2,045,413) (-0.8%) 1,848,472 (1.1%) -------------- ------------ ------------ NET ASSETS.............. $1,931,797,054 (100.0%) $269,517,642 (100.0%) $171,714,421 (100.0%) ============== ============ ============
22 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell 2000 EAFE Index Portfolio Index Portfolio --------------- --------------- Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense........... $ 678,269 (0.6%) $ 193,539 (0.2%) Agriculture & Related......... 69,500 (0.1%) Automotive.................... 1,110,278 (1.0%) 3,241,751 (3.9%) Banking....................... 7,243,688 (6.5%) 8,729,364 (10.6%) Biotechnology................. 2,144,522 (1.9%) 193,965 (0.2%) Broadcasting.................. 1,513,037 (1.4%) 951,178 (1.2%) Building & Construction....... 602,606 (0.5%) 444,750 (0.5%) Business Services............. 7,088,385 (6.4%) 1,208,099 (1.5%) Chemicals..................... 1,803,803 (1.6%) 1,933,527 (2.4%) Coal.......................... 30,375 (0.0%) Computer Equipment & Service.. 8,906,921 (8.0%) 1,885,797 (2.3%) Construction & Mining Equipment.................... 264,722 (0.2%) 37,709 (0.0%) Construction Materials........ 695,375 (0.6%) 920,852 (1.1%) Consumer Products............. 329,088 (0.3%) 426,599 (0.5%) Consumer Services............. 41,388 (0.0%) 103,263 (0.1%) Containers & Glass............ 313,969 (0.3%) 145,958 (0.2%) Cosmetics..................... 43,751 (0.1%) Drugs & Health Care........... 5,063,950 (4.5%) 4,831,395 (5.9%) Education..................... 159,694 (0.1%) Electrical Equipment.......... 2,139,364 (1.9%) 2,346,494 (2.9%) Electronics................... 8,542,542 (7.7%) 6,444,858 (7.8%) Entertainment & Leisure....... 1,726,211 (1.6%) 401,596 (0.5%) Financial Services............ 2,146,995 (1.9%) 3,529,550 (4.3%) Food & Beverages.............. 1,575,037 (1.4%) 2,170,309 (2.6%) Forest Products & Paper....... 919,925 (0.8%) 448,821 (0.5%) Healthcare Services........... 914,353 (0.8%) 21,577 (0.0%) Homebuilders.................. 526,462 (0.5%) 135,410 (0.2%) Hospital Management........... 344,369 (0.3%) Hotel & Motel................. 454,447 (0.4%) 209,742 (0.3%) Household Appliances & Home Furnishings.................. 735,853 (0.7%) 554,907 (0.7%) Household Products............ 307,909 (0.3%) 23,221 (0.0%) Industrial Components & Material..................... 1,976,599 (1.8%) 443,963 (0.5%) Industrial Development / Pollution Bonds........................ 70,720 (0.1%) Insurance..................... 3,360,032 (3.0%) 4,037,027 (4.9%) Investment Companies.......... 38,106 (0.0%) Lease Rental Obligations...... 436,903 (0.4%) 6,440 (0.0%) Liquor........................ 205,856 (0.2%) 628,678 (0.8%) Machinery..................... 1,854,774 (1.7%) 937,355 (1.1%) Medical Equipment & Supply.... 2,052,444 (1.8%) 160,632 (0.2%) Metals-Aluminum............... 56,888 (0.1%) 27,558 (0.0%) Metals-Gold................... 27,638 (0.0%) 17,957 (0.0%) Metals-Non-Ferrous............ 148,431 (0.1%) 243,787 (0.3%) Metals-Steel & Iron........... 794,678 (0.7%) 714,613 (0.9%) Mining........................ 148,944 (0.1%) 51,399 (0.1%) Miscellaneous................. 513,562 (0.5%) 92,534 (0.1%) Mobile Homes.................. 198,119 (0.2%) Multi-Industry................ 902,396 (0.8%) 4,241,874 (5.2%) Newspapers.................... 146,913 (0.1%) 5,582 (0.0%) Office & Business Equipment... 1,049,025 (0.9%) 444,459 (0.5%) Oil........................... 245,419 (0.2%) 1,824,272 (2.2%) Oil & Gas Exploration......... 1,377,606 (1.2%) 74,383 (0.1%) Oil-Domestic.................. 7,204 (0.0%) Oil-Equipment & Services...... 1,199,770 (1.1%) 970,166 (1.2%) Oil-International............. 1,486,992 (1.8%)
23 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell 2000 EAFE Index Portfolio Index Portfolio (continued) (continued) --------------- --------------- Value Value (Note 2A) (Note 2A) COMMON STOCK--(Continued) Packaging.................. 95,138 (0.1%) Personal Care.............. 51,100 (0.1%) 512,187 (0.6%) Photography................ 308,944 (0.3%) 146,031 (0.2%) Plastics................... 136,109 (0.1%) 55,133 (0.1%) Pollution Control.......... 170,117 (0.2%) 8,788 (0.0%) Printing & Publishing...... 681,175 (0.6%) 579,027 (0.7%) Real Estate................ 4,853,008 (4.4%) 1,113,230 (1.4%) Restaurant................. 905,844 (0.8%) 63,682 (0.1%) Retail Grocery............. 358,198 (0.3%) 678,318 (0.8%) Retail Trade............... 3,602,791 (3.2%) 2,263,892 (2.8%) Shipbuilding............... 107,250 (0.1%) 6,851 (0.0%) Software................... 9,163,883 (8.2%) 528,209 (0.6%) Technology................. 1,124,335 (1.0%) Telecommunications Equipment & Services...... 7,256,975 (6.5%) 5,713,882 (6.9%) Textiles & Apparel......... 994,724 (0.9%) 268,027 (0.3%) Tires & Rubber............. 47,500 (0.0%) 246,555 (0.3%) Tobacco.................... 142,120 (0.1%) 298,673 (0.4%) Toys & Amusements.......... 36,441 (0.0%) 182,813 (0.2%) Transportation............. 195,463 (0.2%) 207,016 (0.3%) Transportation-Airlines.... 821,011 (0.7%) 431,963 (0.5%) Transportation- Miscellaneous............. 22,388 (0.0%) Transportation-Railroad.... 462,959 (0.4%) 551,262 (0.7%) Transportation-Shipping.... 201,838 (0.2%) 399,092 (0.5%) Transportation-Trucking.... 698,687 (0.6%) 9,013 (0.0%) Utilities.................. 367,963 (0.3%) Utilities-Electric......... 1,548,840 (1.4%) 1,998,232 (2.4%) Utilities-Gas & Pipelines.. 2,091,713 (1.9%) 462,574 (0.6%) Utilities-Miscellaneous.... 109,089 (0.1%) Utilities-Telephone........ 310,884 (0.3%) 6,851,920 (8.3%) Utilities-Water............ 116,150 (0.1%) ------------ ----------- Total Common Stock......... 111,978,300 (100.2%) 81,773,424 (99.3%) ------------ ----------- PREFERRED STOCK Automotive................. 22,424 (0.0%) Broadcasting............... 152,498 (0.2%) Building & Construction.... 9,187 (0.0%) Oil-Equipment & Services... 8,865 (0.0%) Oil-International.......... 15,413 (0.0%) Retail Grocery............. 7,711 (0.0%) Retail Trade............... 9,096 (0.0%) Software................... 210,838 (0.3%) ----------- Total Preferred Stock...... 436,032 (0.5%) ----------- SHORT-TERM OBLIGATIONS Federal Agency Obligations. 996,977 (0.9%) 1,042,652 (1.3%) ------------ ----------- TOTAL INVESTMENTS.......... 112,975,277 (101.1%) 83,252,108 (101.1%) Other Assets Less Liabilities............... (1,246,645) (-1.1%) (897,193) (-1.1%) ------------ ----------- NET ASSETS................. $111,728,632 (100.0%) $82,354,915 (100.0%) ============ ===========
24 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Lehman Brothers Aggregate Bond Index Portfolio ------------ Value (Note 2A) LONG-TERM DEBT SECURITIES Corporate Bonds: Aerospace & Defense...................................... $ 217,373 (0.2%) Asset Backed............................................. 1,114,534 (0.9%) Automotive............................................... 656,234 (0.5%) Banking.................................................. 2,646,073 (2.0%) Broadcasting............................................. 459,729 (0.4%) Collateralized Mortgage Obligations...................... 1,557,920 (1.2%) Drugs & Health Care...................................... 137,862 (0.1%) Entertainment & Leisure.................................. 447,900 (0.3%) Finance & Banking........................................ 1,184,489 (0.9%) Financial Services....................................... 5,417,318 (4.2%) Food & Beverages......................................... 198,824 (0.2%) Forest Products & Paper.................................. 902,049 (0.7%) Industrials.............................................. 138,134 (0.1%) Liquor................................................... 468,535 (0.4%) Multi-Industry........................................... 712,878 (0.5%) Office & Business Equipment.............................. 465,375 (0.4%) Oil & Gas Exploration.................................... 572,352 (0.4%) Printing & Publishing.................................... 457,777 (0.3%) Real Estate.............................................. 502,193 (0.4%) Restaurant............................................... 457,986 (0.4%) Retail Trade............................................. 1,152,172 (0.9%) Telecommunications Equipment & Services.................. 1,447,723 (1.1%) Transportation-Airlines.................................. 825,882 (0.6%) Transportation-Railroad.................................. 300,801 (0.2%) Utilities-Electric....................................... 1,364,726 (1.1%) Utilities-Gas & Pipelines................................ 723,618 (0.6%) Utilities-Telephone...................................... 1,420,791 (1.1%) ------------ Total Corporate Bonds.................................... 25,951,248 (20.1%) ------------ Federal Agency Obligations............................... 57,027,167 (44.1%) Federal Treasury Obligations............................. 35,460,210 (27.4%) State Agency Obligations................................. 182,909 (0.1%) Yankee Bonds............................................. 2,257,967 (1.7%) ------------ Total Bonds.............................................. 120,879,501 (93.4%) ------------ SHORT-TERM OBLIGATIONS Commercial Paper......................................... 4,535,468 (3.5%) Federal Agency Obligations............................... 595,728 (0.5%) ------------ Total Short-Term Obligations............................. 5,131,196 (4.0%) ------------ TOTAL INVESTMENTS......................................... 126,010,697 (97.4%) Other Assets Less Liabilities............................. 3,327,963 (2.6%) ------------ NET ASSETS................................................ $129,338,660 (100.0%) ============
25 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Harris Oakmark Neuberger Berman T. Rowe Price Large Cap Value Partners Mid Cap Value Large Cap Portfolio Portfolio Growth Portfolio --------------- ---------------------- ---------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 3,218,687 (8.4%) $ 822,900 (2.1%) Automotive............. 1,947,912 (5.0%) $ 260,550 (0.5%) Banking................ 3,446,094 (9.0%) 851,525 (2.2%) 1,887,612 (3.7%) Biotechnology.......... 431,081 (0.8%) Broadcasting........... 1,537,144 (4.0%) 2,779,959 (5.4%) Building & Construction.......... 813,375 (2.1%) 246,138 (0.5%) Business Services...... 3,166,562 (8.3%) 1,177,100 (3.0%) 2,216,848 (4.3%) Chemicals.............. 1,192,344 (3.1%) 1,938,494 (5.0%) Computer Equipment & Service............... 972,969 (2.5%) 1,436,228 (3.7%) 4,917,202 (9.6%) Consumer Products...... 2,168,375 (5.7%) Containers & Glass..... 191,706 (0.5%) Drugs & Health Care.... 727,988 (1.9%) 3,374,794 (6.6%) Electrical Equipment... 439,875 (1.1%) 1,288,125 (2.5%) Electronics............ 1,815,625 (4.7%) 792,706 (2.1%) 4,235,797 (8.2%) Entertainment & Leisure............... 1,735,500 (4.5%) 481,500 (1.2%) 87,750 (0.2%) Financial Services..... 1,618,975 (4.2%) 4,435,533 (8.6%) Food & Beverages....... 341,925 (0.7%) Forest Products & Paper................. 821,250 (2.1%) 1,103,437 (2.9%) 234,900 (0.5%) Hospital Management.... 398,438 (0.8%) Hotel & Motel.......... 368,950 (1.0%) 361,213 (0.7%) Household Appliances & Home Furnishings...... 739,200 (1.9%) Household Products..... 922,387 (1.8%) Industrials............ 201,400 (0.5%) 174,900 (0.3%) Insurance.............. 878,813 (2.3%) 1,890,531 (4.9%) 1,188,617 (2.3%) Machinery.............. 1,577,063 (4.1%) 1,209,506 (3.1%) Medical Equipment & Supply................ 1,241,094 (3.2%) 1,205,187 (2.3%) Metals-Aluminum........ 498,063 (1.3%) Metals-Non-Ferrous..... 434,125 (1.1%) Metals-Steel & Iron.... 570,025 (1.5%) Mining................. 107,400 (0.3%) Miscellaneous.......... 1,785,375 (4.7%) Multi-Industry......... 458,850 (1.2%) 3,303,693 (6.4%) Newspapers............. 1,844,500 (4.8%) 192,719 (0.4%) Office & Business Equipment............. 340,588 (0.7%) Oil.................... 547,031 (1.4%) Oil & Gas Exploration.. 1,010,250 (2.6%) Oil-Domestic........... 592,500 (1.5%) Oil-Equipment & Services.............. 2,015,375 (5.2%) 238,006 (0.5%) Oil-International...... 1,476,969 (2.9%) Packaging.............. 686,359 (1.8%) Printing & Publishing.. 2,301,000 (6.0%) 501,500 (1.3%) 355,081 (0.7%) Real Estate............ 1,281,250 (3.3%) 535,500 (1.4%) 205,969 (0.4%) Restaurant............. 169,313 (0.3%) Retail Grocery......... 981,221 (1.9%) Retail Trade........... 611,000 (1.6%) 2,590,426 (5.0%) Software............... 1,988,325 (5.1%) 4,157,962 (8.1%) Telecommunications Equipment & Services.. 3,108,844 (8.0%) 2,269,381 (4.4%) Textiles & Apparel..... 2,081,625 (5.4%) 163,556 (0.3%) Tobacco................ 1,864,275 (4.9%) 264,338 (0.5%) Toys & Amusements...... 1,765,312 (4.6%) Transportation- Airlines.............. 510,313 (1.3%) Transportation- Railroad.............. 582,075 (1.5%) 261,188 (0.5%) Utilities-Electric..... 1,118,050 (2.9%) Utilities-Gas & Pipelines............. 286,663 (0.7%) Utilities-Telephone.... 2,158,184 (4.2%) ----------- ----------- ----------- Total Common Stock..... 34,729,994 (90.5%) 36,880,419 (95.2%) 50,117,550 (97.5%) ----------- ----------- ----------- SHORT-TERM OBLIGATIONS Commercial Paper....... 1,500,000 (3.9%) Regulated Investment Companies............. 1,867,428 (3.6%) Repurchase Agreements.. 1,482,000 (3.9%) 1,854,000 (4.8%) 703,000 (1.4%) ----------- ----------- ----------- Total Short-Term Obligations........... 2,982,000 (7.8%) 1,854,000 (4.8%) 2,570,428 (5.0%) ----------- ----------- ----------- TOTAL INVESTMENTS...... 37,711,994 (98.3%) 38,734,419 (100.0%) 52,687,978 (102.5%) Other Assets Less Liabilities........... 665,535 (1.7%) (12,430) (0.0%) (1,286,462) (-2.5%) ----------- ----------- ----------- NET ASSETS............. $38,377,529 (100.0%) $38,721,989 (100.0%) $51,401,516 (100.0%) =========== =========== ===========
26 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Templeton Variable Products Series Fund
Templeton International Stock Portfolio -------------- Value (Note 2A) COMMON STOCK Aerospace & Defense................................... $ 1,925,333 (0.2%) Appliances & Household Durables....................... 43,597,485 (3.8%) Automotive............................................ 38,876,270 (3.4%) Banking............................................... 93,961,811 (8.1%) Broadcasting.......................................... 11,671,882 (1.0%) Building Materials & Components....................... 8,232,097 (0.7%) Chemicals............................................. 50,382,806 (4.3%) Data Processing & Reproduction........................ 9,436,991 (0.8%) Electrical & Electronics.............................. 86,309,209 (7.4%) Energy Sources........................................ 61,113,306 (5.3%) Financial Services.................................... 67,495,324 (5.8%) Food & Household Products............................. 22,749,989 (2.0%) Forest Products & Paper............................... 21,609,388 (1.9%) Health & Personal Care................................ 43,531,166 (3.8%) Industrial Components................................. 4,125,846 (0.4%) Insurance............................................. 63,000,165 (5.4%) Machinery & Engineering............................... 7,096,640 (0.6%) Merchandising......................................... 30,647,631 (2.6%) Metals & Mining....................................... 70,173,353 (6.1%) Multi-Industry........................................ 52,379,143 (4.5%) Real Estate........................................... 1,704,438 (0.1%) Recreation & Other Consumer Goods..................... 11,067,926 (1.0%) Telecommunications.................................... 103,119,516 (8.9%) Transportation........................................ 51,149,658 (4.4%) Utilities-Gas & Pipelines............................. 87,566,150 (7.5%) -------------- ------- Total Common Stock.................................... 1,042,923,523 (90.0%) -------------- ------- Preferred Stock....................................... 56,820,552 (4.9%) SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 46,236,000 (4.0%) -------------- ------- TOTAL INVESTMENTS..................................... 1,145,980,075 (98.9%) Other Assets Less Liabilities......................... 12,182,392 (1.1%) -------------- ------- NET ASSETS............................................ $1,158,162,467 (100.0%) ============== =======
27 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Janus Aspen Series Fund
Janus Aspen Growth Portfolio ---------------- Value (Note 2A) COMMON STOCK Audio and Video Products............................. $ 12,027,000 (0.4%) Automotive........................................... 1,586,454 (0.1%) Brewery.............................................. 12,112,537 (0.4%) Broadcast Services and Programming................... 105,648,024 (3.5%) Cable Television..................................... 253,832,722 (8.5%) Cellular Telecommunications.......................... 152,852,858 (5.1%) Circuits............................................. 121,198,124 (4.0%) Commercial Banks..................................... 8,067,519 (0.3%) Commercial Services.................................. 30,151,000 (1.0%) Computer Software.................................... 55,568,330 (1.9%) Computer Memory Devices.............................. 31,415,384 (1.0%) Computers Micro...................................... 158,170,877 (5.3%) Cosmetics and Toiletries............................. 11,884,925 (0.4%) Cruise Lines......................................... 20,701,929 (0.7%) Data Processing and Management....................... 37,104,521 (1.2%) Distribution and Wholesale........................... 24,791,256 (0.8%) Diversified Financial Services....................... 22,502,813 (0.7%) Diversified Operations............................... 165,718,684 (5.5%) Electronic Components................................ 79,706,735 (2.7%) Electronic Safety Devices............................ 6,334,247 (0.2%) Enterprise Software and Services..................... 24,758,379 (0.8%) Finance-Credit Card.................................. 62,213,244 (2.1%) Finance-Investment Bankers/Brokers................... 42,087,398 (1.4%) Food-Wholesale....................................... 3,307,287 (0.1%) Identification Systems and Devices................... 11,250,562 (0.4%) Instruments-Scientific............................... 42,286,156 (1.4%) Internet Content..................................... 11,715,741 (0.4%) Internet Software.................................... 37,657,646 (1.3%) Life and Health Insurance............................ 72,109,337 (2.4%) Medical-Biomedical and Genetic....................... 46,106,600 (1.5%) Medical-Drugs........................................ 21,339,070 (0.7%) Medical-Instruments.................................. 10,103,026 (0.3%) Money Center Banks................................... 72,862,400 (2.4%) Multi-Line Insurance................................. 38,767,246 (1.3%) Multimedia........................................... 191,538,881 (6.4%) Networking Products.................................. 117,238,564 (3.9%) Office Automation and Equipment...................... 11,390,880 (0.4%) Optical Supplies..................................... 15,991,391 (0.5%) Pipelines............................................ 72,361,869 (2.4%) Property and Casualty Insurance...................... 7,297,509 (0.2%) Publishing-Newspapers................................ 8,696,844 (0.3%) Radio................................................ 27,660,475 (0.9%) Retail Building Products............................. 35,819,450 (1.2%) Retail-Discount...................................... 11,151,245 (0.4%) Retail-Office Supplies............................... 20,860,390 (0.7%) Retail-Restaurants................................... 75,633,305 (2.5%) Super Regional Banks................................. 11,427,330 (0.4%) Telecommunication Equipment.......................... 180,832,646 (6.0%) Telecommunication Services........................... 31,562,024 (1.1%) Telephone-Integrated................................. 15,503,209 (0.5%) Television........................................... 41,936,217 (1.4%) -------------- Total Common Stock................................... 2,684,842,260 (89.4%) -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Retail Internet...................................... 13,019,556 (0.4%) Telecommunication Services........................... 15,050,000 (0.5%) -------------- Total Corporate Bonds................................ 28,069,556 (0.9%) -------------- SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 217,600,000 (7.3%) U.S. Government Agencies.............................. 74,360,555 (2.5%) -------------- Total Short-Term Obligations.......................... 291,960,555 (9.8%) -------------- TOTAL INVESTMENTS..................................... 3,004,872,371 (100.1%) Other Assets Less Liabilities......................... (2,889,168) (0.1%) -------------- NET ASSETS............................................ $3,001,983,203 (100.0%) ==============
28 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Invesco Variable Investment Funds, Inc.
Invesco VIF-High Yield Portfolio --------------- Value (Note 2A) COMMON STOCKS & WARRANTS Computer Related..................................... $ 20,475 (0.0%) Telecommunications--Long Distance.................... 1,500 (0.0%) Telephone............................................ 3,454 (0.0%) ----------- Total Common Stocks & Warrants....................... 25,429 (0.0%) ----------- PREFERRED STOCK Publishing........................................... 304,500 (0.5%) Telecommunications--Cellular & Wireless.............. 445,000 (0.8%) Telecommunications--Long Distance.................... 1,005,000 (1.8%) Telephone............................................ 368,083 (0.6%) ----------- Total Preferred Stock................................ 2,122,583 (3.7%) ----------- FIXED INCOME SECURITIES Corporate Bonds: Biotechnology........................................ 552,500 (0.9%) Broadcasting......................................... 2,861,250 (4.9%) Cable................................................ 5,033,700 (8.6%) Chemicals............................................ 1,100,750 (1.9%) Communications--Equipment & Manufacturing............ 866,000 (1.5%) Computer Related..................................... 2,974,625 (5.1%) Electric Utilities................................... 2,348,825 (4.0%) Electrical Equipment................................. 206,000 (0.4%) Engineering & Construction........................... 182,000 (0.3%) Gaming............................................... 1,955,238 (3.3%) Healthcare Services.................................. 740,000 (1.3%) Household Products................................... 365,000 (0.6%) Iron & Steel......................................... 703,570 (1.2%) Lodging--Hotels...................................... 225,000 (0.4%) Metals & Mining...................................... 350,000 (0.6%) Oil & Gas Related.................................... 2,483,975 (4.3%) Paper & Forest Products.............................. 1,046,060 (1.8%) Personal Care........................................ 257,250 (0.4%) Pollution Control.................................... 895,000 (1.5%) Services............................................. 2,530,312 (4.3%) Shipping............................................. 95,000 (0.2%) Specialty Printing................................... 683,750 (1.2%) Telecommunications--Cellular & Wireless.............. 2,369,250 (4.1%) Telecommunications--Long Distance.................... 9,060,975 (15.5%) Telephone............................................ 11,058,433 (18.9%) Textiles & Apparel Manufacturing..................... 915,000 (1.6%) ----------- Total Corporate Bonds................................ 51,859,463 (88.8%) ----------- SHORT-TERM INVESTMENTS Repurchase Agreements................................ 2,968,000 (5.1%) ----------- TOTAL INVESTMENTS.................................... 56,975,475 (97.6%) Other Assets Less Liabilities........................ 1,403,130 (2.4%) ----------- NET ASSETS........................................... $58,378,605 (100.0%) ===========
29 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Invesco Variable Investment Funds, Inc.
Invesco Invesco VIF Industrial VIF Realty Income Portfolio Portfolio ---------------- ---------- Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense............ $ 1,589,874 (2.0%) Automobiles.................... 534,375 (0.7%) Banks.......................... 4,750,694 (5.9%) Beverages...................... 1,977,650 (2.5%) Broadcasting................... 1,475,500 (1.8%) Chemicals...................... 1,117,962 (1.4%) Communications-Equipment Manufacturing................. 972,562 (1.2%) Computer Related............... 2,232,056 (2.8%) Electric Utilities............. 1,438,590 (1.8%) Electronics.................... 1,305,600 (1.6%) Electrical Equipment........... 1,934,375 (2.4%) Electronics-semiconductor...... 2,512,500 (3.1%) Financial...................... 1,111,250 (1.4%) Foods.......................... 3,215,379 (4.0%) Gaming......................... 1,000,000 (1.3%) Gold & Precious Metals Mining.. 171,500 (0.2%) Health Care Drugs- Pharmaceuticals............... 6,066,543 (7.6%) Health Care Related............ 1,027,465 (1.3%) Household Products............. 2,176,500 (2.7%) Insurance...................... 2,640,875 (3.3%) Investment Bank/Broker Firm.... 999,250 (1.3%) Lodging-Hotels................. 772,937 (1.0%) Manufacturing.................. 996,938 (1.2%) Oil & Gas Related.............. 5,659,240 (7.1%) Paper & Forest Products........ 1,426,638 (1.8%) Railroads...................... 2,285,062 (2.9%) Real Estate Investment Trust... $ 544,084 (87.0%) Real Estate Related............ 16,965 (2.7%) Restaurants.................... 1,007,812 (1.3%) Retail......................... 4,794,062 (6.0%) Savings & Loan................. 1,154,156 (1.4%) Services....................... 452,625 (0.6%) Telecommunications-Cellular & Wireless...................... 825,000 (1.0%) Telecommunications-Long Distance...................... 1,555,313 (2.0%) Telephone...................... 4,413,256 (5.5%) Tobacco........................ 394,187 (0.5%) ----------- --------- Total Common Stock............. 65,987,726 (82.6%) 561,049 (89.7%) ----------- --------- FIXED INCOME SECURITIES Corporate Bonds: Airlines....................... 293,092 (0.4%) Building Materials............. 510,509 (0.6%) Cable.......................... 355,750 (0.4%) Computer Related............... 222,469 (0.3%) Electric Utilities............. 3,076,860 (3.9%) Insurance...................... 425,360 (0.5%) Lodging-Hotels................. 218,852 (0.3%) Oil & Gas Related.............. 1,470,846 (1.9%) Paper & Forest Products........ 105,624 (0.1%) Services....................... 98,500 (0.1%) Telecommunications-Long Distance...................... 151,250 (0.2%) Telephone...................... 653,905 (0.8%) ----------- Total Corporate Bonds.......... 7,583,017 (9.5%) ----------- US Government Obligations...... 712,501 (0.9%) ----------- Total Fixed Income Securities.. 8,295,518 (10.4%) SHORT TERM INVESTMENTS Repurchase Agreements.......... 6,586,000 (8.2%) ----------- --------- TOTAL INVESTMENTS.............. 80,869,244 (101.2%) 561,049 (89.7%) Other Assets Less Liabilities.. (976,632) (-1.2%) 64,429 (10.3%) ----------- --------- NET ASSETS..................... $79,892,612 (100.0%) $ 625,478 (100.0%) =========== =========
30 NOTES TO FINANCIAL STATEMENTS--(Concluded) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Concluded) The value of investments in the Funds portfolios are determined using the following valuation techniques: Portfolio securities that are traded on domestic stock exchanges are valued at the last price as of the close of business on the day the securities are being valued. Lacking any sales, securities are valued at the mean between closing bid and asked prices (except the Loomis Sayles High Yield Bond Portfolio, which values such securities at last bid price). Securities trading primarily on non-domestic exchanges are valued at the preceding closing price on the exchange where it primarily trades (or in the case of Loomis Sayles High Yield Bond and Scudder Global Equity Portfolios, the last sale). A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for that security by the Board of Directors or its delegates. If no closing price is available, then such securities are valued, first, by using the mean between last current bid and asked prices or, second, by using last available closing price (except the Scudder Global Equity Portfolio which second values such securities at last current bid or third, by using last available price). Domestic securities traded on over-the-counter markets are valued at the mean between bid and asked prices or yield equivalent as obtained from two or more dealers that make markets in the securities (except for the Loomis Sayles High Yield Bond Portfolio, which would value such security, first, at last sale price and, second, at bid price or the Scudder Global Equity and the Neuberger Berman Partners Mid Cap Value Portfolios that value such securities, first, at last sale price and, second, at last bid price). All non-U.S. securities traded on over-the-counter securities markets are valued at the last sale quote if market quotations are available, or the last closing bid price if there is no active trading in a particular security for a given day (except the Neuberger Berman Partners Mid Cap Value Portfolio which is valued at the mean between closing bid and asked prices). Where market quotations are not readily available for such non-domestic, over-the-counter securities, then such securities will be valued in good faith by a method that the Board of Directors or its delegates believe accurately reflects fair value. Portfolio securities that are traded both on over-the-counter markets and on a stock exchange are valued according to the broadest and most representative market. For debt securities, this ordinarily will be the over-the-counter market. Securities and assets for which market quotations are not readily available (e.g. certain long-term bonds and notes) are valued at fair value as determined in good faith by or under the direction of the Board of Directors, including valuations furnished by a pricing service retained for this purpose and typically utilized by other institutional-sized trading organizations. Forward foreign exchange contracts are valued based on the closing prices of the forward currency contract rates in London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Short-term instruments with a remaining maturity of sixty days or less are valued utilizing the amortized cost method of valuation. If for any reason the fair value of any security is not fairly reflected by such method, such security will be valued by the same method as securities having a maturity of more than sixty days. Options on securities, indices, or futures contracts are valued at the last sales price available as of the close of business on the day of valuation. If no sales have occurred, options are valued at the mean between bid and asked prices. Options on currencies are valued at the spot price each day. As a general matter, futures contracts are marked-to-market daily. The value of futures contracts will be the sum of the margin deposits plus or minus the difference between the value of the futures contract on each day the net asset value is calculated and the value on the date the futures contract originated. For this purpose, value is the value established on a recognized commodity exchange, or by reference to other customary sources, with gain or loss being realized when the futures contract closes or expires. 31 1 INDEX TO FINANCIAL STATEMENTS
PAGE ---- METROPOLITAN LIFE INSURANCE COMPANY Independent Auditors' Report................................ Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997.......................... Consolidated Balance Sheets at December 31, 1999 and 1998... Consolidated Statements of Equity for the years ended December 31, 1999, 1998 and 1997.......................... Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.......................... Notes to Consolidated Financial Statements..................
2 INDEPENDENT AUDITORS' REPORT The Board of Directors and Policyholders of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York February 7, 2000 3 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
1999 1998 1997 ---- ---- ---- REVENUES Premiums.................................................... $12,088 $11,503 $11,278 Universal life and investment-type product policy fees...... 1,438 1,360 1,418 Net investment income....................................... 9,816 10,228 9,491 Other revenues.............................................. 2,154 1,994 1,491 Net realized investment gains (losses) (net of amounts allocable to other accounts of $(67), $608 and $231, respectively)............................................. (70) 2,021 787 ------- ------- ------- 25,426 27,106 24,465 ------- ------- ------- EXPENSES Policyholder benefits and claims (excludes amounts directly related to net realized investment gains (losses) of $(21), $368 and $161, respectively)....................... 13,105 12,638 12,403 Interest credited to policyholder account balances.......... 2,441 2,711 2,878 Policyholder dividends...................................... 1,690 1,651 1,742 Other expenses (excludes amounts directly related to net realized investment gains (losses) of $(46), $240 and $70, respectively)............................................. 6,755 8,019 5,771 ------- ------- ------- 23,991 25,019 22,794 ------- ------- ------- Income before provision for income taxes and extraordinary item...................................................... 1,435 2,087 1,671 Provision for income taxes.................................. 593 740 468 ------- ------- ------- Income before extraordinary item............................ 842 1,347 1,203 Extraordinary item -- demutualization expense............... 225 4 -- ------- ------- ------- Net income.................................................. $ 617 $ 1,343 $ 1,203 ======= ======= =======
See accompanying notes to consolidated financial statements. 4 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998 (IN MILLIONS)
1999 1998 ---- ---- ASSETS Investments: Fixed maturities available-for-sale, at fair value........ $ 96,981 $100,767 Equity securities, at fair value.......................... 2,006 2,340 Mortgage loans on real estate............................. 19,739 16,827 Real estate and real estate joint ventures................ 5,649 6,287 Policy loans.............................................. 5,598 5,600 Other limited partnership interests....................... 1,331 1,047 Short-term investments.................................... 3,055 1,369 Other invested assets..................................... 1,501 1,484 -------- -------- 135,860 135,721 Cash and cash equivalents................................... 2,789 3,301 Accrued investment income................................... 1,725 1,994 Premiums and other receivables.............................. 6,681 5,972 Deferred policy acquisition costs........................... 8,492 6,538 Deferred income taxes....................................... 603 -- Other....................................................... 4,141 3,752 Separate account assets..................................... 64,941 58,068 -------- -------- $225,232 $215,346 ======== ======== LIABILITIES AND EQUITY Liabilities: Future policy benefits...................................... $ 73,582 $ 72,701 Policyholder account balances............................... 45,901 46,494 Other policyholder funds.................................... 4,498 4,061 Policyholder dividends payable.............................. 974 947 Short-term debt............................................. 4,208 3,585 Long-term debt.............................................. 2,514 2,903 Current income taxes payable................................ 548 403 Deferred income taxes payable............................... -- 545 Other....................................................... 14,376 10,772 Separate account liabilities................................ 64,941 58,068 -------- -------- 211,542 200,479 -------- -------- Commitments and contingencies (Note 9) Equity: Retained earnings........................................... 14,100 13,483 Accumulated other comprehensive income (loss)............... (410) 1,384 -------- -------- 13,690 14,867 -------- -------- $225,232 $215,346 ======== ========
See accompanying notes to consolidated financial statements. 5 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ----------------------------------------- NET FOREIGN MINIMUM UNREALIZED CURRENCY PENSION COMPREHENSIVE RETAINED INVESTMENT TRANSLATION LIABILITY TOTAL INCOME (LOSS) EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT ----- ------------- -------- -------------- ----------- ---------- Balance at January 1, 1997....... $11,983 $10,937 $ 1,028 $ 18 $ -- Comprehensive income: Net income..................... 1,203 $ 1,203 1,203 ------- Other comprehensive income: Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes...................... 870 870 Foreign currency translation adjustments................ (49) (49) ------- Other comprehensive income... 821 821 ------- Comprehensive income........... $ 2,024 ======= ------- ------- ------- ----- ---- Balance at December 31, 1997..... 14,007 12,140 1,898 (31) -- Comprehensive income: Net income..................... 1,343 $ 1,343 1,343 ------- Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes...................... (358) (358) Foreign currency translation adjustments................ (113) (113) Minimum pension liability adjustment................. (12) (12) ------- Other comprehensive loss..... (483) (483) ------- Comprehensive income........... $ 860 ======= ------- ------- ------- ----- ---- Balance at December 31, 1998..... 14,867 13,483 1,540 (144) (12) Comprehensive loss: Net income..................... 617 $ 617 617 ------- Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes...................... (1,837) (1,837) Foreign currency translation adjustments................ 50 50 Minimum pension liability adjustment................. (7) (7) ------- Other comprehensive loss..... (1,794) (1,794) ------- Comprehensive loss............. $(1,177) ======= ------- ------- ------- ----- ---- Balance at December 31, 1999..... $13,690 $14,100 $ (297) $ (94) $(19) ======= ======= ======= ===== ====
See accompanying notes to consolidated financial statements. 6 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
1999 1998 1997 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 617 $ 1,343 $ 1,203 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.................. 173 56 (36) (Gains) losses from sales of investments and businesses, net................................................... 137 (2,629) (1,018) Change in undistributed income of real estate joint ventures and other limited partnership interests...... (322) (91) 157 Interest credited to policyholder account balances...... 2,441 2,711 2,878 Universal life and investment-type product policy fees.................................................. (1,438) (1,360) (1,418) Change in accrued investment income..................... 269 (181) (215) Change in premiums and other receivables................ (619) (2,681) (792) Change in deferred policy acquisition costs, net........ (389) (188) (159) Change in insurance related liabilities................. 2,248 1,481 2,364 Change in income taxes payable.......................... 22 251 (99) Change in other liabilities............................. 857 2,390 (206) Other, net.............................................. (131) (260) 213 -------- -------- -------- Net cash provided by operating activities................... 3,865 842 2,872 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturities........................................ 73,120 57,857 75,346 Equity securities....................................... 760 3,085 1,821 Mortgage loans on real estate........................... 1,992 2,296 2,784 Real estate and real estate joint ventures.............. 1,062 1,122 2,046 Other limited partnership interests..................... 469 146 166 Purchases of: Fixed maturities........................................ (72,253) (67,543) (76,603) Equity securities....................................... (410) (854) (2,121) Mortgage loans on real estate........................... (4,395) (2,610) (4,119) Real estate and real estate joint ventures.............. (341) (423) (624) Other limited partnership interests..................... (465) (723) (338) Net change in short-term investments...................... (1,577) (761) 63 Net change in policy loans................................ 2 133 17 Purchase of businesses, net of cash received.............. (2,972) -- (430) Proceeds from sales of businesses......................... -- 7,372 135 Net change in investment collateral....................... 2,692 3,769 -- Other, net................................................ (73) (183) 191 -------- -------- -------- Net cash provided by (used in) investing activities......... (2,389) 2,683 (1,666) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits................................................ 18,428 19,361 16,061 Withdrawals............................................. (20,650) (21,706) (18,831) Short-term debt, net...................................... 623 (1,002) 1,265 Long-term debt issued..................................... 44 693 989 Long-term debt repaid..................................... (433) (481) (104) -------- -------- -------- Net cash used in financing activities....................... (1,988) (3,135) (620) -------- -------- -------- Change in cash and cash equivalents......................... (512) 390 586 Cash and cash equivalents, beginning of year................ 3,301 2,911 2,325 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 2,789 $ 3,301 $ 2,911 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest.................................................. $ 388 $ 367 $ 422 ======== ======== ======== Income taxes.............................................. $ 587 $ 579 $ 589 ======== ======== ========
See accompanying notes to consolidated financial statements. 7 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the "Company") is a leading provider of insurance and financial services to a broad section of institutional and individual customers. The Company offers life insurance, annuities and mutual funds to individuals and group insurance and retirement and savings products and services to corporations and other institutions. PLAN OF REORGANIZATION On September 28, 1999, the board of directors of MetLife adopted, pursuant to the New York Insurance Law, a plan of reorganization, and subsequently adopted amendments to the plan, pursuant to which MetLife proposes to convert from a mutual life insurance company to a stock life insurance company and become a wholly-owned subsidiary of MetLife, Inc. The plan was approved by MetLife's voting policyholders on February 7, 2000. The plan will become effective at such time as the New York Superintendent of Insurance ("Superintendent") approves it based on finding, among other things, that the plan is fair and equitable to policyholders. The plan requires an initial public offering of common stock and provides for other capital raising transactions on the effective date of the plan. On the date the plan of reorganization becomes effective, each policyholder's membership interest will be extinguished and each eligible policyholder will be entitled to receive, in exchange for that interest, trust interests representing shares of common stock of MetLife, Inc. to be held in a trust, cash or an adjustment to their policy values in the form of policy credits, as provided in the plan. In addition, when MetLife demutualizes, MetLife's Canadian branch will make cash payments to holders of certain policies transferred to Clarica Life Insurance Company ("Clarica Life") in connection with the sale of a substantial portion of MetLife's Canadian operations in 1998. See Note 9. The plan of reorganization requires that MetLife establish and operate a closed block for the benefit of holders of certain individual life insurance policies of MetLife. Assets will be allocated to the closed block in an amount that is expected to produce cash flows which, together with anticipated revenue from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of these policies included in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience relating to the closed block are, in the aggregate, more or less favorable than assumed in establishing the closed block, total dividends paid to the closed block policyholders in the future may be greater than or less than which would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. The closed block will continue in effect until the last policy in the closed block is no longer in force. 8 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The accounting principles to account for the participating policies included in the closed block will be those used prior to the date of the demutualization. However, a policyholder dividend obligation will be established for earnings that will be paid to policyholders as additional dividends in the amounts described below, unless these earnings are offset by future unfavorable experience in the closed block. Although all of the cash flows of the closed block are for the benefit of closed block policyholders, the excess of closed block liabilities over closed block assets at the effective date will represent the estimated maximum future contributions from the closed block expected to be reported in income as the contribution from the closed block after income taxes. The contribution from the closed block will be recognized in income over the period the policies and contracts in the closed block remain in force. Management believes that over time the actual cumulative contributions from the closed block will approximately equal the expected cumulative contributions, due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative contribution from the closed block is greater than the expected cumulative contribution from the closed block, the expected cumulative contribution will be recognized in income with the excess recorded as a policyholder dividend obligation, because the excess of the actual cumulative contribution from the closed block over the expected cumulative contribution will be paid to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block. If over such period, the actual cumulative contribution from the closed block is less than the expected cumulative contribution from the closed block, the actual contribution will be recognized in income. However, dividends in the future may be changed, which would be intended to increase future actual contribution until the actual contribution equal the expected cumulative contribution. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The New York State Insurance Department (the "Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company for determining solvency under the New York Insurance Law. No consideration is given by the Department to financial statements prepared in accordance with GAAP in making such determination. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates include those used in determining deferred policy acquisition costs, investment allowances and the liability for future policyholder benefits. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of MetLife and its subsidiaries, partnerships and joint ventures in which MetLife has a majority voting interest or general partner interest with limited removal rights by limited partners. All material intercompany accounts and transactions have been eliminated. The Company accounts for its investments in real estate joint ventures and other limited partnership interests in which it does not have a controlling interest, but more than a minimal interest, under the equity method of accounting. Minority interest related to consolidated entities included in other liabilities was $245 and $274 at December 31, 1999 and 1998, respectively. 9 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 1999 presentation. INVESTMENTS The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income (loss), net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other than temporary. These adjustments are recorded as realized losses on investments. Realized gains and losses on sales of securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are established for the excess carrying value of the mortgage loan over its estimated fair value when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are based upon the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. Interest income earned on impaired loans is accrued on the net carrying value amount of the loan based on the loan's effective interest rate. Real estate, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 40 years). Cost is adjusted for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Impaired real estate is written down to estimated fair value with the impairment loss being included in realized losses on investments. Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired in satisfaction of debt is recorded at estimated fair value at the date of foreclosure. Valuation allowances on real estate held-for-sale are computed using the lower of depreciated cost or estimated fair value, net of disposition costs. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. DERIVATIVE INSTRUMENTS The Company uses derivative instruments to manage market risk through one of four principal risk management strategies: the hedging of invested assets, liabilities, portfolios of assets or liabilities and anticipated transactions. The Company's derivative strategy employs a variety of instruments including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options. The Company's derivative program is monitored by senior management. The Company's risk of loss is typically limited to the fair value of its derivative instruments and not to the notional or contractual amounts of these derivatives. Risk arises from changes in the fair value of the underlying instruments and, with respect to over-the-counter transactions, from the possible inability of counterparties to meet the terms of the contracts. The Company has strict policies regarding the financial stability and credit standing of its major counterparties. 10 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's derivative instruments are designated as hedges and are highly correlated to the underlying risk at contract inception. The Company monitors the effectiveness of its hedges throughout the contract term using an offset ratio of 80 to 125 percent as its minimum acceptable threshold for hedge effectiveness. Derivative instruments that lose their effectiveness are marked to market through net investment income. Gains or losses on financial futures contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, recorded as an adjustment to the basis of the purchased assets or to the proceeds on disposition. Gains or losses on financial futures used in asset risk management are deferred and amortized into net investment income over the remaining term of the investment. Gains or losses on financial futures used in portfolio risk management are deferred and amortized into net investment income or policyholder benefits over the remaining life of the hedged sector of the underlying portfolio. Financial forward contracts that are entered into to purchase securities are marked to fair value through other comprehensive income (loss), similar to the accounting for the investment security. Such contracts are accounted for at settlement by recording the purchase of the specified securities at the contracted value. Gains or losses resulting from the termination of forward contracts are recognized immediately as a component of net investment income. Interest rate and certain foreign currency swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net receipts or payments are accrued and recognized over the term of the swap agreement as an adjustment to net investment income or other expense. Gains or losses resulting from swap terminations are amortized over the remaining term of the underlying asset or liability. Gains and losses on swaps and certain foreign forward exchange contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, reflected as an adjustment to the basis of the purchased assets or to the proceeds of disposition. In the event the asset or liability underlying a swap is disposed of, the swap position is closed immediately and any gain or loss is recorded as an adjustment to the proceeds from disposition. The Company periodically enters into collars, which consist of purchased put and written call options, to lock in unrealized gains on equity securities. Collars are marked to market through other comprehensive income (loss), similar to the accounting for the underlying equity securities. Purchased interest rate caps and floors are used to offset the risk of interest rate changes related to insurance liabilities. Premiums paid on floors, caps and options are split into two components, time value and intrinsic value. Time value is amortized over the life of the applicable derivative instrument. The intrinsic value and any gains or losses relating to these derivative instruments adjust the basis of the underlying asset or liability and are recognized as a component of net investment income over the term of the underlying asset or liability being hedged as an adjustment to the yield. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 11 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years-digits method over the estimated useful lives of the assets. Estimated lives range from 20 to 40 years for real estate and 5 to 15 years for all other property and equipment. Accumulated depreciation of property and equipment and accumulated amortization on leasehold improvements was $1,130 and $1,098 at December 31, 1999 and 1998, respectively. Related depreciation and amortization expense was $103, $116 and $103 for the years ended December 31, 1999, 1998 and 1997, respectively. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new insurance business that vary with, and are primarily related to, the production of new business are deferred. Such costs, which consist principally of commissions, agency and policy issue expenses, are amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, deferred policy acquisition costs are amortized in proportion to the present value of estimated gross margins or profits from investment, mortality, expense margins and surrender charges. Interest rates are based on rates in effect at the inception of the contracts. Actual gross margins or profits can vary from management's estimates resulting in increases or decreases in the rate of amortization. Management periodically updates these estimates and evaluates the recoverability of deferred policy acquisition costs. When appropriate, management revises its assumptions of the estimated gross margins or profits of these contracts, and the cumulative amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. Deferred policy acquisition costs for non-participating traditional life, non-medical health and annuity policies with life contingencies are amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are made at the date of policy issuance and are consistently applied during the lives of the contracts. Deviations from estimated experience are included in operations when they occur. For these contracts, the amortization period is typically the estimated life of the policy. Deferred policy acquisition costs related to internally replaced contracts are expensed at date of replacement. Deferred policy acquisition costs for property and casualty insurance contracts, which are primarily comprised of commissions and certain underwriting expenses, are deferred and amortized on a pro rata basis over the applicable contract term or reinsurance treaty. On September 28, 1999, the Company's Board of Directors adopted a plan of reorganization. Consequently, in the fourth quarter of 1999, the Company was able to commit to state insurance regulatory authorities that it would establish investment sub-segments to further align investments with the traditional individual life business of the Individual segment. As a result, future dividends for the traditional individual life business will be determined based on the results of the new investment sub-segments. Additionally, estimated future gross margins used to determine amortization of deferred policy acquisition costs and the amount of unrealized investment gains and losses relating to these products are based on investments in the new sub-segments. Using the investments in the sub-segments to determine estimated gross margins and unrealized investment gains and losses increased 1999 amortization of deferred policy acquisition costs by $56 (net of income taxes of $32) and decreased other comprehensive loss in 1999 by $123 (net of income taxes of $70). 12 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding deferred policy acquisition costs is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1.................................. $ 6,538 $6,436 $7,227 Capitalized during the year........................... 1,160 1,025 1,000 ------- ------ ------ Total............................................ 7,698 7,461 8,227 ------- ------ ------ Amortization allocated to: Net realized investment gains (losses).............. (46) 240 70 Unrealized investment gains (losses)................ (1,628) (216) 727 Other expenses...................................... 862 587 771 ------- ------ ------ Total amortization............................... (812) 611 1,568 ------- ------ ------ Dispositions and other................................ (18) (312) (223) ------- ------ ------ Balance at December 31................................ $ 8,492 $6,538 $6,436 ======= ====== ======
Amortization of deferred policy acquisition costs is allocated to (1) realized investment gains and losses to provide consolidated statement of income information regarding the impact of such gains and losses on the amount of the amortization, (2) unrealized investment gains and losses to provide information regarding the amount of deferred policy acquisition costs that would have been amortized if such gains and losses had been realized and (3) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. Realized investment gains and losses related to certain products have a direct impact on the amortization of deferred policy acquisition costs. Presenting realized investment gains and losses net of related amortization of deferred policy acquisition costs provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. INTANGIBLE ASSETS The excess of cost over the fair value of net assets acquired ("goodwill") and other intangible assets, including the value of business acquired, are included in other assets. Goodwill is amortized on a straight-line basis over a period ranging from 10 to 30 years. The Company continually reviews goodwill to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results if a permanent diminution in value is deemed to have occurred. Other intangible assets are amortized over the expected policy or contract duration in relation to the present value of estimated gross profits from such policies and contracts. 13 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL OTHER INTANGIBLE ASSETS -------------------- -------------------------- 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- YEARS ENDED DECEMBER 31 Net Balance at January 1.............. $404 $359 $136 $1,006 $1,055 $ 767 Acquisitions.......................... 237 67 240 156 39 355 Amortization.......................... (30) (22) (17) (114) (88) (67) ---- ---- ---- ------ ------ ------ Net Balance at December 31............ $611 $404 $359 $1,048 $1,006 $1,055 ==== ==== ==== ====== ====== ====== DECEMBER 31 Accumulated amortization.............. $118 $ 88 $ 392 $ 278 ==== ==== ====== ======
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of (a) net level premium reserves for death and endowment policy benefits (calculated based upon the nonforfeiture interest rate, ranging from 3% to 10%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts), (b) the liability for terminal dividends and (c) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits and expenses after deferred policy acquisition costs are written off. Future policy benefit liabilities for traditional annuities are equal to accumulated contractholder fund balances during the accumulation period and the present value of expected future payments after annuitization. Interest rates used in establishing such liabilities range from 3% to 8%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 10%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 10%. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 2% to 17%, less expenses, mortality charges and withdrawals. The liability for unpaid claims and claim expenses for property and casualty insurance represents the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. Revisions of these estimates are included in operations in the year such refinements are made. RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. 14 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Premiums related to non-medical health contracts are recognized on a pro rata basis over the applicable contract term. Premiums related to universal life and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums related to property and casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums are included in other liabilities. DIVIDENDS TO POLICYHOLDERS Dividends to policyholders are determined annually by the board of directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by MetLife and its insurance subsidiaries. DIVIDEND RESTRICTIONS MetLife, when it converts from a mutual life insurance company to a stock life insurance company, may be restricted as to the amounts it may pay as dividends to MetLife, Inc. Under the New York Insurance Law, the Superintendent has broad discretion to determine whether the financial condition of a stock life insurance company would support the payment of dividends to its shareholders. The Department has established informal guidelines for the Superintendent's determinations which focus upon, among other things, the overall financial condition and profitability of the insurer under statutory accounting practices. PARTICIPATING BUSINESS Participating business represented approximately 19% and 21% of the Company's life insurance in-force, and 84% and 81% of the number of life insurance policies in-force, at December 31, 1999 and 1998, respectively. Participating policies represented approximately 42% and 44%, 39% and 40%, and 41% and 41% of gross and net life insurance premiums for the years ended December 31, 1999, 1998 and 1997, respectively. INCOME TAXES MetLife and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code, as amended (the "Code"). Under the Code, the amount of federal income tax expense incurred by mutual life insurance companies includes an equity tax calculated based upon a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. MetLife will not be subject to the equity tax when it converts to a stock life insurance company. The future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. REINSURANCE The Company has reinsured certain of its life insurance and property and casualty insurance contracts with other insurance companies under various agreements. Amounts due from 15 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Policy and contract liabilities are reported gross of reinsurance credits. Deferred policy acquisition costs are reduced by amounts recovered under reinsurance contracts. Amounts received from reinsurers for policy administration are reported in other revenues. SEPARATE ACCOUNTS Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Investments (stated at estimated fair value) and liabilities of the separate accounts are reported separately as assets and liabilities. Deposits to separate accounts, investment income and realized and unrealized gains and losses on the investments of the separate accounts accrue directly to contractholders and, accordingly, are not reflected in the Company's consolidated statements of income and cash flows. Mortality, policy administration and surrender charges to all separate accounts are included in revenues. See Note 6. FOREIGN CURRENCY TRANSLATION Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income (loss). Gains and losses from foreign currency transactions are reported in other expenses and were insignificant for all years presented. EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSE The accompanying consolidated statements of income include extraordinary charges of $225 (net of income taxes of $35) and $4 (net of income taxes of $2) for the years ended December 31, 1999 and 1998, respectively, related to costs associated with the demutualization. APPLICATION OF ACCOUNTING PRONOUNCEMENTS Effective January 1, 1999, the Company adopted Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Adoption of SOP 98-5 did not have a material effect on the Company's consolidated financial statements. Effective January 1, 1999, the Company adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance for determining when an entity should capitalize or expense external and internal costs of computer software developed or obtained for internal use. Adoption of the provisions of SOP 98-1 had the effect of increasing other assets by $82 at December 31, 1999. Effective January 1, 1999, the Company adopted SOP 97-3, Accounting for Insurance and Other Enterprises for Insurance Related Assessments ("SOP 97-3"). SOP 97-3 provides guidance on accounting by insurance and other enterprises for assessments related to insurance activities including recognition, measurement and disclosure of guaranty fund and other insurance related 16 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) assessments. Adoption of SOP 97-3 did not have a material effect on the Company's consolidated financial statements. In 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 125") which were deferred by SFAS 127, Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125. The deferred provisions provide accounting and reporting standards related to repurchase agreements, dollar rolls, securities lending and similar transactions. Adoption of the provisions had the effect of increasing assets and liabilities by $3,769 at December 31, 1998 and increasing other revenues and other expenses by $266 for the year ended December 31, 1998. During 1997, the Company changed to the retrospective interest method of accounting for investment income on structured notes in accordance with Emerging Issues Task Force Consensus No. 96-12, Recognition of Interest Income and Balance Sheet Classification of Structured Notes. This accounting change increased 1997 net investment income by $175, which included an immaterial amount related to prior years. In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137"). SFAS 137 defers the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") until January 1, 2001. SFAS 133 requires, among other things, that all derivatives be recognized in the consolidated balance sheets as either assets or liabilities and measured at fair value. The corresponding derivative gains and losses should be reported based upon the hedge relationship, if such a relationship exists. Changes in the fair value of derivatives that are not designated as hedges or that do not meet the hedge accounting criteria in SFAS 133 are required to be reported in income. The Company is in the process of quantifying the impact of SFAS 133 on its consolidated financial statements. In October 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method of accounting for insurance and reinsurance contracts that do not transfer insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts for which the deposit method is appropriate into those that 1) transfer only significant timing risk, 2) transfer only significant underwriting risk, 3) transfer neither significant timing or underwriting risk and 4) have an indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1, 2000. Adoption of SOP 98-7 is not expected to have a material effect on the Company's consolidated financial statements. 17 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. INVESTMENTS The components of net investment income were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities.................................... $ 6,766 $ 6,563 $ 6,445 Equity securities................................... 40 78 50 Mortgage loans on real estate....................... 1,479 1,572 1,684 Real estate and real estate joint ventures.......... 1,426 1,529 1,718 Policy loans........................................ 340 387 368 Other limited partnership interests................. 199 196 302 Cash, cash equivalents and short-term investments... 173 187 169 Other............................................... 501 841 368 ------- ------- ------- 10,924 11,353 11,104 Less: Investment expenses........................... 1,108 1,125 1,613 ------- ------- ------- $ 9,816 $10,228 $ 9,491 ======= ======= =======
Net realized investment gains (losses), including changes in valuation allowances, were as follows:
YEARS ENDED DECEMBER 31, ------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities........................................ $(538) $ 573 $ 118 Equity securities....................................... 99 994 224 Mortgage loans on real estate........................... 28 23 56 Real estate and real estate joint ventures.............. 265 424 446 Other limited partnership interests..................... 33 13 12 Sales of businesses..................................... -- 531 139 Other................................................... (24) 71 23 ----- ------ ------ (137) 2,629 1,018 Amounts allocable to: Future policy benefit loss recognition................ -- (272) (126) Deferred policy acquisition costs..................... 46 (240) (70) Participating contracts............................... 21 (96) (35) ----- ------ ------ $ (70) $2,021 $ 787 ===== ====== ======
Realized investment gains (losses) have been reduced by (1) additions to future policy benefits resulting from the need to establish additional liabilities due to the recognition of investment gains, (2) deferred policy acquisition cost amortization to the extent that such amortization results from realized investment gains and losses, and (3) additions to participating contractholder accounts when amounts equal to such investment gains and losses are credited to the contractholders' accounts. This presentation may not be comparable to presentations made by other insurers. 18 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities.................................... $(1,828) $ 4,809 $ 4,766 Equity securities................................... 875 832 1,605 Other invested assets............................... 165 154 294 ------- ------- ------- (788) 5,795 6,665 ------- ------- ------- Amounts allocable to: Future policy benefit loss recognition............ (249) (2,248) (2,189) Deferred policy acquisition costs................. 697 (931) (1,147) Participating contracts........................... (118) (212) (312) Deferred income taxes............................... 161 (864) (1,119) ------- ------- ------- 491 (4,255) (4,767) ------- ------- ------- $ (297) $ 1,540 $ 1,898 ======= ======= =======
The changes in net unrealized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1.................................. $ 1,540 $1,898 $1,028 Unrealized investment gains (losses) during the year................................................ (6,583) (870) 3,402 Unrealized investment (gains) losses relating to: Future policy benefit loss recognition.............. 1,999 (59) (970) Deferred policy acquisition costs................... 1,628 216 (727) Participating contracts............................. 94 100 (303) Deferred income taxes................................. 1,025 255 (532) ------- ------ ------ Balance at December 31................................ $ (297) $1,540 $1,898 ======= ====== ====== Net change in unrealized investment gains (losses).... $(1,837) $ (358) $ 870 ======= ====== ======
19 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FIXED MATURITIES AND EQUITY SECURITIES Fixed maturities and equity securities at December 31, 1999 were as follows:
COST OR GROSS UNREALIZED AMORTIZED ---------------- ESTIMATED COST GAIN LOSS FAIR VALUE --------- ---- ---- ---------- Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 5,990 $ 456 $ 147 $ 6,299 States and political subdivisions.... 1,583 4 45 1,542 Foreign governments.................. 4,090 210 94 4,206 Corporate............................ 47,505 585 1,913 46,177 Mortgage and asset-backed securities......................... 27,396 112 847 26,661 Other................................ 12,235 313 462 12,086 ------- ------ ------ ------- 98,799 1,680 3,508 96,971 Redeemable preferred stocks............. 10 -- -- 10 ------- ------ ------ ------- $98,809 $1,680 $3,508 $96,981 ======= ====== ====== ======= Equity Securities: Common stocks........................... $ 980 $ 921 $ 35 $ 1,866 Nonredeemable preferred stocks.......... 151 -- 11 140 ------- ------ ------ ------- $ 1,131 $ 921 $ 46 $ 2,006 ======= ====== ====== =======
Fixed maturities and equity securities at December 31, 1998 were as follows:
COST OR GROSS UNREALIZED AMORTIZED ----------------- ESTIMATED COST GAIN LOSS FAIR VALUE --------- ---- ---- ---------- Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 6,640 $1,117 $ 10 $ 7,747 States and political subdivisions.... 597 26 -- 623 Foreign governments.................. 3,435 254 88 3,601 Corporate............................ 46,377 2,471 260 48,588 Mortgage and asset-backed securities......................... 26,456 569 46 26,979 Other................................ 12,438 1,069 293 13,214 ------- ------ ---- -------- 95,943 5,506 697 100,752 Redeemable preferred stocks............. 15 -- -- 15 ------- ------ ---- -------- $95,958 $5,506 $697 $100,767 ======= ====== ==== ======== Equity Securities: Common stocks........................... $ 1,286 $ 923 $ 77 $ 2,132 Nonredeemable preferred stocks.......... 222 4 18 208 ------- ------ ---- -------- $ 1,508 $ 927 $ 95 $ 2,340 ======= ====== ==== ========
20 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company held foreign currency derivatives with notional amounts of $4,002 and $716 to hedge the exchange rate risk associated with foreign bonds at December 31, 1999 and 1998, respectively. The Company also held options with fair values of $(11) to hedge the market value of common stocks at December 31, 1998. At December 31, 1999, fixed maturities held by the Company that were below investment grade or not rated by an independent rating agency had an estimated fair value of $8,813. At December 31, 1999, non-income producing fixed maturities were insignificant. The amortized cost and estimated fair value of bonds at December 31, 1999, by contractual maturity date, are shown below:
AMORTIZED ESTIMATED COST FAIR VALUE --------- ---------- Due in one year or less............................... $ 3,180 $ 3,217 Due after one year through five years................. 18,152 18,061 Due after five years through ten years................ 23,755 23,114 Due after ten years................................... 26,316 25,918 ------- ------- 71,403 70,310 Mortgage and asset-backed securities.................. 27,396 26,661 ------- ------- $98,799 $96,971 ======= =======
Fixed maturities not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales of securities were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Securities classified as available-for-sale: Proceeds.......................................... $59,852 $46,913 $69,275 Gross realized gains.............................. $ 605 $ 2,053 $ 965 Gross realized losses............................. $ 911 $ 486 $ 627 Fixed maturities classified as held-to-maturity: Proceeds.......................................... $ -- $ -- $ 352 Gross realized gains.............................. $ -- $ -- $ 5 Gross realized losses............................. $ -- $ -- $ 1
Gross realized losses above exclude writedowns recorded during 1999 for permanently impaired available-for-sale securities of $133. During 1997, fixed maturities with an amortized cost of $11,682 were transferred from held-to-maturity to available-for-sale. Other comprehensive income at the date of reclassification was increased by $198 excluding the effects of deferred income taxes and policyholder related amounts. Excluding investments in U.S. governments and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturities portfolio. 21 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SECURITIES LENDING PROGRAM The Company participates in securities lending programs whereby large blocks of securities, which are returnable to the Company on short notice and included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $6,458 and $4,005 and estimated fair value of $6,391 and $4,552 were on loan under the program at December 31, 1999 and 1998, respectively. The Company was liable for cash collateral under its control of $6,461 and $3,769 at December 31, 1999 and 1998, respectively. This liability is included in other liabilities. Security collateral on deposit from securities borrowers is returnable to them on short notice and is not reflected in the consolidated financial statements. STATUTORY DEPOSITS The Company had investment assets on deposit with regulatory agencies of $476 and $466 at December 31, 1999 and 1998, respectively. MORTGAGE LOANS ON REAL ESTATE Mortgage loans were categorized as follows:
DECEMBER 31, ---------------------------------------- 1999 1998 ------------------ ------------------ AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Commercial mortgage loans.................. $14,931 75% $12,503 74% Agricultural mortgage loans................ 4,816 24% 4,256 25% Residential mortgage loans................. 82 1% 241 1% ------- --- ------- --- 19,829 100% 17,000 100% === === Less: Valuation allowances................. 90 173 ------- ------- $19,739 $16,827 ======= =======
Mortgage loans on real estate are collateralized by properties primarily located throughout the United States. At December 31, 1999, approximately 16%, 8% and 8% of the properties were located in California, New York and Florida, respectively. Generally, the Company (as the lender) requires that a minimum of one-fourth of the purchase price of the underlying real estate be paid by the borrower. Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $547 and $606 at December 31, 1999 and 1998, respectively. 22 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in mortgage loan valuation allowances were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1................................. $ 173 $ 289 $ 469 Additions............................................ 40 40 61 Deductions for writedowns and dispositions........... (123) (130) (241) Deductions for disposition of affiliates............. -- (26) -- ----- ----- ----- Balance at December 31............................... $ 90 $ 173 $ 289 ===== ===== =====
A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
DECEMBER 31, -------------- 1999 1998 ---- ---- Impaired mortgage loans with valuation allowances.......... $540 $ 823 Impaired mortgage loans without valuation allowances....... 437 375 ---- ------ 977 1,198 Less: Valuation allowances................................. 83 149 ---- ------ $894 $1,049 ==== ======
The average investment in impaired mortgage loans on real estate was $1,134, $1,282 and $1,680 for the years ended December 31, 1999, 1998 and 1997, respectively. Interest income on impaired mortgages was $101, $109 and $110 for the years ended December 31, 1999, 1998 and 1997, respectively. The investment in restructured mortgage loans on real estate was $980 and $1,140 at December 31, 1999 and 1998, respectively. Interest income of $80, $74 and $91 was recognized on restructured loans for the years ended December 31, 1999, 1998 and 1997, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $92, $87 and $116 for the years ended December 31, 1999, 1998 and 1997, respectively. Mortgage loans on real estate with scheduled payments of 60 days (90 days for agriculture mortgages) or more past due or in foreclosure had an amortized cost of $44 and $65 at December 31, 1999 and 1998, respectively. 23 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate and real estate joint ventures consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Real estate and real estate joint ventures held-for-investment....................................... $5,440 $6,301 Impairments................................................. (289) (408) ------ ------ 5,151 5,893 ------ ------ Real estate and real estate joint ventures held-for-sale.... 719 546 Impairments................................................. (187) (119) Valuation allowance......................................... (34) (33) ------ ------ 498 394 ------ ------ $5,649 $6,287 ====== ======
Accumulated depreciation on real estate was $2,235 and $2,065 at December 31, 1999 and 1998, respectively. Related depreciation expense was $247, $282 and $338 for the years ended December 31, 1999, 1998 and 1997, respectively. Real estate and real estate joint ventures were categorized as follows:
DECEMBER 31, -------------------------------------- 1999 1998 ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Office........................................ $3,846 68% $4,265 68% Retail........................................ 587 10% 640 10% Apartments.................................... 474 8% 418 7% Land.......................................... 258 5% 313 5% Agriculture................................... 96 2% 195 3% Other......................................... 388 7% 456 7% ------ --- ------ --- $5,649 100% $6,287 100% ====== === ====== ===
The Company's real estate holdings are primarily located throughout the United States. At December 31, 1999, approximately 25%, 24% and 10% of the Company's real estate holdings were located in New York, California and Texas, respectively. Changes in real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Balance at January 1....................................... $ 33 $110 $ 661 Additions charged (credited) to operations................. 36 (5) (76) Deductions for writedowns and dispositions................. (35) (72) (475) ---- ---- ----- Balance at December 31..................................... $ 34 $ 33 $ 110 ==== ==== =====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $61, $105 and $28 for the years ended December 31, 1999, 1998 and 1997, respectively. Investment income related to real estate and real estate joint ventures held-for-sale 24 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) was $14, $3 and $11 for the years ended December 31, 1999, 1998 and 1997, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $22 and $1 at December 31, 1999 and 1998, respectively. The Company owned real estate acquired in satisfaction of debt of $47 and $154 at December 31, 1999 and 1998, respectively. Real estate of $37, $69 and $151 was acquired in satisfaction of debt during the years ended December 31, 1999, 1998 and 1997, respectively. LEVERAGED LEASES Leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Investment............................................... $1,016 $1,067 Estimated residual values................................ 559 607 ------ ------ 1,575 1,674 Unearned income.......................................... (417) (471) ------ ------ $1,158 $1,203 ====== ======
The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from four to 15 years, but in certain circumstances are as long as 30 years. Average yields range from 7% to 12%. These receivables are generally collateralized by the related property. 3. DERIVATIVE INSTRUMENTS The table below provides a summary of the carrying value, notional amount and current market or fair value of derivative financial instruments (other than equity options) held at December 31, 1999 and 1998:
1999 1998 ------------------------------------------ ------------------------------------------ CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE CARRYING NOTIONAL -------------------- CARRYING NOTIONAL -------------------- VALUE AMOUNT ASSETS LIABILITIES VALUE AMOUNT ASSETS LIABILITIES -------- -------- ------ ----------- -------- -------- ------ ----------- Financial futures.................. $ 27 $ 3,140 $37 $ 10 $ 3 $ 2,190 $ 8 $ 6 Foreign exchange contracts......... -- -- -- -- -- 136 -- 2 Interest rate swaps................ (32) 1,316 11 40 (9) 1,621 17 50 Foreign currency swaps............. -- 4,002 26 103 (1) 580 3 62 Caps............................... 1 12,376 3 -- -- 8,391 -- -- ---- ------- --- ---- --- ------- --- ---- Total contractual commitments...... $ (4) $20,834 $77 $153 $(7) $12,918 $28 $120 ==== ======= === ==== === ======= === ====
25 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a reconciliation of the notional amounts by derivative type and strategy at December 31, 1999 and 1998:
DECEMBER 31, 1998 TERMINATIONS/ DECEMBER 31, 1999 NOTIONAL AMOUNT ADDITIONS MATURITIES NOTIONAL AMOUNT ----------------- --------- ------------- ----------------- BY DERIVATIVE TYPE Financial futures................... $ 2,190 $18,259 $17,309 $ 3,140 Foreign exchange contracts.......... 136 702 838 -- Interest rate swaps................. 1,621 429 734 1,316 Foreign currency swaps.............. 580 3,501 79 4,002 Caps................................ 8,391 5,860 1,875 12,376 ------- ------- ------- ------- Total contractual commitments....... $12,918 $28,751 $20,835 $20,834 ======= ======= ======= ======= BY STRATEGY Liability hedging................... $ 8,741 $ 5,865 $ 2,035 $12,571 Invested asset hedging.............. 864 4,288 937 4,215 Portfolio hedging................... 2,830 13,920 14,729 2,021 Anticipated transaction hedging..... 483 4,678 3,134 2,027 ------- ------- ------- ------- Total contractual commitments....... $12,918 $28,751 $20,835 $20,834 ======= ======= ======= =======
The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 1999:
REMAINING LIFE ------------------------------------------------------------------- ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL -------- ------------------ ----------------- --------------- ----- Financial futures......... $3,140 $ -- $ -- $ -- $ 3,140 Interest rate swaps....... 833 483 -- -- 1,316 Foreign currency swaps.... 7 3,371 503 121 4,002 Caps...................... 3,426 8,930 20 -- 12,376 ------ ------- ---- ---- ------- Total contractual commitments............. $7,406 $12,784 $523 $121 $20,834 ====== ======= ==== ==== =======
In addition to the derivative instruments above, the Company uses equity option contracts as invested asset hedges. There were ninety-two thousand equity option contracts outstanding with a carrying value of $(11) and a market value of $(11) at December 31, 1998. 4. FAIR VALUE INFORMATION The estimated fair values of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. 26 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amounts related to the Company's financial instruments were as follows:
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 1999 AMOUNT VALUE FAIR VALUE - ----------------- -------- -------- ---------- Assets: Fixed maturities.................................. $96,981 $96,981 Equity securities................................. 2,006 2,006 Mortgage loans on real estate..................... 19,739 19,452 Policy loans...................................... 5,598 5,618 Short-term investments............................ 3,055 3,055 Cash and cash equivalents......................... 2,789 2,789 Mortgage loan commitments......................... $465 -- (7) Liabilities: Policyholder account balances..................... 37,170 36,893 Short-term debt................................... 4,208 4,208 Long-term debt.................................... 2,514 2,466 Investment collateral............................. 6,451 6,451
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 1998 AMOUNT VALUE FAIR VALUE - ----------------- -------- -------- ---------- Assets: Fixed maturities................................. $100,767 $100,767 Equity securities................................ 2,340 2,340 Mortgage loans on real estate.................... 16,827 17,793 Policy loans..................................... 5,600 6,143 Short-term investments........................... 1,369 1,369 Cash and cash equivalents........................ 3,301 3,301 Mortgage loan commitments........................ $472 -- 14 Liabilities: Policyholder account balances.................... 37,448 37,664 Short-term debt.................................. 3,585 3,585 Long-term debt................................... 2,903 3,006 Investment collateral............................ 3,769 3,769
The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: FIXED MATURITIES AND EQUITY SECURITIES The fair value of fixed maturities and equity securities are based upon quotations published by applicable stock exchanges or received from other reliable sources. For securities in which the market values were not readily available, fair values were estimated using quoted market prices of comparable investments. MORTGAGE LOANS ON REAL ESTATE AND MORTGAGE LOAN COMMITMENTS Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, the estimated fair value is the net premium or discount of the commitments. 27 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) POLICY LOANS Fair values for policy loans are estimated by discounting expected future cash flows using U.S. treasury rates to approximate interest rates and the Company's past experiences to project patterns of loan accrual and repayment characteristics. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximated fair market values due to the short-term maturities of these instruments. POLICYHOLDER ACCOUNT BALANCES The fair value of policyholder account balances are estimated by discounting expected future cash flows, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. SHORT-TERM AND LONG-TERM DEBT AND INVESTMENT COLLATERAL The fair values of short-term and long-term debt and investment collateral are determined by discounting expected future cash flows, using risk rates currently available for debt with similar terms and remaining maturities. DERIVATIVE INSTRUMENTS The fair value of derivative instruments, including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 5. EMPLOYEE BENEFIT PLANS PENSION BENEFIT AND OTHER BENEFIT PLANS The Company is both the sponsor and administrator of defined benefit pension plans covering all eligible employees and sales representatives of MetLife and certain of its subsidiaries. Retirement benefits are based upon years of credited service and final average earnings history. The Company also provides certain postemployment benefits and certain postretirement health care and life insurance benefits for retired employees through insurance contracts. Substantially all of the Company's employees may, in accordance with the plans applicable to the 28 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) postretirement benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company.
DECEMBER 31, ------------------------------------ PENSION BENEFITS OTHER BENEFITS ---------------- ---------------- 1999 1998 1999 1998 ---- ---- ---- ---- Change in projected benefit obligation: Projected benefit obligation at beginning of year.... $3,920 $3,573 $1,708 $1,763 Service cost....................................... 100 90 28 31 Interest cost...................................... 271 257 107 114 Actuarial (gains) losses........................... (260) 212 (281) (74) Divestitures, curtailments and terminations........ (22) 24 10 (13) Change in benefits................................. -- 12 -- -- Benefits paid........................................ (272) (248) (89) (113) ------ ------ ------ ------ Projected benefit obligation at end of year.......... 3,737 3,920 1,483 1,708 ------ ------ ------ ------ Change in plan assets: Contract value of plan assets at beginning of year... 4,403 4,056 1,123 1,004 Actuarial return on plan assets.................... 575 680 141 171 Employer contribution.............................. 20 15 24 61 Benefits paid...................................... (272) (248) (89) (113) Other payments..................................... -- (100) -- -- ------ ------ ------ ------ Contract value of plan assets at end of year......... 4,726 4,403 1,199 1,123 ------ ------ ------ ------ Over (under) funded.................................. 989 483 (284) (585) ------ ------ ------ ------ Unrecognized net asset at transition................. (66) (98) -- -- Unrecognized net actuarial gains..................... (564) (78) (487) (322) Unrecognized prior service cost...................... 127 145 (2) (2) ------ ------ ------ ------ Prepaid (accrued) benefit cost....................... $ 486 $ 452 $ (773) $ (909) ====== ====== ====== ====== Qualified plan prepaid pension cost.................. $ 632 $ 568 $ -- $ -- Non-qualified plan accrued pension cost.............. (146) (116) -- -- ------ ------ ------ ------ Prepaid benefit cost................................. $ 486 $ 452 $ -- $ -- ====== ====== ====== ======
The aggregate projected benefit obligation and aggregate contract value of plan assets for the pension plans were as follows:
NON-QUALIFIED QUALIFIED PLAN PLAN TOTAL ---------------- -------------- ---------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Aggregate projected benefit obligation...................... $3,482 $3,697 $ 255 $ 223 $3,737 $3,920 Aggregate contract value of plan assets (principally Company contracts)...................... 4,726 4,403 -- -- 4,726 4,403 ------ ------ ----- ----- ------ ------ Over (under) funded............... $1,244 $ 706 $(255) $(223) $ 989 $ 483 ====== ====== ===== ===== ====== ======
29 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assumptions used in determining the aggregate projected benefit obligation and aggregate contract value for the pension and other benefits were as follows:
PENSION BENEFITS OTHER BENEFITS ---------------------------- ----------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Weighted average assumptions at December 31, Discount rate....................... 6.25% - 7.75% 6.5% - 7.25% 6% - 7.75% 7% Expected rate of return on plan assets............................ 8% - 10.5% 8.5% - 10.5% 6% - 9% 7.25% - 9% Rate of compensation increase....... 4.5% - 8.5% 4.5% - 8.5% N/A N/A
The assumed health care cost trend rates used in measuring the accumulated nonpension postretirement benefit obligation were 6.5% for pre-Medicare eligible claims and 6% for Medicare eligible claims in both 1999 and 1998. Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- Effect on total of service and interest cost components.... $ 14 $ 11 Effect of accumulated postretirement benefit obligation.... $134 $111
The components of periodic benefit costs were as follows:
PENSION BENEFITS OTHER BENEFITS --------------------- ------------------ 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- Service cost............................... $ 100 $ 90 $ 74 $ 28 $ 31 $ 30 Interest cost.............................. 271 257 247 107 114 122 Expected return on plan assets............. (363) (337) (324) (89) (79) (66) Amortization of prior actuarial gains...... (6) (11) (5) (11) (13) (4) Curtailment (credit) cost.................. (17) (10) -- 10 4 -- ----- ----- ----- ---- ---- ---- Net periodic benefit cost (credit)......... $ (15) $ (11) $ (8) $ 45 $ 57 $ 82 ===== ===== ===== ==== ==== ====
SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans for substantially all employees under which the Company matches a portion of employee contributions. The Company contributed $45, $43 and $44 for the years ended December 31, 1999, 1998 and 1997, respectively. 6. SEPARATE ACCOUNTS Separate accounts reflect two categories of risk assumption: non-guaranteed separate accounts totaling $47,618 and $39,490 at December 31, 1999 and 1998, respectively, for which the policyholder assumes the investment risk, and guaranteed separate accounts totaling $17,323 and $18,578 at December 31, 1999 and 1998, respectively, for which MetLife contractually guarantees either a minimum return or account value to the policyholder. 30 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $485, $413 and $287 for the years ended December 31, 1999, 1998 and 1997, respectively. Guaranteed separate accounts consisted primarily of Met Managed Guaranteed Interest Contracts and participating close out contracts. The average interest rates credited on these contracts were 6.5% and 7% at December 31, 1999 and 1998, respectively. The assets that support these liabilities were comprised of $16,874 and $16,639 in fixed maturities at December 31, 1999 and 1998, respectively. The portfolios are segregated from other investments and are managed to minimize liquidity and interest rate risk. In order to minimize the risk of disintermediation associated with early withdrawals, these investment products carry a graded surrender charge as well as a market value adjustment. 7. DEBT Debt consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- MetLife: 6.300% surplus notes due 2003.......................... $ 397 $ 397 7.000% surplus notes due 2005.......................... 249 249 7.700% surplus notes due 2015.......................... 198 198 7.450% surplus notes due 2023.......................... 296 296 7.785% surplus notes due 2024.......................... 148 148 7.800% surplus notes due 2025.......................... 248 248 Other.................................................... 130 207 ------ ------ 1,666 1,743 ------ ------ Investment related: Floating rate debt, interest based on LIBOR............ -- 212 Exchangeable debt, interest rates ranging from 4.90% to 5.80%, due 2001 and 2002............................ 369 371 ------ ------ 369 583 ------ ------ Total MetLife............................................ 2,035 2,326 ------ ------ Nvest: 7.060% senior notes due 2003........................... 110 110 7.290% senior notes due 2007........................... 160 160 ------ ------ 270 270 ------ ------ Other Affiliated Companies: Fixed rate notes, interest rates ranging from 6.96% to 8.51%, maturity dates ranging from 2000 to 2008..... 170 179 Other.................................................. 39 128 ------ ------ 209 307 ------ ------ Total long-term debt..................................... 2,514 2,903 Total short-term debt.................................... 4,208 3,585 ------ ------ $6,722 $6,488 ====== ======
31 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Short-term debt consisted of commercial paper with a weighted average interest rate of 6.05% and 5.31% and a weighted average maturity of 74 and 44 days at December 31, 1999 and 1998, respectively. The Company maintains unsecured credit facilities aggregating $7,000 (five-year facility of $1,000 expiring in April 2003; 364-day facility of $1,000 expiring in April 2000; 364-day facility of $5,000 expiring in September 2000). Both $1,000 facilities bear interest at LIBOR plus 20 basis points. The $5,000 facility bears interest at various rates under specified borrowing scenarios. The facilities can be used for general corporate purposes and also provide backup for the Company's commercial paper program. At December 31, 1999, there were no outstanding borrowings under any of the facilities. Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the Superintendent. Subject to the prior approval of the Superintendent, the 7.45% surplus notes may be redeemed, in whole or in part, at the election of the Company at any time on or after November 1, 2003. Each issue of investment related debt is payable in cash or by delivery of an underlying security owned by the Company. The amount payable at maturity of the debt is greater than the principal of the debt if the market value of the underlying security appreciates above certain levels at the date of debt repayment as compared to the market value of the underlying security at the date of debt issuance. The aggregate maturities of long-term debt are $93 in 2000, $194 in 2001, $210 in 2002, $415 in 2003, $126 in 2004 and $1,477 thereafter. Interest expense related to the Company's outstanding indebtedness was $358, $333 and $344 for the years ended December 31, 1999, 1998 and 1997, respectively. 8. ACQUISITIONS AND DISPOSITIONS In 1999 and 1997, respectively, the Company acquired assets of $4,832 and $3,777 and assumed liabilities of $1,860 and $3,347 through the acquisition of certain insurance and non-insurance operations. The aggregate purchase prices were allocated to the assets and liabilities acquired based on their estimated fair values. During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial financing company) and a substantial portion of its Canadian and Mexican insurance operations, which resulted in a realized investment gain of $531. During 1997, the Company sold its United Kingdom insurance operations, which resulted in a realized investment gain of $139. Such sales caused a reduction in assets of $10,663 and $4,342 and liabilities of $3,691 and $4,207 in 1998 and 1997, respectively. See Note 16 for information regarding the Company's acquisition of GenAmerica Corporation. 9. COMMITMENTS AND CONTINGENCIES LITIGATION The Company is currently a defendant in approximately 500 lawsuits raising allegations of improper marketing and sales of individual life insurance policies or annuities. These lawsuits are generally referred to as "sales practices claims". 32 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On December 28, 1999, after a fairness hearing, the United States District Court for the Western District of Pennsylvania approved a class action settlement resolving a multidistrict litigation proceeding involving alleged sales practices claims. The settlement class includes most of the owners of permanent life insurance policies and annuity contracts or certificates issued pursuant to individual sales in the United States by Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company between January 1, 1982 and December 31, 1997. This class includes owners of approximately six million in-force or terminated insurance policies and approximately one million in-force or terminated annuity contracts or certificates. In addition to dismissing the consolidated class actions, the District Court's order also bars sales practices claims by class members for sales by the defendant insurers during the class period, effectively resolving all pending class actions against these insurers. The defendants are in the process of having these claims dismissed. Under the terms of the order, only those class members who excluded themselves from the settlement may continue an existing, or start a new, sales practices lawsuit against Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company for sales that occurred during the class period. Approximately 20,000 class members elected to exclude themselves from the settlement. Over 400 of the approximately 500 lawsuits noted above are brought by individuals who elected to exclude themselves from the settlement. The settlement provides three forms of relief. General relief, in the form of free death benefits, is provided automatically to class members who did not exclude themselves from the settlement or who did not elect the claim evaluation procedures set forth in the settlement. The claim evaluation procedures permit a class member to have a claim evaluated by a third party under procedures set forth in the settlement. Claim awards made under the claim evaluation procedures will be in the form of policy adjustments, free death benefits or, in some instances, cash payments. In addition, class members who have or had an ownership interest in specified policies will also automatically receive deferred acquisition cost tax relief in the form of free death benefits. The settlement fixes the aggregate amounts that are available under each form of relief. The Company expects that the total cost of the settlement will be approximately $957. This amount is equal to the amount of the increase in liabilities for the death benefits and policy adjustments and the present value of expected cash payments to be provided to included class members, as well as attorneys' fees and expenses and estimated other administrative costs, but does not include the cost of litigation with policyholders who are excluded from the settlement. The Company believes that the cost of the settlement will be substantially covered by available reinsurance and the provisions made in its consolidated financial statements, and thus will not have a material adverse effect on its business, results of operations or financial position. The Company has not yet made a claim under those reinsurance agreements and, although there is a risk that the carriers will refuse coverage for all or part of the claim, the Company believes this is very unlikely to occur. The Company believes it has made adequate provision in its consolidated financial statements for all probable losses for sales practices claims, including litigation costs involving policyholders who are excluded from the settlement. The class action settlement does not resolve nine purported or certified class actions currently pending against New England Mutual Life Insurance Company with which the Company merged in 1996. Eight of those actions have been consolidated as a multidistrict proceeding for pre-trial purposes in the United States District Court in Massachusetts. That Court certified a mandatory class as to those claims. Following an appeal of that certification, the United States 33 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Court of Appeals remanded the case to the District Court for further consideration. The Company is negotiating a settlement with class counsel. The class action settlement also does not resolve three putative sales practices class action lawsuits which have been brought against General American Life Insurance Company. These lawsuits have been consolidated in a single proceeding in the United States District Court for the Eastern District of Missouri. General American Life Insurance Company and counsel for plaintiffs have negotiated a settlement in principle of this consolidated proceeding. General American Life Insurance Company has not reached agreement with plaintiffs' counsel on the attorneys' fees to be paid. However, negotiations are ongoing. In addition, the class action settlement does not resolve two putative class actions involving sales practices claims filed against Metropolitan Life Insurance Company in Canada. The class action settlement also does not resolve a certified class action with conditionally certified subclasses against Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company, Metropolitan Tower Life Insurance Company and various individual defendants alleging improper sales abroad. That lawsuit is pending in a New York federal court. In the past, the Company has resolved some individual sales practices claims through settlement, dispositive motion or, in a few instances, trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance may be commenced in the future. Regulatory authorities in a small number of states, including both insurance departments and one state attorney general, as well as the National Association of Securities Dealers, Inc., have ongoing investigations or inquiries relating to the Company's sales of individual life insurance policies or annuities, including investigations of alleged improper replacement transactions and alleged improper sales of insurance with inaccurate or inadequate disclosures as to the period for which premiums would be payable. Over the past several years, the Company has resolved a number of investigations by other regulatory authorities for monetary payments and certain other relief, and may continue to do so in the future. MetLife is also a defendant in numerous lawsuits seeking compensatory and punitive damages for personal injuries allegedly caused by exposure to asbestos or asbestos-containing products. MetLife has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. Rather, these lawsuits, currently numbering in the thousands, have principally been based upon allegations relating to certain research, publication and other activities of one or more of MetLife's employees during the period from the 1920s through approximately the 1950s and alleging that MetLife learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Legal theories asserted against MetLife have included negligence, intentional tort claims and conspiracy claims concerning the health risks associated with asbestos. While MetLife believes it has meritorious defenses to these claims, and has not suffered any adverse judgments in respect of these claims, most of the cases have been resolved by settlements. MetLife intends to continue to exercise its best judgment regarding settlement or defense of such cases. The number of such cases that may be brought or the aggregate amount of any liability that MetLife may ultimately incur is uncertain. Significant portions of amounts paid in settlement of such cases have been funded with proceeds from a previously resolved dispute with MetLife's primary, umbrella and first level excess liability insurance carriers. MetLife is presently in litigation with several of its excess 34 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liability insurers regarding amounts payable under its policies with respect to coverage for these claims. The trial court has granted summary judgment to these insurers. MetLife has appealed. There can be no assurances regarding the outcome of this litigation or the amount and timing of recoveries, if any, from these excess liability insurers. MetLife's asbestos-related litigation with these insurers should have no effect on recoveries under the excess insurance policies described below. The Company has recorded, in other expenses, charges of $499 ($317 after-tax), $1,895 ($1,203 after-tax) and $300 ($190 after-tax) for the years ended December 31, 1999, 1998 and 1997, respectively, for sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products. The 1999 charge was principally related to the settlement of the multidistrict litigation proceeding involving alleged improper sales practices, accruals for sales practices claims not covered by the settlement and other legal costs. The 1998 charge was comprised of $925 and $970 for sales practices claims and asbestos-related claims, respectively. The Company recorded the charges for sales practices claims based on preliminary settlement discussions and the settlement history of other insurers. Prior to the fourth quarter of 1998, the Company established a liability for asbestos-related claims based on settlement costs for claims that the Company had settled, estimates of settlement costs for claims pending against the Company and an estimate of settlement costs for unasserted claims. The amount for unasserted claims was based on management's estimate of unasserted claims that would be probable of assertion. A liability is not established for claims which management believes are only reasonably possible of assertion. Based on this process, the accrual for asbestos-related claims at December 31, 1997 was $386. Potential liabilities for asbestos-related claims are not easily quantified, due to the nature of the allegations against the Company, which are not related to the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products, adding to the uncertainty as to the number of claims that may be brought against the Company. During 1998, the Company decided to pursue the purchase of excess insurance to limit its exposure to asbestos-related claims. In connection with the negotiations with the casualty insurers to obtain this insurance, the Company obtained information that caused management to reassess the accruals for asbestos-related claims. This information included: - Information from the insurers regarding the asbestos-related claims experience of other insureds, which indicated that the number of claims that were probable of assertion against the Company in the future was significantly greater than it had assumed in its accruals. The number of claims brought against the Company is generally a reflection of the number of asbestos-related claims brought against asbestos defendants generally and the percentage of those claims in which the Company is included as a defendant. The information provided to the Company relating to other insureds indicated that the Company had been included as a defendant for a significant percentage of total asbestos-related claims and that it may be included in a larger percentage of claims in the future, because of greater awareness of asbestos litigation generally by potential plaintiffs and plaintiffs' lawyers and because of the bankruptcy and reorganization or the exhaustion of insurance coverage of other asbestos defendants; and that, although volatile, there was an upward trend in the number of total claims brought against asbestos defendants. - Information derived from actuarial calculations the Company made in the fourth quarter of 1998 in connection with these negotiations, which helped to frame, define and quantify this liability. These calculations were made using, among other things, current information regarding the Company's claims and settlement experience (which reflected the Com- 35 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) pany's decision to resolve an increased number of these claims by settlement), recent and historic claims and settlement experience of selected other companies and information obtained from the insurers. Based on this information, the Company concluded that certain claims that previously were considered as only reasonably possible of assertion were now probable of assertion, increasing the number of assumed claims to approximately three times the number assumed in prior periods. As a result of this reassessment, the Company increased its liability for asbestos-related claims to $1,278 at December 31, 1998. During 1998, the Company paid $1,407 of premiums for excess of loss reinsurance agreements and excess insurance policies, consisting of $529 for the excess of loss reinsurance agreements for sales practices claims and excess mortality losses and $878 for the excess insurance policies for asbestos-related claims. The Company obtained the excess of loss reinsurance agreements to provide reinsurance with respect to sales practices claims made on or prior to December 31, 1999 and for certain mortality losses in 1999. These reinsurance agreements have a maximum aggregate limit of $650, with a maximum sublimit of $550 for losses for sales practices claims. This coverage is in excess of an aggregate self-insured retention of $385 with respect to sales practices claims and $506, plus the Company's statutory policy reserves released upon the death of insureds, with respect to life mortality losses. At December 31, 1999, the subject losses under the reinsurance agreements due to sales practices claims and related counsel fees from the time the Company entered into the reinsurance agreements did not exceed that self-insured retention. The maximum sublimit of $550 for sales practices claims was within a range of losses that management believed were reasonably possible at December 31, 1998. Each excess of loss reinsurance agreement for sales practices claims and mortality losses contains an experience fund, which provides for payments to the Company at the commutation date if experience is favorable at such date. The Company accounts for the aggregate excess of loss reinsurance agreements as reinsurance; however, if deposit accounting were applied, the effect on the Company's consolidated financial statements in 1998, 1999 and 2000 would not be significant. Under reinsurance accounting, the excess of the liability recorded for sales practices losses recoverable under the agreements of $550 over the premium paid of $529 results in a deferred gain of $21 which is being amortized into income over the settlement period from January 1999 through April 2000. Under deposit accounting, the premium would be recorded as an other asset rather than as an expense, and the reinsurance loss recoverable and the deferred gain would not have been recorded. Because the agreements also contain an experience fund which increases with the passage of time, the increase in the experience fund in 1999 and 2000 under deposit accounting would be recognized as interest income in an amount approximately equal to the deferred gain that will be amortized into income under reinsurance accounting. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1,500, which is in excess of a $400 self-insured retention ($878 of which was recorded as a recoverable at December 31, 1999 and 1998). The asbestos-related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid in any given year that are recoverable under the policies will be reflected as a reduction in the Company's operating cash flows for that year, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to the Company at the commutation date if experience under the policy to such date has been favorable, or pro rata reductions from time to 36 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) time in the loss reimbursements to the Company if the cumulative return on the reference fund is less than the return specified in the experience fund. A purported class action suit involving policyholders in 32 states has been filed in a Rhode Island state court against MetLife's subsidiary, Metropolitan Property and Casualty Insurance Company, with respect to claims by policyholders for the alleged diminished value of automobiles after accident-related repairs. A similar "diminished value" allegation was made recently in a Texas Deceptive Trade Practices Act letter and lawsuit which involve a Metropolitan Property and Casualty Company policyholder. A purported class action has been filed against Metropolitan Property and Casualty Insurance Company and its subsidiary, Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging breach of contract and unfair trade practices with respect to Metropolitan Casualty Insurance Company allowing the use of parts not made by the original manufacturer to repair damaged automobiles. These suits are in the early stages of litigation and Metropolitan Property and Casualty Insurance Company and Metropolitan Casualty Insurance Company intend to vigorously defend themselves against these suits. Similar suits have been filed against several other personal lines property and casualty insurers. The United States, the Commonwealth of Puerto Rico and various hotels and individuals have sued MetLife Capital Corporation, a former subsidiary of the Company, seeking damages for clean up costs, natural resource damages, personal injuries and lost profits and taxes based upon, among other things, a release of oil from a barge which was being towed by the M/V Emily S. In connection with the sale of MetLife Capital, the Company acquired MetLife Capital's potential liability with respect to the M/V Emily S lawsuit. MetLife Capital had entered into a sale and leaseback financing arrangement with respect to the M/V Emily S. The plaintiffs have taken the position that MetLife Capital, as the owner of record of the M/V Emily S, is responsible for all damages caused by the barge, including the oil spill. The governments of the United States and Puerto Rico have claimed damages in excess of $150. At a mediation, the action brought by the United States and Puerto Rico was conditionally settled, provided that the governments have access to additional sums from a fund contributed to by oil companies to help remediate oil spills. The Company can provide no assurance that this action will be settled in this manner. Three putative class actions have been filed by Conning Corporation shareholders alleging that the Company's announced offer to purchase the publicly-held Conning shares is inadequate and constitutes a breach of fiduciary duty (see Note 16). The Company believes the actions are without merit, and expects that they will not materially affect its offer to purchase the shares. A civil complaint challenging the fairness of the plan of reorganization and the adequacy and accuracy of the disclosures to policyholders regarding the plan has been filed in New York Supreme Court for Kings County on behalf of an alleged class consisting of the policyholders of MetLife who should have membership benefits in MetLife and were and are eligible to receive notice, vote and receive consideration in the demutualization. The complaint seeks to enjoin or rescind the plan and seeks other relief. The defendants named in the complaint are MetLife and the individual members of its board of directors and MetLife, Inc. MetLife believes that the allegations made in the complaint are wholly without merit, and intends to vigorously contest the complaint. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other Federal and state authorities regularly 37 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, it is the opinion of the Company's management that their outcomes, after consideration of available insurance and reinsurance and the provisions made in the Company's consolidated financial statements, are not likely to have a material adverse effect on the Company's consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's operating results or cash flows in particular quarterly or annual periods. TRANSFERRED CANADIAN POLICIES In July 1998, MetLife sold a substantial portion of its Canadian operations to Clarica Life. As part of that sale, a large block of policies in effect with MetLife in Canada were transferred to Clarica Life, and the holders of the transferred Canadian policies became policyholders of Clarica Life. Those transferred policyholders are no longer policyholders of MetLife and, therefore, are not entitled to compensation under the plan of reorganization. However, as a result of a commitment made in connection with obtaining Canadian regulatory approval of that sale, if MetLife demutualizes, its Canadian branch will make cash payments to those who are, or are deemed to be, holders of those transferred Canadian policies. The payments, which will be recorded in other expenses in the same period as the effective date of the plan, will be determined in a manner that is consistent with the treatment of, and fair and equitable to, eligible policyholders of MetLife. The amount of the payment is dependent upon the initial public offering price of common stock to be issued on the effective date of the plan of demutualization. YEAR 2000 The Year 2000 issue was the result of the widespread use of computer programs written using two digits (rather than four) to define the applicable year. Such programming was a common industry practice designed to avoid the significant costs associated with additional mainframe capacity necessary to accommodate a four-digit field. As a result, any of the Company's computer systems that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major system failures or miscalculations. The Company has conducted a comprehensive review of its computer systems to identify the systems that could be affected by the Year 2000 issue and has implemented a plan to resolve the issue. There can be no assurances that the Year 2000 plan of the Company or that of its vendors or third parties have resolved all Year 2000 issues. Further, there can be no assurance that there will not be any future system failure or that such failure, if any, will not have a material impact on the operations of the Company. LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements 38 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for office space, data processing and other equipment. Future minimum rental and subrental income and minimum gross rental payments relating to these lease agreements were as follows:
GROSS RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- 2000......................................... $ 817 $13 $156 2001......................................... 740 12 135 2002......................................... 689 11 111 2003......................................... 612 9 90 2004......................................... 542 9 69 Thereafter................................... 2,032 27 299
10. INCOME TAXES The provision for income taxes was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Current: Federal................................................... $643 $668 $370 State and local........................................... 24 60 10 Foreign................................................... 4 99 26 ---- ---- ---- 671 827 406 ---- ---- ---- Deferred: Federal................................................... (78) (25) 28 State and local........................................... 2 (8) 9 Foreign................................................... (2) (54) 25 ---- ---- ---- (78) (87) 62 ---- ---- ---- Provision for income taxes.................................. $593 $740 $468 ==== ==== ====
Reconciliations of the income tax provision at the U.S. statutory rate to the provision for income taxes as reported were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Tax provision at U.S. statutory rate........................ $502 $730 $585 Tax effect of: Tax exempt investment income.............................. (39) (40) (30) Surplus tax............................................... 125 18 (40) State and local income taxes.............................. 18 31 15 Tax credits............................................... (5) (25) (15) Prior year taxes.......................................... (31) 4 (2) Sale of businesses........................................ -- (19) (41) Other, net................................................ 23 41 (4) ---- ---- ---- Provision for income taxes.................................. $593 $740 $468 ==== ==== ====
39 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes represent the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Deferred income tax assets: Policyholder liabilities and receivables............... $3,042 $3,108 Net operating losses................................... 72 22 Net unrealized investment losses....................... 161 -- Employee benefits...................................... 192 174 Litigation related..................................... 468 312 Other.................................................. 242 158 ------ ------ 4,177 3,774 Less: Valuation allowance.............................. 72 21 ------ ------ 4,105 3,753 ------ ------ Deferred income tax liabilities: Investments............................................ 1,472 1,529 Deferred policy acquisition costs...................... 1,967 1,887 Net unrealized investment gains........................ -- 864 Other.................................................. 63 18 ------ ------ 3,502 4,298 ------ ------ Net deferred income tax asset (liability)................ $ 603 $ (545) ====== ======
Foreign net operating loss carryforwards generated deferred income tax benefits of $72 and $21 at December 31, 1999 and 1998, respectively. The Company has recorded a valuation allowance related to these tax benefits. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for foreign net operating loss carryforwards will not be realized. The benefit will be recognized when management believes that it is more likely than not that the portion of the deferred income tax asset is realizable. The Company has been audited by the Internal Revenue Service for the years through and including 1993. The Company is being audited for the years 1994, 1995 and 1996. The Company believes that any adjustments that might be required for open years will not have a material effect on the Company's consolidated financial statements. 11. REINSURANCE The Company assumes and cedes insurance with other insurance companies. The Company continually evaluates the financial condition of its reinsurers and monitors concentration of credit risk in an effort to minimize its exposure to significant losses from reinsurer insolvencies. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. The amounts in the consolidated statements of income are presented net of reinsurance ceded. The Company's life insurance operations participate in reinsurance in order to limit losses, minimize exposure to large risks and to provide additional capacity for future growth. During 40 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998, the Company began reinsuring, under yearly renewal term policies, 90 percent of the mortality risk on universal life policies issued after 1983. The Company also reinsures 90 percent of the mortality risk on term life insurance policies issued after 1995 under yearly renewal term policies and coinsures 100 percent of the mortality risk in excess of $25 and $35 on single and joint survivorship policies, respectively. During 1997, the Company obtained a 100 percent coinsurance policy to provide coverage for contractual payments generated by certain portions of the Company's non-life contingency long-term guaranteed interest contracts and structured settlement lump sum contracts issued during the periods 1991 through 1993. The policy was amended in 1998 to include structured settlement lump sum payments issued during the period 1983 through 1990, 1994 and 1995. Reinsurance recoverables under the contract, which has been accounted for as a financing transaction, were $1,372 and $1,374 at December 31, 1999 and 1998, respectively. See Note 9 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales practices claims. The Company has exposure to catastrophes, which are an inherent risk of the property and casualty insurance business and could contribute to material fluctuations in the Company's results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposure to larger risks. The Company's reinsurance program is designed to limit a catastrophe loss to no more than 10% of the Auto & Home segment's statutory surplus. The effects of reinsurance were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Direct premiums..................................... $13,249 $12,763 $12,728 Reinsurance assumed................................. 484 409 360 Reinsurance ceded................................... (1,645) (1,669) (1,810) ------- ------- ------- Net premiums........................................ $12,088 $11,503 $11,278 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits.......................................... $ 1,626 $ 1,744 $ 1,648 ======= ======= =======
The effects of reinsurance with GenAmerica Corporation ("GenAmerica") were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Premiums ceded to GenAmerica.............................. $108 $113 $61 ==== ==== === Reinsurance recoveries from GenAmerica netted against policyholder benefits................................... $ 74 $ 28 $24 ==== ==== ===
Reinsurance recoverables, included in other receivables, were $2,898 and $3,134 at December 31, 1999 and 1998, respectively, of which $5 and $5, respectively, were recoverable from GenAmerica. Reinsurance and ceded commissions payables, included in other liabilities, were $148 and $105 at December 31, 1999 and 1998, respectively. 41 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following provides an analysis of the activity in the liability for benefits relating to property and casualty and group accident and non-medical health policies and contracts:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1................................ $ 3,320 $ 3,655 $ 3,345 Reinsurance recoverables.......................... (233) (229) (215) ------- ------- ------- Net balance at January 1............................ 3,087 3,426 3,130 ------- ------- ------- Acquisition of business............................. 204 -- -- ------- ------- ------- Incurred related to: Current year...................................... 3,129 2,726 2,855 Prior years....................................... (16) (245) 88 ------- ------- ------- 3,113 2,481 2,943 ------- ------- ------- Paid related to: Current year...................................... (2,128) (1,967) (1,832) Prior years....................................... (759) (853) (815) ------- ------- ------- (2,887) (2,820) (2,647) ------- ------- ------- Balance at December 31.............................. 3,517 3,087 3,426 Add: Reinsurance recoverables..................... 272 233 229 ------- ------- ------- Balance at December 31.............................. $ 3,789 $ 3,320 $ 3,655 ======= ======= =======
12. OTHER EXPENSES Other expenses were comprised of the following:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Compensation........................................ $ 2,590 $ 2,478 $ 2,078 Commissions......................................... 937 902 766 Interest and debt issue costs....................... 405 379 453 Amortization of policy acquisition costs (excludes amortization of $(46), $240 and $70, respectively, related to realized investment gains and (losses))......................................... 862 587 771 Capitalization of policy acquisition costs.......... (1,160) (1,025) (1,000) Rent, net of sublease income........................ 239 155 179 Minority interest................................... 55 67 56 Restructuring charge................................ -- 81 -- Other............................................... 2,827 4,395 2,468 ------- ------- ------- $ 6,755 $ 8,019 $ 5,771 ======= ======= =======
During 1998, the Company recorded charges of $81 to restructure headquarters operations and consolidate certain agencies and other operations. These costs have been fully paid at December 31, 1999. 42 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. STATUTORY FINANCIAL INFORMATION The reconciliations of MetLife's statutory surplus and net change in statutory surplus, determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities, with equity and net income determined in conformity with generally accepted accounting principles were as follows:
DECEMBER 31, ------------------ 1999 1998 ---- ---- Statutory surplus........................................... $ 7,630 $ 7,388 GAAP adjustments for: Future policy benefits and policyholder account balances............................................... (4,167) (6,830) Deferred policy acquisition costs......................... 8,381 6,560 Deferred income taxes..................................... 886 (190) Valuation of investments.................................. (2,102) 3,981 Statutory asset valuation reserves........................ 3,189 3,381 Statutory interest maintenance reserves................... 1,114 1,486 Surplus notes............................................. (1,602) (1,595) Other, net................................................ 361 686 ------- ------- Equity...................................................... $13,690 $14,867 ======= =======
YEARS ENDED DECEMBER 31, ------------------------- 1999 1998 1997 ---- ---- ---- Net change in statutory surplus......................... $ 242 $ 10 $ 227 GAAP adjustments for: Future policy benefits and policyholder account balances........................................... 556 127 (38) Deferred policy acquisition costs..................... 379 224 149 Deferred income taxes................................. 154 234 62 Valuation of investments.............................. 473 1,158 (387) Statutory asset valuation reserves.................... (226) (461) 1,136 Statutory interest maintenance reserves............... (368) 312 53 Other, net............................................ (593) (261) 1 ----- ------ ------ Net income.............................................. $ 617 $1,343 $1,203 ===== ====== ======
43 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 1999, 1998 and 1997 to avoid double-counting in other comprehensive income (loss) items that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
1999 1998 1997 ---- ---- ---- Holding (losses) gains on investments arising during the year...................................................... $(6,314) $ 1,493 $ 4,257 Income tax effect of holding gains or losses................ 2,262 (617) (1,615) Transfer of securities from held-to-maturity to available-for-sale: Holding gains on investments.............................. -- -- 198 Income tax effect......................................... -- -- (75) Reclassification adjustments: Realized holding (gains) losses included in current year net income............................................. 38 (2,013) (844) Amortization of premium and discount on investments....... (307) (350) (209) Realized holding (losses) gains allocated to other policyholder amounts................................... (67) 608 231 Income tax effect......................................... 120 729 312 Allocation of holding losses (gains) on investments relating to other policyholder amounts............................. 3,788 (351) (2,231) Income tax effect of allocation of holding gains and losses to other policyholder amounts............................. (1,357) 143 846 ------- ------- ------- Net unrealized investment (losses) gains.................... (1,837) (358) 870 ------- ------- ------- Foreign currency translation adjustments arising during the year...................................................... 50 (115) (46) Reclassification adjustment for sale of investment in foreign operation......................................... -- 2 (3) ------- ------- ------- Foreign currency translation adjustment..................... 50 (113) (49) ------- ------- ------- Minimum pension liability adjustment........................ (7) (12) -- ------- ------- ------- Other comprehensive income (loss)........................... $(1,794) $ (483) $ 821 ======= ======= =======
15. BUSINESS SEGMENT INFORMATION The Company provides insurance and financial services to customers in the United States, Canada, Central America, South America, Europe and Asia. The Company's business is divided into six segments: Individual, Institutional, Auto & Home, International, Asset Management and Corporate. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Individual offers a wide variety of individual insurance and investment products, including life insurance, annuities and mutual funds. Institutional offers a broad range of group insurance and retirement and savings products and services, including group life insurance, non-medical health insurance such as short and long-term disability, long-term care and dental insurance and other insurance products and services. Auto & Home provides insurance coverages including private passenger automobile, homeowners and personal excess liability insurance. International provides life insurance, accident and health insurance, annuities and retirement and savings 44 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) products to both individuals and groups, and auto and homeowners coverage to individuals. Asset Management provides a broad variety of asset management products and services to individuals and institutions such as mutual funds for savings and retirement needs, commercial real estate advisory and management services, and institutional and retail investment management. Through its Corporate segment, the Company reports items that are not allocated to any of the business segments. Set forth in the tables below is certain financial information with respect to the Company's operating segments for the years ended December 31, 1999, 1998 and 1997. The accounting policies of the segments are the same as those described in the summary of significant accounting policies, except for the method of capital allocation. The Company allocates capital to each segment based upon an internal capital allocation system that allows the Company to more effectively manage its capital. The Company has divested operations that did not meet targeted rates of return, including its commercial leasing business (Corporate segment) and substantial portions of its Canadian operations (International segment), and insurance operations in the United Kingdom (International segment). The Company evaluates the performance of each operating segment based upon income or loss from operations before provision for income taxes and non-recurring items (e.g. items of unusual or infrequent nature). The Company allocates non-recurring items (primarily consisting of sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products) and prior to its sale in 1998, the results of MetLife Capital Holdings, Inc. to the Corporate segment.
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................ $ 4,289 $ 5,525 $1,751 $ 523 $ -- $ -- $ -- $ 12,088 Universal life and investment-type product policy fees... 888 502 -- 48 -- -- -- 1,438 Net investment income... 5,346 3,755 103 206 80 605 (279) 9,816 Other revenues.......... 558 629 21 12 803 59 72 2,154 Net realized investment gains (losses)........ (14) (31) 1 1 -- (41) 14 (70) Policyholder benefits and claims............ 4,625 6,712 1,301 463 -- -- 4 13,105 Interest credited to policyholder account balances.............. 1,359 1,030 -- 52 -- -- -- 2,441 Policyholder dividends............. 1,509 159 -- 22 -- -- -- 1,690 Other expenses.......... 2,719 1,589 514 248 795 1,031 (141) 6,755 Income (loss) before provision for income taxes and extraordinary item.... 855 890 61 5 88 (408) (56) 1,435 Income (loss) after provision for income taxes before extraordinary item.... 555 567 56 21 51 (358) (50) 842 Total assets............ 109,401 88,127 4,443 4,381 1,036 19,834 (1,990) 225,232 Deferred policy acquisition costs..... 8,049 106 93 244 -- -- -- 8,492 Separate account assets................ 28,828 35,236 -- 877 -- -- -- 64,941 Policyholder liabilities........... 72,956 47,781 2,318 2,187 -- 6 (293) 124,955 Separate account liabilities........... 28,828 35,236 -- 877 -- -- -- 64,941
45 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1998 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................ $ 4,323 $ 5,159 $1,403 $ 618 $ -- $ -- $ -- $ 11,503 Universal life and investment-type product policy fees... 817 475 -- 68 -- -- -- 1,360 Net investment income... 5,480 3,885 81 343 75 682 (318) 10,228 Other revenues.......... 474 575 36 33 817 111 (52) 1,994 Net realized investment gains................. 659 557 122 117 -- 679 (113) 2,021 Policyholder benefits and claims............ 4,606 6,416 1,029 597 -- (10) -- 12,638 Interest credited to policyholder account balances.............. 1,423 1,199 -- 89 -- -- -- 2,711 Policyholder dividends............. 1,445 142 -- 64 -- -- -- 1,651 Other expenses.......... 2,577 1,613 386 352 799 2,601 (309) 8,019 Income (loss) before provision for income taxes and extraordinary item.... 1,702 1,281 227 77 93 (1,119) (174) 2,087 Income (loss) after provision for income taxes before extraordinary item.... 1,069 846 161 56 49 (691) (143) 1,347 Total assets............ 103,614 88,741 2,763 3,432 1,164 20,852 (5,220) 215,346 Deferred policy acquisition costs..... 6,194 82 57 205 -- -- -- 6,538 Separate account assets................ 23,013 35,029 -- 26 -- -- -- 58,068 Policyholder liabilities........... 71,571 49,406 1,477 2,043 -- 1 (295) 124,203 Separate account liabilities........... 23,013 35,029 -- 26 -- -- -- 58,068
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1997 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................. $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $ 11,278 Universal life and investment-type product policy fees............ 855 426 -- 137 -- -- -- 1,418 Net investment income.... 4,754 3,754 71 504 78 700 (370) 9,491 Other revenues........... 338 357 25 54 682 19 16 1,491 Net realized investment gains.................. 356 45 9 142 -- 326 (91) 787 Policyholder benefits and claims................. 4,597 5,934 1,003 869 -- -- -- 12,403 Interest credited to policyholder account balances............... 1,422 1,319 -- 137 -- -- -- 2,878 Policyholder dividends... 1,340 305 -- 97 -- -- -- 1,742 Other expenses........... 2,394 1,178 351 497 679 966 (294) 5,771 Income before provision for income taxes....... 877 535 105 145 81 79 (151) 1,671 Income after provision for income taxes....... 599 339 74 126 45 163 (143) 1,203 Total assets............. 95,323 83,473 2,542 7,412 1,136 18,641 (5,745) 202,782 Deferred policy acquisition costs...... 5,912 40 56 428 -- -- -- 6,436 Separate account assets.. 17,345 30,473 -- 520 -- -- -- 48,338 Policyholder liabilities............ 70,686 49,547 1,509 5,615 -- 1 -- 127,358 Separate account liabilities............ 17,345 30,473 -- 520 -- -- -- 48,338
46 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Individual segment includes an equity ownership interest in Nvest Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has been included within the Asset Management segment due to the types of products and strategies employed by the entity. The individual segment's equity in earnings of Nvest, which is included in net investment income, was $48, $49 and $45 for the years ended December 31, 1999, 1998 and 1997, respectively. The investment in Nvest was $196, $252 and $216 at December 31, 1999, 1998 and 1997, respectively. Net investment income and net realized investment gains are based upon the actual results of each segment's specifically identifiable asset portfolio. Other costs and operating costs were allocated to each of the segments based upon: (1) a review of the nature of such costs, (2) time studies analyzing the amount of employee compensation costs incurred by each segment, and (3) cost estimates included in the Company's product pricing. The consolidation/elimination column includes the elimination of all intersegment amounts and the Individual segment's ownership interest in Nvest. The principal component of the intersegment amounts related to intersegment loans, which bore interest at rates commensurate with related borrowings. Revenues derived from any customer did not exceed 10% of consolidated revenues. Revenues from U.S. operations were $24,637, $25,643 and $22,664 for the years ended December 31, 1999, 1998 and 1997, respectively, which represented 97%, 96% and 93%, respectively, of consolidated revenues. 16. SUBSEQUENT EVENTS On January 6, 2000, the Company acquired GenAmerica for $1.2 billion. In connection with this acquisition, the Company incurred $900 of short-term debt. GenAmerica is a holding company which includes General American Life Insurance Company, 48.3% of the outstanding shares of Reinsurance Group of America ("RGA") common stock, a provider of reinsurance, and 61.0% of the outstanding shares of Conning Corporation common stock, an asset manager. On January 18, 2000, the Company announced that it had proposed to acquire all of the outstanding shares of Conning common stock not already owned by it for $10.50 per share in cash, or approximately $55. At December 31, 1999, the Company owned 9.6% of the outstanding shares of RGA common stock which were acquired on November 24, 1999 for $125. Subsequent to the GenAmerica acquisition, the Company owned 57.9% of the outstanding shares of RGA common stock. Total assets, revenues and net loss of GenAmerica were $23,594, $3,916 and $(174), respectively, at or for the year ended December 31, 1999. As part of the acquisition agreement, in September 1999 the Company assumed $5,752 of General American Life funding agreements and received cash of $1,926 and investment assets with a market value of $3,826. In October 1999, as part of the assumption arrangement, the holders of General American Life funding agreements aggregating $5,136 elected to have the Company redeem the funding agreements for cash. General American Life agreed to pay the Company a fee of $120 in connection with the assumption of the funding agreements. The fee will be considered as part of the purchase price to be allocated to the fair value of assets and liabilities acquired. The Company also agreed to make a capital contribution of $120 to General American Life after the completion of the acquisition. At the date of the acquisition agreement, the Company and GenAmerica were parties to a number of reinsurance agreements. In addition, as part of the acquisition, the Company entered into agreements effective as of July 25, 1999, which coinsured new and certain existing business of General American Life and some of its affiliates. See Note 11. U L I I PROSPECTUS FOR UL II, a Flexible Premium Multifunded Life Insurance Policy Issued by Metropolitan Life Insurance Company May 1, 2000 The Policy is designed to provide: . Life insurance coverage . Flexible premium payments . A choice among three death benefit options . Funding options for allocating premium payments to and transferring cash value among a fixed interest account and the following Metropolitan Life Separate Account UL investment divisions which invest in the corresponding portfolios of the Metropolitan Series Fund, Inc. and series of the New England Zenith Fund (each a "Fund"), subject to state approval. For convenience, both portfolios and the series are referred to as "Portfolios" in this Prospectus: Metropolitan Series Fund, Inc. Portfolios: State Street Research Money Janus Mid Cap Market Lehman Brothers(R) Aggregate State Street Research Aggressive Bond Index* State Street Research Income Growth State Street Research Loomis Sayles High Yield Bond Diversified MetLife Stock Index Russell 2000(R) Index* Harris Oakmark Large Cap T. Rowe Price Small Cap Growth Value* T. Rowe Price Large Cap State Street Research Aurora Growth* State Street Research Growth Small Cap Value* Putnam Large Cap Growth* Scudder Global Equity MetLife Mid Cap Stock Index* Morgan Stanley EAFE(R) Index* Neuberger Berman Partners Putnam International Stock (formerly Santander Mid Cap Value* International Stock) New England Zenith Fund Portfolios: Davis Venture Value* Loomis Sayles Small Cap* * Available on or about July 5, 2000. A word about risk: This Prospectus discusses the risks associated with purchasing the Policy. Other prospectuses discuss the risks associated with investment in the Fund described therein. These prospectuses are being provided to you in addition to this Prospectus because each of the Separate Account UL investment divisions named above invests solely in a corresponding "Portfolio" of a Fund. This Prospectus is not valid unless you also receive or have received current Fund prospectuses. The purchase of the Policy involves risk. You could lose money. You might have to pay additional amounts of premium to avoid losing the life insurance protection you purchased through a Policy. How to learn more: Before purchasing a Policy, read the information in this Prospectus and in each Fund prospectus. Keep these prospectuses for future reference. ----------- Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. This prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Any representation otherwise is a criminal offense. Interests in the Separate Account and the Fixed Account are not deposits or obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material.
Page in this Subject Prospectus ------- ---------- Summary........................................................... 2 MetLife........................................................... 6 Separate Account UL............................................... 7 The Fixed Account................................................. 8 The Funds......................................................... 8 Issuing a Policy.................................................. 9 Policy Benefits................................................... 10 Policy Rights..................................................... 14 Payment and Allocation of Premiums................................ 18 Charges and Deductions............................................ 19 Federal Tax Matters............................................... 22 Showing Performance............................................... 23 Rights We Reserve................................................. 24 Other Policy Provisions........................................... 24 Sales and Administration of the Policies.......................... 25 Voting Rights..................................................... 26 Reports........................................................... 27 Illustration of Policy Benefits................................... 28 Getting More Information.......................................... 28 Legal, Accounting and Actuarial Matters........................... 28 Management........................................................ 29 Financial Statements.............................................. 32
Summary This summary gives an overview of the Policy and is qualified by the more detailed information in the balance of this Prospectus and the Policy. MetLife issues the Policy. The Policy is designed to meet your changing life insurance needs. In addition to the base Policy, optional insurance benefits may also be added to your coverage. Premiums The Policy allows flexibility in making premium payments. There are certain minimum premium requirements during the first two Policy years. Other than these minimum premium payment requirements, the Policy will remain in force as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. Cash Value Your cash value in the Policy reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. MetLife doesn't guarantee the investment performance of the Separate Account UL investment divisions and you should consider your risk tolerance before selecting any of these funding options. 2 Transfers and Automated Investment Strategies You may transfer cash value among the funding options, subject to certain limits. You may also choose among four automated investment strategies: the Equity Generator SM, the Equalizer SM, the Allocator SM and the Rebalancer SM. Specified Face Amount of Insurance Within certain limits, you may choose your specified face amount of insurance when the Policy is issued. You may also change the amount after the second Policy year, subject to our rules and procedures. Death Benefit Options Generally, you have a choice among three options. These range from an amount equal to the specified face amount to an amount equal to the specified face amount plus the policy cash value at the date of death. Surrenders, Partial Withdrawals and Loans Within certain limits, you may take partial withdrawals and loans from the Policy. You may also surrender your Policy for its cash surrender value. Tax Treatment In most cases, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Policy, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. If your Policy is a modified endowment contract, you will pay income taxes on loans and withdrawals to the extent of any gains (which is generally the excess of cash value over the premiums paid). In this case, an additional 10% tax may also apply. If the Policy is part of a collateral assignment equity split dollar arrangement with an employer, any increases in cash value that are not due to premium payments may be taxed annually. The death benefit may be subject to Federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. Table of Charges and Expenses This table shows the charges and expenses that you pay under your Policy. See "Charges and Deductions," below for more information your Policy's charges:
Type of Charge or Expense Amount of Charge or Expense - -------------------------------------------------------------------------------- Charges we deduct from each premium payment Sales charge: 2% of each premium payment Charge for average expected state taxes attributable to premiums: 2% of each premium payment Charge for expected federal taxes attributable to premiums: 1.50% of each premium payment - -------------------------------------------------------------------------------- Monthly Deduction from your Policy's cash value Cost of term insurance charges: Amount varies depending on the specifics of your Policy/2/ Administration charge: $.25 per $1,000 of specified face amount per month, plus First Policy year/3/: (a) $5 per month for insureds Age 17 and under (b) $15 per month for insureds age 18-49 (c) $20 per month for insureds Age 50 and over.
3
Type of Charge or Expense Amount of Charge or Expense - -------------------------------------------------------------------------------- Second and later Policy years/3/: (a) $5 per month for a specified face amount of $250,000 or more (b) $7 per month for a specified face amount between $100,000 and $249,999 (c) $9 per month for a specified face amount of less than $100,000. Mortality and expense risk charge: Annual rate of .90% of the average daily value of the assets in the Separate Account on each monthly anniversary. Underwriting charge: (applies only Maximum charge of $5 for each $1,000 of if you request an increase in your specified face amount increase. specified face amount) Currently, the charge will not exceed the lesser of: . $2,500; or . $100 for the first $100,000 of face increase and $3 per thousand thereafter Charge for optional benefits added As specified in the form of each rider. by rider: - -------------------------------------------------------------------------------- Surrender charge: Full surrender or termination of The charge ranges from $30 to $1 per your Policy during the 15 years thousand dollars/4/ of the highest level after we issue your Policy or after of specified face amount (excluding you have increased your policy's changes in specified face amount that specified face amount: are the result of a change in death benefit option) that the Policy has ever had and is based on: . the insured's age at the time of Policy issue or any increase in specified face amount, . the death benefit option in effect at the time of Policy issue or any increase in specified face amount, and . the number of Policy years since issue or increase in specified face amount. In no event will the surrender charge during the first two Policy years, together with all premium expense charges deducted (other than the 2% charge for state premium taxes and that portion of the DAC tax charge that is not considered to be sales load) exceed the sum of: . 30% of premium payments in aggregate amount less than or equal to one guideline annual premium/5/, plus . 10% of premium payments in aggregate amount greater than one guideline annual premium but not more than two guideline annual premiums, plus . 9% of each premium payment in excess of two guideline annual premiums. A comparable limit applies to the surrender charge attributable to a specified face amount increase for a period of two years following the increase./6/ Partial withdrawals: No surrender charge
- -------- /1/Charges for any insurance coverage provided by any riders you choose will be included as part of the monthly deduction. /2/See "Cost of Term Insurance" under "Charges and Deductions" for a more detailed discussion of factors affecting this charge. If you would like, we will provide you with an illustration of the impact of these and other charges under the Policy based on various assumptions. /3/We will deduct the portion of the first year's administration charges referred to in (a), (b) and (c) that remain unpaid at the time of any full surrender or other termination of your Policy during its first year. /4/The Surrender Charge tables are set forth below under "Charges and Deductions--Surrender Charge." /5/The Guideline Annual Premium is the level annual amount of premium that would be payable through the Final Date of a Policy for the specified face amount of the Policy if we fixed premiums as to both timing and amount based on 1980 Commissioners Standard Ordinary Mortality Tables, net investment earnings at an annual effective rate of 5%, and fees and charges as set forth in the Policy and any Policy riders. /6/To compute this limit a portion of each premium paid after the increase will be attributed to the increase, as prescribed by SEC rule. 4 Fund Investment Management Fees and Direct Expenses The investment manager of each of the Funds receives an investment management fee. Each of the Funds also incurs direct expenses (see the Fund Prospectus and Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. The following sets forth the fees and expenses for each Portfolio, expressed as a percentage of average net assets, for the year ending 12/31/99 for all Portfolios of each Fund, except those Portfolios (referred to in footnote (d) to the table) to be introduced on or about July 5, 2000, for which estimates for the first year are used. The percentages in the table are before taking into account the expense reimbursements referred to in the footnotes that follow the table.
Total Total Manage- Other Annual Manage- Other Annual Portfolios ment Fee Expenses Expenses Portfolios ment Fee Expenses Expenses - ----------------------------------------------------------------------------------------------- Neuberger Berman Partners State Street Research Mid Cap Money Market .25% .17% .42% Value(a)(b) .70% .48% 1.18% - ----------------------------------------------------------------------------------------------- Lehman Brothers(R) Aggregate Bond Index .25% .15% .40% Janus Mid Cap .67% .04% .71% - ----------------------------------------------------------------------------------------------- State Street Research State Street Research Aggressive Income .32% .06% .38% Growth(a) .70% .04% .74% - ----------------------------------------------------------------------------------------------- Loomis Sayles State Street Research High Yield Diversified(a) .43% .03% .46% Bond .70% .24% .94% - ----------------------------------------------------------------------------------------------- Russell 2000(R) MetLife Stock Index .25% .04% .29% Index(e) .25% .64% .89% - ----------------------------------------------------------------------------------------------- T. Rowe Price Harris Oakmark Large Cap Small Cap Value(a)(b) .75% .40% 1.15% Growth(a) .52% .09% .61% - ----------------------------------------------------------------------------------------------- Loomis Sayles T. Rowe Price Large Cap Small Growth(a)(b) .69% .62% 1.31% Cap(c)(f) .90% .10% 1.00% - ----------------------------------------------------------------------------------------------- State Street Research State Street Research Aurora Small Growth(a) .47% .04% .51% Cap Value(d) .85% .23% 1.08% - ----------------------------------------------------------------------------------------------- Scudder Davis Venture Value(c) .75% .06% .81% Global Equity .67% .20% .87% - ----------------------------------------------------------------------------------------------- Morgan Stanley Putnam Large Cap EAFE(R) Growth(d) .80% .59% 1.39% Index(g) .30% 1.47% 1.77% - ----------------------------------------------------------------------------------------------- Putnam MetLife Mid Cap Stock International Index(d) .25% .65% .90% Stock .90% .22% 1.12%
- -------- (a) The Metropolitan Series Fund directed certain portfolio trades to brokers who paid a portion of the Fund's expenses. In addition, the Fund has entered into arrangements with its custodian whereby credits realized as a result of this practice were used to reduce a portion of each Portfolio's custodian fees. These expense reductions are reflected in the table following (g) below. (b) During 1999, we paid all expenses (other than management fees, brokerage commissions, taxes, interest, extraordinary and non-recurring expenses) (hereinafter "Expenses") in excess of .20% of the average net assets for each of these Portfolios. This subsidy ceases when each Portfolio's assets reaches $100 million or on November 8, 2000, whichever comes first. This expense reimbursement is reflected in the table following (g) below. It states our estimate of the effect of the anticipated reimbursement of expenses for the entire current year. 5 (c) New England Investment Management, Inc. ("NEIM") pays MetLife for providing administrative services. You do not bear these fees. NEIM absorbs the fees payable to MetLife. (d) These Portfolios will begin operations on or about July 5, 2000, except for the Putnam Large Cap Growth Portfolio which will begin operations on May 1, 2000, but will not be available until on or about July 5, 2000. We will pay all Expenses in excess of .20% of the average net assets for each of these Portfolios until each Portfolio's total assets reaches $100 million or until July 4, 2002, whichever comes first. Therefore, the expenses for these Portfolios will be lower than those indicated in the table above. The table following (g) below shows estimated first year expenses for these Portfolios after expense reimbursement. (e) We ceased subsidizing expenses for this Portfolio during 1999. The expense information in the above table has been restated to reflect current expenses as if they had been in effect all year. Beginning on February 22, 2000, we began to pay all Expenses in excess of .30% of the average net assets for the Russell 2000(R) Index Portfolio until the Portfolio's assets reach $200 million or until April 30, 2001, whichever comes first. This expense reimbursement is reflected in the table following (g) below and is stated as if it was in effect for the entire current year. (f) NEIM pays all expenses other than brokerage costs, interest, taxes or other extraordinary expenses in excess of 1.00% of the average net assets for this Portfolio. (g) We pay all Expenses in excess of .25% the average net assets for the Morgan Stanley EAFE(R) Index Portfolio until the Portfolio's assets reach $100 million, or until November 8, 2000, whichever comes first. After such date, MetLife will continue to pay all Expenses in excess of .40% of the Portfolio's average net assets until the Portfolio's assets reach $200 million, or until April 30, 2001, whichever comes first. These expense reimbursements are reflected in the table below. It states our estimate of the effect of these anticipated reimbursements of expenses for the entire current year.
Total Total Other Annual Other Annual Expenses Expenses Expenses Expenses After Expense After Expense After Expense After Expense Portfolio Reimbursement Reimbursement Portfolio Reimbursement Reimbursement - --------------------------------------------------------------------------------------------- Neuberger Berman Partners State Street Research Mid Cap Diversified .02% .45% Value .06% .76% - --------------------------------------------------------------------------------------------- State Street Research Harris Oakmark Large Cap Aggressive Value .19% .94% Growth .02% .72% - --------------------------------------------------------------------------------------------- Russell T. Rowe Price Large Cap 2000(R) Growth .24% .93% Index .30% .55% - --------------------------------------------------------------------------------------------- T. Rowe Price State Street Research Small Cap Growth .02% .49% Growth .09% .61% - --------------------------------------------------------------------------------------------- State Street Research Aurora Small Cap Putnam Large Cap Growth .20% 1.00% Value .20% 1.05% - --------------------------------------------------------------------------------------------- Morgan Stanley MetLife Mid Cap Stock EAFE(R) Index .20% .45% Index .36% .66%
Other Please refer to "Federal Tax Matters-Our taxation" and "Policy Benefits--Cash Value Transfers" for a description of certain charges that we currently do not impose but may impose in the future. MetLife Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. Headquartered in New York City, we are a leading provider of insurance and financial services to a broad spectrum of individual and group customers. With approximately 6 [SIDEBAR: You can contact us at our Designated Office.] $420 billion of assets under management as of December 31, 1999 on a pro-forma basis, including the acquisition of GenAmerica Corp., MetLife provides individual insurance and investment products to approximately 9 million households in the United States. MetLife also provides group insurance and investment products to corporations and other institutions employing over 33 million employees and members. We have listed our directors and certain key officers under "Management," and our financial information under "Financial Statements", below. Giving us requests, instructions or notifications Contacting us: You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Designated Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Policy loan; changing your death benefit option; taking a partial withdrawal; surrendering your Policy; making transfer requests (including elections with respect to the automated investment strategies) or changing your premium allocations. Our Designated Office is our home office at 1 Madison Avenue, New York, NY 10010. We may name additional or alternate Designated Offices. If we do, we will notify you in writing. When your requests, instructions and notifications become effective: . Generally, requests, premium payments premium allocation and transfer requests and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of the Valuation Period during which we receive them at our Designated Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) . A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. . A Valuation Date is: . Each day on which the New York Stock Exchange is open for trading. . Other days, if we think that there has been a sufficient degree of trading in a Fund's portfolio securities that the current net asset value of its shares might be materially affected. . Your Investment Start Date is the date the first net premium is applied to the Fixed Account or Separate Account and is the later of (1) the Date of Policy and (2) the Date of Receipt of your first premium payment. . The effective date of your Automated Investment Strategies will be that set forth in the strategy chosen. Separate Account UL We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Policy described in this Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust 7 [SIDEBAR: Each Separate Account investment division invests in a corresponding Portfolio of a Fund.] [SIDEBAR: You should carefully review the investment objectives, strategies, and risks of each Fund's Portfolios, which are contained in each Fund prospectus you have also received.] under the Investment Company Act of 1940 (the "1940 Act"). The assets in the Separate Account legally belong to us, but they are held solely for the benefit of investors in the Separate Account and no one else, including our other creditors. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. The Separate Account has subdivisions, called "investment divisions." Each investment division invests its assets exclusively in shares of a corresponding Portfolio of a Fund. We can add new investment divisions to or eliminate investment divisions from the Separate Account. You can designate how you would like your net premiums and cash value to be allocated among the available investment divisions and our Fixed Account. Amounts you allocate to each investment division receive the investment experience of the investment division, and you bear this investment risk. The Fixed Account The Fixed Account is part of our general assets that are not in any legally- segregated separate accounts. Amounts in the Fixed Account are credited with interest at an effective annual rate of at least 4%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account and whether they were premium payments or transfers from the investment divisions. Any partial amounts we remove from the Fixed Account (such as any portion of your Policy's monthly deduction that is allocable to the Fixed Account) will be taken from the most recently allocated amount first. Any excess interest rate will be credited for at least 12 months before a new rate is credited. We can delay transfers, withdrawals, surrender and payment of Policy loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. The Funds Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the 1940 Act. Each Fund is divided into Portfolios, each of which represents a different class of stock in which a corresponding investment division of the Separate Account invests. You should read each Fund prospectus, which you have also received. They contain information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. They also contain information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. As of the end of each Valuation Period, we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of 8 [SIDEBAR: We will issue a Policy to you as owner. You will have all the rights under the Policy, including the ability to name a new owner or contingent owner. any of the following transactions that take effect at the end of the Valuation Period: . The allocation of net premiums to the Separate Account. . Dividends and distributions on Fund shares that are reinvested as of the dates paid (which reduces the value of each share of the Fund, increases the number of Fund shares outstanding, but has no affect on the cash value in the Separate Account). . Policy loans and loan repayments allocated to the Separate Account. . Transfers to and among investment divisions. . Withdrawals and surrenders taken from the Separate Account. Issuing a Policy If you want to own a Policy, then you must complete an application, which must be received by the Designated Office. We reserve the right to reject an application for any reason permitted by law, and our acceptance of an application is subject to our underwriting rules. Generally, we will issue a Policy only for insureds that are age 80 or less (although we may decide to permit an insured that is older) that have provided evidence of insurability that we find acceptable. An "insured" is the person upon whose life we issue the Policy. You do not have to be the insured. For the purpose of computing the insured's age under the Policy, we start with the insured's age on the Date of Policy which is set forth in the Policy. Age under the Policy at any other time is then computed using that issue age and adding the number of full Policy years completed. The Date of Policy is usually the date the Policy application is approved. We use the Date of Policy to calculate the Policy years (and Policy months and monthly anniversaries). We may permit a Date of Policy that is earlier than the date the application is approved if there have been no material misrepresentations in the application (but not earlier than the date that the application is completed) in order to preserve a younger age for the insured. Your Date of Policy can also be the date the application is completed if you ask us and if we receive a payment of at least $2,500 with the application. Temporary insurance will be provided for up to 90 days from the date of the application, provided that we receive a payment equal to at least one "check-o- matic" payment and any necessary medical examination has been completed. Even if the insured hasn't completed the medical examination, there will be coverage if the insured dies from an accident within 30 days of the date of the application. The temporary insurance does not cover death by suicide. The temporary insurance provided is equal to the specified face amount applied for up to a maximum of $500,000. There will be no charge for the insurance protection under the temporary insurance. Insurance coverage under the Policy will begin at the time the Policy is delivered and any temporary insurance that is then in force will end. For coverage to be effective, the insured's health must be the same as stated in the application and, in most states, the insured must not have sought medical advice or treatment after the date of the application. As to when charges under the Policy begin, see "Charges Included in the Monthly Deduction." 9 [SIDWBAR: The Policy generally offers a choice of three death benefit options.] Policy Benefits Insurance Proceeds If the Policy is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the insured's date of death. We will pay this amount after we receive documents that we request as due proof of the insured's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the insured's lifetime. If no selection is made we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. The beneficiary has one year from the date the insurance proceeds are paid to change the selection from a single sum payment to an income plan, as long as we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. The insurance proceeds equal: . The death benefit under the death benefit option or alternate death benefit that is then in effect; plus . Any additional insurance proceeds provided by rider; minus . Any unpaid Policy loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. Death Benefit Options Generally, you can choose among three options, although the choice may be limited based upon availability in your state and the insured's age. You select which option you want in the Policy application. The three options are: . Option A: The death benefit is a level amount and equals the specified face amount of the Policy. . Option B: The death benefit varies and equals the specified face amount of the Policy plus the cash value on the date of death. . Option C: The death benefit is designed to increase during your earning years (because we assume that your need for life insurance will probably increase during these years) and levels off thereafter. The death benefit is one of two amounts and is available only if insured is age 60 or less when we issue the Policy and the Policy was issued on or after May 1, 1994: . The death benefit varies and equals the specified face amount plus the cash value on the date of death, until the insured is age 65 ("CI"). . At age 65, the death benefit becomes a level amount equal to the specified face amount under CI plus the cash value at the end of the Valuation Date immediately preceding the date on which the insured became age 65. This new amount then becomes the specified face amount ("CII"). There are issues that you should consider in choosing your death benefit option. For example, under Options B and CI, the cash value is added to the specified face amount. Therefore, the death benefit will generally be greater under these options than under Options A and CII, for Policies with the same specified face amount and premium payments. By the same token, the cost of insurance will generally be greater under Options B and CI than under Options A and CII. 10 You can change your death benefit option after the second Policy year, provided that: . Your cash surrender value after the change would be enough to pay at least two monthly deductions. . The specified face amount continues to be no less than the minimum we allow after a decrease. . The total premiums you have paid do not exceed the then current maximum premium limitations permitted under Internal Revenue Service rules. . If the change is to C, the insured is age 60 or less. [SIDEBAR: You can generally change your death benefit option.] Any change will be effective on the monthly anniversary on or immediately following the Date of Receipt of the request. A change in death benefit will have the following effects on your specified face amount: . Change from A or CII to B or CI: The specified face amount will decrease to equal the death benefit less the cash value on the effective date of the change. . Change from B or CI to A or CII: The specified face amount will increase to equal the death benefit plus the cash value of the Policy on the effective date of the change. . Change from B to CI or A to CII: The specified face amount will remain the same. Before you change your death benefit option you should consider the following: . If the term insurance portion of your death benefit changes, as it may with a change from A or CII to B or CI and vice versa, the term insurance charge will also change. This will affect your cash value and, in some cases, the death benefit levels. . If your specified face amount changes because of the change in death benefit option, consider also the issues presented by changing your specified face amount that are described under "Specified Face Amount," below. These issues include the possibility: that your Policy would become a modified endowment contract; that you would receive a taxable distribution; of an increase or decrease in the monthly administration charge; and of changes in the maximum premium amounts that you can pay. Alternate Death Benefit In order to ensure that the Policy qualifies as life insurance under the federal income tax laws, the beneficiary will receive an alternate death benefit if it is greater than the amount that the beneficiary would have received under the death benefit option that you chose. The alternate death benefit is as follows: Age of Insured at Death 40 and 45 50 55 60 65 70 75 to 90 95 less % of Cash Value: * 250 215 185 150 130 120 115 105 100
- -------- *For the ages not listed, the percentage decreases by a ratable portion for each full year. [SIDEBAR: You can generally increase or decrease your Policy's specified face amount.] Specified Face Amount The specified face amount is the basic amount of insurance specified in your Policy. The Minimum Initial Specified Face amount is the smallest amount of specified face amount for which a Policy may be issued. Currently these amounts are generally: . $100,000 for insureds in the preferred rate class; . $50,000 for most other insureds; and 11 . $250,000 for most Policies distributed through broker-dealers not affiliated with us. Generally, you may change your specified face amount after the second Policy year, as long as the insured is age 79 or under. Any change will be effective on: the monthly anniversary on or next following (a) the Date of Receipt of your request; or (b) if we require evidence of insurability, the date we approve your request. You are permitted to decrease the specified face amount to as low as $25,000 except that no reduction may decrease the specified face amount below the Minimum Initial Specified Face Amount during the first five Policy years or one half that amount thereafter. These lowest available specified face amount requirements also apply to decreases that result from partial withdrawals or changes in death benefit option. If there have been previous specified face amount increases, any decreases in specified face amount will be made in the following order: (i) the specified face amount provided by the most recent increase; (ii) the next most recent increases successively; and (iii) the initial specified face amount. You may increase the specified face amount only if: the cash surrender value after the change is large enough to cover at least two monthly deductions based on your most recent cost of term insurance charge. Generally, the minimum specified face amount increase is $5,000. Any increase will require that we receive additional evidence of insurability that is satisfactory to us. We will also impose an underwriting charge. Before you change your specified face amount you should consider the following: . The term insurance portion of your death benefit will likely change and so will the term insurance charge. This will affect the insurance charges, cash value and, in some cases, death benefit levels. . Reducing your specified face amount in the first 15 Policy years may result in our returning an amount to you which could then be taxed on an income first basis. . We will establish an additional amount of surrender charge at the time of any increase in the specified face amount, other than an increase resulting automatically from a change of death benefit option. . The amount of additional premiums that the tax laws permit you to pay into your Policy may increase or decrease. The additional amount you can pay without causing your Policy to be a modified endowment contract for tax purposes may also increase or decrease. . In some circumstances, the Policy could become a modified endowment contract. . The monthly administration charge may change. Cash Value Your Policy's cash value equals: . The Fixed Account cash value, plus . The Policy Loan Account cash value, plus . The Separate Account cash value. 12 [SIDEBAR: Your Policy is designed to accumulate cash value.] Your Policy's cash surrender value equals your cash value minus: . Any outstanding Policy loans (plus accrued interest); . Any surrender charges; and . A portion of the administration charge for any full Policy month remaining in the first Policy year. The Separate Account cash value allocated to each investment division is calculated as follows: . At the end of each Valuation Period the cash value in an investment division will equal: . The cash value in the investment division at the beginning of the Valuation Period; plus . All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus . All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus . The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus . The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the portfolio during the period. The net investment return could in the future be reduced by a charge for taxes that we have the right to impose. Benefit at Final Date The Final Date is the Policy anniversary on which the insured is Age 95. If the insured is living on the Final Date, we will pay you the cash value of the Policy, reduced by any outstanding loans (plus accrued interest). You can receive the cash value in a single sum, in an account that earns interest, or under an available income plan. Optional Benefits Added By Rider You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. Each rider contains important information, including limits and conditions that apply to the benefits. If you decide to purchase any of the riders, you should carefully review their provisions to be sure if the benefit is something that you want. You should also consider: . That the addition of certain riders can restrict your ability to exercise certain rights under the Policy. . That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Policy terminates because of poor investment performance or any other reason, the riders generally will also terminate. . The tax consequences. You should also consult with your tax advisor before purchasing one of the riders. 13 [SIDEBAR: Generally, you can receive the Policy's insurance proceeds, amounts payable at the Final Date or amounts paid upon surrender under an income plan instead of in a lump sum.] [SIDEBAR: You can transfer your cash value among the investment divisions and the Fixed Account at any time.] Generally, we currently make the following benefits available by rider: . Disability Waiver of Monthly Deduction .Children's Term Insurance Benefit Benefit/1/ - ------------------------------------------------------------------------------ . Accidental Death Benefit .Spouse Term Insurance Benefit - ------------------------------------------------------------------------------ .Accelerated Death Benefit/2/
- -------- /1/An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Policy's termination. For this reason, it may be advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /2/Payment under this rider may affect eligibility for benefits under state or federal law. Income Plans Before you purchase an income plan you should consider: . The tax consequences associated with the Policy proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax adviser about tax consequences. . That your Policy will terminate at the time you purchase an income plan and you will receive a new contract, which describes the terms of the income plan. You should carefully review the terms of the new contract, because it contains important information about the terms and conditions of the income plan. . That these plans do not have a variable investment return. Generally, we currently make the following income plans available: . Interest income .Installment Income for a Stated Period - ---------------------------------------------------------------------------- . Installment Income for a Stated . Single Life Income--Guaranteed Amount Payment Period - ---------------------------------------------------------------------------- . Joint and Survivor Life Income .Single Life Income--Guaranteed Return
Policy Rights Cash Value Transfers The minimum amount you may transfer is $50 or, if less, the total amount in an investment option. You may make transfers at any time. We do not currently charge for transfers, but we do reserve the right to charge up to $25 per transfer, except for transfers under the Automated Investment Strategies. Currently, transfers are not taxable transactions. Each Fund may restrict or refuse purchases or redemptions of shares in their Portfolios as a result of certain market timing activities. You should read each Fund's prospectus for more details. We reserve the right to refuse to accept any transaction request where the request would tend to disrupt administration of the Policies or is not in the best interests of Policy owners or the Separate Account. . Automated Investment Strategies: You can choose one of four currently available strategies. You can also change or cancel your choice at any time. 14 [SIDEBAR: You can borrow from us and use your Policy as security for the loan.] . Equity Generator: allows you to transfer an amount equal to the interest earned in the Fixed Account in any Policy month equal to at least $20 to the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. The transfer will be made at the beginning of the Policy month following the Policy month in which the interest was earned. . Equalizer: allows you to periodically equalize amounts in your Fixed Account and either the MetLife Stock Index investment division or the State Street Research Aggressive Growth investment division. We currently make equalization each quarter. We will terminate this strategy if you make a transfer out of the investment division or the Fixed Account that isn't part of the strategy. You may then reelect the Equalizer on your next Policy anniversary. . Rebalancer: allows you to periodically redistribute amounts in the Fixed Account and investment divisions in the same proportion that the net premiums are then being allocated. We currently make the redistribution each quarter. . Allocator: allows you to systematically transfer money from the State Street Research Money Market division to the Fixed Account and/or to any investment division(s). You must have enough cash value in the Fixed Account to enable the election to be in effect for three months. The election can be to transfer each month: . A specific amount until the cash value in the Fixed Account is exhausted, . A specific amount for a specific number of months, or . Amounts in equal installments until the total amount you have requested has been transferred. . Transfers by Telephone: We may, if permitted by state law, allow you to make transfer requests, changes to Automated Investment Strategies and allocations of future net premium by phone. We may also allow you to authorize your sales representative to make such requests. The following procedures apply: . We must have received your authorization in writing satisfactory to us, to act on instructions from any person that claims to be you or your sales representative, as applicable, as long as that person follows our procedures. . We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. . All telephone calls will be recorded. . You will receive a written confirmation of any transaction. . Neither the Separate Account nor we will be liable for any loss, expense or cost arising out of a telephone request if we reasonably believed the request to be genuine. . You should contact our Designated Office with any questions regarding the procedures. Loan Privileges The amount of each loan must be: . At least $250 . No more than the cash surrender value less two monthly deductions, or, if greater, 75% of the cash surrender value (unless your Policy tells you that state law requires a different percentage to be applied) when added to all other outstanding Policy loans. 15 [SIDEBAR: You can surrender your Policy for its cash surrender value.] As of your loan request's Date of Receipt, we will: . Remove an amount equal to the loan from your cash value in the Fixed Account and the cash value in the investment divisions of the Separate Account in the same proportion as your cash value is then allocated among these options. . Transfer such cash value to the Policy loan account, where it will be credited with interest at the rate of 8% per year less a percentage charge we base on expenses associated with Policy loans. This percentage charge is currently 2%, thus we currently credit interest in the Policy loan account at currently 6%. At no time will we credit less than 4%. At least once a year, we will transfer any interest earned in your Policy loan account to the Fixed Account and the investment divisions, according to the way that we then allocate net premiums. . Charge you interest, which will accrue daily at a rate of 8% per year. Your interest payments are due at the end of each Policy year and if you don't pay the amount within 31 days after it is due, we will treat it as a new Policy loan. Repaying your loans (plus accrued interest) is done by sending in payments at least equal to your voluntary planned periodic premium, or $50, if less. You should designate whether a payment is intended to be a loan repayment. If you do not so designate, we will treat the payment as a premium payment. We will allocate your repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated. Before taking a Policy loan you should consider the following: . Interest payments on loans are generally not deductible for tax purposes. . Under certain situations, Policy loans could be considered taxable distributions. . If you surrender your Policy or if we terminate your Policy, or at the Final Date, any outstanding loan amounts (plus accrued interest) will be taxed as a distribution. (See "Federal Tax Matters--The Policy--Loans" below.) . A policy loan increases the chances of our terminating your policy due to insufficient cash value. We will terminate your Policy with no value if: (a) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (b) we tell you of the insufficiency and you do not make a sufficient payment within 61 days of the monthly anniversary. . Your Policy's death benefit will be reduced by any unpaid loan (plus accrued interest). Surrender and Withdrawal Privileges We may ask you to return the Policy before we honor your request to surrender your Policy. You can choose to have the proceeds paid in a single sum, or under an income plan. If the insured dies after you surrender the Policy but before the end of the Policy month in which you surrendered the Policy, we will pay your beneficiary an amount equal to the difference between the Policy's death benefit and its cash value, computed as of the surrender date. You can make partial withdrawals at any time without charge if: . The withdrawal would not result in a reduction in your specified face amount during the first 2 Policy years, as described under "Specified Face Amount" above. . The withdrawal would not result in the cash surrender value being less than sufficient to pay 2 monthly deductions. 16 . The withdrawal is at least $250. . The withdrawal would not result in your specified face amount falling below the minimum allowable amount, as described under "Specified Face Amount," above. . The withdrawal would not result in total premiums paid exceeding the then current maximum premium limitation determined by Internal Revenue Code rules. If you make a request for a partial withdrawal that is not permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Policy. We will deduct your withdrawal from the Fixed Account and the investment divisions in the same proportion as your cash value is then allocated among these options. Before surrendering your Policy or requesting a partial withdrawal you should consider the following: . Surrender charges may apply to a full surrender. . Amounts received may be taxable as income and, if your Policy is a modified endowment contract, subject to certain tax penalties. . Your Policy could become a modified endowment contract. . For partial withdrawals, your death benefit will decrease by the amount of the withdrawal (for options A and CI, your specified face amount will also decrease, generally by the amount of the withdrawal). . Any withdrawal that causes the specified face amount to decrease could cause an increase in the monthly administrative charge. . In some cases you may be better off taking a Policy loan, rather than a partial withdrawal. Exchange Privilege If you decide that you no longer want to take advantage of the investment divisions in the Separate Account, you may transfer all of your money into the Fixed Account. There is currently no charge on transfers. Even if we do have a transfer charge in the future, such charge will never be imposed on a transfer of your entire cash value (or the cash value attributable to a specified face amount increase) to the Fixed Account within the first 24 Policy months (or within 24 Policy months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Policy cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy, which we make available. Third Party Requests Generally, we only accept requests for transactions or information from you. Therefore, we reserve the right not to process transactions requested on your behalf by your agent with a power of attorney or any other authorization. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Policy owners, and who simultaneously makes the same request or series of requests on behalf of other Policy owners. 17 [SIDEBAR: You can make voluntary planned periodic premium payments and unscheduled premium payments.] [SIDEBAR: Net premiums are your premiums minus the charges deducted from your premiums.] Payment and Allocation of Premiums Premiums The payment of premiums won't guarantee that your Policy will remain in force. Rather, this depends on your Policy's cash surrender value. Paying Premiums You can make premium payments, subject to certain limitations discussed below, through the: . Voluntary planned periodic premium schedule: You choose the schedule on your application. The schedule sets forth the amount of premiums, fixed payment intervals, and the period of time that you intend to pay premiums. The schedule can be: (a) annual; (b) semi-annual; (c) periodic automatic pre- authorized transfers from your checking account ( "check-o-matic"); (d) systematic through payment plans that your employer makes available; or (e) through another method to which we agree. You do not have to pay premiums in accordance with your voluntary planned period premium schedule. . Unscheduled premium payment option: You can make premium payments at any time. Maximum and Minimum Premium Payments . During the first two Policy years you must pay an amount of premium that we call the minimum allowable planned premium. . After the first two Policy years, your voluntary planned periodic payments must be at least: . $200 annually (except that some Policies distributed by certain brokers must be at least $2,500) . $100 semi-annually . $15 on a "check-o-matic" or other systematic payment schedule. . Unscheduled premium payments must be at least $250 each. . You may not pay premiums that exceed tax law premium limitations for life insurance policies. We will return any amounts that exceed these limits except that we will keep any amounts that are required to keep the Policy from terminating. We will let you make premium payments that would turn your Policy into a modified endowment contract, but we will tell you of this status in your annual statement, and if possible, we will tell you how to reverse the status. Allocating Net Premiums We will allocate your net premiums according to your net premium allocation instructions in your application. You can instruct us to allocate your net premiums among the Fixed Account and the investment divisions. The percentage of your net premium allocation into each of these investment options must be a minimum of 1% and in whole numbers. You can change your allocations at any time by giving us written notification at our Designated Office or in another manner that we permit. 18 [SIDEBAR: Carefully review the "Table of Charges and Expenses" in the "Summary", which sets forth the charges that you pay under your Policy.] Policy Termination and Reinstatement Termination: We will terminate your Policy without any cash surrender value if: During the first two Policy years, the total premiums paid as of such monthly anniversary are not equal to the minimum premiums required as of that date and (a) and (b) below occur. (a) The cash surrender value is less than the monthly deduction; and (b) We do not receive a sufficient premium payment within the 61-day grace period to cover the difference between the total premiums previously paid and the minimum required premiums. After the first two Policy years: (a) The cash surrender value is less than the monthly deduction; and (b) We do not receive a sufficient premium payment within the 61-day grace period to cover two monthly deductions. We will mail you notice if any grace period starts. Reinstatement: Upon your request, we will reinstate your Policy (without reinstating any amounts in a Policy loan account), subject to certain terms and conditions that the Policy provides. We must receive your request within 3 years (or within a longer period if required by state law) after the end of the grace period and before the Final Date. You also must provide us: . A written application for reinstatement (the date we approve the application will be the effective date of the reinstatement). . Evidence of insurability that we find satisfactory. . An additional premium amount that the Policy prescribes for this purpose. Charges and Deductions The Policy charges compensate us for our expenses and risks. Any distinctions we make about the specific purposes of the different charges are imprecise, and we are free to keep and use our revenues or profits for any other purpose, including paying any of our costs and expenses in connection with the Policies. The following sets forth additional information about some (but not all) of the Policy charges. Charge for average expected state taxes attributable to premiums: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Premium taxes vary from state to state and currently range from 0 to 3.5%. Our charge approximates the average tax rate we expect to pay on premiums we receive from all states. Charges included in the Monthly Deduction: The monthly deduction is taken from the Fixed Account and each investment division in which you have cash value in the same proportion as your cash value is allocated among these options at the beginning of the policy month. We deduct the monthly deductions as of each monthly anniversary beginning as of the Date of Policy. . Cost of term insurance: This charge varies monthly based on many factors. Each month, we determine the charge by multiplying your cost of insurance rates by the term insurance amount. 19 . The term insurance amount is the death benefit at the beginning of the Policy month divided by a discount factor to account for an assumed return; minus the cash value at the beginning of the Policy month after deduction of all other applicable charges. Factors that affect the term insurance amount include the specified face amount, the cash value and the death benefit you choose (generally, the term insurance amount will be higher for options B and CI). . The term insurance rate is based on our expectations as to future experience, taking into account the insured's sex (if permitted by law), age and rate class. The rates will never exceed the guaranteed rates, which are based on certain 1980 Commissioners Standard Ordinary Mortality Tables and the insured's sex, age and smoking status. Our current rates are lower than the maximums in most cases. We review our rates periodically and may adjust them, but we will apply the same rates to everyone who has had their Policy for the same amount of time and who is the same age, sex and rate class. As a general rule, the cost of insurance rate increases each year you own your Policy, as the insured's age increases. . Rate class relates to the level of mortality risk we assume with respect to an insured. It can be the standard rate class, or one that is higher or lower (and if the insured is 18 or older, we divide rate class by smoking status). The insured's rate class will affect your cost of term insurance. You can also have more than one rate class in effect, if the insured's rate class has changed and you change your specified face amount. A better rate class will lower the cost of term insurance on your entire Policy and a worse rate class will affect the portion of your cost of term insurance charge attributable to the specified face amount increase. . Administration charge: We make this monthly charge primarily to compensate us for expenses we incur in the administration of the Policy, and also, in the first year, our underwriting and start-up expenses. . Mortality and expense risk charge: We make this monthly charge primarily to compensate us for: . mortality risks that insureds may live for a shorter period than we expect; and . expense risks that our issuing and administrative expenses may be higher than we expect. If our estimates are correct, we will realize a profit from this charge, otherwise, we could incur a loss. Surrender charge The surrender charges per thousand dollars of initial specified face amount (or per thousand dollars of a specified face amount increase you request) are as follows: 20 [SIDEBAR: Surrender charges may apply when you surrender your Policy or if we terminate your Policy.] Death Benefit Option A:
Policy Years Since Issue or Increase ------------------------------------------------------------------- Age at issue or increase 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 - ------------------------------------------------------------------------ 0-5 $ 3 $ 3 $ 3 $ 3 $ 3 $ 2 $ 2 $ 2 $ 2 $ 2 $ 1 $ 1 $ 1 $ 1 $ 1 6-10 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1 11-20 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1 21-25 3 3 3 3 3 2 2 2 2 2 1 1 1 1 1 26-30 4 4 3 3 3 3 3 2 2 2 2 1 1 1 1 31-35 7 6 6 6 5 5 5 4 4 3 3 2 2 1 1 36-40 8 7 7 7 6 6 5 5 4 4 3 3 2 1 1 41-44 10 9 8 8 7 7 6 6 5 4 4 3 2 2 1 45-50 12 12 11 10 10 9 8 7 7 6 5 4 3 2 1 51-54 15 15 14 13 12 11 10 9 8 7 6 5 4 3 1 55-59 18 17 16 15 14 13 12 11 10 9 8 6 5 3 2 60-69 22 21 20 18 17 16 15 13 12 11 9 7 6 4 2 70-79 22 21 20 18 17 16 15 13 12 11 9 8 6 4 2 80 22 21 20 18 17 16 15 14 13 12 10 9 8 6 3
Death Benefit Option B:
Policy Years Since Issue or Increase ------------------------------------------------------------------- Age at issue or increase 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 - ------------------------------------------------------------------------ 0-5 $ 4 $ 4 $ 3 $ 3 $ 3 $ 3 $ 3 $ 2 $ 2 $ 2 $ 2 $ 1 $ 1 $ 1 $ 1 6-10 4 4 4 4 3 3 3 3 2 2 2 1 1 1 1 11-20 5 5 5 4 4 4 3 3 3 2 2 2 1 1 1 21-25 7 7 6 6 6 5 5 4 4 3 3 2 2 1 1 26-30 10 8 7 7 7 6 6 5 4 4 3 3 2 1 1 31-35 12 12 11 10 10 9 8 7 6 5 4 4 3 2 1 36-40 15 14 13 12 12 11 10 9 8 7 6 5 4 3 1 41-44 20 20 19 18 17 16 14 13 12 10 9 7 5 4 2 45-50 24 24 24 22 21 19 17 16 14 12 10 8 6 4 2 51-54 27 27 26 24 23 21 19 18 16 14 12 10 7 5 3 55-59 30 29 27 25 24 22 20 18 16 14 12 10 8 5 3 60-69 32 30 29 27 25 23 22 20 18 15 13 11 8 6 3 70-79 36 34 33 31 29 27 25 23 20 18 16 13 10 7 4 80 40 38 36 34 32 30 28 26 24 22 19 17 14 11 6
Death Benefit Option C:
Policy Years Since Issue or Increase ------------------------------------------------------------------- Age at issue or increase 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 - ------------------------------------------------------------------------ 0-5 $ 4 $ 4 $ 3 $ 3 $ 3 $ 3 $ 3 $ 2 $ 2 $ 2 $ 2 $ 1 $ 1 $ 1 $ 1 6-10 4 4 4 4 3 3 3 3 2 2 2 1 1 1 1 11-20 4 4 4 4 4 3 3 3 3 2 2 2 1 1 1 21-25 5 5 5 5 5 4 4 3 3 3 2 2 2 1 1 26-30 7 6 5 5 5 5 5 4 3 3 3 2 2 1 1 31-35 10 9 9 8 8 7 7 6 5 4 4 3 3 2 1 36-40 12 11 10 10 9 9 8 7 6 6 5 4 3 2 1 41-44 15 15 14 13 12 12 10 10 9 7 7 5 4 3 2 45-50 18 18 18 16 16 14 13 12 11 9 8 6 5 3 2 51-54 21 21 20 19 18 16 15 14 12 11 9 8 6 4 2 55-59 24 23 22 20 19 18 16 15 13 12 10 8 7 4 3 60-64 27 26 25 23 21 20 19 17 15 13 11 9 7 5 3 65-69 22 22 20 18 17 16 15 13 12 11 9 7 6 4 2 70-79 22 21 20 18 17 16 15 13 12 11 9 8 6 4 2 80 22 21 20 18 17 16 15 14 13 12 10 9 8 6 3
21 [SIDEBAR: You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy.] Federal Tax Matters The following is a brief summary of some tax rules that may apply to your Policy. You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under your Policy, especially before you make unscheduled premium payments, change your specified face amount, change your death benefit option, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the Policy. The Policy Insurance proceeds . Generally excludable from your beneficiary's gross income. . The proceeds may be subject to federal estate tax: (i) if paid to the insured's estate; or (ii) if paid to a different beneficiary if the insured possessed incidents of ownership at or within three years before death. . If you die before the insured, the value of your Policy (determined under IRS rules) is included in your estate and may be subject to federal estate tax. . Whether or not any federal estate tax is due is based on a number of factors including the estate size. Cash value (if your Policy is not a modified endowment contract) . You are generally not taxed on your cash value until you withdraw it, surrender your Policy or receive a distribution on the Final Date. In these cases, you are generally permitted to take withdrawals up to the amount of premiums paid without any tax consequences. However, withdrawals will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules apply in the first 15 Policy years, when a distribution may be subject to tax if there is a gain in your Policy (which is generally when your cash value exceeds the cumulative premiums you paid). Finally, if your Policy is part of a collateral assignment equity split dollar arrangement, there is a risk that increases in cash value may be taxed annually. Loans . Loan amounts received will generally not be subject to income tax, unless your Policy is or becomes a modified endowment contract or terminates. . Interest on loans is generally not deductible. For businesses that own a Policy, at least part of the interest deduction unrelated to the Policy may be disallowed unless the insured is a 20% owner, officer, director or employee of the business. . If your Policy terminates (upon surrender, cancellation, lapse or the Final Date) while any Policy loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Policy distribution. Modified Endowment Contracts These contracts are life insurance contracts where the premiums paid during the first 7 years after the Policy is issued, or after a material change in the Policy, exceeds tax law limits referred to as the "7-pay test." Material 22 changes in the Policy, include changes in the level of benefits and certain other changes to your Policy after the issue date. Reductions in benefits during a 7-pay period may cause your Policy to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. If your Policy is considered a modified endowment contract the following applies: . The death benefit will generally be income tax free to your beneficiary, as discussed above. . Amounts withdrawn or distributed before the insured's death, including loans, assignments and pledges, are (to the extent of any gains in your policy) treated as income first and subject to income tax. All modified endowment contracts you purchase from us and our affiliates during the same calendar year are treated as a single contract for purposes of determining the amount of any such income. . An additional 10% income tax generally applies to the taxable portion of the amounts received before age 59 1/2, except generally if you are disabled or the distribution is part of a series of substantially equal periodic payments. Diversification In order for your Policy to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Policy. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Policy owners of gains under their Policies. Changes to tax rules and interpretations Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Policy. These changes may take effect retroactively. We reserve the right to amend the Policy in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: . Possible taxation of cash value transfers. . Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. . Possible limits on the number of investment funds available or the frequency of transfers among them. . Possible changes in the tax treatment of Policy benefits and rights. Our taxation In general, we don't expect to incur federal, state or local taxes upon the earnings or realize capital gains attributable to the assets in the Separate Account relating to the Policies' cash surrender value. If we do incur such taxes, we reserve the right to charge the cash value allocated to the Separate Account for these taxes. Showing Performance We may advertise or otherwise show: . Investment division performance ranking and rating information as it compares among similar investments as compiled by independent organizations. 23 [SIDEBAR: Carefully review your Policy which contains a full discussion of all its provisions.] . Comparisons of the investment divisions with performance of similar investments and appropriate indices. . Our insurance company ratings that are assigned by independent rating agencies and that are relevant when considering our ability to honor our guarantees. . Personalized illustrations based on historical Separate Account performance. Rights We Reserve We reserve the right to make certain changes if we believe the changes are in the best interest of our Policy owners or would help carry out the purposes of the Policy. We will make these changes in the manner permitted by applicable law and only after getting any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: . Operating the Separate Account in any other form that is permitted by applicable law. . Changes to obtain or continue exemptions from the 1940 Act. . Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. . Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. . Changing the way we assess charges without exceeding the aggregate amount of the Policy's guaranteed maximum charges. . Making any necessary technical changes to the Policy to conform it to the changes we have made. Other Policy Provisions You should read your Policy for a full discussion of its provisions. The following is a brief discussion of some of the provisions that you should consider: Free Look Period You can return the Policy during this period. The period is the later of: . 10 days after you receive the Policy (unless state law requires your Policy to specify a longer specified period); and . 45 days after we receive Part A of the completed application. If you return your Policy, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. You have a smiliar free look period with respect to any specified face amount increase you request. If you exercise this right, we will restore your policy values to what they would have been if you had never requested the increase. Incontestability We will not contest: . Your Policy after 2 Policy years from issue or reinstatement (excluding riders added later). 24 [SIDEBAR: Under certain situations, we may defer payments.] [SIDEBAR: We perform the sales and administrative services for the Policies.] . An increase in a death benefit after it has been in effect for two years. Suicide If the insured commits suicide within the first two Policy years (or another period required by state law), your beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the insured commits suicide within two years of such increase. Age and Sex We will adjust benefits to reflect the correct age and sex of the insured, if this information isn't correct in the Policy application. Assignment and Change of Ownership You can assign your Policy as collateral if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Designated Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax adviser before making any change of ownership or other assignment. Payment and Deferment Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: . The New York Stock Exchange has an unscheduled closing. . There is an emergency so that we could not reasonably determine the investment experience of a Policy. . The Securities and Exchange Commission by order permits us do so for the protection of Policy owners (provided that the delay is permitted under New York State insurance law and regulations). . With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. . We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. We currently pay interest on the amount of insurance proceeds at 6% per year (or higher if state law requires) from the date of death until the date we pay the benefit. Dividends The Policy is "nonparticipating," which means it is not eligible for dividends from us and does not share in any distributions of our surplus. Sales and Administration of the Policies We serve as the "principal underwriter," as defined in the 1940 Act, for the Policy and other variable life insurance and variable annuity contracts issued by our subsidiary and us. We are registered under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We are an investment manager to the Fund and may also provide advisory services to other clients. 25 [SIDEBAR: You can give us voting instructions on shares of each Portfolio of a Fund that are attributed to your Policy.] Bonding Our directors, officers and employees are bonded in the amount of $50,000,000, subject to a $5,000,000 deductible. Distributing the Policies We sell the Policies through licensed life insurance sales representatives: . Registered through us. . Registered through other broker-dealers, including a wholly owned subsidiary. Commissions We pay commissions to representatives (or the broker-dealers through which they are registered) for the sale of our products. The commissions do not result in a charge against the Policy in addition to the charges already described elsewhere in this Prospectus. Commissions paid in 1997, 1998 and 1999 totaled $21,001,907, $18,428,323, and $19,290,501, respectively. Maximum commissions are: . First Policy Year: . The lesser of 60% of the Option A target premium; plus . 3% of the excess of the premium paid over the Option A target premium; or . $40 per $1000 of face amount of insurance issued. . Policy Years 2-4: 5% of premiums paid in the Policy year. . Policy Years 5-10: A servicing fee of 2% of premiums paid in the Policy year. . Policy Years 11 and later: A servicing fee of 1% of premiums paid in the Policy year. We also pay the sales manager of a sales representative employed by us an override commission based on many factors including the commissions paid to the representative who sold the Policy and to other representatives the sales manager supervises. We may require all or part of the commissions to be returned to us if you do not continue your Policy for at least 2 years. Voting Rights The Funds have shareholder meetings from time to time to, for example, elect directors and approve investment managers. We will vote the shares of each Portfolio that are attributed to your Policy based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Policy owners. 26 The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: . Your Policy's cash value in the corresponding investment division; by . The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Policy owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. Reports Generally, you will promptly receive statements confirming your significant transactions such as: . Change in specified face amount. . Change in death benefit options. . Transfers among investment divisions (including those through Automated Investment Strategies, which are confirmed quarterly). . Partial withdrawals. . Loan amounts you request. . Loan repayments and premium payments. If your premium payments are made through check-o-matic or another systematic payment method, we will not send you any confirmation in addition to the one you receive from your bank or employer. We will also send you an annual statement within 30 days after a Policy year that will summarize the year's transactions and include information on: . Deductions and charges. . Status of the death benefit. . Cash and cash surrender values. . Amounts in the investment divisions and Fixed Account. . Status of Policy loans. . Automatic loans to pay interest. . Information on your modified endowment contract status (if applicable). We will also send you a Fund's annual and semi-annual reports to shareholders. 27 [SIDEBAR: Personalized illustrations can help you understand how your Policy values can vary.] Illustration of Policy Benefits In order to help you understand how your Policy values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the insured under your Policy and such factors as the specified face amount, death benefit option, premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. Getting More Information We are regulated by the New York Insurance Department and periodically are examined by them. We are also subject to the laws and regulations of all the jurisdictions in which we do business and, if required, we have filed the Policy for approval in every jurisdiction in which the Policy is sold. The Policy and /or the guaranteed minimum death benefit may not be available in every jurisdiction. You should ask your sales representative whether the Policy is available in your jurisdiction. We file annual statements on our operations, including financial statements, with insurance departments of various jurisdictions so that they can review our solvency and compliance with applicable laws and regulations. You can review these statements which are available at the offices of the various insurance departments. This Prospectus is part of a registration statement that we filed with the Securities and Exchange Commission under the Securities Act of 1933. The registration statement includes additional information, amendments and exhibits. You can get this information from the Securities and Exchange Commission (a copying fee may apply) by visiting or writing to its Public Reference Room or using its Internet site at: . Securities and Exchange Commission Public Reference Room Washington, D.C. 20549 Call 1-800-SEC-0330 (for information about using the Public Reference Room) Internet site: http://www.sec.gov Legal, Accounting and Actuarial Matters Christopher P. Nicholas, Associate General Counsel at MetLife, has passed upon the legality of the Policies. Messrs. Freedman, Levy Kroll &Simonds, Washington, D.C., have advised us on certain matters relating to the federal securities laws. Deloitte & Touche LLP, independent auditors, audited the financial statements included in this Prospectus, as stated in their reports appearing herein. The financial statements are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. Marian Zeldin, FSA, MAAA, Vice-President and Actuary of MetLife, has examined actuarial matters included in the registration statement, as stated in her opinion filed as an exhibit to the registration statement. 28 Management The present directors and the senior officers and secretary of MetLife are listed below, together with certain information concerning them: Directors, Officers-Directors
Principal Occupation & Positions and Offices Name Business Address with MetLife - ------------------------------------------------------------------------------------------------- Curtis H. Barnette Chairman and Chief Executive Officer Director Bethlehem Steel Corp. 1170 Eight Ave. -- Martin Tower 2118 Bethlehem, PA 18016 - ------------------------------------------------------------------------------------------------- Robert H. Benmosche Chairman of the Board, President and Chairman of the Board, President, Chief Executive Officer Chief Executive Officer and Director Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Gerald Clark Vice Chairman of the Board and Vice Chairman of the Board, Chief Investment Officer Chief Investment Officer and Director Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Joan Ganz Cooney Chairman, Executive Committee Director Children's Television Workshop One Lincoln Plaza New York, NY 10023 - ------------------------------------------------------------------------------------------------- Burton A. Dole, Jr. Retired Chairman, President and Director Chief Executive Officer Nellcor Puritan Bennett 2200 Faraday Avenue Carlsbad, CA 92008 - ------------------------------------------------------------------------------------------------- James R. Houghton Chairman of the Board Emeritus Director and Director Corning Incorporated 80 East Market Street, 2nd Floor Corning, NY 14830 - ------------------------------------------------------------------------------------------------- Harry P. Kamen Retired Chairman and Director Chief Executive Officer Metropolitan Life Insurance Company One Madison Ave. New York, NY 10010 - ------------------------------------------------------------------------------------------------- Helene L. Kaplan Of Counsel Director Skadden Arps, Slate, Meagher & Flom 919 Third Ave. New York, NY 10022 - ------------------------------------------------------------------------------------------------- Charles M. Leighton Retired Chairman and Director Chief Executive Officer CML Group, Inc. 524 Main Street Bolton, MA 01720 - ------------------------------------------------------------------------------------------------- Allen E. Murray Retired Chairman of the Board and Director Chief Executive Officer Mobil Corporation 375 Park Ave., Suite 2901 New York, NY 10152 - ------------------------------------------------------------------------------------------------- Stewart Nagler Vice Chairman of the Board and Vice Chairman of the Board and Chief Financial Officer Chief Financial Officer and Director Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010
29
Principal Occupation & Positions and Offices Name Business Address with MetLife - ------------------------------------------------------------------------------------- John J. Phelan, Jr. Retired Chairman and Director Chief Executive Officer New York Stock Exchange, Inc. P.O. Box 312 Mill Neck, NY 11765 - ------------------------------------------------------------------------------------- Hugh B. Price President and Chief Executive Officer Director National Urban League, Inc. 12 Wall Street New York, NY 10005 - ------------------------------------------------------------------------------------- Robert G. Schwartz Retired Chairman of the Board, Director President and Chief Executive Officer Metropolitan Life Insurance Company 200 Park Ave., Suite 5700 New York, NY 10166 - ------------------------------------------------------------------------------------- Ruth J. Simmons, Ph.D. President Director Smith College College Hall 20 Northhampton, MA 01063 - ------------------------------------------------------------------------------------- William C. Steere, Jr. Chairman of the Board and Director Chief Executive Officer Pfizer, Inc. 235 East 42nd Street New York, NY 10017
30
Name of Officer* Position with Metropolitan Life - ---------------------------------------------------------------------------------------- Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer - ---------------------------------------------------------------------------------------- Gerald Clark Vice Chairman of the Board, Chief Investment Officer and Director - ---------------------------------------------------------------------------------------- Stewart G. Nagler Vice Chairman of the Board, Chief Financial Officer and Director - ---------------------------------------------------------------------------------------- Gary A. Beller Senior Executive Vice-President and General Counsel - ---------------------------------------------------------------------------------------- James H. Benson President, Individual Business; Chairman, Chief Executive Officer and President, New England Life Insurance Company - ---------------------------------------------------------------------------------------- C. Robert Henrikson President, Institutional Business - ---------------------------------------------------------------------------------------- William J. Toppeta President, Client Services and Chief Administrative Officer - ---------------------------------------------------------------------------------------- Richard A. Liddy Senior Executive Vice-President - ---------------------------------------------------------------------------------------- Catherine A. Rein Senior Executive Vice-President; President and Chief Executive Officer, Metropolitan Property and Casualty Insurance Company - ---------------------------------------------------------------------------------------- John H. Tweedie Senior Executive Vice-President - ---------------------------------------------------------------------------------------- Lisa M. Weber Executive Vice-President - ---------------------------------------------------------------------------------------- Judy E. Weiss Executive Vice-President and Chief Actuary
- ------------ * The principal occupation of each officer, except for the following officers, during the last five years has been as an officer of Metropolitan Life or an affiliate thereof. Robert H. Benmosche has been an officer of Metropolitan Life since September, 1995; prior thereto, he was an Executive Vice- President of Paine Webber. Lisa Weber has been an officer of Metropolitan Life since March 16, 1998; prior thereto, she was a Director of Diversity Strategies and Development and an Associate Director of Human Resources of Paine Webber. The business address of each officer is 1 Madison Avenue, New York, New York 10010. 31 INDEPENDENT AUDITORS' REPORT To the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statements of assets and liabilities of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios of Metropolitan Life Separate Account UL (the "Separate Account") as of December 31, 1999, and the related statements (i) of operations for the year ended December 31, 1999 and of changes in net assets for the years ended December 31, 1999 and 1998 of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index and Russell 2000 Index Portfolios and (ii) of operations and of changes in net assets for the period May 3, 1999 (commencement of operations) to December 31, 1999 of Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and the depositor of the Separate Account. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the State Street Research Growth, State Street Research Income, State Street Research Money Market, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large Cap Value, Neuberger Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000 Index, Janus Large Cap Growth, Invesco VIF High Yield, Invesco VIF Industrial Income, Invesco VIF Realty and Templeton International Stock Portfolios of Metropolitan Life Separate Account UL as of December 31, 1999 and the results of their operations and the changes in their net assets for the respective stated periods, in conformity with generally accepted accounting principles. We did not audit the financial statements for the Templeton Variable Products Series Fund, the Janus Aspen Series Fund and the Investco Investment Funds, Inc., of which the investment information for these funds is summarized in Note 5 to the financial statements. The financial statements for these funds were audited by other auditors. DELOITTE & TOUCHE LLP Tampa, Florida March 27, 2000 1 Metropolitan Life Separate Account UL STATEMENT OF ASSETS AND LIABILITIES At December 31, 1999
State Street State Street State Street State Street Research State Street Research Research Research Money Research Aggressive Growth Income Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ ASSETS: Investments at Value (Note 2A): State Street Research Growth Portfolio (10,745,186 shares; cost $333,312,756)..... $420,566,549 -- -- -- -- State Street Research Income Portfolio (5,620,168 shares; cost $70,920,972)........... -- $65,643,563 -- -- -- State Street Research Money Market Portfolio (3,197,886 shares; cost $34,029,917)........... -- -- $33,075,729 -- -- State Street Research Diversified Portfolio (13,568,374 shares; cost $225,692,070)..... -- -- -- $247,894,193 -- State Street Research Aggressive Growth Portfolio (5,593,963 shares; cost $149,637,856).......... -- -- -- -- $215,087,902 MetLife Stock Index Portfolio (6,441,446 shares; cost $196,867,091)..... -- -- -- -- -- Santander International Stock Portfolio (3,175,743 shares ; cost $41,292,139)...... -- -- -- -- -- Loomis Sayles High Yield Bond Portfolio (541,135 shares; cost $5,032,558)............ -- -- -- -- -- Janus Mid Cap Portfolio (3,102,796 shares; cost $64,508,142)........... -- -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,043,071 shares; cost $24,804,658)........... -- -- -- -- -- Scudder Global Equity Portfolio (970,303 shares; cost $11,980,830)...... -- -- -- -- -- Harris Oakmark Large Cap Value Portfolio (33,250 shares; cost $310,760). -- -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (49,457 shares; cost $575,293). -- -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (96,515 shares; cost $1,121,477)............ -- -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (56,961 shares; cost $565,809). -- -- -- -- -- Morgan Stanley EAFE Index Portfolio (93,368 shares; cost $1,085,242)....... -- -- -- -- -- Russell 2000 Index Portfolio (36,094 shares; cost $410,863). -- -- -- -- -- Janus Large Cap Growth Portfolio (2,864 shares; cost $85,665).......... -- -- -- -- -- Invesco VIF High Yield Portfolio (280 shares; cost $3,233)........... -- -- -- -- -- Invesco VIF Industrial Income Portfolio (279 shares; cost $5,827)).......... -- -- -- -- -- Invesco VIF Realty Portfolio (200 shares; cost $1,500)........... -- -- -- -- -- Templeton International Stock (307 shares; cost $6,351)................ -- -- -- -- -- ------------ ----------- ----------- ------------ ------------ Total Investments....... 420,566,549 65,643,563 33,075,729 247,894,193 215,087,902 Cash and Accounts Receivable............. 20 0 0 0 0 ------------ ----------- ----------- ------------ ------------ Total Assets............ 420,566,569 65,643,563 33,075,729 247,894,193 215,087,902 LIABILITIES............. 898,400 12,123 2,247 191,488 417,916 ------------ ----------- ----------- ------------ ------------ NET ASSETS.............. $419,668,169 $65,631,440 $33,073,482 $247,702,705 $214,669,986 ============ =========== =========== ============ ============
See Notes to Financial Statements. 2
Loomis T. Rowe Harris Neuberger MetLife Santander Sayles Price Scudder Oakmark Berman Stock International High Yield Janus Small Cap Global Large Cap Partners Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ------------ ------------- ---------- ------------ ----------- ----------- --------- ------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $261,458,295 -- -- -- -- -- -- -- -- $44,047,550 -- -- -- -- -- -- -- -- $4,918,907 -- -- -- -- -- -- -- -- $113,376,167 -- -- -- -- -- -- -- -- $32,137,518 -- -- -- -- -- -- -- -- $14,467,210 -- -- -- -- -- -- -- -- $296,920 -- -- -- -- -- -- -- -- $592,005 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- 261,458,295 44,047,550 4,918,907 113,376,167 32,137,518 14,467,210 296,920 592,005 84,625 0 35,301 0 11,803 30,687 42,578 285 - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- 261,542,920 44,047,550 4,954,208 113,376,167 32,149,321 14,497,897 339,498 592,290 248,062 122,989 0 297,416 0 0 0 0 - ------------ ----------- ---------- ------------ ----------- ----------- -------- -------- $261,294,858 $43,924,561 $4,954,208 $113,078,751 $32,149,321 $14,497,897 $339,498 $592,290 ============ =========== ========== ============ =========== =========== ======== ========
3 Metropolitan Life Separate Account UL STATEMENT OF ASSETS AND LIABILITIES (Continued) At December 31, 1999
T. Rowe Lehman Morgan Price Brothers Stanley Russell Large Cap Aggregate EAFE 2000 Growth Bond Index Index Index Portfolio Portfolio Portfolio Portfolio ASSETS: ----------- ---------- ---------- --------- Investments at Value (Note 2A): State Street Research Growth Portfolio (10,745,186 shares; cost $333,312,756)..................... -- -- -- -- State Street Research Income Portfolio (5,620,168 shares; cost $70,920,972)...................... -- -- -- -- State Street Research Money Market Portfolio (3,197,886 shares; cost $34,029,917)...................... -- -- -- -- State Street Research Diversified Portfolio (13,568,374 shares; cost $225,692,070)..................... -- -- -- -- State Street Research Aggressive Growth Portfolio (5,593,963 shares; cost $149,637,856)........ -- -- -- -- MetLife Stock Index Portfolio (6,441,446 shares; cost $196,867,091)................ -- -- -- -- Santander International Stock Portfolio (3,175,743 shares ; cost $41,292,139)...................... -- -- -- -- Loomis Sayles High Yield Bond Portfolio (541,135 shares; cost $5,032,558)....................... -- -- -- -- Janus Mid Cap Portfolio (3,102,796 shares; cost $64,508,142)................. -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (2,043,071 shares; cost $24,804,658)...................... -- -- -- -- Scudder Global Equity Portfolio (970,303 shares; cost $11,980,830)................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (33,250 shares; cost $310,760)......................... -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (49,457 shares; cost $575,293).................... -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (96,515 shares; cost $1,121,477)....................... $1,294,264 -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (56,961 shares; cost $565,809).................... -- $538,275 -- -- Morgan Stanley EAFE Index Portfolio (93,368 shares; cost $1,085,242).................. -- -- $1,245,531 -- Russell 2000 Index Portfolio (36,094 shares; cost $410,863).... -- -- -- $451,900 Janus Large Cap Growth Portfolio (2,864 shares; cost $85,665)..................... -- -- -- -- Invesco VIF High Yield Portfolio (280 shares; cost $3,233)......... -- -- -- -- Invesco VIF Industrial Income Portfolio (279 shares; cost $5,827))..................... -- -- -- -- Invesco VIF Realty Portfolio (200 shares; cost $1,500).............. -- -- -- -- Templeton International Stock (307 shares; cost $6,351).............. -- -- -- -- ---------- -------- ---------- -------- Total Investments................. 1,294,264 538,275 1,245,531 451,900 Cash and Accounts Receivable....... 0 22,766 0 88 ---------- -------- ---------- -------- Total Assets...................... 1,294,264 561,041 1,245,531 451,988 LIABILITIES........................ 40,869 0 23,869 0 ---------- -------- ---------- -------- NET ASSETS......................... $1,253,395 $561,041 $1,221,662 $451,988 ========== ======== ========== ========
See Notes to Financial Statements. 4
Janus Invesco Invesco VIF Invesco Templeton Large Cap VIF Industrial VIF International Growth High Yield Income Realty Stock Portfolio Portfolio Portfolio Portfolio Portfolio Total - --------- ---------- ----------- --------- ------------- -------------- -- -- -- -- -- $ 420,566,549 -- -- -- -- -- 65,643,563 -- -- -- -- -- 33,075,729 -- -- -- -- -- 247,894,193 -- -- -- -- -- 215,087,902 -- -- -- -- -- 261,458,295 -- -- -- -- -- 44,047,550 -- -- -- -- -- 4,918,907 -- -- -- -- -- 113,376,167 -- -- -- -- -- 32,137,518 -- -- -- -- -- 14,467,210 -- -- -- -- -- 296,920 -- -- -- -- -- 592,005 -- -- -- -- -- 1,294,264 -- -- -- -- -- 538,275 -- -- -- -- -- 1,245,531 -- -- -- -- -- 451,900 $96,373 -- -- -- -- 96,373 -- $3,227 -- -- -- 3,227 -- -- $5,872 -- -- 5,872 -- -- -- $1,584 -- 1,584 -- -- -- -- $6,832 6,832 ------- ------ ------ ------ ------ -------------- 96,373 3,227 5,872 1,584 6,832 1,457,206,366 0 0 0 0 0 228,153 ------- ------ ------ ------ ------ -------------- 96,373 3,227 5,872 1,584 6,832 1,457,434,519 0 0 0 0 0 2,255,379 ------- ------ ------ ------ ------ -------------- $96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140 ======= ====== ====== ====== ====== ==============
5 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS
For the year ended December 31, 1999 ------------------------------------------------------------------ State Street State Street State Street State Street Research State Street Research Research Research Money Research Aggressive Growth Income Market Diversified Growth Portfolio Portfolio Portfolio Portfolio Portfolio ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME: Income: Dividends (Note 3)..... $44,038,080 $ 4,181,436 $1,538,117 $20,799,436 $ 4,466,938 Expenses: Mortality and expense charges (Note 4)...... 3,209,889 499,462 241,265 1,973,981 1,429,076 ----------- ----------- ---------- ----------- ----------- Net investment income (loss)................. 40,828,191 3,681,974 1,296,852 18,825,455 3,037,862 ----------- ----------- ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions........... 3,593,964 15,187 245,673 743,624 1,280,373 Change in unrealized appreciation (depreciation) of investments............ 16,515,105 (5,496,396) (275,023) (2,237,161) 47,914,985 ----------- ----------- ---------- ----------- ----------- Net realized and unrealized gain (loss) on investments......... 20,109,069 (5,481,209) (29,350) (1,493,537) 49,195,358 ----------- ----------- ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............. $60,937,260 $(1,799,235) $1,267,502 $17,331,918 $52,233,220 =========== =========== ========== =========== ===========
See Notes to Financial Statements. 6
- -------------------------------------------------------------------------------------------------- Loomis T. Rowe Harris Neuberger MetLife Santander Sayles Price Scudder Oakmark Berman Stock International High Yield Janus Small Cap Global Large Cap Partners Index Stock Bond Mid Cap Growth Equity Value Mid Cap Value Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio - ----------- ------------- ---------- ----------- ---------- ---------- --------- ------------- $12,076,347 $ 6,737,411 $ 384,074 $ 5,416,355 $ 0 $ 486,049 $ 2,973 $13,508 1,722,924 334,318 32,947 432,040 159,812 86,933 615 627 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 10,353,423 6,403,093 351,127 4,984,315 (159,812) 399,116 2,358 12,881 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 3,899,836 528,185 (159,077) 1,140,427 41,394 272,213 (5,489) 679 24,029,258 (1,137,521) 384,776 44,344,823 6,830,580 1,937,990 (13,841) 16,713 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- 27,929,094 (609,336) 225,699 45,485,250 6,871,974 2,210,203 (19,330) 17,392 - ----------- ----------- --------- ----------- ---------- ---------- -------- ------- $38,282,517 $ 5,793,757 $ 576,826 $50,469,565 $6,712,162 $2,609,319 $(16,972) $30,273 =========== =========== ========= =========== ========== ========== ======== =======
7 Metropolitan Life Separate Account UL STATEMENTS OF OPERATIONS (Continued)
For the year ended December 31, 1999 ---------------------------------------- T. Rowe Lehman Morgan Price Brothers Stanley Russell Large Cap Aggregate EAFE 2000 Growth Bond Index Index Index Portfolio Portfolio Portfolio Portfolio --------- ---------- --------- --------- INVESTMENT INCOME: Income: Dividends (Note 3).................. $ 5,264 $ 24,999 $ 15,956 $13,398 Expenses: Mortality and expense charges (Note 4)................................. 4,482 2,156 4,919 1,131 -------- -------- -------- ------- Net investment income (loss)......... 782 22,843 11,037 12,267 -------- -------- -------- ------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: (Note 2B) Net realized gain (loss) from security transactions............... 2,027 (1,189) 92,428 10,610 Change in unrealized appreciation (depreciation) of investments....... 172,687 (27,533) 160,288 41,036 -------- -------- -------- ------- Net realized and unrealized gain (loss) on investments............... 174,714 (28,722) 252,716 51,646 -------- -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS..................... $175,496 $ (5,879) $263,753 $63,913 ======== ======== ======== =======
See Notes to Financial Statements. 8
For the period May 3, 1999 to December 31, 1999 - ------------------------------------------------------------- Janus Invesco Invesco VIF Invesco Templeton Large Cap VIF Industrial VIF International Growth High Yield Income Realty Stock Portfolio Portfolio Portfolio Portfolio Portfolio Total - ----------- ------------ ----------- --------- ------------- ------------ $ 0 $ 0 $ 0 $ 0 $ 0 $100,200,341 61 0 0 1 5 10,136,644 ------- --- --- --- ---- ------------ (61) 0 0 (1) (5) 90,063,697 ------- --- --- --- ---- ------------ 79 0 0 0 32 11,700,976 10,708 (6) 45 84 481 133,172,078 ------- --- --- --- ---- ------------ 10,787 (6) 45 84 513 144,873,054 ------- --- --- --- ---- ------------ $10,726 $(6) $45 $83 $508 $234,936,751 ======= === === === ==== ============
9 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS
State Street Research State Street Research State Street Research Growth Portfolio Income Portfolio Money Market Portfolio -------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 40,828,191 $ 27,785,410 $ 3,681,974 $ 3,877,871 $ 1,296,852 $ 1,022,138 Net realized gain (loss) from security transactions.......... 3,593,964 1,828,922 15,187 239,248 245,673 139,583 Change in unrealized appreciation (depreciation) of investments........... 16,515,105 38,462,367 (5,496,396) (12,424) (275,023) (384,125) ------------ ------------ ----------- ----------- ------------ ------------ Net increase (decrease) in net assets from operations............ 60,937,260 68,076,699 (1,799,235) 4,104,695 1,267,502 777,596 ------------ ------------ ----------- ----------- ------------ ------------ From capital transactions: Net premiums........... 76,267,713 68,697,236 15,797,917 13,501,414 35,768,800 28,800,532 Redemptions............ (15,563,840) (9,651,413) (1,719,595) (1,455,088) (296,905) (292,311) Net portfolio transfers............. 3,590,588 462,907 2,922,342 2,032,607 (23,898,442) (12,984,969) Other net transfers.... (38,125,701) (33,909,522) (6,009,960) (5,444,551) (2,027,635) (2,036,921) ------------ ------------ ----------- ----------- ------------ ------------ Net increase in net assets from capital transactions.......... 26,168,760 25,599,208 10,990,704 8,634,382 9,545,818 13,486,331 ------------ ------------ ----------- ----------- ------------ ------------ NET CHANGE IN NET ASSETS................. 87,106,020 93,675,907 9,191,469 12,739,077 10,813,320 14,263,927 NET ASSETS--BEGINNING OF YEAR................... 332,562,149 238,886,242 56,439,971 43,700,894 22,260,162 7,996,235 ------------ ------------ ----------- ----------- ------------ ------------ NET ASSETS--END OF YEAR. $419,668,169 $332,562,149 $65,631,440 $56,439,971 $ 33,073,482 $ 22,260,162 ============ ============ =========== =========== ============ ============
See Notes to Financial Statements. 10
State Street Research State Street Research Aggressive Growth MetLife Santander Diversified Portfolio Portfolio Stock Index Portfolio International Stock Portfolio - -------------------------- -------------------------- -------------------------- ------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 1999 1998 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- $ 18,825,455 $ 17,838,146 $ 3,037,862 $ 7,473,609 $ 10,353,423 $ 5,466,190 $ 6,403,093 $ 119,967 743,624 522,086 1,280,373 390,678 3,899,836 2,060,324 528,185 251,518 (2,237,161) 12,721,568 47,914,985 9,316,026 24,029,258 21,573,004 (1,137,521) 5,740,557 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 17,331,918 31,081,800 52,233,220 17,180,313 38,282,517 29,099,518 5,793,757 6,112,042 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 54,466,186 48,746,380 41,977,555 48,080,744 80,432,444 59,343,787 8,765,614 10,224,172 (8,542,813) (5,712,146) (6,935,090) (4,373,459) (5,037,136) (2,361,734) (1,805,287) (1,153,624) 2,267,794 2,809,643 (8,586,687) (6,687,894) 20,459,060 9,729,932 (1,507,125) (2,377,311) (26,640,820) (23,504,994) (18,101,172) (18,773,580) (31,708,703) (23,041,439) (3,575,131) (3,678,501) - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 21,550,347 22,338,883 8,354,606 18,245,811 64,145,665 43,670,546 1,878,071 3,014,736 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- 38,882,265 53,420,683 60,587,826 35,426,124 102,428,182 72,770,064 7,671,828 9,126,778 208,820,440 155,399,757 154,082,160 118,656,036 158,866,676 86,096,612 36,252,733 27,125,955 - ------------ ------------ ------------ ------------ ------------ ------------ -------------- -------------- $247,702,705 $208,820,440 $214,669,986 $154,082,160 $261,294,858 $158,866,676 $ 43,924,561 $ 36,252,733 ============ ============ ============ ============ ============ ============ ============== ==============
11 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
T. Rowe Price Loomis Sayles Janus Small Cap Growth High Yield Bond Portfolio Mid Cap Portfolio Portfolio ------------------------- -------------------------- -------------------------- For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 351,127 $ 241,444 $ 4,984,315 $ 9,561 $ (159,812) $ (71,325) Net realized gain (loss) from security transactions.......... (159,077) (15,746) 1,140,427 178,428 41,394 (14,908) Change in unrealized appreciation (depreciation) of investments........... 384,776 (428,334) 44,344,823 4,299,801 6,830,580 455,213 ---------- ---------- ------------ ----------- ----------- ----------- Net increase (decrease) in net assets from operations............ 576,826 (202,636) 50,469,565 4,487,790 6,712,162 368,980 ---------- ---------- ------------ ----------- ----------- ----------- From capital transactions: Net premiums........... 1,766,270 1,559,975 31,140,404 13,796,446 10,707,741 8,413,079 Redemptions............ (387,694) (29,635) (1,283,943) (179,560) (556,621) (87,656) Net portfolio transfers............. 1,046,383 180,422 24,344,237 4,280,509 5,288,531 3,021,876 Other net transfers.... (587,488) (451,340) (12,718,059) (5,121,876) (3,307,953) (2,968,930) ---------- ---------- ------------ ----------- ----------- ----------- Net increase in net assets from capital transactions.......... 1,837,471 1,259,422 41,482,639 12,775,519 12,131,698 8,378,369 ---------- ---------- ------------ ----------- ----------- ----------- NET CHANGE IN NET ASSETS................. 2,414,297 1,056,786 91,952,204 17,263,309 18,843,860 8,747,349 NET ASSETS--BEGINNING OF YEAR................... 2,539,911 1,483,125 21,126,547 3,863,238 13,305,461 4,558,112 ---------- ---------- ------------ ----------- ----------- ----------- NET ASSETS--END OF YEAR. $4,954,208 $2,539,911 $113,078,751 $21,126,547 $32,149,321 $13,305,461 ========== ========== ============ =========== =========== ===========
See Notes to Financial Statements. 12
Scudder Harris Oakmark Neuberger Berman Partners T. Rowe Price Global Equity Portfolio Large Cap Value Portfolio Mid Cap Value Portfolio Large Cap Growth Portfolio ---------------------------- --------------------------- --------------------------- --------------------------- For the Period For the Period For the Period For the Year For the Year For the Year November 9, For the Year November 9, For the Year November 9, Ended Ended Ended 1998 to Ended 1998 to Ended 1998 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 1999 1998 ------------ ------------ ------------ -------------- ------------ -------------- ------------ -------------- $ 399,116 $ 82,316 $ 2,358 $ 0 $ 12,881 $ 0 $ 782 $ 0 272,213 35,936 (5,489) 0 679 0 2,027 0 1,937,990 556,946 (13,841) 0 16,713 0 172,687 0 ----------- ----------- -------- --- -------- --- ---------- --- 2,609,319 675,198 (16,972) 0 30,273 0 175,496 0 ----------- ----------- -------- --- -------- --- ---------- --- 4,574,226 3,660,518 125,384 0 162,181 0 141,433 0 (541,665) (44,451) (8,780) 0 0 0 0 0 985,125 2,251,711 224,137 0 433,203 0 1,037,195 0 (1,431,966) (1,263,459) 15,729 0 (33,367) 0 (100,729) 0 ----------- ----------- -------- --- -------- --- ---------- --- 3,585,720 4,604,319 356,470 0 562,017 0 1,077,899 0 ----------- ----------- -------- --- -------- --- ---------- --- 6,195,039 5,279,517 339,498 0 592,290 0 1,253,395 0 8,302,858 3,023,341 0 0 0 0 0 0 ----------- ----------- -------- --- -------- --- ---------- --- $14,497,897 $ 8,302,858 $339,498 $ 0 $592,290 $ 0 $1,253,395 $ 0 =========== =========== ======== === ======== === ========== ===
13 Metropolitan Life Separate Account UL STATEMENTS OF CHANGES IN NET ASSETS (Continued)
Lehman Brothers Aggregate Morgan Stanley Russell 2000 Bond Index Portfolio EAFE Index Portfolio Index Portfolio --------------------------- --------------------------- --------------------------- For the Period For the Period For the Period For the Year November 9, For the Year November 9, For the Year November 9, Ended 1998 to Ended 1998 to Ended 1998 to December 31, December 31, December 31, December 31, December 31, December 31, 1999 1998 1999 1998 1999 1998 ------------ -------------- ------------ -------------- ------------ -------------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income (loss)................ $ 22,843 $ 0 $ 11,037 $ 0 $ 12,267 $ 0 Net realized gain (loss) from security transactions.......... (1,189) 0 92,428 0 10,610 0 Change in unrealized appreciation (depreciation) of investments........... (27,533) 0 160,288 0 41,036 0 -------- --- ---------- --- -------- --- Net increase (decrease) in net assets from operations............ (5,879) 0 263,753 0 63,913 0 -------- --- ---------- --- -------- --- From capital transactions: Net premiums........... 93,732 0 139,276 0 214,532 0 Redemptions............ (1,012) 0 (1,812) 0 (1,472) 0 Net portfolio transfers............. 484,526 0 862,477 0 219,845 0 Other net transfers.... (10,326) 0 (42,032) 0 (44,830) 0 -------- --- ---------- --- -------- --- Net increase in net assets from capital transactions.......... 566,920 0 957,909 0 388,075 0 -------- --- ---------- --- -------- --- NET CHANGE IN NET ASSETS................. 561,041 0 1,221,662 0 451,988 0 NET ASSETS--BEGINNING OF YEAR................... 0 0 0 0 0 0 -------- --- ---------- --- -------- --- NET ASSETS--END OF YEAR. $561,041 $ 0 $1,221,662 $ 0 $451,988 $ 0 ======== === ========== === ======== ===
See Notes to Financial Statements. 14
Invesco VIF Invesco VIF Templeton Janus Large Cap High Yield Industrial Income Invesco VIF International Growth Portfolio Portfolio Portfolio Realty Portfolio Stock Portfolio TOTAL - ---------------- -------------- ----------------- ---------------- --------------- ------------------------------ For the Period For the Period For the Period For the Period For the Period For the Year For the Year May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to May 3, 1999 to Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, 1999 1999 1999 1999 1999 1999 1998 - ---------------- -------------- ----------------- ---------------- --------------- -------------- -------------- $ (61) $ 0 $ 0 $ (1) $ (5) $ 90,063,697 $ 63,845,327 79 0 0 0 32 11,700,976 5,616,069 10,708 (6) 45 84 481 133,172,078 92,300,599 ------- ------ ------ ------ ------ -------------- -------------- 10,726 (6) 45 83 508 234,936,751 161,761,995 ------- ------ ------ ------ ------ -------------- -------------- 99 0 0 0 1,166 362,542,673 304,824,283 0 0 0 0 0 (42,683,665) (25,341,077) 86,070 3,236 5,802 1,524 5,208 30,275,029 2,719,433 (522) (3) 25 (23) (50) (144,450,716) (120,195,113) ------- ------ ------ ------ ------ -------------- -------------- 85,647 3,233 5,827 1,501 6,324 205,683,321 162,007,526 ------- ------ ------ ------ ------ -------------- -------------- 96,373 3,227 5,872 1,584 6,832 440,620,072 323,769,521 0 0 0 0 0 1,014,559,068 690,789,547 ------- ------ ------ ------ ------ -------------- -------------- $96,373 $3,227 $5,872 $1,584 $6,832 $1,455,179,140 $1,014,559,068 ======= ====== ====== ====== ====== ============== ==============
15 Metropolitan Life Separate Account UL NOTES TO FINANCIAL STATEMENTS December 31, 1999 1.BUSINESS Metropolitan Life Separate Account UL (the "Separate Account") is a multi- division unit investment trust registered under the Investment Company Act of 1940. The five divisions are ULII, IVUL, GVUL, UL2001 and VAI. The Separate Account presently consists of twenty-two investment portfolios used to support variable universal life insurance policies. The assets in each portfolio are invested in shares of the corresponding portfolio of the Metropolitan Series Fund, Inc., the Janus Aspen Series Fund, the Invesco Variable Investment Funds, Inc. and the Templeton Variable Products Series Fund (the "Funds"). Each portfolio has varying investment objectives relative to growth of capital and income. The Separate Account was formed by Metropolitan Life Insurance Company ("Metropolitan Life"), on December 13, 1988 and registered as a unit investment trust on January 5, 1990. The assets of the Separate Account are the property of Metropolitan Life. On May 3, 1999, operations commenced for the five new investment portfolios added to the Separate Account on that date: the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio, the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio and the Templeton International Stock Portfolio. On November 9, 1998, operations commenced for the six new investment portfolios added to the Separate Account on that date: the Harris Oakmark Large Cap Value Portfolio, the Neuberger Berman Partners Mid Cap Value Portfolio, the T. Rowe Price Large Cap Growth Portfolio, the Lehman Brothers Aggregate Bond Index Portfolio, the Morgan Stanley EAFE Index Portfolio and the Russell 2000 Index Portfolio. 2.SIGNIFICANT ACCOUNTING POLICIES A.Valuation of Investments Investments in shares of the Funds are valued at the reported net asset values of the respective portfolios. A summary of investments of the twenty-two designated portfolios of the Funds in which the five investment divisions of the Separate Account invest as of December 31, 1999 is included as Note 5. B.Security Transactions Purchases and sales are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. C.Federal Income Taxes In the opinion of counsel of Metropolitan Life, the Separate Account will be treated as a part of Metropolitan Life and its operations, and the Separate Account will not be taxed as a "regulated investment company" under existing law. Metropolitan Life is taxed as a life insurance company. The policies permit Metropolitan Life to charge against the Separate Account any taxes or reserve for taxes, attributable to the maintenance or operation of the Separate Account. Metropolitan Life is not currently charging any federal income taxes against the Separate Account arising from the earnings of realized capital gains attributable to the Separate Account. Such charges may be imposed in future years depending on market fluctuations and transactions involving the Separate Account. D.Net Premiums Metropolitan Life deducts a sales load and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In certain policies, Metropolitan Life also deducts a Federal income tax charge before amounts are allocated to the Separate Account. The Federal income tax charge is imposed on certain policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. 16 NOTES TO FINANCIAL STATEMENTS--(Continued) 3.DIVIDENDS On May 4, 1999 and December 16, 1999, the Metropolitan Series Fund, Inc. declared dividends for all shareholders of record on May 7, 1999 and December 21, 1999 respectively. The amount of dividends received by the Separate Account was $100,200,341. The dividends were paid to Metropolitan Life on May 11, 1999 and December 22, 1999, respectively, and were immediately reinvested in additional shares of the portfolios in which the investment divisions invest. As a result of this reinvestment, the number of shares of the Metropolitan Series Fund, Inc. held by each of the sixteen investment portfolios increased by the following: State Street Research Growth Portfolio, 1,168,696 shares; State Street Research Income Portfolio, 357,372 shares; State Street Research Money Market Portfolio, 148,919 shares; State Street Research Diversified Portfolio, 1,161,405 shares; State Street Research Aggressive Growth Portfolio, 126,713 shares; MetLife Stock Index Portfolio, 307,335 shares; Santander International Stock Portfolio, 495,499 shares; Loomis Sayles High Yield Bond Portfolio, 42,345 shares; Janus Mid Cap Portfolio, 164,544 shares; Scudder Global Equity Portfolio, 34,867 shares; Harris Oakmark Large Cap Value Portfolio, 343 shares; Neuberger Berman Partners Mid Cap Value Portfolio, 1,185 shares; T. Rowe Price Large Cap Growth Portfolio, 410 shares; Lehman Brothers Aggregate Bond Index Portfolio, 2,648 shares; Morgan Stanley EAFE Index Portfolio, 1,260 shares and Russell 2000 Index Portfolio, 1,133 shares. No dividends were received by the T. Rowe Price Small Cap Growth Portfolio, the Janus Large Cap Growth Portfolio, the Invesco VIF High Yield Portfolio, the Invesco VIF Industrial Income Portfolio, the Invesco VIF Realty Portfolio or the Templeton International Stock Portfolio. 4.EXPENSES For assets in the Separate Account that support certain policies, Metropolitan Life applies a charge against the assets attributable to the Separate Account for the mortality and expense risks assumed by Metropolitan Life. This charge varies by policy type but will be higher than an effective annual rate of .90% of the average daily value of the net assets of the monthly anniversary value of the net assets in the Separate Account attributable to such policies. 17 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999 Investment information, summarized by investment type and industry sector, for each portfolio in which the Separate Account invests is presented below: Metropolitan Series Fund, Inc.
State Street State Street State Street State Street Research Research Research Research Growth Income Money Market Diversified Portfolio Portfolio Portfolio Portfolio -------------- ------------ ------------ -------------- Value Value Value Value (Note 2A) (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Banking................. $ 82,527,431 (2.3%) $ 37,290,000 (1.3%) Biotechnology........... 54,963,147 (1.5%) 24,690,597 (0.9%) Broadcasting............ 296,377,400 (8.2%) 133,419,212 (4.6%) Business Services....... 112,535,700 (3.1%) 50,496,775 (1.8%) Chemicals............... 76,861,100 (2.1%) 34,515,338 (1.2%) Computer Equipment & Service................ 256,218,167 (7.1%) 115,412,728 (4.0%) Consumer Products....... 41,549,200 (1.1%) 18,585,325 (0.6%) Drugs & Health Care..... 199,768,100 (5.5%) 89,658,175 (3.1%) Electrical Equipment.... 135,638,375 (3.7%) 61,141,725 (2.1%) Electronics............. 311,786,331 (8.6%) 139,112,337 (4.8%) Entertainment & Leisure. 69,260,925 (1.9%) 31,127,400 (1.1%) Financial Services...... 207,714,472 (5.7%) 93,083,836 (3.2%) Food & Beverages........ 68,059,775 (1.9%) 30,438,238 (1.1%) Household Products...... 115,271,300 (3.2%) 52,737,925 (1.8%) Insurance............... 122,153,209 (3.4%) 55,087,431 (1.9%) Liquor.................. 35,878,100 (1.0%) 16,110,094 (0.6%) Medical Equipment & Supply................. 64,919,375 (1.8%) 29,183,519 (1.0%) Multi-Industry.......... 157,590,888 (4.3%) 70,569,787 (2.5%) Office & Business Equipment.............. 100,591,019 (2.8%) 45,145,450 (1.6%) Oil..................... 78,019,820 (2.1%) 34,877,416 (1.2%) Oil & Gas Exploration... 10,186,600 (0.3%) 4,492,675 (0.2%) Oil-International....... 148,770,011 (4.1%) 66,566,008 (2.3%) Retail Trade............ 230,490,362 (6.4%) 103,622,031 (3.6%) Software................ 220,768,794 (6.1%) 99,297,338 (3.5%) Telecommunications Equipment & Services... 166,601,284 (4.6%) 74,851,353 (2.6%) Transportation-Trucking. 5 (0.0%) Utilities-Electric...... 29,997,175 (0.8%) 13,395,200 (0.5%) Utilities-Gas & Pipelines.............. 38,584,063 (1.1%) 17,426,063 (0.6%) Utilities-Telephone..... 103,491,375 (2.9%) 46,478,737 (1.6%) -------------- -------------- Total Common Stock...... 3,536,573,498 (97.6%) 1,588,812,718 (55.3%) -------------- -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Aerospace & Defense..... $ 3,129,248 (0.7%) 8,007,919 (0.3%) Asset Backed............ 13,145,137 (2.7%) 16,750,976 (0.6%) Automotive.............. 7,115,862 (1.5%) 14,621,369 (0.5%) Banking................. 5,120,913 (1.1%) Collateralized Mortgage Obligations............ 23,320,293 (4.9%) 45,392,738 (1.6%) Drugs & Health Care..... 2,903,965 (0.6%) 6,368,139 (0.2%) Electrical Equipment.... 5,032,173 (0.2%) Entertainment & Leisure. 4,307,188 (0.2%) Finance & Banking....... 19,467,181 (4.1%) 90,280,549 (3.1%) Financial Services...... 120,137,416 (25.1%) 305,430,425 (10.6%) Food & Beverages........ 9,895,519 (2.1%) 12,511,591 (0.4%) Healthcare Services..... 13,325,625 (2.8%) 28,557,900 (1.0%) Industrials............. 13,357,360 (2.8%) 58,750,359 (2.0%) Mortgage Related........ 11,533,851 (2.4%) 31,552,849 (1.1%) Newspapers.............. 9,744,055 (2.0%) 20,468,019 (0.7%) Pollution Control....... 1,760,000 (0.4%) 19,866,031 (0.7%) Restaurant.............. 3,089,555 (0.6%) 3,884,012 (0.1%) Retail Grocery.......... 7,162,867 (1.5%) 20,183,815 (0.7%) Telecommunications Equipment & Services... 14,952,575 (3.1%) 36,301,441 (1.3%) Utilities-Electric...... 23,188,403 (4.9%) 35,847,072 (1.3%) Utilities-Gas & Pipelines.............. 2,508,129 (0.5%) 6,344,091 (0.2%) ------------ -------------- Total Corporate Bonds... 304,857,954 (63.8%) 770,458,656 (26.8%) ------------ -------------- Federal Agency Obligations............ 33,244,644 (6.9%) 64,815,085 (2.3%) Federal Treasury Obligations............ 69,212,535 (14.5%) 254,049,569 (8.8%) Foreign Obligations..... 9,200,344 (1.9%) 23,045,630 (0.8%) State Agency Obligations............ 19,552,778 (4.1%) 46,617,831 (1.6%) Yankee Bonds............ 26,698,901 (5.6%) 63,191,720 (2.2%) ------------ -------------- Total Long-Term Debt Securities............. 462,767,156 (96.8%) 1,222,178,491 (42.5%) ------------ -------------- SHORT-TERM OBLIGATIONS Bankers' Acceptances.... $ 2,296,541 (4.5%) Commercial Paper........ 104,406,562 (2.9%) 4,153,120 (0.9%) 46,206,089 (89.6%) 40,162,565 (1.4%) Foreign Obligations..... 2,527,260 (4.9%) Repurchase Agreements... 906,000 (0.0%) -------------- ------------ ----------- -------------- Total Short-Term Obligations............ 105,312,562 (2.9%) 4,153,120 (0.9%) 51,029,890 (99.0%) 40,162,565 (1.4%) -------------- ------------ ----------- -------------- TOTAL INVESTMENTS....... 3,641,886,060 (100.5%) 466,920,276 (97.7%) 51,029,890 (99.0%) 2,851,153,774 (99.2%) Other Assets Less Liabilities............ (18,570,414) (-0.5%) 10,959,423 (2.3%) 515,101 (1.0%) 23,257,871 (0.8%) -------------- ------------ ----------- -------------- NET ASSETS.............. $3,623,315,646 (100.0%) $477,879,699 (100.0%) $51,544,991 (100.0%) $2,874,411,645 (100.0%) ============== ============ =========== ==============
18 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
State Street Research Santander MetLife Aggressive International Stock Index Growth Stock Portfolio Portfolio Portfolio -------------- -------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 42,520,747 (1.0%) Automotive............. 53,473,320 (1.3%) $ 24,293,875 (1.5%) $ 12,765,921 (4.0%) Banking................ 222,504,127 (5.3%) 11,599,213 (0.7%) 35,345,047 (11.1%) Biotechnology.......... 4,259,062 (0.1%) 24,580,406 (1.5%) Broadcasting........... 102,304,763 (2.4%) 113,538,148 (7.1%) Building & Construction.......... 12,908,642 (0.3%) 1,129,927 (0.4%) Business Services...... 52,283,928 (1.2%) 128,551,113 (8.0%) 6,578,957 (2.1%) Chemicals.............. 66,926,188 (1.6%) 5,668,625 (0.4%) 14,809,559 (4.7%) Computer Equipment & Service............... 344,503,286 (8.2%) 176,966,356 (11.1%) Construction Materials. 1,347,336 (0.0%) 4,145,142 (1.3%) Consumer Products...... 1,541,270 (0.0%) 15,105,475 (0.9%) 2,347,558 (0.7%) Consumer Services...... 1,546,791 (0.0%) 22,926,075 (1.4%) Containers & Glass..... 4,748,324 (0.1%) 1,276,864 (0.4%) Cosmetics.............. 4,566,110 (0.1%) Drugs & Health Care.... 269,559,821 (6.4%) 33,934,131 (2.1%) 15,475,094 (4.9%) Electrical Equipment... 198,603,236 (4.7%) 11,781,000 (0.7%) 11,051,542 (3.5%) Electronics............ 290,979,817 (6.9%) 205,642,403 (12.8%) 27,888,740 (8.8%) Entertainment & Leisure............... 31,589,263 (0.8%) 55,319,769 (3.5%) Financial Services..... 211,099,391 (5.0%) 15,565,562 (1.0%) 22,770,469 (7.2%) Food & Beverages....... 144,392,638 (3.4%) Forest Products & Paper................. 38,649,761 (0.9%) Healthcare Services.... 540,800 (0.0%) Homebuilders........... 1,209,419 (0.0%) 2,861,065 (0.9%) Hospital Management.... 11,657,934 (0.3%) Hotel & Motel.......... 6,028,073 (0.1%) 11,613,994 (0.7%) Household Appliances & Home Furnishings...... 4,477,880 (0.1%) 10,469,911 (3.3%) Household Products..... 95,206,866 (2.3%) Industrial Components & Material.............. 190,650 (0.0%) 4,141,955 (1.3%) Insurance.............. 123,792,495 (3.0%) 9,968,500 (3.1%) Liquor................. 6,651,963 (0.2%) Machinery.............. 24,637,034 (0.6%) 4,784,205 (1.5%) Medical Equipment & Supply................ 98,448,956 (2.3%) 15,930,200 (1.0%) 1,710,480 (0.5%) Metals-Aluminum........ 15,170,831 (0.4%) Metals-Gold............ 5,671,760 (0.1%) Metals-Non-Ferrous..... 2,318,173 (0.1%) 3,141,599 (1.0%) Metals-Steel & Iron.... 4,254,478 (0.1%) 10,929,924 (3.4%) Mining................. 3,046,177 (0.1%) Miscellaneous.......... 4,915,428 (0.1%) 4,099,931 (1.3%) Multi-Industry......... 53,514,408 (1.3%) 9,173,529 (2.9%) Newspapers............. 20,296,141 (0.5%) Office & Business Equipment............. 192,540,031 (4.6%) 43,779,375 (2.7%) 2,382,141 (0.8%) Oil.................... 3,253,848 (1.0%) Oil & Gas Exploration.. 4,313,126 (0.1%) 2,903,201 (0.9%) Oil-Domestic........... 26,869,426 (0.6%) Oil-Equipment & Services.............. 26,067,054 (0.6%) 10,873,000 (0.7%) 3,294,267 (1.0%) Oil-International...... 174,437,716 (4.2%) 6,183,861 (1.9%) Packaging.............. 618,375 (0.0%) Personal Care.......... 1,790,854 (0.6%) Photography............ 7,423,620 (0.2%) 3,030,146 (1.0%) Plastics............... 1,642,705 (0.5%) Pollution Control...... 4,170,830 (0.1%) Printing & Publishing.. 8,326,516 (0.2%) 21,786,212 (1.4%) 1,419,888 (0.4%) Real Estate............ 4,807,378 (1.5%) Restaurant............. 22,291,487 (0.5%) Retail Grocery......... 17,788,649 (0.4%) 1,661,126 (0.5%) Retail Trade........... 258,726,495 (6.2%) 176,908,418 (11.1%) 12,081,931 (3.8%) Software............... 306,073,513 (7.3%) 118,954,841 (7.4%) Technology............. 19,159,525 (1.2%) Telecommunications Equipment & Services.. 121,104,733 (2.9%) 154,558,970 (9.7%) 11,386,247 (3.6%) Textiles & Apparel..... 7,270,147 (0.2%) 8,983,463 (0.6%) Tires & Rubber......... 2,933,650 (0.1%) 1,029,788 (0.3%) Tobacco................ 20,221,865 (0.5%) 7,882,048 (2.5%) Toys & Amusements...... 3,146,864 (0.1%) 814,349 (0.3%) Transportation- Airlines.............. 9,225,687 (0.2%) 7,301,153 (2.3%) Transportation- Miscellaneous......... 3,557,910 (1.1%) Transportation- Railroad.............. 15,390,852 (0.4%) Transportation- Trucking.............. 525,406 (0.0%) Utilities-Electric..... 67,540,874 (1.6%) 9,663,975 (0.6%) Utilities-Gas & Pipelines............. 21,701,498 (0.5%) 13,129,119 (0.8%) 1,526,783 (0.5%) Utilities- Miscellaneous......... 1,420,319 (0.0%) Utilities-Telephone.... 306,347,545 (7.3%) 16,136,400 (1.0%) 15,549,318 (4.9%) -------------- -------------- ------------- Total Common Stock..... 4,208,813,565 (100.1%) 1,466,949,643 (91.6%) 310,364,861 (97.7%) -------------- -------------- -------------
19 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
State Street Research Santander MetLife Aggressive International Stock Index Growth Stock Portfolio Portfolio Portfolio (continued) (continued) (continued) -------------- -------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) PREFERRED STOCK Banking................ 2,290,901 (0.7%) Retail Trade........... 309,734 (0.1%) ------------ Total Preferred Stock.. 2,600,635 (0.8%) ------------ LONG-TERM DEBT SECURITIES Foreign Obligations.... 158,596 (0.0%) SHORT TERM OBLIGATIONS Commercial Paper....... 154,949,235 (9.7%) Repurchase Agreements.. 4,097,000 (1.3%) Federal Agency Obligations........... 1,206,498 (0.0%) -------------- -------------- ------------ TOTAL INVESTMENTS....... 4,210,020,063 (100.1%) 1,621,898,878 (101.3%) 317,221,092 (99.8%) Other Assets Less Liabilities............ (4,818,376) (-0.1%) (21,058,178) (-1.3%) 609,779 (0.2%) -------------- -------------- ------------ NET ASSETS.............. $4,205,201,687 (100.0%) $1,600,840,700 (100.0%) $317,830,871 (100.0%) ============== ============== ============
20 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Loomis Sayles High Yield Bond Portfolio -------------- Value (Note 2A) COMMON STOCK Banking............................................... $ 3,252 (0.0%) Forest Products & Paper............................... 1,625,767 (2.7%) Oil & Gas Exploration................................. 141,728 (0.2%) Oil-Equipment & Services.............................. 56,250 (0.1%) Real Estate........................................... 239,906 (0.4%) Restaurant............................................ 3,479 (0.0%) Utilities-Electric.................................... 20,632 (0.0%) ----------- Total Common Stock.................................... 2,091,014 (3.4%) ----------- PREFERRED STOCK Banking............................................... 8,549 (0.0%) Construction Materials................................ 129,844 (0.2%) Food & Beverages...................................... 29,250 (0.0%) Metals-Steel & Iron................................... 182,000 (0.3%) Oil & Gas Exploration................................. 267,750 (0.4%) Oil-Equipment & Services.............................. 281,685 (0.5%) Real Estate........................................... 175,650 (0.3%) Telecommunications Equipment & Services............... 1,400,884 (2.3%) Transportation-Shipping............................... 12,000 (0.0%) Utilities-Electric.................................... 300,459 (0.5%) Utilities-Telephone................................... 214,312 (0.4%) ----------- Total Preferred Stock................................. 3,002,383 (4.9%) ----------- LONG-TERM DEBT SECURITIES Convertible Bonds Automotive............................................ 380,625 (0.6%) Building & Construction............................... 81,500 (0.1%) Computer Equipment & Service.......................... 3,458,197 (5.6%) Drugs & Health Care................................... 1,967,862 (3.2%) Electronics........................................... 1,882,512 (3.1%) Entertainment & Leisure............................... 237,480 (0.4%) Foreign Obligations................................... 5,617,845 (9.1%) Healthcare Services................................... 297,375 (0.5%) Industrial Components & Material...................... 364,625 (0.6%) Industrials........................................... 692,775 (1.1%) Medical Equipment & Supply............................ 208,050 (0.3%) Oil & Gas Exploration................................. 150,000 (0.2%) Oil-Equipment & Services.............................. 1,094,043 (1.8%) Pollution Control..................................... 123,188 (0.2%) Real Estate........................................... 91,000 (0.2%) Restaurant............................................ 357,360 (0.6%) Retail Trade.......................................... 68,563 (0.1%) Telecommunications Equipment & Services............... 442,500 (0.7%) Transportation-Trucking............................... 129,600 (0.2%) ----------- Total Convertible Bonds............................... 17,645,100 (28.6%) ----------- Corporate Bonds Broadcasting.......................................... 1,687,875 (2.7%) Chemicals............................................. 292,740 (0.5%) Computer Equipment & Service.......................... 627,120 (1.0%) Food & Beverages...................................... 76,402 (0.1%) Healthcare Services................................... 976,095 (1.6%) Industrials........................................... 912,871 (1.5%) Oil & Gas Exploration................................. 988,687 (1.6%) Oil-Equipment & Services.............................. 3,231,875 (5.2%) Real Estate........................................... 409,937 (0.7%) Retail Trade.......................................... 452,163 (0.7%) Telecommunications Equipment & Services............... 5,659,875 (9.2%) Textiles & Apparel.................................... 333,506 (0.6%) Transportation........................................ 261,563 (0.4%) Transportation-Shipping............................... 626,800 (1.0%) Utilities-Electric.................................... 705,750 (1.2%) Utilities-Telephone................................... 493,000 (0.8%) ----------- Total Corporate Bonds................................. 17,736,259 (28.8%) ----------- Foreign Obligations................................... 11,987,615 (19.4%) Yankee Bonds.......................................... 6,418,660 (10.4%) ----------- Total Long-Term Debt Securities....................... 53,787,634 (87.2%) ----------- SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 884,000 (1.4%) ----------- TOTAL INVESTMENTS..................................... 59,765,031 (96.9%) Other Assets Less Liabilities......................... 1,936,338 (3.1%) ----------- NET ASSETS............................................ $61,701,369 (100.0%) ===========
21 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
T. Rowe Price Janus Small Cap Scudder Mid Cap Growth Global Equity Portfolio Portfolio Portfolio -------------- ------------- ------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 1,025,437 (0.4%) $ 2,654,542 (1.5%) Automotive............. 2,668,712 (1.0%) 389,527 (0.2%) Banking................ 2,779,701 (1.0%) 6,374,730 (3.7%) Biotechnology.......... $ 42,717,280 (2.2%) 1,622,128 (0.6%) 3,766,838 (2.2%) Broadcasting........... 182,450,383 (9.4%) 9,202,244 (3.4%) 4,670,099 (2.7%) Building & Construction.......... 1,147,375 (0.4%) 514,750 (0.3%) Business Services...... 152,634,350 (7.9%) 23,868,284 (8.9%) 2,358,915 (1.4%) Chemicals.............. 3,291,533 (1.2%) 10,906,382 (6.4%) Computer Equipment & Service............... 419,901,193 (21.7%) 24,709,494 (9.2%) 3,283,932 (1.9%) Construction & Mining Equipment............. 727,050 (0.3%) Construction Materials. 678,125 (0.3%) 2,484,832 (1.5%) Consumer Products...... 398,263 (0.1%) Drugs & Health Care.... 51,178,119 (2.6%) 16,126,810 (6.0%) 5,494,040 (3.2%) Education.............. 34,102,280 (1.8%) 3,104,162 (1.2%) Electrical Equipment... 5,424,125 (2.0%) 5,874,457 (3.4%) Electronics............ 255,169,133 (13.2%) 39,158,644 (14.5%) 13,213,361 (7.7%) Entertainment & Leisure............... 49,936,749 (2.6%) 5,588,944 (2.1%) Financial Services..... 6,797,057 (2.5%) 5,079,216 (3.0%) Food & Beverages....... 1,538,278 (0.6%) Forest Products & Paper................. 963,375 (0.6%) Healthcare Services.... 14,559,746 (0.8%) 702,625 (0.3%) 568,269 (0.3%) Hospital Management.... 500,656 (0.2%) Household Appliances & Home Furnishings...... 1,246,452 (0.7%) Industrial Components & Material.............. 856,794 (0.3%) Insurance.............. 2,260,759 (0.8%) 4,670,482 (2.7%) Lease Rental Obligations........... 1,193,456 (0.4%) Machinery.............. 151,599 (0.1%) Medical Equipment & Supply................ 14,836,617 (0.8%) 6,020,644 (2.2%) Metals-Gold............ 4,072,604 (2.4%) Metals-Non-Ferrous..... 4,677,775 (2.7%) Metals-Steel & Iron.... 6,605,028 (3.9%) Mining................. 1,744,481 (1.0%) Miscellaneous.......... 275,600 (0.1%) Multi-Industry......... 2,482,024 (1.4%) Newspapers............. 854,775 (0.3%) Office & Business Equipment............. 4,939,347 (1.8%) 5,639,675 (3.3%) Oil & Gas Exploration.. 932,512 (0.3%) 683,750 (0.4%) Oil-Domestic........... 3,765,288 (2.2%) Oil-Equipment & Services.............. 2,943,681 (1.1%) 1,531,040 (0.9%) Oil-International...... 3,368,984 (2.0%) Photography............ 1,244,309 (0.5%) Pollution Control...... 969,891 (0.4%) Real Estate............ 2,692,804 (1.0%) 2,179,844 (1.3%) Restaurant............. 1,091,461 (0.1%) 4,051,256 (1.5%) Retail Grocery......... 1,830,483 (0.7%) Retail Trade........... 13,244,333 (0.7%) 13,945,028 (5.2%) 1,396,008 (0.8%) Software............... 124,501,640 (6.4%) 31,128,170 (11.5%) 7,143,207 (4.2%) Telecommunications Equipment & Services.. 473,207,570 (24.5%) 23,235,061 (8.6%) 12,333,669 (7.2%) Textiles & Apparel..... 2,968,687 (1.1%) 575,629 (0.3%) Tobacco................ 212,694 (0.1%) Toys & Amusements...... 478,400 (0.2%) Transportation- Airlines.............. 1,232,378 (0.5%) 2,112,781 (1.2%) Transportation- Railroad.............. 824,988 (0.3%) 5,090,951 (3.0%) Transportation- Trucking.............. 940,175 (0.3%) Utilities-Electric..... 7,734,478 (4.5%) Utilities-Gas & Pipelines............. 1,606,375 (0.9%) Utilities-Telephone.... 91,101,795 (4.7%) 1,916,966 (0.7%) 8,137,388 (4.7%) -------------- ------------ ------------ Total Common Stock..... 1,920,632,649 (99.4%) 258,795,811 (96.0%) 157,759,471 (91.9%) -------------- ------------ ------------ SHORT-TERM OBLIGATIONS Commercial Paper....... 44,688,825 (2.3%) Foreign Obligations.... 5,218,413 (3.0%) Repurchase Agreements.. 1,914,000 (0.1%) 6,468,000 (3.8%) -------------- ------------ Total Short-Term Obligations........... 46,602,825 (2.4%) 11,686,413 (6.8%) -------------- ------------ LONG-TERM DEBT SECURITIES Participating Loan Notes................. 420,065 (0.2%) Federal Treasury Obligations........... 195,140 (0.1%) SHORT-TERM OBLIGATIONS Regulated Investment Companies............. 12,572,104 (4.7%) -------------- ------------ ------------ TOTAL INVESTMENTS....... 1,967,235,474 (101.8%) 271,563,055 (100.8%) 169,865,949 (98.9%) Other Assets Less Liabilities............ (35,438,420) (-1.8%) (2,045,413) (-0.8%) 1,848,472 (1.1%) -------------- ------------ ------------ NET ASSETS.............. $1,931,797,054 (100.0%) $269,517,642 (100.0%) $171,714,421 (100.0%) ============== ============ ============
22 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell 2000 EAFE Index Portfolio Index Portfolio --------------- --------------- Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense........... $ 678,269 (0.6%) $ 193,539 (0.2%) Agriculture & Related......... 69,500 (0.1%) Automotive.................... 1,110,278 (1.0%) 3,241,751 (3.9%) Banking....................... 7,243,688 (6.5%) 8,729,364 (10.6%) Biotechnology................. 2,144,522 (1.9%) 193,965 (0.2%) Broadcasting.................. 1,513,037 (1.4%) 951,178 (1.2%) Building & Construction....... 602,606 (0.5%) 444,750 (0.5%) Business Services............. 7,088,385 (6.4%) 1,208,099 (1.5%) Chemicals..................... 1,803,803 (1.6%) 1,933,527 (2.4%) Coal.......................... 30,375 (0.0%) Computer Equipment & Service.. 8,906,921 (8.0%) 1,885,797 (2.3%) Construction & Mining Equipment.................... 264,722 (0.2%) 37,709 (0.0%) Construction Materials........ 695,375 (0.6%) 920,852 (1.1%) Consumer Products............. 329,088 (0.3%) 426,599 (0.5%) Consumer Services............. 41,388 (0.0%) 103,263 (0.1%) Containers & Glass............ 313,969 (0.3%) 145,958 (0.2%) Cosmetics..................... 43,751 (0.1%) Drugs & Health Care........... 5,063,950 (4.5%) 4,831,395 (5.9%) Education..................... 159,694 (0.1%) Electrical Equipment.......... 2,139,364 (1.9%) 2,346,494 (2.9%) Electronics................... 8,542,542 (7.7%) 6,444,858 (7.8%) Entertainment & Leisure....... 1,726,211 (1.6%) 401,596 (0.5%) Financial Services............ 2,146,995 (1.9%) 3,529,550 (4.3%) Food & Beverages.............. 1,575,037 (1.4%) 2,170,309 (2.6%) Forest Products & Paper....... 919,925 (0.8%) 448,821 (0.5%) Healthcare Services........... 914,353 (0.8%) 21,577 (0.0%) Homebuilders.................. 526,462 (0.5%) 135,410 (0.2%) Hospital Management........... 344,369 (0.3%) Hotel & Motel................. 454,447 (0.4%) 209,742 (0.3%) Household Appliances & Home Furnishings.................. 735,853 (0.7%) 554,907 (0.7%) Household Products............ 307,909 (0.3%) 23,221 (0.0%) Industrial Components & Material..................... 1,976,599 (1.8%) 443,963 (0.5%) Industrial Development / Pollution Bonds........................ 70,720 (0.1%) Insurance..................... 3,360,032 (3.0%) 4,037,027 (4.9%) Investment Companies.......... 38,106 (0.0%) Lease Rental Obligations...... 436,903 (0.4%) 6,440 (0.0%) Liquor........................ 205,856 (0.2%) 628,678 (0.8%) Machinery..................... 1,854,774 (1.7%) 937,355 (1.1%) Medical Equipment & Supply.... 2,052,444 (1.8%) 160,632 (0.2%) Metals-Aluminum............... 56,888 (0.1%) 27,558 (0.0%) Metals-Gold................... 27,638 (0.0%) 17,957 (0.0%) Metals-Non-Ferrous............ 148,431 (0.1%) 243,787 (0.3%) Metals-Steel & Iron........... 794,678 (0.7%) 714,613 (0.9%) Mining........................ 148,944 (0.1%) 51,399 (0.1%) Miscellaneous................. 513,562 (0.5%) 92,534 (0.1%) Mobile Homes.................. 198,119 (0.2%) Multi-Industry................ 902,396 (0.8%) 4,241,874 (5.2%) Newspapers.................... 146,913 (0.1%) 5,582 (0.0%) Office & Business Equipment... 1,049,025 (0.9%) 444,459 (0.5%) Oil........................... 245,419 (0.2%) 1,824,272 (2.2%) Oil & Gas Exploration......... 1,377,606 (1.2%) 74,383 (0.1%) Oil-Domestic.................. 7,204 (0.0%) Oil-Equipment & Services...... 1,199,770 (1.1%) 970,166 (1.2%) Oil-International............. 1,486,992 (1.8%)
23 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Morgan Stanley Russell 2000 EAFE Index Portfolio Index Portfolio (continued) (continued) --------------- --------------- Value Value (Note 2A) (Note 2A) COMMON STOCK--(Continued) Packaging.................. 95,138 (0.1%) Personal Care.............. 51,100 (0.1%) 512,187 (0.6%) Photography................ 308,944 (0.3%) 146,031 (0.2%) Plastics................... 136,109 (0.1%) 55,133 (0.1%) Pollution Control.......... 170,117 (0.2%) 8,788 (0.0%) Printing & Publishing...... 681,175 (0.6%) 579,027 (0.7%) Real Estate................ 4,853,008 (4.4%) 1,113,230 (1.4%) Restaurant................. 905,844 (0.8%) 63,682 (0.1%) Retail Grocery............. 358,198 (0.3%) 678,318 (0.8%) Retail Trade............... 3,602,791 (3.2%) 2,263,892 (2.8%) Shipbuilding............... 107,250 (0.1%) 6,851 (0.0%) Software................... 9,163,883 (8.2%) 528,209 (0.6%) Technology................. 1,124,335 (1.0%) Telecommunications Equipment & Services...... 7,256,975 (6.5%) 5,713,882 (6.9%) Textiles & Apparel......... 994,724 (0.9%) 268,027 (0.3%) Tires & Rubber............. 47,500 (0.0%) 246,555 (0.3%) Tobacco.................... 142,120 (0.1%) 298,673 (0.4%) Toys & Amusements.......... 36,441 (0.0%) 182,813 (0.2%) Transportation............. 195,463 (0.2%) 207,016 (0.3%) Transportation-Airlines.... 821,011 (0.7%) 431,963 (0.5%) Transportation- Miscellaneous............. 22,388 (0.0%) Transportation-Railroad.... 462,959 (0.4%) 551,262 (0.7%) Transportation-Shipping.... 201,838 (0.2%) 399,092 (0.5%) Transportation-Trucking.... 698,687 (0.6%) 9,013 (0.0%) Utilities.................. 367,963 (0.3%) Utilities-Electric......... 1,548,840 (1.4%) 1,998,232 (2.4%) Utilities-Gas & Pipelines.. 2,091,713 (1.9%) 462,574 (0.6%) Utilities-Miscellaneous.... 109,089 (0.1%) Utilities-Telephone........ 310,884 (0.3%) 6,851,920 (8.3%) Utilities-Water............ 116,150 (0.1%) ------------ ----------- Total Common Stock......... 111,978,300 (100.2%) 81,773,424 (99.3%) ------------ ----------- PREFERRED STOCK Automotive................. 22,424 (0.0%) Broadcasting............... 152,498 (0.2%) Building & Construction.... 9,187 (0.0%) Oil-Equipment & Services... 8,865 (0.0%) Oil-International.......... 15,413 (0.0%) Retail Grocery............. 7,711 (0.0%) Retail Trade............... 9,096 (0.0%) Software................... 210,838 (0.3%) ----------- Total Preferred Stock...... 436,032 (0.5%) ----------- SHORT-TERM OBLIGATIONS Federal Agency Obligations. 996,977 (0.9%) 1,042,652 (1.3%) ------------ ----------- TOTAL INVESTMENTS.......... 112,975,277 (101.1%) 83,252,108 (101.1%) Other Assets Less Liabilities............... (1,246,645) (-1.1%) (897,193) (-1.1%) ------------ ----------- NET ASSETS................. $111,728,632 (100.0%) $82,354,915 (100.0%) ============ ===========
24 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Lehman Brothers Aggregate Bond Index Portfolio ------------ Value (Note 2A) LONG-TERM DEBT SECURITIES Corporate Bonds: Aerospace & Defense...................................... $ 217,373 (0.2%) Asset Backed............................................. 1,114,534 (0.9%) Automotive............................................... 656,234 (0.5%) Banking.................................................. 2,646,073 (2.0%) Broadcasting............................................. 459,729 (0.4%) Collateralized Mortgage Obligations...................... 1,557,920 (1.2%) Drugs & Health Care...................................... 137,862 (0.1%) Entertainment & Leisure.................................. 447,900 (0.3%) Finance & Banking........................................ 1,184,489 (0.9%) Financial Services....................................... 5,417,318 (4.2%) Food & Beverages......................................... 198,824 (0.2%) Forest Products & Paper.................................. 902,049 (0.7%) Industrials.............................................. 138,134 (0.1%) Liquor................................................... 468,535 (0.4%) Multi-Industry........................................... 712,878 (0.5%) Office & Business Equipment.............................. 465,375 (0.4%) Oil & Gas Exploration.................................... 572,352 (0.4%) Printing & Publishing.................................... 457,777 (0.3%) Real Estate.............................................. 502,193 (0.4%) Restaurant............................................... 457,986 (0.4%) Retail Trade............................................. 1,152,172 (0.9%) Telecommunications Equipment & Services.................. 1,447,723 (1.1%) Transportation-Airlines.................................. 825,882 (0.6%) Transportation-Railroad.................................. 300,801 (0.2%) Utilities-Electric....................................... 1,364,726 (1.1%) Utilities-Gas & Pipelines................................ 723,618 (0.6%) Utilities-Telephone...................................... 1,420,791 (1.1%) ------------ Total Corporate Bonds.................................... 25,951,248 (20.1%) ------------ Federal Agency Obligations............................... 57,027,167 (44.1%) Federal Treasury Obligations............................. 35,460,210 (27.4%) State Agency Obligations................................. 182,909 (0.1%) Yankee Bonds............................................. 2,257,967 (1.7%) ------------ Total Bonds.............................................. 120,879,501 (93.4%) ------------ SHORT-TERM OBLIGATIONS Commercial Paper......................................... 4,535,468 (3.5%) Federal Agency Obligations............................... 595,728 (0.5%) ------------ Total Short-Term Obligations............................. 5,131,196 (4.0%) ------------ TOTAL INVESTMENTS......................................... 126,010,697 (97.4%) Other Assets Less Liabilities............................. 3,327,963 (2.6%) ------------ NET ASSETS................................................ $129,338,660 (100.0%) ============
25 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Metropolitan Series Fund, Inc.
Harris Oakmark Neuberger Berman T. Rowe Price Large Cap Value Partners Mid Cap Value Large Cap Portfolio Portfolio Growth Portfolio --------------- ---------------------- ---------------- Value Value Value (Note 2A) (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense.... $ 3,218,687 (8.4%) $ 822,900 (2.1%) Automotive............. 1,947,912 (5.0%) $ 260,550 (0.5%) Banking................ 3,446,094 (9.0%) 851,525 (2.2%) 1,887,612 (3.7%) Biotechnology.......... 431,081 (0.8%) Broadcasting........... 1,537,144 (4.0%) 2,779,959 (5.4%) Building & Construction.......... 813,375 (2.1%) 246,138 (0.5%) Business Services...... 3,166,562 (8.3%) 1,177,100 (3.0%) 2,216,848 (4.3%) Chemicals.............. 1,192,344 (3.1%) 1,938,494 (5.0%) Computer Equipment & Service............... 972,969 (2.5%) 1,436,228 (3.7%) 4,917,202 (9.6%) Consumer Products...... 2,168,375 (5.7%) Containers & Glass..... 191,706 (0.5%) Drugs & Health Care.... 727,988 (1.9%) 3,374,794 (6.6%) Electrical Equipment... 439,875 (1.1%) 1,288,125 (2.5%) Electronics............ 1,815,625 (4.7%) 792,706 (2.1%) 4,235,797 (8.2%) Entertainment & Leisure............... 1,735,500 (4.5%) 481,500 (1.2%) 87,750 (0.2%) Financial Services..... 1,618,975 (4.2%) 4,435,533 (8.6%) Food & Beverages....... 341,925 (0.7%) Forest Products & Paper................. 821,250 (2.1%) 1,103,437 (2.9%) 234,900 (0.5%) Hospital Management.... 398,438 (0.8%) Hotel & Motel.......... 368,950 (1.0%) 361,213 (0.7%) Household Appliances & Home Furnishings...... 739,200 (1.9%) Household Products..... 922,387 (1.8%) Industrials............ 201,400 (0.5%) 174,900 (0.3%) Insurance.............. 878,813 (2.3%) 1,890,531 (4.9%) 1,188,617 (2.3%) Machinery.............. 1,577,063 (4.1%) 1,209,506 (3.1%) Medical Equipment & Supply................ 1,241,094 (3.2%) 1,205,187 (2.3%) Metals-Aluminum........ 498,063 (1.3%) Metals-Non-Ferrous..... 434,125 (1.1%) Metals-Steel & Iron.... 570,025 (1.5%) Mining................. 107,400 (0.3%) Miscellaneous.......... 1,785,375 (4.7%) Multi-Industry......... 458,850 (1.2%) 3,303,693 (6.4%) Newspapers............. 1,844,500 (4.8%) 192,719 (0.4%) Office & Business Equipment............. 340,588 (0.7%) Oil.................... 547,031 (1.4%) Oil & Gas Exploration.. 1,010,250 (2.6%) Oil-Domestic........... 592,500 (1.5%) Oil-Equipment & Services.............. 2,015,375 (5.2%) 238,006 (0.5%) Oil-International...... 1,476,969 (2.9%) Packaging.............. 686,359 (1.8%) Printing & Publishing.. 2,301,000 (6.0%) 501,500 (1.3%) 355,081 (0.7%) Real Estate............ 1,281,250 (3.3%) 535,500 (1.4%) 205,969 (0.4%) Restaurant............. 169,313 (0.3%) Retail Grocery......... 981,221 (1.9%) Retail Trade........... 611,000 (1.6%) 2,590,426 (5.0%) Software............... 1,988,325 (5.1%) 4,157,962 (8.1%) Telecommunications Equipment & Services.. 3,108,844 (8.0%) 2,269,381 (4.4%) Textiles & Apparel..... 2,081,625 (5.4%) 163,556 (0.3%) Tobacco................ 1,864,275 (4.9%) 264,338 (0.5%) Toys & Amusements...... 1,765,312 (4.6%) Transportation- Airlines.............. 510,313 (1.3%) Transportation- Railroad.............. 582,075 (1.5%) 261,188 (0.5%) Utilities-Electric..... 1,118,050 (2.9%) Utilities-Gas & Pipelines............. 286,663 (0.7%) Utilities-Telephone.... 2,158,184 (4.2%) ----------- ----------- ----------- Total Common Stock..... 34,729,994 (90.5%) 36,880,419 (95.2%) 50,117,550 (97.5%) ----------- ----------- ----------- SHORT-TERM OBLIGATIONS Commercial Paper....... 1,500,000 (3.9%) Regulated Investment Companies............. 1,867,428 (3.6%) Repurchase Agreements.. 1,482,000 (3.9%) 1,854,000 (4.8%) 703,000 (1.4%) ----------- ----------- ----------- Total Short-Term Obligations........... 2,982,000 (7.8%) 1,854,000 (4.8%) 2,570,428 (5.0%) ----------- ----------- ----------- TOTAL INVESTMENTS...... 37,711,994 (98.3%) 38,734,419 (100.0%) 52,687,978 (102.5%) Other Assets Less Liabilities........... 665,535 (1.7%) (12,430) (0.0%) (1,286,462) (-2.5%) ----------- ----------- ----------- NET ASSETS............. $38,377,529 (100.0%) $38,721,989 (100.0%) $51,401,516 (100.0%) =========== =========== ===========
26 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Templeton Variable Products Series Fund
Templeton International Stock Portfolio -------------- Value (Note 2A) COMMON STOCK Aerospace & Defense................................... $ 1,925,333 (0.2%) Appliances & Household Durables....................... 43,597,485 (3.8%) Automotive............................................ 38,876,270 (3.4%) Banking............................................... 93,961,811 (8.1%) Broadcasting.......................................... 11,671,882 (1.0%) Building Materials & Components....................... 8,232,097 (0.7%) Chemicals............................................. 50,382,806 (4.3%) Data Processing & Reproduction........................ 9,436,991 (0.8%) Electrical & Electronics.............................. 86,309,209 (7.4%) Energy Sources........................................ 61,113,306 (5.3%) Financial Services.................................... 67,495,324 (5.8%) Food & Household Products............................. 22,749,989 (2.0%) Forest Products & Paper............................... 21,609,388 (1.9%) Health & Personal Care................................ 43,531,166 (3.8%) Industrial Components................................. 4,125,846 (0.4%) Insurance............................................. 63,000,165 (5.4%) Machinery & Engineering............................... 7,096,640 (0.6%) Merchandising......................................... 30,647,631 (2.6%) Metals & Mining....................................... 70,173,353 (6.1%) Multi-Industry........................................ 52,379,143 (4.5%) Real Estate........................................... 1,704,438 (0.1%) Recreation & Other Consumer Goods..................... 11,067,926 (1.0%) Telecommunications.................................... 103,119,516 (8.9%) Transportation........................................ 51,149,658 (4.4%) Utilities-Gas & Pipelines............................. 87,566,150 (7.5%) -------------- ------- Total Common Stock.................................... 1,042,923,523 (90.0%) -------------- ------- Preferred Stock....................................... 56,820,552 (4.9%) SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 46,236,000 (4.0%) -------------- ------- TOTAL INVESTMENTS..................................... 1,145,980,075 (98.9%) Other Assets Less Liabilities......................... 12,182,392 (1.1%) -------------- ------- NET ASSETS............................................ $1,158,162,467 (100.0%) ============== =======
27 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Janus Aspen Series Fund
Janus Aspen Growth Portfolio ---------------- Value (Note 2A) COMMON STOCK Audio and Video Products............................. $ 12,027,000 (0.4%) Automotive........................................... 1,586,454 (0.1%) Brewery.............................................. 12,112,537 (0.4%) Broadcast Services and Programming................... 105,648,024 (3.5%) Cable Television..................................... 253,832,722 (8.5%) Cellular Telecommunications.......................... 152,852,858 (5.1%) Circuits............................................. 121,198,124 (4.0%) Commercial Banks..................................... 8,067,519 (0.3%) Commercial Services.................................. 30,151,000 (1.0%) Computer Software.................................... 55,568,330 (1.9%) Computer Memory Devices.............................. 31,415,384 (1.0%) Computers Micro...................................... 158,170,877 (5.3%) Cosmetics and Toiletries............................. 11,884,925 (0.4%) Cruise Lines......................................... 20,701,929 (0.7%) Data Processing and Management....................... 37,104,521 (1.2%) Distribution and Wholesale........................... 24,791,256 (0.8%) Diversified Financial Services....................... 22,502,813 (0.7%) Diversified Operations............................... 165,718,684 (5.5%) Electronic Components................................ 79,706,735 (2.7%) Electronic Safety Devices............................ 6,334,247 (0.2%) Enterprise Software and Services..................... 24,758,379 (0.8%) Finance-Credit Card.................................. 62,213,244 (2.1%) Finance-Investment Bankers/Brokers................... 42,087,398 (1.4%) Food-Wholesale....................................... 3,307,287 (0.1%) Identification Systems and Devices................... 11,250,562 (0.4%) Instruments-Scientific............................... 42,286,156 (1.4%) Internet Content..................................... 11,715,741 (0.4%) Internet Software.................................... 37,657,646 (1.3%) Life and Health Insurance............................ 72,109,337 (2.4%) Medical-Biomedical and Genetic....................... 46,106,600 (1.5%) Medical-Drugs........................................ 21,339,070 (0.7%) Medical-Instruments.................................. 10,103,026 (0.3%) Money Center Banks................................... 72,862,400 (2.4%) Multi-Line Insurance................................. 38,767,246 (1.3%) Multimedia........................................... 191,538,881 (6.4%) Networking Products.................................. 117,238,564 (3.9%) Office Automation and Equipment...................... 11,390,880 (0.4%) Optical Supplies..................................... 15,991,391 (0.5%) Pipelines............................................ 72,361,869 (2.4%) Property and Casualty Insurance...................... 7,297,509 (0.2%) Publishing-Newspapers................................ 8,696,844 (0.3%) Radio................................................ 27,660,475 (0.9%) Retail Building Products............................. 35,819,450 (1.2%) Retail-Discount...................................... 11,151,245 (0.4%) Retail-Office Supplies............................... 20,860,390 (0.7%) Retail-Restaurants................................... 75,633,305 (2.5%) Super Regional Banks................................. 11,427,330 (0.4%) Telecommunication Equipment.......................... 180,832,646 (6.0%) Telecommunication Services........................... 31,562,024 (1.1%) Telephone-Integrated................................. 15,503,209 (0.5%) Television........................................... 41,936,217 (1.4%) -------------- Total Common Stock................................... 2,684,842,260 (89.4%) -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Retail Internet...................................... 13,019,556 (0.4%) Telecommunication Services........................... 15,050,000 (0.5%) -------------- Total Corporate Bonds................................ 28,069,556 (0.9%) -------------- SHORT-TERM OBLIGATIONS Repurchase Agreements................................. 217,600,000 (7.3%) U.S. Government Agencies.............................. 74,360,555 (2.5%) -------------- Total Short-Term Obligations.......................... 291,960,555 (9.8%) -------------- TOTAL INVESTMENTS..................................... 3,004,872,371 (100.1%) Other Assets Less Liabilities......................... (2,889,168) (0.1%) -------------- NET ASSETS............................................ $3,001,983,203 (100.0%) ==============
28 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Invesco Variable Investment Funds, Inc.
Invesco VIF-High Yield Portfolio --------------- Value (Note 2A) COMMON STOCKS & WARRANTS Computer Related..................................... $ 20,475 (0.0%) Telecommunications--Long Distance.................... 1,500 (0.0%) Telephone............................................ 3,454 (0.0%) ----------- Total Common Stocks & Warrants....................... 25,429 (0.0%) ----------- PREFERRED STOCK Publishing........................................... 304,500 (0.5%) Telecommunications--Cellular & Wireless.............. 445,000 (0.8%) Telecommunications--Long Distance.................... 1,005,000 (1.8%) Telephone............................................ 368,083 (0.6%) ----------- Total Preferred Stock................................ 2,122,583 (3.7%) ----------- FIXED INCOME SECURITIES Corporate Bonds: Biotechnology........................................ 552,500 (0.9%) Broadcasting......................................... 2,861,250 (4.9%) Cable................................................ 5,033,700 (8.6%) Chemicals............................................ 1,100,750 (1.9%) Communications--Equipment & Manufacturing............ 866,000 (1.5%) Computer Related..................................... 2,974,625 (5.1%) Electric Utilities................................... 2,348,825 (4.0%) Electrical Equipment................................. 206,000 (0.4%) Engineering & Construction........................... 182,000 (0.3%) Gaming............................................... 1,955,238 (3.3%) Healthcare Services.................................. 740,000 (1.3%) Household Products................................... 365,000 (0.6%) Iron & Steel......................................... 703,570 (1.2%) Lodging--Hotels...................................... 225,000 (0.4%) Metals & Mining...................................... 350,000 (0.6%) Oil & Gas Related.................................... 2,483,975 (4.3%) Paper & Forest Products.............................. 1,046,060 (1.8%) Personal Care........................................ 257,250 (0.4%) Pollution Control.................................... 895,000 (1.5%) Services............................................. 2,530,312 (4.3%) Shipping............................................. 95,000 (0.2%) Specialty Printing................................... 683,750 (1.2%) Telecommunications--Cellular & Wireless.............. 2,369,250 (4.1%) Telecommunications--Long Distance.................... 9,060,975 (15.5%) Telephone............................................ 11,058,433 (18.9%) Textiles & Apparel Manufacturing..................... 915,000 (1.6%) ----------- Total Corporate Bonds................................ 51,859,463 (88.8%) ----------- SHORT-TERM INVESTMENTS Repurchase Agreements................................ 2,968,000 (5.1%) ----------- TOTAL INVESTMENTS.................................... 56,975,475 (97.6%) Other Assets Less Liabilities........................ 1,403,130 (2.4%) ----------- NET ASSETS........................................... $58,378,605 (100.0%) ===========
29 NOTES TO FINANCIAL STATEMENTS--(Continued) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Continued) Invesco Variable Investment Funds, Inc.
Invesco Invesco VIF Industrial VIF Realty Income Portfolio Portfolio ---------------- ---------- Value Value (Note 2A) (Note 2A) COMMON STOCK Aerospace & Defense............ $ 1,589,874 (2.0%) Automobiles.................... 534,375 (0.7%) Banks.......................... 4,750,694 (5.9%) Beverages...................... 1,977,650 (2.5%) Broadcasting................... 1,475,500 (1.8%) Chemicals...................... 1,117,962 (1.4%) Communications-Equipment Manufacturing................. 972,562 (1.2%) Computer Related............... 2,232,056 (2.8%) Electric Utilities............. 1,438,590 (1.8%) Electronics.................... 1,305,600 (1.6%) Electrical Equipment........... 1,934,375 (2.4%) Electronics-semiconductor...... 2,512,500 (3.1%) Financial...................... 1,111,250 (1.4%) Foods.......................... 3,215,379 (4.0%) Gaming......................... 1,000,000 (1.3%) Gold & Precious Metals Mining.. 171,500 (0.2%) Health Care Drugs- Pharmaceuticals............... 6,066,543 (7.6%) Health Care Related............ 1,027,465 (1.3%) Household Products............. 2,176,500 (2.7%) Insurance...................... 2,640,875 (3.3%) Investment Bank/Broker Firm.... 999,250 (1.3%) Lodging-Hotels................. 772,937 (1.0%) Manufacturing.................. 996,938 (1.2%) Oil & Gas Related.............. 5,659,240 (7.1%) Paper & Forest Products........ 1,426,638 (1.8%) Railroads...................... 2,285,062 (2.9%) Real Estate Investment Trust... $ 544,084 (87.0%) Real Estate Related............ 16,965 (2.7%) Restaurants.................... 1,007,812 (1.3%) Retail......................... 4,794,062 (6.0%) Savings & Loan................. 1,154,156 (1.4%) Services....................... 452,625 (0.6%) Telecommunications-Cellular & Wireless...................... 825,000 (1.0%) Telecommunications-Long Distance...................... 1,555,313 (2.0%) Telephone...................... 4,413,256 (5.5%) Tobacco........................ 394,187 (0.5%) ----------- --------- Total Common Stock............. 65,987,726 (82.6%) 561,049 (89.7%) ----------- --------- FIXED INCOME SECURITIES Corporate Bonds: Airlines....................... 293,092 (0.4%) Building Materials............. 510,509 (0.6%) Cable.......................... 355,750 (0.4%) Computer Related............... 222,469 (0.3%) Electric Utilities............. 3,076,860 (3.9%) Insurance...................... 425,360 (0.5%) Lodging-Hotels................. 218,852 (0.3%) Oil & Gas Related.............. 1,470,846 (1.9%) Paper & Forest Products........ 105,624 (0.1%) Services....................... 98,500 (0.1%) Telecommunications-Long Distance...................... 151,250 (0.2%) Telephone...................... 653,905 (0.8%) ----------- Total Corporate Bonds.......... 7,583,017 (9.5%) ----------- US Government Obligations...... 712,501 (0.9%) ----------- Total Fixed Income Securities.. 8,295,518 (10.4%) SHORT TERM INVESTMENTS Repurchase Agreements.......... 6,586,000 (8.2%) ----------- --------- TOTAL INVESTMENTS.............. 80,869,244 (101.2%) 561,049 (89.7%) Other Assets Less Liabilities.. (976,632) (-1.2%) 64,429 (10.3%) ----------- --------- NET ASSETS..................... $79,892,612 (100.0%) $ 625,478 (100.0%) =========== =========
30 NOTES TO FINANCIAL STATEMENTS--(Concluded) 5.SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1999--(Concluded) The value of investments in the Funds portfolios are determined using the following valuation techniques: Portfolio securities that are traded on domestic stock exchanges are valued at the last price as of the close of business on the day the securities are being valued. Lacking any sales, securities are valued at the mean between closing bid and asked prices (except the Loomis Sayles High Yield Bond Portfolio, which values such securities at last bid price). Securities trading primarily on non-domestic exchanges are valued at the preceding closing price on the exchange where it primarily trades (or in the case of Loomis Sayles High Yield Bond and Scudder Global Equity Portfolios, the last sale). A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for that security by the Board of Directors or its delegates. If no closing price is available, then such securities are valued, first, by using the mean between last current bid and asked prices or, second, by using last available closing price (except the Scudder Global Equity Portfolio which second values such securities at last current bid or third, by using last available price). Domestic securities traded on over-the-counter markets are valued at the mean between bid and asked prices or yield equivalent as obtained from two or more dealers that make markets in the securities (except for the Loomis Sayles High Yield Bond Portfolio, which would value such security, first, at last sale price and, second, at bid price or the Scudder Global Equity and the Neuberger Berman Partners Mid Cap Value Portfolios that value such securities, first, at last sale price and, second, at last bid price). All non-U.S. securities traded on over-the-counter securities markets are valued at the last sale quote if market quotations are available, or the last closing bid price if there is no active trading in a particular security for a given day (except the Neuberger Berman Partners Mid Cap Value Portfolio which is valued at the mean between closing bid and asked prices). Where market quotations are not readily available for such non-domestic, over-the-counter securities, then such securities will be valued in good faith by a method that the Board of Directors or its delegates believe accurately reflects fair value. Portfolio securities that are traded both on over-the-counter markets and on a stock exchange are valued according to the broadest and most representative market. For debt securities, this ordinarily will be the over-the-counter market. Securities and assets for which market quotations are not readily available (e.g. certain long-term bonds and notes) are valued at fair value as determined in good faith by or under the direction of the Board of Directors, including valuations furnished by a pricing service retained for this purpose and typically utilized by other institutional-sized trading organizations. Forward foreign exchange contracts are valued based on the closing prices of the forward currency contract rates in London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Short-term instruments with a remaining maturity of sixty days or less are valued utilizing the amortized cost method of valuation. If for any reason the fair value of any security is not fairly reflected by such method, such security will be valued by the same method as securities having a maturity of more than sixty days. Options on securities, indices, or futures contracts are valued at the last sales price available as of the close of business on the day of valuation. If no sales have occurred, options are valued at the mean between bid and asked prices. Options on currencies are valued at the spot price each day. As a general matter, futures contracts are marked-to-market daily. The value of futures contracts will be the sum of the margin deposits plus or minus the difference between the value of the futures contract on each day the net asset value is calculated and the value on the date the futures contract originated. For this purpose, value is the value established on a recognized commodity exchange, or by reference to other customary sources, with gain or loss being realized when the futures contract closes or expires. 31 1 INDEX TO FINANCIAL STATEMENTS
PAGE ---- METROPOLITAN LIFE INSURANCE COMPANY Independent Auditors' Report................................ Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997.......................... Consolidated Balance Sheets at December 31, 1999 and 1998... Consolidated Statements of Equity for the years ended December 31, 1999, 1998 and 1997.......................... Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997.......................... Notes to Consolidated Financial Statements..................
2 INDEPENDENT AUDITORS' REPORT The Board of Directors and Policyholders of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of income, equity and cash flows for each of the three years in the period ended December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries at December 31, 1999 and 1998, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. Deloitte & Touche LLP New York, New York February 7, 2000 3 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
1999 1998 1997 ---- ---- ---- REVENUES Premiums.................................................... $12,088 $11,503 $11,278 Universal life and investment-type product policy fees...... 1,438 1,360 1,418 Net investment income....................................... 9,816 10,228 9,491 Other revenues.............................................. 2,154 1,994 1,491 Net realized investment gains (losses) (net of amounts allocable to other accounts of $(67), $608 and $231, respectively)............................................. (70) 2,021 787 ------- ------- ------- 25,426 27,106 24,465 ------- ------- ------- EXPENSES Policyholder benefits and claims (excludes amounts directly related to net realized investment gains (losses) of $(21), $368 and $161, respectively)....................... 13,105 12,638 12,403 Interest credited to policyholder account balances.......... 2,441 2,711 2,878 Policyholder dividends...................................... 1,690 1,651 1,742 Other expenses (excludes amounts directly related to net realized investment gains (losses) of $(46), $240 and $70, respectively)............................................. 6,755 8,019 5,771 ------- ------- ------- 23,991 25,019 22,794 ------- ------- ------- Income before provision for income taxes and extraordinary item...................................................... 1,435 2,087 1,671 Provision for income taxes.................................. 593 740 468 ------- ------- ------- Income before extraordinary item............................ 842 1,347 1,203 Extraordinary item -- demutualization expense............... 225 4 -- ------- ------- ------- Net income.................................................. $ 617 $ 1,343 $ 1,203 ======= ======= =======
See accompanying notes to consolidated financial statements. 4 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND 1998 (IN MILLIONS)
1999 1998 ---- ---- ASSETS Investments: Fixed maturities available-for-sale, at fair value........ $ 96,981 $100,767 Equity securities, at fair value.......................... 2,006 2,340 Mortgage loans on real estate............................. 19,739 16,827 Real estate and real estate joint ventures................ 5,649 6,287 Policy loans.............................................. 5,598 5,600 Other limited partnership interests....................... 1,331 1,047 Short-term investments.................................... 3,055 1,369 Other invested assets..................................... 1,501 1,484 -------- -------- 135,860 135,721 Cash and cash equivalents................................... 2,789 3,301 Accrued investment income................................... 1,725 1,994 Premiums and other receivables.............................. 6,681 5,972 Deferred policy acquisition costs........................... 8,492 6,538 Deferred income taxes....................................... 603 -- Other....................................................... 4,141 3,752 Separate account assets..................................... 64,941 58,068 -------- -------- $225,232 $215,346 ======== ======== LIABILITIES AND EQUITY Liabilities: Future policy benefits...................................... $ 73,582 $ 72,701 Policyholder account balances............................... 45,901 46,494 Other policyholder funds.................................... 4,498 4,061 Policyholder dividends payable.............................. 974 947 Short-term debt............................................. 4,208 3,585 Long-term debt.............................................. 2,514 2,903 Current income taxes payable................................ 548 403 Deferred income taxes payable............................... -- 545 Other....................................................... 14,376 10,772 Separate account liabilities................................ 64,941 58,068 -------- -------- 211,542 200,479 -------- -------- Commitments and contingencies (Note 9) Equity: Retained earnings........................................... 14,100 13,483 Accumulated other comprehensive income (loss)............... (410) 1,384 -------- -------- 13,690 14,867 -------- -------- $225,232 $215,346 ======== ========
See accompanying notes to consolidated financial statements. 5 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) ----------------------------------------- NET FOREIGN MINIMUM UNREALIZED CURRENCY PENSION COMPREHENSIVE RETAINED INVESTMENT TRANSLATION LIABILITY TOTAL INCOME (LOSS) EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT ----- ------------- -------- -------------- ----------- ---------- Balance at January 1, 1997....... $11,983 $10,937 $ 1,028 $ 18 $ -- Comprehensive income: Net income..................... 1,203 $ 1,203 1,203 ------- Other comprehensive income: Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes...................... 870 870 Foreign currency translation adjustments................ (49) (49) ------- Other comprehensive income... 821 821 ------- Comprehensive income........... $ 2,024 ======= ------- ------- ------- ----- ---- Balance at December 31, 1997..... 14,007 12,140 1,898 (31) -- Comprehensive income: Net income..................... 1,343 $ 1,343 1,343 ------- Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes...................... (358) (358) Foreign currency translation adjustments................ (113) (113) Minimum pension liability adjustment................. (12) (12) ------- Other comprehensive loss..... (483) (483) ------- Comprehensive income........... $ 860 ======= ------- ------- ------- ----- ---- Balance at December 31, 1998..... 14,867 13,483 1,540 (144) (12) Comprehensive loss: Net income..................... 617 $ 617 617 ------- Other comprehensive loss: Unrealized investment losses, net of related offsets, reclassification adjustments and income taxes...................... (1,837) (1,837) Foreign currency translation adjustments................ 50 50 Minimum pension liability adjustment................. (7) (7) ------- Other comprehensive loss..... (1,794) (1,794) ------- Comprehensive loss............. $(1,177) ======= ------- ------- ------- ----- ---- Balance at December 31, 1999..... $13,690 $14,100 $ (297) $ (94) $(19) ======= ======= ======= ===== ====
See accompanying notes to consolidated financial statements. 6 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 (IN MILLIONS)
1999 1998 1997 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 617 $ 1,343 $ 1,203 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.................. 173 56 (36) (Gains) losses from sales of investments and businesses, net................................................... 137 (2,629) (1,018) Change in undistributed income of real estate joint ventures and other limited partnership interests...... (322) (91) 157 Interest credited to policyholder account balances...... 2,441 2,711 2,878 Universal life and investment-type product policy fees.................................................. (1,438) (1,360) (1,418) Change in accrued investment income..................... 269 (181) (215) Change in premiums and other receivables................ (619) (2,681) (792) Change in deferred policy acquisition costs, net........ (389) (188) (159) Change in insurance related liabilities................. 2,248 1,481 2,364 Change in income taxes payable.......................... 22 251 (99) Change in other liabilities............................. 857 2,390 (206) Other, net.............................................. (131) (260) 213 -------- -------- -------- Net cash provided by operating activities................... 3,865 842 2,872 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturities........................................ 73,120 57,857 75,346 Equity securities....................................... 760 3,085 1,821 Mortgage loans on real estate........................... 1,992 2,296 2,784 Real estate and real estate joint ventures.............. 1,062 1,122 2,046 Other limited partnership interests..................... 469 146 166 Purchases of: Fixed maturities........................................ (72,253) (67,543) (76,603) Equity securities....................................... (410) (854) (2,121) Mortgage loans on real estate........................... (4,395) (2,610) (4,119) Real estate and real estate joint ventures.............. (341) (423) (624) Other limited partnership interests..................... (465) (723) (338) Net change in short-term investments...................... (1,577) (761) 63 Net change in policy loans................................ 2 133 17 Purchase of businesses, net of cash received.............. (2,972) -- (430) Proceeds from sales of businesses......................... -- 7,372 135 Net change in investment collateral....................... 2,692 3,769 -- Other, net................................................ (73) (183) 191 -------- -------- -------- Net cash provided by (used in) investing activities......... (2,389) 2,683 (1,666) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits................................................ 18,428 19,361 16,061 Withdrawals............................................. (20,650) (21,706) (18,831) Short-term debt, net...................................... 623 (1,002) 1,265 Long-term debt issued..................................... 44 693 989 Long-term debt repaid..................................... (433) (481) (104) -------- -------- -------- Net cash used in financing activities....................... (1,988) (3,135) (620) -------- -------- -------- Change in cash and cash equivalents......................... (512) 390 586 Cash and cash equivalents, beginning of year................ 3,301 2,911 2,325 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 2,789 $ 3,301 $ 2,911 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest.................................................. $ 388 $ 367 $ 422 ======== ======== ======== Income taxes.............................................. $ 587 $ 579 $ 589 ======== ======== ========
See accompanying notes to consolidated financial statements. 7 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the "Company") is a leading provider of insurance and financial services to a broad section of institutional and individual customers. The Company offers life insurance, annuities and mutual funds to individuals and group insurance and retirement and savings products and services to corporations and other institutions. PLAN OF REORGANIZATION On September 28, 1999, the board of directors of MetLife adopted, pursuant to the New York Insurance Law, a plan of reorganization, and subsequently adopted amendments to the plan, pursuant to which MetLife proposes to convert from a mutual life insurance company to a stock life insurance company and become a wholly-owned subsidiary of MetLife, Inc. The plan was approved by MetLife's voting policyholders on February 7, 2000. The plan will become effective at such time as the New York Superintendent of Insurance ("Superintendent") approves it based on finding, among other things, that the plan is fair and equitable to policyholders. The plan requires an initial public offering of common stock and provides for other capital raising transactions on the effective date of the plan. On the date the plan of reorganization becomes effective, each policyholder's membership interest will be extinguished and each eligible policyholder will be entitled to receive, in exchange for that interest, trust interests representing shares of common stock of MetLife, Inc. to be held in a trust, cash or an adjustment to their policy values in the form of policy credits, as provided in the plan. In addition, when MetLife demutualizes, MetLife's Canadian branch will make cash payments to holders of certain policies transferred to Clarica Life Insurance Company ("Clarica Life") in connection with the sale of a substantial portion of MetLife's Canadian operations in 1998. See Note 9. The plan of reorganization requires that MetLife establish and operate a closed block for the benefit of holders of certain individual life insurance policies of MetLife. Assets will be allocated to the closed block in an amount that is expected to produce cash flows which, together with anticipated revenue from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of these policies included in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience relating to the closed block are, in the aggregate, more or less favorable than assumed in establishing the closed block, total dividends paid to the closed block policyholders in the future may be greater than or less than which would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. The closed block will continue in effect until the last policy in the closed block is no longer in force. 8 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The accounting principles to account for the participating policies included in the closed block will be those used prior to the date of the demutualization. However, a policyholder dividend obligation will be established for earnings that will be paid to policyholders as additional dividends in the amounts described below, unless these earnings are offset by future unfavorable experience in the closed block. Although all of the cash flows of the closed block are for the benefit of closed block policyholders, the excess of closed block liabilities over closed block assets at the effective date will represent the estimated maximum future contributions from the closed block expected to be reported in income as the contribution from the closed block after income taxes. The contribution from the closed block will be recognized in income over the period the policies and contracts in the closed block remain in force. Management believes that over time the actual cumulative contributions from the closed block will approximately equal the expected cumulative contributions, due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative contribution from the closed block is greater than the expected cumulative contribution from the closed block, the expected cumulative contribution will be recognized in income with the excess recorded as a policyholder dividend obligation, because the excess of the actual cumulative contribution from the closed block over the expected cumulative contribution will be paid to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block. If over such period, the actual cumulative contribution from the closed block is less than the expected cumulative contribution from the closed block, the actual contribution will be recognized in income. However, dividends in the future may be changed, which would be intended to increase future actual contribution until the actual contribution equal the expected cumulative contribution. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The New York State Insurance Department (the "Department") recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company for determining solvency under the New York Insurance Law. No consideration is given by the Department to financial statements prepared in accordance with GAAP in making such determination. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates include those used in determining deferred policy acquisition costs, investment allowances and the liability for future policyholder benefits. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of MetLife and its subsidiaries, partnerships and joint ventures in which MetLife has a majority voting interest or general partner interest with limited removal rights by limited partners. All material intercompany accounts and transactions have been eliminated. The Company accounts for its investments in real estate joint ventures and other limited partnership interests in which it does not have a controlling interest, but more than a minimal interest, under the equity method of accounting. Minority interest related to consolidated entities included in other liabilities was $245 and $274 at December 31, 1999 and 1998, respectively. 9 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 1999 presentation. INVESTMENTS The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income (loss), net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other than temporary. These adjustments are recorded as realized losses on investments. Realized gains and losses on sales of securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are established for the excess carrying value of the mortgage loan over its estimated fair value when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are based upon the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. Interest income earned on impaired loans is accrued on the net carrying value amount of the loan based on the loan's effective interest rate. Real estate, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 40 years). Cost is adjusted for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Impaired real estate is written down to estimated fair value with the impairment loss being included in realized losses on investments. Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired in satisfaction of debt is recorded at estimated fair value at the date of foreclosure. Valuation allowances on real estate held-for-sale are computed using the lower of depreciated cost or estimated fair value, net of disposition costs. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. DERIVATIVE INSTRUMENTS The Company uses derivative instruments to manage market risk through one of four principal risk management strategies: the hedging of invested assets, liabilities, portfolios of assets or liabilities and anticipated transactions. The Company's derivative strategy employs a variety of instruments including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options. The Company's derivative program is monitored by senior management. The Company's risk of loss is typically limited to the fair value of its derivative instruments and not to the notional or contractual amounts of these derivatives. Risk arises from changes in the fair value of the underlying instruments and, with respect to over-the-counter transactions, from the possible inability of counterparties to meet the terms of the contracts. The Company has strict policies regarding the financial stability and credit standing of its major counterparties. 10 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company's derivative instruments are designated as hedges and are highly correlated to the underlying risk at contract inception. The Company monitors the effectiveness of its hedges throughout the contract term using an offset ratio of 80 to 125 percent as its minimum acceptable threshold for hedge effectiveness. Derivative instruments that lose their effectiveness are marked to market through net investment income. Gains or losses on financial futures contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, recorded as an adjustment to the basis of the purchased assets or to the proceeds on disposition. Gains or losses on financial futures used in asset risk management are deferred and amortized into net investment income over the remaining term of the investment. Gains or losses on financial futures used in portfolio risk management are deferred and amortized into net investment income or policyholder benefits over the remaining life of the hedged sector of the underlying portfolio. Financial forward contracts that are entered into to purchase securities are marked to fair value through other comprehensive income (loss), similar to the accounting for the investment security. Such contracts are accounted for at settlement by recording the purchase of the specified securities at the contracted value. Gains or losses resulting from the termination of forward contracts are recognized immediately as a component of net investment income. Interest rate and certain foreign currency swaps involve the periodic exchange of payments without the exchange of underlying principal or notional amounts. Net receipts or payments are accrued and recognized over the term of the swap agreement as an adjustment to net investment income or other expense. Gains or losses resulting from swap terminations are amortized over the remaining term of the underlying asset or liability. Gains and losses on swaps and certain foreign forward exchange contracts entered into in anticipation of investment transactions are deferred and, at the time of the ultimate investment purchase or disposition, reflected as an adjustment to the basis of the purchased assets or to the proceeds of disposition. In the event the asset or liability underlying a swap is disposed of, the swap position is closed immediately and any gain or loss is recorded as an adjustment to the proceeds from disposition. The Company periodically enters into collars, which consist of purchased put and written call options, to lock in unrealized gains on equity securities. Collars are marked to market through other comprehensive income (loss), similar to the accounting for the underlying equity securities. Purchased interest rate caps and floors are used to offset the risk of interest rate changes related to insurance liabilities. Premiums paid on floors, caps and options are split into two components, time value and intrinsic value. Time value is amortized over the life of the applicable derivative instrument. The intrinsic value and any gains or losses relating to these derivative instruments adjust the basis of the underlying asset or liability and are recognized as a component of net investment income over the term of the underlying asset or liability being hedged as an adjustment to the yield. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 11 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years-digits method over the estimated useful lives of the assets. Estimated lives range from 20 to 40 years for real estate and 5 to 15 years for all other property and equipment. Accumulated depreciation of property and equipment and accumulated amortization on leasehold improvements was $1,130 and $1,098 at December 31, 1999 and 1998, respectively. Related depreciation and amortization expense was $103, $116 and $103 for the years ended December 31, 1999, 1998 and 1997, respectively. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new insurance business that vary with, and are primarily related to, the production of new business are deferred. Such costs, which consist principally of commissions, agency and policy issue expenses, are amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, deferred policy acquisition costs are amortized in proportion to the present value of estimated gross margins or profits from investment, mortality, expense margins and surrender charges. Interest rates are based on rates in effect at the inception of the contracts. Actual gross margins or profits can vary from management's estimates resulting in increases or decreases in the rate of amortization. Management periodically updates these estimates and evaluates the recoverability of deferred policy acquisition costs. When appropriate, management revises its assumptions of the estimated gross margins or profits of these contracts, and the cumulative amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. Deferred policy acquisition costs for non-participating traditional life, non-medical health and annuity policies with life contingencies are amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are made at the date of policy issuance and are consistently applied during the lives of the contracts. Deviations from estimated experience are included in operations when they occur. For these contracts, the amortization period is typically the estimated life of the policy. Deferred policy acquisition costs related to internally replaced contracts are expensed at date of replacement. Deferred policy acquisition costs for property and casualty insurance contracts, which are primarily comprised of commissions and certain underwriting expenses, are deferred and amortized on a pro rata basis over the applicable contract term or reinsurance treaty. On September 28, 1999, the Company's Board of Directors adopted a plan of reorganization. Consequently, in the fourth quarter of 1999, the Company was able to commit to state insurance regulatory authorities that it would establish investment sub-segments to further align investments with the traditional individual life business of the Individual segment. As a result, future dividends for the traditional individual life business will be determined based on the results of the new investment sub-segments. Additionally, estimated future gross margins used to determine amortization of deferred policy acquisition costs and the amount of unrealized investment gains and losses relating to these products are based on investments in the new sub-segments. Using the investments in the sub-segments to determine estimated gross margins and unrealized investment gains and losses increased 1999 amortization of deferred policy acquisition costs by $56 (net of income taxes of $32) and decreased other comprehensive loss in 1999 by $123 (net of income taxes of $70). 12 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding deferred policy acquisition costs is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1.................................. $ 6,538 $6,436 $7,227 Capitalized during the year........................... 1,160 1,025 1,000 ------- ------ ------ Total............................................ 7,698 7,461 8,227 ------- ------ ------ Amortization allocated to: Net realized investment gains (losses).............. (46) 240 70 Unrealized investment gains (losses)................ (1,628) (216) 727 Other expenses...................................... 862 587 771 ------- ------ ------ Total amortization............................... (812) 611 1,568 ------- ------ ------ Dispositions and other................................ (18) (312) (223) ------- ------ ------ Balance at December 31................................ $ 8,492 $6,538 $6,436 ======= ====== ======
Amortization of deferred policy acquisition costs is allocated to (1) realized investment gains and losses to provide consolidated statement of income information regarding the impact of such gains and losses on the amount of the amortization, (2) unrealized investment gains and losses to provide information regarding the amount of deferred policy acquisition costs that would have been amortized if such gains and losses had been realized and (3) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. Realized investment gains and losses related to certain products have a direct impact on the amortization of deferred policy acquisition costs. Presenting realized investment gains and losses net of related amortization of deferred policy acquisition costs provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. INTANGIBLE ASSETS The excess of cost over the fair value of net assets acquired ("goodwill") and other intangible assets, including the value of business acquired, are included in other assets. Goodwill is amortized on a straight-line basis over a period ranging from 10 to 30 years. The Company continually reviews goodwill to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results if a permanent diminution in value is deemed to have occurred. Other intangible assets are amortized over the expected policy or contract duration in relation to the present value of estimated gross profits from such policies and contracts. 13 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL OTHER INTANGIBLE ASSETS -------------------- -------------------------- 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- YEARS ENDED DECEMBER 31 Net Balance at January 1.............. $404 $359 $136 $1,006 $1,055 $ 767 Acquisitions.......................... 237 67 240 156 39 355 Amortization.......................... (30) (22) (17) (114) (88) (67) ---- ---- ---- ------ ------ ------ Net Balance at December 31............ $611 $404 $359 $1,048 $1,006 $1,055 ==== ==== ==== ====== ====== ====== DECEMBER 31 Accumulated amortization.............. $118 $ 88 $ 392 $ 278 ==== ==== ====== ======
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of (a) net level premium reserves for death and endowment policy benefits (calculated based upon the nonforfeiture interest rate, ranging from 3% to 10%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts), (b) the liability for terminal dividends and (c) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits and expenses after deferred policy acquisition costs are written off. Future policy benefit liabilities for traditional annuities are equal to accumulated contractholder fund balances during the accumulation period and the present value of expected future payments after annuitization. Interest rates used in establishing such liabilities range from 3% to 8%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 10%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 10%. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 2% to 17%, less expenses, mortality charges and withdrawals. The liability for unpaid claims and claim expenses for property and casualty insurance represents the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. Revisions of these estimates are included in operations in the year such refinements are made. RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. 14 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Premiums related to non-medical health contracts are recognized on a pro rata basis over the applicable contract term. Premiums related to universal life and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums related to property and casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums are included in other liabilities. DIVIDENDS TO POLICYHOLDERS Dividends to policyholders are determined annually by the board of directors. The aggregate amount of policyholders' dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by MetLife and its insurance subsidiaries. DIVIDEND RESTRICTIONS MetLife, when it converts from a mutual life insurance company to a stock life insurance company, may be restricted as to the amounts it may pay as dividends to MetLife, Inc. Under the New York Insurance Law, the Superintendent has broad discretion to determine whether the financial condition of a stock life insurance company would support the payment of dividends to its shareholders. The Department has established informal guidelines for the Superintendent's determinations which focus upon, among other things, the overall financial condition and profitability of the insurer under statutory accounting practices. PARTICIPATING BUSINESS Participating business represented approximately 19% and 21% of the Company's life insurance in-force, and 84% and 81% of the number of life insurance policies in-force, at December 31, 1999 and 1998, respectively. Participating policies represented approximately 42% and 44%, 39% and 40%, and 41% and 41% of gross and net life insurance premiums for the years ended December 31, 1999, 1998 and 1997, respectively. INCOME TAXES MetLife and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code, as amended (the "Code"). Under the Code, the amount of federal income tax expense incurred by mutual life insurance companies includes an equity tax calculated based upon a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. MetLife will not be subject to the equity tax when it converts to a stock life insurance company. The future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. REINSURANCE The Company has reinsured certain of its life insurance and property and casualty insurance contracts with other insurance companies under various agreements. Amounts due from 15 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Policy and contract liabilities are reported gross of reinsurance credits. Deferred policy acquisition costs are reduced by amounts recovered under reinsurance contracts. Amounts received from reinsurers for policy administration are reported in other revenues. SEPARATE ACCOUNTS Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Investments (stated at estimated fair value) and liabilities of the separate accounts are reported separately as assets and liabilities. Deposits to separate accounts, investment income and realized and unrealized gains and losses on the investments of the separate accounts accrue directly to contractholders and, accordingly, are not reflected in the Company's consolidated statements of income and cash flows. Mortality, policy administration and surrender charges to all separate accounts are included in revenues. See Note 6. FOREIGN CURRENCY TRANSLATION Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income (loss). Gains and losses from foreign currency transactions are reported in other expenses and were insignificant for all years presented. EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSE The accompanying consolidated statements of income include extraordinary charges of $225 (net of income taxes of $35) and $4 (net of income taxes of $2) for the years ended December 31, 1999 and 1998, respectively, related to costs associated with the demutualization. APPLICATION OF ACCOUNTING PRONOUNCEMENTS Effective January 1, 1999, the Company adopted Statement of Position ("SOP") 98-5, Reporting on the Costs of Start-Up Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. Adoption of SOP 98-5 did not have a material effect on the Company's consolidated financial statements. Effective January 1, 1999, the Company adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides guidance for determining when an entity should capitalize or expense external and internal costs of computer software developed or obtained for internal use. Adoption of the provisions of SOP 98-1 had the effect of increasing other assets by $82 at December 31, 1999. Effective January 1, 1999, the Company adopted SOP 97-3, Accounting for Insurance and Other Enterprises for Insurance Related Assessments ("SOP 97-3"). SOP 97-3 provides guidance on accounting by insurance and other enterprises for assessments related to insurance activities including recognition, measurement and disclosure of guaranty fund and other insurance related 16 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) assessments. Adoption of SOP 97-3 did not have a material effect on the Company's consolidated financial statements. In 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 125") which were deferred by SFAS 127, Deferral of the Effective Date of Certain Provisions of FASB Statement No. 125. The deferred provisions provide accounting and reporting standards related to repurchase agreements, dollar rolls, securities lending and similar transactions. Adoption of the provisions had the effect of increasing assets and liabilities by $3,769 at December 31, 1998 and increasing other revenues and other expenses by $266 for the year ended December 31, 1998. During 1997, the Company changed to the retrospective interest method of accounting for investment income on structured notes in accordance with Emerging Issues Task Force Consensus No. 96-12, Recognition of Interest Income and Balance Sheet Classification of Structured Notes. This accounting change increased 1997 net investment income by $175, which included an immaterial amount related to prior years. In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137"). SFAS 137 defers the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") until January 1, 2001. SFAS 133 requires, among other things, that all derivatives be recognized in the consolidated balance sheets as either assets or liabilities and measured at fair value. The corresponding derivative gains and losses should be reported based upon the hedge relationship, if such a relationship exists. Changes in the fair value of derivatives that are not designated as hedges or that do not meet the hedge accounting criteria in SFAS 133 are required to be reported in income. The Company is in the process of quantifying the impact of SFAS 133 on its consolidated financial statements. In October 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method of accounting for insurance and reinsurance contracts that do not transfer insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts for which the deposit method is appropriate into those that 1) transfer only significant timing risk, 2) transfer only significant underwriting risk, 3) transfer neither significant timing or underwriting risk and 4) have an indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1, 2000. Adoption of SOP 98-7 is not expected to have a material effect on the Company's consolidated financial statements. 17 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. INVESTMENTS The components of net investment income were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities.................................... $ 6,766 $ 6,563 $ 6,445 Equity securities................................... 40 78 50 Mortgage loans on real estate....................... 1,479 1,572 1,684 Real estate and real estate joint ventures.......... 1,426 1,529 1,718 Policy loans........................................ 340 387 368 Other limited partnership interests................. 199 196 302 Cash, cash equivalents and short-term investments... 173 187 169 Other............................................... 501 841 368 ------- ------- ------- 10,924 11,353 11,104 Less: Investment expenses........................... 1,108 1,125 1,613 ------- ------- ------- $ 9,816 $10,228 $ 9,491 ======= ======= =======
Net realized investment gains (losses), including changes in valuation allowances, were as follows:
YEARS ENDED DECEMBER 31, ------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities........................................ $(538) $ 573 $ 118 Equity securities....................................... 99 994 224 Mortgage loans on real estate........................... 28 23 56 Real estate and real estate joint ventures.............. 265 424 446 Other limited partnership interests..................... 33 13 12 Sales of businesses..................................... -- 531 139 Other................................................... (24) 71 23 ----- ------ ------ (137) 2,629 1,018 Amounts allocable to: Future policy benefit loss recognition................ -- (272) (126) Deferred policy acquisition costs..................... 46 (240) (70) Participating contracts............................... 21 (96) (35) ----- ------ ------ $ (70) $2,021 $ 787 ===== ====== ======
Realized investment gains (losses) have been reduced by (1) additions to future policy benefits resulting from the need to establish additional liabilities due to the recognition of investment gains, (2) deferred policy acquisition cost amortization to the extent that such amortization results from realized investment gains and losses, and (3) additions to participating contractholder accounts when amounts equal to such investment gains and losses are credited to the contractholders' accounts. This presentation may not be comparable to presentations made by other insurers. 18 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Fixed maturities.................................... $(1,828) $ 4,809 $ 4,766 Equity securities................................... 875 832 1,605 Other invested assets............................... 165 154 294 ------- ------- ------- (788) 5,795 6,665 ------- ------- ------- Amounts allocable to: Future policy benefit loss recognition............ (249) (2,248) (2,189) Deferred policy acquisition costs................. 697 (931) (1,147) Participating contracts........................... (118) (212) (312) Deferred income taxes............................... 161 (864) (1,119) ------- ------- ------- 491 (4,255) (4,767) ------- ------- ------- $ (297) $ 1,540 $ 1,898 ======= ======= =======
The changes in net unrealized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1.................................. $ 1,540 $1,898 $1,028 Unrealized investment gains (losses) during the year................................................ (6,583) (870) 3,402 Unrealized investment (gains) losses relating to: Future policy benefit loss recognition.............. 1,999 (59) (970) Deferred policy acquisition costs................... 1,628 216 (727) Participating contracts............................. 94 100 (303) Deferred income taxes................................. 1,025 255 (532) ------- ------ ------ Balance at December 31................................ $ (297) $1,540 $1,898 ======= ====== ====== Net change in unrealized investment gains (losses).... $(1,837) $ (358) $ 870 ======= ====== ======
19 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FIXED MATURITIES AND EQUITY SECURITIES Fixed maturities and equity securities at December 31, 1999 were as follows:
COST OR GROSS UNREALIZED AMORTIZED ---------------- ESTIMATED COST GAIN LOSS FAIR VALUE --------- ---- ---- ---------- Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 5,990 $ 456 $ 147 $ 6,299 States and political subdivisions.... 1,583 4 45 1,542 Foreign governments.................. 4,090 210 94 4,206 Corporate............................ 47,505 585 1,913 46,177 Mortgage and asset-backed securities......................... 27,396 112 847 26,661 Other................................ 12,235 313 462 12,086 ------- ------ ------ ------- 98,799 1,680 3,508 96,971 Redeemable preferred stocks............. 10 -- -- 10 ------- ------ ------ ------- $98,809 $1,680 $3,508 $96,981 ======= ====== ====== ======= Equity Securities: Common stocks........................... $ 980 $ 921 $ 35 $ 1,866 Nonredeemable preferred stocks.......... 151 -- 11 140 ------- ------ ------ ------- $ 1,131 $ 921 $ 46 $ 2,006 ======= ====== ====== =======
Fixed maturities and equity securities at December 31, 1998 were as follows:
COST OR GROSS UNREALIZED AMORTIZED ----------------- ESTIMATED COST GAIN LOSS FAIR VALUE --------- ---- ---- ---------- Fixed Maturities: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agencies.......... $ 6,640 $1,117 $ 10 $ 7,747 States and political subdivisions.... 597 26 -- 623 Foreign governments.................. 3,435 254 88 3,601 Corporate............................ 46,377 2,471 260 48,588 Mortgage and asset-backed securities......................... 26,456 569 46 26,979 Other................................ 12,438 1,069 293 13,214 ------- ------ ---- -------- 95,943 5,506 697 100,752 Redeemable preferred stocks............. 15 -- -- 15 ------- ------ ---- -------- $95,958 $5,506 $697 $100,767 ======= ====== ==== ======== Equity Securities: Common stocks........................... $ 1,286 $ 923 $ 77 $ 2,132 Nonredeemable preferred stocks.......... 222 4 18 208 ------- ------ ---- -------- $ 1,508 $ 927 $ 95 $ 2,340 ======= ====== ==== ========
20 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company held foreign currency derivatives with notional amounts of $4,002 and $716 to hedge the exchange rate risk associated with foreign bonds at December 31, 1999 and 1998, respectively. The Company also held options with fair values of $(11) to hedge the market value of common stocks at December 31, 1998. At December 31, 1999, fixed maturities held by the Company that were below investment grade or not rated by an independent rating agency had an estimated fair value of $8,813. At December 31, 1999, non-income producing fixed maturities were insignificant. The amortized cost and estimated fair value of bonds at December 31, 1999, by contractual maturity date, are shown below:
AMORTIZED ESTIMATED COST FAIR VALUE --------- ---------- Due in one year or less............................... $ 3,180 $ 3,217 Due after one year through five years................. 18,152 18,061 Due after five years through ten years................ 23,755 23,114 Due after ten years................................... 26,316 25,918 ------- ------- 71,403 70,310 Mortgage and asset-backed securities.................. 27,396 26,661 ------- ------- $98,799 $96,971 ======= =======
Fixed maturities not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales of securities were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Securities classified as available-for-sale: Proceeds.......................................... $59,852 $46,913 $69,275 Gross realized gains.............................. $ 605 $ 2,053 $ 965 Gross realized losses............................. $ 911 $ 486 $ 627 Fixed maturities classified as held-to-maturity: Proceeds.......................................... $ -- $ -- $ 352 Gross realized gains.............................. $ -- $ -- $ 5 Gross realized losses............................. $ -- $ -- $ 1
Gross realized losses above exclude writedowns recorded during 1999 for permanently impaired available-for-sale securities of $133. During 1997, fixed maturities with an amortized cost of $11,682 were transferred from held-to-maturity to available-for-sale. Other comprehensive income at the date of reclassification was increased by $198 excluding the effects of deferred income taxes and policyholder related amounts. Excluding investments in U.S. governments and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturities portfolio. 21 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SECURITIES LENDING PROGRAM The Company participates in securities lending programs whereby large blocks of securities, which are returnable to the Company on short notice and included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $6,458 and $4,005 and estimated fair value of $6,391 and $4,552 were on loan under the program at December 31, 1999 and 1998, respectively. The Company was liable for cash collateral under its control of $6,461 and $3,769 at December 31, 1999 and 1998, respectively. This liability is included in other liabilities. Security collateral on deposit from securities borrowers is returnable to them on short notice and is not reflected in the consolidated financial statements. STATUTORY DEPOSITS The Company had investment assets on deposit with regulatory agencies of $476 and $466 at December 31, 1999 and 1998, respectively. MORTGAGE LOANS ON REAL ESTATE Mortgage loans were categorized as follows:
DECEMBER 31, ---------------------------------------- 1999 1998 ------------------ ------------------ AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Commercial mortgage loans.................. $14,931 75% $12,503 74% Agricultural mortgage loans................ 4,816 24% 4,256 25% Residential mortgage loans................. 82 1% 241 1% ------- --- ------- --- 19,829 100% 17,000 100% === === Less: Valuation allowances................. 90 173 ------- ------- $19,739 $16,827 ======= =======
Mortgage loans on real estate are collateralized by properties primarily located throughout the United States. At December 31, 1999, approximately 16%, 8% and 8% of the properties were located in California, New York and Florida, respectively. Generally, the Company (as the lender) requires that a minimum of one-fourth of the purchase price of the underlying real estate be paid by the borrower. Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $547 and $606 at December 31, 1999 and 1998, respectively. 22 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in mortgage loan valuation allowances were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1................................. $ 173 $ 289 $ 469 Additions............................................ 40 40 61 Deductions for writedowns and dispositions........... (123) (130) (241) Deductions for disposition of affiliates............. -- (26) -- ----- ----- ----- Balance at December 31............................... $ 90 $ 173 $ 289 ===== ===== =====
A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
DECEMBER 31, -------------- 1999 1998 ---- ---- Impaired mortgage loans with valuation allowances.......... $540 $ 823 Impaired mortgage loans without valuation allowances....... 437 375 ---- ------ 977 1,198 Less: Valuation allowances................................. 83 149 ---- ------ $894 $1,049 ==== ======
The average investment in impaired mortgage loans on real estate was $1,134, $1,282 and $1,680 for the years ended December 31, 1999, 1998 and 1997, respectively. Interest income on impaired mortgages was $101, $109 and $110 for the years ended December 31, 1999, 1998 and 1997, respectively. The investment in restructured mortgage loans on real estate was $980 and $1,140 at December 31, 1999 and 1998, respectively. Interest income of $80, $74 and $91 was recognized on restructured loans for the years ended December 31, 1999, 1998 and 1997, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $92, $87 and $116 for the years ended December 31, 1999, 1998 and 1997, respectively. Mortgage loans on real estate with scheduled payments of 60 days (90 days for agriculture mortgages) or more past due or in foreclosure had an amortized cost of $44 and $65 at December 31, 1999 and 1998, respectively. 23 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate and real estate joint ventures consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Real estate and real estate joint ventures held-for-investment....................................... $5,440 $6,301 Impairments................................................. (289) (408) ------ ------ 5,151 5,893 ------ ------ Real estate and real estate joint ventures held-for-sale.... 719 546 Impairments................................................. (187) (119) Valuation allowance......................................... (34) (33) ------ ------ 498 394 ------ ------ $5,649 $6,287 ====== ======
Accumulated depreciation on real estate was $2,235 and $2,065 at December 31, 1999 and 1998, respectively. Related depreciation expense was $247, $282 and $338 for the years ended December 31, 1999, 1998 and 1997, respectively. Real estate and real estate joint ventures were categorized as follows:
DECEMBER 31, -------------------------------------- 1999 1998 ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- Office........................................ $3,846 68% $4,265 68% Retail........................................ 587 10% 640 10% Apartments.................................... 474 8% 418 7% Land.......................................... 258 5% 313 5% Agriculture................................... 96 2% 195 3% Other......................................... 388 7% 456 7% ------ --- ------ --- $5,649 100% $6,287 100% ====== === ====== ===
The Company's real estate holdings are primarily located throughout the United States. At December 31, 1999, approximately 25%, 24% and 10% of the Company's real estate holdings were located in New York, California and Texas, respectively. Changes in real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Balance at January 1....................................... $ 33 $110 $ 661 Additions charged (credited) to operations................. 36 (5) (76) Deductions for writedowns and dispositions................. (35) (72) (475) ---- ---- ----- Balance at December 31..................................... $ 34 $ 33 $ 110 ==== ==== =====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $61, $105 and $28 for the years ended December 31, 1999, 1998 and 1997, respectively. Investment income related to real estate and real estate joint ventures held-for-sale 24 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) was $14, $3 and $11 for the years ended December 31, 1999, 1998 and 1997, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $22 and $1 at December 31, 1999 and 1998, respectively. The Company owned real estate acquired in satisfaction of debt of $47 and $154 at December 31, 1999 and 1998, respectively. Real estate of $37, $69 and $151 was acquired in satisfaction of debt during the years ended December 31, 1999, 1998 and 1997, respectively. LEVERAGED LEASES Leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Investment............................................... $1,016 $1,067 Estimated residual values................................ 559 607 ------ ------ 1,575 1,674 Unearned income.......................................... (417) (471) ------ ------ $1,158 $1,203 ====== ======
The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from four to 15 years, but in certain circumstances are as long as 30 years. Average yields range from 7% to 12%. These receivables are generally collateralized by the related property. 3. DERIVATIVE INSTRUMENTS The table below provides a summary of the carrying value, notional amount and current market or fair value of derivative financial instruments (other than equity options) held at December 31, 1999 and 1998:
1999 1998 ------------------------------------------ ------------------------------------------ CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE CARRYING NOTIONAL -------------------- CARRYING NOTIONAL -------------------- VALUE AMOUNT ASSETS LIABILITIES VALUE AMOUNT ASSETS LIABILITIES -------- -------- ------ ----------- -------- -------- ------ ----------- Financial futures.................. $ 27 $ 3,140 $37 $ 10 $ 3 $ 2,190 $ 8 $ 6 Foreign exchange contracts......... -- -- -- -- -- 136 -- 2 Interest rate swaps................ (32) 1,316 11 40 (9) 1,621 17 50 Foreign currency swaps............. -- 4,002 26 103 (1) 580 3 62 Caps............................... 1 12,376 3 -- -- 8,391 -- -- ---- ------- --- ---- --- ------- --- ---- Total contractual commitments...... $ (4) $20,834 $77 $153 $(7) $12,918 $28 $120 ==== ======= === ==== === ======= === ====
25 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a reconciliation of the notional amounts by derivative type and strategy at December 31, 1999 and 1998:
DECEMBER 31, 1998 TERMINATIONS/ DECEMBER 31, 1999 NOTIONAL AMOUNT ADDITIONS MATURITIES NOTIONAL AMOUNT ----------------- --------- ------------- ----------------- BY DERIVATIVE TYPE Financial futures................... $ 2,190 $18,259 $17,309 $ 3,140 Foreign exchange contracts.......... 136 702 838 -- Interest rate swaps................. 1,621 429 734 1,316 Foreign currency swaps.............. 580 3,501 79 4,002 Caps................................ 8,391 5,860 1,875 12,376 ------- ------- ------- ------- Total contractual commitments....... $12,918 $28,751 $20,835 $20,834 ======= ======= ======= ======= BY STRATEGY Liability hedging................... $ 8,741 $ 5,865 $ 2,035 $12,571 Invested asset hedging.............. 864 4,288 937 4,215 Portfolio hedging................... 2,830 13,920 14,729 2,021 Anticipated transaction hedging..... 483 4,678 3,134 2,027 ------- ------- ------- ------- Total contractual commitments....... $12,918 $28,751 $20,835 $20,834 ======= ======= ======= =======
The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 1999:
REMAINING LIFE ------------------------------------------------------------------- ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL -------- ------------------ ----------------- --------------- ----- Financial futures......... $3,140 $ -- $ -- $ -- $ 3,140 Interest rate swaps....... 833 483 -- -- 1,316 Foreign currency swaps.... 7 3,371 503 121 4,002 Caps...................... 3,426 8,930 20 -- 12,376 ------ ------- ---- ---- ------- Total contractual commitments............. $7,406 $12,784 $523 $121 $20,834 ====== ======= ==== ==== =======
In addition to the derivative instruments above, the Company uses equity option contracts as invested asset hedges. There were ninety-two thousand equity option contracts outstanding with a carrying value of $(11) and a market value of $(11) at December 31, 1998. 4. FAIR VALUE INFORMATION The estimated fair values of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. 26 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amounts related to the Company's financial instruments were as follows:
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 1999 AMOUNT VALUE FAIR VALUE - ----------------- -------- -------- ---------- Assets: Fixed maturities.................................. $96,981 $96,981 Equity securities................................. 2,006 2,006 Mortgage loans on real estate..................... 19,739 19,452 Policy loans...................................... 5,598 5,618 Short-term investments............................ 3,055 3,055 Cash and cash equivalents......................... 2,789 2,789 Mortgage loan commitments......................... $465 -- (7) Liabilities: Policyholder account balances..................... 37,170 36,893 Short-term debt................................... 4,208 4,208 Long-term debt.................................... 2,514 2,466 Investment collateral............................. 6,451 6,451
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 1998 AMOUNT VALUE FAIR VALUE - ----------------- -------- -------- ---------- Assets: Fixed maturities................................. $100,767 $100,767 Equity securities................................ 2,340 2,340 Mortgage loans on real estate.................... 16,827 17,793 Policy loans..................................... 5,600 6,143 Short-term investments........................... 1,369 1,369 Cash and cash equivalents........................ 3,301 3,301 Mortgage loan commitments........................ $472 -- 14 Liabilities: Policyholder account balances.................... 37,448 37,664 Short-term debt.................................. 3,585 3,585 Long-term debt................................... 2,903 3,006 Investment collateral............................ 3,769 3,769
The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: FIXED MATURITIES AND EQUITY SECURITIES The fair value of fixed maturities and equity securities are based upon quotations published by applicable stock exchanges or received from other reliable sources. For securities in which the market values were not readily available, fair values were estimated using quoted market prices of comparable investments. MORTGAGE LOANS ON REAL ESTATE AND MORTGAGE LOAN COMMITMENTS Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, the estimated fair value is the net premium or discount of the commitments. 27 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) POLICY LOANS Fair values for policy loans are estimated by discounting expected future cash flows using U.S. treasury rates to approximate interest rates and the Company's past experiences to project patterns of loan accrual and repayment characteristics. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The carrying values for cash and cash equivalents and short-term investments approximated fair market values due to the short-term maturities of these instruments. POLICYHOLDER ACCOUNT BALANCES The fair value of policyholder account balances are estimated by discounting expected future cash flows, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. SHORT-TERM AND LONG-TERM DEBT AND INVESTMENT COLLATERAL The fair values of short-term and long-term debt and investment collateral are determined by discounting expected future cash flows, using risk rates currently available for debt with similar terms and remaining maturities. DERIVATIVE INSTRUMENTS The fair value of derivative instruments, including financial futures, financial forwards, interest rate and foreign currency swaps, floors, foreign exchange contracts, caps and options are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 5. EMPLOYEE BENEFIT PLANS PENSION BENEFIT AND OTHER BENEFIT PLANS The Company is both the sponsor and administrator of defined benefit pension plans covering all eligible employees and sales representatives of MetLife and certain of its subsidiaries. Retirement benefits are based upon years of credited service and final average earnings history. The Company also provides certain postemployment benefits and certain postretirement health care and life insurance benefits for retired employees through insurance contracts. Substantially all of the Company's employees may, in accordance with the plans applicable to the 28 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) postretirement benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company.
DECEMBER 31, ------------------------------------ PENSION BENEFITS OTHER BENEFITS ---------------- ---------------- 1999 1998 1999 1998 ---- ---- ---- ---- Change in projected benefit obligation: Projected benefit obligation at beginning of year.... $3,920 $3,573 $1,708 $1,763 Service cost....................................... 100 90 28 31 Interest cost...................................... 271 257 107 114 Actuarial (gains) losses........................... (260) 212 (281) (74) Divestitures, curtailments and terminations........ (22) 24 10 (13) Change in benefits................................. -- 12 -- -- Benefits paid........................................ (272) (248) (89) (113) ------ ------ ------ ------ Projected benefit obligation at end of year.......... 3,737 3,920 1,483 1,708 ------ ------ ------ ------ Change in plan assets: Contract value of plan assets at beginning of year... 4,403 4,056 1,123 1,004 Actuarial return on plan assets.................... 575 680 141 171 Employer contribution.............................. 20 15 24 61 Benefits paid...................................... (272) (248) (89) (113) Other payments..................................... -- (100) -- -- ------ ------ ------ ------ Contract value of plan assets at end of year......... 4,726 4,403 1,199 1,123 ------ ------ ------ ------ Over (under) funded.................................. 989 483 (284) (585) ------ ------ ------ ------ Unrecognized net asset at transition................. (66) (98) -- -- Unrecognized net actuarial gains..................... (564) (78) (487) (322) Unrecognized prior service cost...................... 127 145 (2) (2) ------ ------ ------ ------ Prepaid (accrued) benefit cost....................... $ 486 $ 452 $ (773) $ (909) ====== ====== ====== ====== Qualified plan prepaid pension cost.................. $ 632 $ 568 $ -- $ -- Non-qualified plan accrued pension cost.............. (146) (116) -- -- ------ ------ ------ ------ Prepaid benefit cost................................. $ 486 $ 452 $ -- $ -- ====== ====== ====== ======
The aggregate projected benefit obligation and aggregate contract value of plan assets for the pension plans were as follows:
NON-QUALIFIED QUALIFIED PLAN PLAN TOTAL ---------------- -------------- ---------------- 1999 1998 1999 1998 1999 1998 ---- ---- ---- ---- ---- ---- Aggregate projected benefit obligation...................... $3,482 $3,697 $ 255 $ 223 $3,737 $3,920 Aggregate contract value of plan assets (principally Company contracts)...................... 4,726 4,403 -- -- 4,726 4,403 ------ ------ ----- ----- ------ ------ Over (under) funded............... $1,244 $ 706 $(255) $(223) $ 989 $ 483 ====== ====== ===== ===== ====== ======
29 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assumptions used in determining the aggregate projected benefit obligation and aggregate contract value for the pension and other benefits were as follows:
PENSION BENEFITS OTHER BENEFITS ---------------------------- ----------------------- 1999 1998 1999 1998 ---- ---- ---- ---- Weighted average assumptions at December 31, Discount rate....................... 6.25% - 7.75% 6.5% - 7.25% 6% - 7.75% 7% Expected rate of return on plan assets............................ 8% - 10.5% 8.5% - 10.5% 6% - 9% 7.25% - 9% Rate of compensation increase....... 4.5% - 8.5% 4.5% - 8.5% N/A N/A
The assumed health care cost trend rates used in measuring the accumulated nonpension postretirement benefit obligation were 6.5% for pre-Medicare eligible claims and 6% for Medicare eligible claims in both 1999 and 1998. Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- Effect on total of service and interest cost components.... $ 14 $ 11 Effect of accumulated postretirement benefit obligation.... $134 $111
The components of periodic benefit costs were as follows:
PENSION BENEFITS OTHER BENEFITS --------------------- ------------------ 1999 1998 1997 1999 1998 1997 ---- ---- ---- ---- ---- ---- Service cost............................... $ 100 $ 90 $ 74 $ 28 $ 31 $ 30 Interest cost.............................. 271 257 247 107 114 122 Expected return on plan assets............. (363) (337) (324) (89) (79) (66) Amortization of prior actuarial gains...... (6) (11) (5) (11) (13) (4) Curtailment (credit) cost.................. (17) (10) -- 10 4 -- ----- ----- ----- ---- ---- ---- Net periodic benefit cost (credit)......... $ (15) $ (11) $ (8) $ 45 $ 57 $ 82 ===== ===== ===== ==== ==== ====
SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans for substantially all employees under which the Company matches a portion of employee contributions. The Company contributed $45, $43 and $44 for the years ended December 31, 1999, 1998 and 1997, respectively. 6. SEPARATE ACCOUNTS Separate accounts reflect two categories of risk assumption: non-guaranteed separate accounts totaling $47,618 and $39,490 at December 31, 1999 and 1998, respectively, for which the policyholder assumes the investment risk, and guaranteed separate accounts totaling $17,323 and $18,578 at December 31, 1999 and 1998, respectively, for which MetLife contractually guarantees either a minimum return or account value to the policyholder. 30 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $485, $413 and $287 for the years ended December 31, 1999, 1998 and 1997, respectively. Guaranteed separate accounts consisted primarily of Met Managed Guaranteed Interest Contracts and participating close out contracts. The average interest rates credited on these contracts were 6.5% and 7% at December 31, 1999 and 1998, respectively. The assets that support these liabilities were comprised of $16,874 and $16,639 in fixed maturities at December 31, 1999 and 1998, respectively. The portfolios are segregated from other investments and are managed to minimize liquidity and interest rate risk. In order to minimize the risk of disintermediation associated with early withdrawals, these investment products carry a graded surrender charge as well as a market value adjustment. 7. DEBT Debt consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- MetLife: 6.300% surplus notes due 2003.......................... $ 397 $ 397 7.000% surplus notes due 2005.......................... 249 249 7.700% surplus notes due 2015.......................... 198 198 7.450% surplus notes due 2023.......................... 296 296 7.785% surplus notes due 2024.......................... 148 148 7.800% surplus notes due 2025.......................... 248 248 Other.................................................... 130 207 ------ ------ 1,666 1,743 ------ ------ Investment related: Floating rate debt, interest based on LIBOR............ -- 212 Exchangeable debt, interest rates ranging from 4.90% to 5.80%, due 2001 and 2002............................ 369 371 ------ ------ 369 583 ------ ------ Total MetLife............................................ 2,035 2,326 ------ ------ Nvest: 7.060% senior notes due 2003........................... 110 110 7.290% senior notes due 2007........................... 160 160 ------ ------ 270 270 ------ ------ Other Affiliated Companies: Fixed rate notes, interest rates ranging from 6.96% to 8.51%, maturity dates ranging from 2000 to 2008..... 170 179 Other.................................................. 39 128 ------ ------ 209 307 ------ ------ Total long-term debt..................................... 2,514 2,903 Total short-term debt.................................... 4,208 3,585 ------ ------ $6,722 $6,488 ====== ======
31 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Short-term debt consisted of commercial paper with a weighted average interest rate of 6.05% and 5.31% and a weighted average maturity of 74 and 44 days at December 31, 1999 and 1998, respectively. The Company maintains unsecured credit facilities aggregating $7,000 (five-year facility of $1,000 expiring in April 2003; 364-day facility of $1,000 expiring in April 2000; 364-day facility of $5,000 expiring in September 2000). Both $1,000 facilities bear interest at LIBOR plus 20 basis points. The $5,000 facility bears interest at various rates under specified borrowing scenarios. The facilities can be used for general corporate purposes and also provide backup for the Company's commercial paper program. At December 31, 1999, there were no outstanding borrowings under any of the facilities. Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the Superintendent. Subject to the prior approval of the Superintendent, the 7.45% surplus notes may be redeemed, in whole or in part, at the election of the Company at any time on or after November 1, 2003. Each issue of investment related debt is payable in cash or by delivery of an underlying security owned by the Company. The amount payable at maturity of the debt is greater than the principal of the debt if the market value of the underlying security appreciates above certain levels at the date of debt repayment as compared to the market value of the underlying security at the date of debt issuance. The aggregate maturities of long-term debt are $93 in 2000, $194 in 2001, $210 in 2002, $415 in 2003, $126 in 2004 and $1,477 thereafter. Interest expense related to the Company's outstanding indebtedness was $358, $333 and $344 for the years ended December 31, 1999, 1998 and 1997, respectively. 8. ACQUISITIONS AND DISPOSITIONS In 1999 and 1997, respectively, the Company acquired assets of $4,832 and $3,777 and assumed liabilities of $1,860 and $3,347 through the acquisition of certain insurance and non-insurance operations. The aggregate purchase prices were allocated to the assets and liabilities acquired based on their estimated fair values. During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial financing company) and a substantial portion of its Canadian and Mexican insurance operations, which resulted in a realized investment gain of $531. During 1997, the Company sold its United Kingdom insurance operations, which resulted in a realized investment gain of $139. Such sales caused a reduction in assets of $10,663 and $4,342 and liabilities of $3,691 and $4,207 in 1998 and 1997, respectively. See Note 16 for information regarding the Company's acquisition of GenAmerica Corporation. 9. COMMITMENTS AND CONTINGENCIES LITIGATION The Company is currently a defendant in approximately 500 lawsuits raising allegations of improper marketing and sales of individual life insurance policies or annuities. These lawsuits are generally referred to as "sales practices claims". 32 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On December 28, 1999, after a fairness hearing, the United States District Court for the Western District of Pennsylvania approved a class action settlement resolving a multidistrict litigation proceeding involving alleged sales practices claims. The settlement class includes most of the owners of permanent life insurance policies and annuity contracts or certificates issued pursuant to individual sales in the United States by Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company between January 1, 1982 and December 31, 1997. This class includes owners of approximately six million in-force or terminated insurance policies and approximately one million in-force or terminated annuity contracts or certificates. In addition to dismissing the consolidated class actions, the District Court's order also bars sales practices claims by class members for sales by the defendant insurers during the class period, effectively resolving all pending class actions against these insurers. The defendants are in the process of having these claims dismissed. Under the terms of the order, only those class members who excluded themselves from the settlement may continue an existing, or start a new, sales practices lawsuit against Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life Insurance Company for sales that occurred during the class period. Approximately 20,000 class members elected to exclude themselves from the settlement. Over 400 of the approximately 500 lawsuits noted above are brought by individuals who elected to exclude themselves from the settlement. The settlement provides three forms of relief. General relief, in the form of free death benefits, is provided automatically to class members who did not exclude themselves from the settlement or who did not elect the claim evaluation procedures set forth in the settlement. The claim evaluation procedures permit a class member to have a claim evaluated by a third party under procedures set forth in the settlement. Claim awards made under the claim evaluation procedures will be in the form of policy adjustments, free death benefits or, in some instances, cash payments. In addition, class members who have or had an ownership interest in specified policies will also automatically receive deferred acquisition cost tax relief in the form of free death benefits. The settlement fixes the aggregate amounts that are available under each form of relief. The Company expects that the total cost of the settlement will be approximately $957. This amount is equal to the amount of the increase in liabilities for the death benefits and policy adjustments and the present value of expected cash payments to be provided to included class members, as well as attorneys' fees and expenses and estimated other administrative costs, but does not include the cost of litigation with policyholders who are excluded from the settlement. The Company believes that the cost of the settlement will be substantially covered by available reinsurance and the provisions made in its consolidated financial statements, and thus will not have a material adverse effect on its business, results of operations or financial position. The Company has not yet made a claim under those reinsurance agreements and, although there is a risk that the carriers will refuse coverage for all or part of the claim, the Company believes this is very unlikely to occur. The Company believes it has made adequate provision in its consolidated financial statements for all probable losses for sales practices claims, including litigation costs involving policyholders who are excluded from the settlement. The class action settlement does not resolve nine purported or certified class actions currently pending against New England Mutual Life Insurance Company with which the Company merged in 1996. Eight of those actions have been consolidated as a multidistrict proceeding for pre-trial purposes in the United States District Court in Massachusetts. That Court certified a mandatory class as to those claims. Following an appeal of that certification, the United States 33 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Court of Appeals remanded the case to the District Court for further consideration. The Company is negotiating a settlement with class counsel. The class action settlement also does not resolve three putative sales practices class action lawsuits which have been brought against General American Life Insurance Company. These lawsuits have been consolidated in a single proceeding in the United States District Court for the Eastern District of Missouri. General American Life Insurance Company and counsel for plaintiffs have negotiated a settlement in principle of this consolidated proceeding. General American Life Insurance Company has not reached agreement with plaintiffs' counsel on the attorneys' fees to be paid. However, negotiations are ongoing. In addition, the class action settlement does not resolve two putative class actions involving sales practices claims filed against Metropolitan Life Insurance Company in Canada. The class action settlement also does not resolve a certified class action with conditionally certified subclasses against Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company, Metropolitan Tower Life Insurance Company and various individual defendants alleging improper sales abroad. That lawsuit is pending in a New York federal court. In the past, the Company has resolved some individual sales practices claims through settlement, dispositive motion or, in a few instances, trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance may be commenced in the future. Regulatory authorities in a small number of states, including both insurance departments and one state attorney general, as well as the National Association of Securities Dealers, Inc., have ongoing investigations or inquiries relating to the Company's sales of individual life insurance policies or annuities, including investigations of alleged improper replacement transactions and alleged improper sales of insurance with inaccurate or inadequate disclosures as to the period for which premiums would be payable. Over the past several years, the Company has resolved a number of investigations by other regulatory authorities for monetary payments and certain other relief, and may continue to do so in the future. MetLife is also a defendant in numerous lawsuits seeking compensatory and punitive damages for personal injuries allegedly caused by exposure to asbestos or asbestos-containing products. MetLife has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. Rather, these lawsuits, currently numbering in the thousands, have principally been based upon allegations relating to certain research, publication and other activities of one or more of MetLife's employees during the period from the 1920s through approximately the 1950s and alleging that MetLife learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Legal theories asserted against MetLife have included negligence, intentional tort claims and conspiracy claims concerning the health risks associated with asbestos. While MetLife believes it has meritorious defenses to these claims, and has not suffered any adverse judgments in respect of these claims, most of the cases have been resolved by settlements. MetLife intends to continue to exercise its best judgment regarding settlement or defense of such cases. The number of such cases that may be brought or the aggregate amount of any liability that MetLife may ultimately incur is uncertain. Significant portions of amounts paid in settlement of such cases have been funded with proceeds from a previously resolved dispute with MetLife's primary, umbrella and first level excess liability insurance carriers. MetLife is presently in litigation with several of its excess 34 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liability insurers regarding amounts payable under its policies with respect to coverage for these claims. The trial court has granted summary judgment to these insurers. MetLife has appealed. There can be no assurances regarding the outcome of this litigation or the amount and timing of recoveries, if any, from these excess liability insurers. MetLife's asbestos-related litigation with these insurers should have no effect on recoveries under the excess insurance policies described below. The Company has recorded, in other expenses, charges of $499 ($317 after-tax), $1,895 ($1,203 after-tax) and $300 ($190 after-tax) for the years ended December 31, 1999, 1998 and 1997, respectively, for sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products. The 1999 charge was principally related to the settlement of the multidistrict litigation proceeding involving alleged improper sales practices, accruals for sales practices claims not covered by the settlement and other legal costs. The 1998 charge was comprised of $925 and $970 for sales practices claims and asbestos-related claims, respectively. The Company recorded the charges for sales practices claims based on preliminary settlement discussions and the settlement history of other insurers. Prior to the fourth quarter of 1998, the Company established a liability for asbestos-related claims based on settlement costs for claims that the Company had settled, estimates of settlement costs for claims pending against the Company and an estimate of settlement costs for unasserted claims. The amount for unasserted claims was based on management's estimate of unasserted claims that would be probable of assertion. A liability is not established for claims which management believes are only reasonably possible of assertion. Based on this process, the accrual for asbestos-related claims at December 31, 1997 was $386. Potential liabilities for asbestos-related claims are not easily quantified, due to the nature of the allegations against the Company, which are not related to the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products, adding to the uncertainty as to the number of claims that may be brought against the Company. During 1998, the Company decided to pursue the purchase of excess insurance to limit its exposure to asbestos-related claims. In connection with the negotiations with the casualty insurers to obtain this insurance, the Company obtained information that caused management to reassess the accruals for asbestos-related claims. This information included: - Information from the insurers regarding the asbestos-related claims experience of other insureds, which indicated that the number of claims that were probable of assertion against the Company in the future was significantly greater than it had assumed in its accruals. The number of claims brought against the Company is generally a reflection of the number of asbestos-related claims brought against asbestos defendants generally and the percentage of those claims in which the Company is included as a defendant. The information provided to the Company relating to other insureds indicated that the Company had been included as a defendant for a significant percentage of total asbestos-related claims and that it may be included in a larger percentage of claims in the future, because of greater awareness of asbestos litigation generally by potential plaintiffs and plaintiffs' lawyers and because of the bankruptcy and reorganization or the exhaustion of insurance coverage of other asbestos defendants; and that, although volatile, there was an upward trend in the number of total claims brought against asbestos defendants. - Information derived from actuarial calculations the Company made in the fourth quarter of 1998 in connection with these negotiations, which helped to frame, define and quantify this liability. These calculations were made using, among other things, current information regarding the Company's claims and settlement experience (which reflected the Com- 35 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) pany's decision to resolve an increased number of these claims by settlement), recent and historic claims and settlement experience of selected other companies and information obtained from the insurers. Based on this information, the Company concluded that certain claims that previously were considered as only reasonably possible of assertion were now probable of assertion, increasing the number of assumed claims to approximately three times the number assumed in prior periods. As a result of this reassessment, the Company increased its liability for asbestos-related claims to $1,278 at December 31, 1998. During 1998, the Company paid $1,407 of premiums for excess of loss reinsurance agreements and excess insurance policies, consisting of $529 for the excess of loss reinsurance agreements for sales practices claims and excess mortality losses and $878 for the excess insurance policies for asbestos-related claims. The Company obtained the excess of loss reinsurance agreements to provide reinsurance with respect to sales practices claims made on or prior to December 31, 1999 and for certain mortality losses in 1999. These reinsurance agreements have a maximum aggregate limit of $650, with a maximum sublimit of $550 for losses for sales practices claims. This coverage is in excess of an aggregate self-insured retention of $385 with respect to sales practices claims and $506, plus the Company's statutory policy reserves released upon the death of insureds, with respect to life mortality losses. At December 31, 1999, the subject losses under the reinsurance agreements due to sales practices claims and related counsel fees from the time the Company entered into the reinsurance agreements did not exceed that self-insured retention. The maximum sublimit of $550 for sales practices claims was within a range of losses that management believed were reasonably possible at December 31, 1998. Each excess of loss reinsurance agreement for sales practices claims and mortality losses contains an experience fund, which provides for payments to the Company at the commutation date if experience is favorable at such date. The Company accounts for the aggregate excess of loss reinsurance agreements as reinsurance; however, if deposit accounting were applied, the effect on the Company's consolidated financial statements in 1998, 1999 and 2000 would not be significant. Under reinsurance accounting, the excess of the liability recorded for sales practices losses recoverable under the agreements of $550 over the premium paid of $529 results in a deferred gain of $21 which is being amortized into income over the settlement period from January 1999 through April 2000. Under deposit accounting, the premium would be recorded as an other asset rather than as an expense, and the reinsurance loss recoverable and the deferred gain would not have been recorded. Because the agreements also contain an experience fund which increases with the passage of time, the increase in the experience fund in 1999 and 2000 under deposit accounting would be recognized as interest income in an amount approximately equal to the deferred gain that will be amortized into income under reinsurance accounting. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1,500, which is in excess of a $400 self-insured retention ($878 of which was recorded as a recoverable at December 31, 1999 and 1998). The asbestos-related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid in any given year that are recoverable under the policies will be reflected as a reduction in the Company's operating cash flows for that year, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to the Company at the commutation date if experience under the policy to such date has been favorable, or pro rata reductions from time to 36 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) time in the loss reimbursements to the Company if the cumulative return on the reference fund is less than the return specified in the experience fund. A purported class action suit involving policyholders in 32 states has been filed in a Rhode Island state court against MetLife's subsidiary, Metropolitan Property and Casualty Insurance Company, with respect to claims by policyholders for the alleged diminished value of automobiles after accident-related repairs. A similar "diminished value" allegation was made recently in a Texas Deceptive Trade Practices Act letter and lawsuit which involve a Metropolitan Property and Casualty Company policyholder. A purported class action has been filed against Metropolitan Property and Casualty Insurance Company and its subsidiary, Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging breach of contract and unfair trade practices with respect to Metropolitan Casualty Insurance Company allowing the use of parts not made by the original manufacturer to repair damaged automobiles. These suits are in the early stages of litigation and Metropolitan Property and Casualty Insurance Company and Metropolitan Casualty Insurance Company intend to vigorously defend themselves against these suits. Similar suits have been filed against several other personal lines property and casualty insurers. The United States, the Commonwealth of Puerto Rico and various hotels and individuals have sued MetLife Capital Corporation, a former subsidiary of the Company, seeking damages for clean up costs, natural resource damages, personal injuries and lost profits and taxes based upon, among other things, a release of oil from a barge which was being towed by the M/V Emily S. In connection with the sale of MetLife Capital, the Company acquired MetLife Capital's potential liability with respect to the M/V Emily S lawsuit. MetLife Capital had entered into a sale and leaseback financing arrangement with respect to the M/V Emily S. The plaintiffs have taken the position that MetLife Capital, as the owner of record of the M/V Emily S, is responsible for all damages caused by the barge, including the oil spill. The governments of the United States and Puerto Rico have claimed damages in excess of $150. At a mediation, the action brought by the United States and Puerto Rico was conditionally settled, provided that the governments have access to additional sums from a fund contributed to by oil companies to help remediate oil spills. The Company can provide no assurance that this action will be settled in this manner. Three putative class actions have been filed by Conning Corporation shareholders alleging that the Company's announced offer to purchase the publicly-held Conning shares is inadequate and constitutes a breach of fiduciary duty (see Note 16). The Company believes the actions are without merit, and expects that they will not materially affect its offer to purchase the shares. A civil complaint challenging the fairness of the plan of reorganization and the adequacy and accuracy of the disclosures to policyholders regarding the plan has been filed in New York Supreme Court for Kings County on behalf of an alleged class consisting of the policyholders of MetLife who should have membership benefits in MetLife and were and are eligible to receive notice, vote and receive consideration in the demutualization. The complaint seeks to enjoin or rescind the plan and seeks other relief. The defendants named in the complaint are MetLife and the individual members of its board of directors and MetLife, Inc. MetLife believes that the allegations made in the complaint are wholly without merit, and intends to vigorously contest the complaint. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other Federal and state authorities regularly 37 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. While it is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, it is the opinion of the Company's management that their outcomes, after consideration of available insurance and reinsurance and the provisions made in the Company's consolidated financial statements, are not likely to have a material adverse effect on the Company's consolidated financial position. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's operating results or cash flows in particular quarterly or annual periods. TRANSFERRED CANADIAN POLICIES In July 1998, MetLife sold a substantial portion of its Canadian operations to Clarica Life. As part of that sale, a large block of policies in effect with MetLife in Canada were transferred to Clarica Life, and the holders of the transferred Canadian policies became policyholders of Clarica Life. Those transferred policyholders are no longer policyholders of MetLife and, therefore, are not entitled to compensation under the plan of reorganization. However, as a result of a commitment made in connection with obtaining Canadian regulatory approval of that sale, if MetLife demutualizes, its Canadian branch will make cash payments to those who are, or are deemed to be, holders of those transferred Canadian policies. The payments, which will be recorded in other expenses in the same period as the effective date of the plan, will be determined in a manner that is consistent with the treatment of, and fair and equitable to, eligible policyholders of MetLife. The amount of the payment is dependent upon the initial public offering price of common stock to be issued on the effective date of the plan of demutualization. YEAR 2000 The Year 2000 issue was the result of the widespread use of computer programs written using two digits (rather than four) to define the applicable year. Such programming was a common industry practice designed to avoid the significant costs associated with additional mainframe capacity necessary to accommodate a four-digit field. As a result, any of the Company's computer systems that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in major system failures or miscalculations. The Company has conducted a comprehensive review of its computer systems to identify the systems that could be affected by the Year 2000 issue and has implemented a plan to resolve the issue. There can be no assurances that the Year 2000 plan of the Company or that of its vendors or third parties have resolved all Year 2000 issues. Further, there can be no assurance that there will not be any future system failure or that such failure, if any, will not have a material impact on the operations of the Company. LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements 38 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) for office space, data processing and other equipment. Future minimum rental and subrental income and minimum gross rental payments relating to these lease agreements were as follows:
GROSS RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- 2000......................................... $ 817 $13 $156 2001......................................... 740 12 135 2002......................................... 689 11 111 2003......................................... 612 9 90 2004......................................... 542 9 69 Thereafter................................... 2,032 27 299
10. INCOME TAXES The provision for income taxes was as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Current: Federal................................................... $643 $668 $370 State and local........................................... 24 60 10 Foreign................................................... 4 99 26 ---- ---- ---- 671 827 406 ---- ---- ---- Deferred: Federal................................................... (78) (25) 28 State and local........................................... 2 (8) 9 Foreign................................................... (2) (54) 25 ---- ---- ---- (78) (87) 62 ---- ---- ---- Provision for income taxes.................................. $593 $740 $468 ==== ==== ====
Reconciliations of the income tax provision at the U.S. statutory rate to the provision for income taxes as reported were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Tax provision at U.S. statutory rate........................ $502 $730 $585 Tax effect of: Tax exempt investment income.............................. (39) (40) (30) Surplus tax............................................... 125 18 (40) State and local income taxes.............................. 18 31 15 Tax credits............................................... (5) (25) (15) Prior year taxes.......................................... (31) 4 (2) Sale of businesses........................................ -- (19) (41) Other, net................................................ 23 41 (4) ---- ---- ---- Provision for income taxes.................................. $593 $740 $468 ==== ==== ====
39 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes represent the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
DECEMBER 31, ---------------- 1999 1998 ---- ---- Deferred income tax assets: Policyholder liabilities and receivables............... $3,042 $3,108 Net operating losses................................... 72 22 Net unrealized investment losses....................... 161 -- Employee benefits...................................... 192 174 Litigation related..................................... 468 312 Other.................................................. 242 158 ------ ------ 4,177 3,774 Less: Valuation allowance.............................. 72 21 ------ ------ 4,105 3,753 ------ ------ Deferred income tax liabilities: Investments............................................ 1,472 1,529 Deferred policy acquisition costs...................... 1,967 1,887 Net unrealized investment gains........................ -- 864 Other.................................................. 63 18 ------ ------ 3,502 4,298 ------ ------ Net deferred income tax asset (liability)................ $ 603 $ (545) ====== ======
Foreign net operating loss carryforwards generated deferred income tax benefits of $72 and $21 at December 31, 1999 and 1998, respectively. The Company has recorded a valuation allowance related to these tax benefits. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for foreign net operating loss carryforwards will not be realized. The benefit will be recognized when management believes that it is more likely than not that the portion of the deferred income tax asset is realizable. The Company has been audited by the Internal Revenue Service for the years through and including 1993. The Company is being audited for the years 1994, 1995 and 1996. The Company believes that any adjustments that might be required for open years will not have a material effect on the Company's consolidated financial statements. 11. REINSURANCE The Company assumes and cedes insurance with other insurance companies. The Company continually evaluates the financial condition of its reinsurers and monitors concentration of credit risk in an effort to minimize its exposure to significant losses from reinsurer insolvencies. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. The amounts in the consolidated statements of income are presented net of reinsurance ceded. The Company's life insurance operations participate in reinsurance in order to limit losses, minimize exposure to large risks and to provide additional capacity for future growth. During 40 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 1998, the Company began reinsuring, under yearly renewal term policies, 90 percent of the mortality risk on universal life policies issued after 1983. The Company also reinsures 90 percent of the mortality risk on term life insurance policies issued after 1995 under yearly renewal term policies and coinsures 100 percent of the mortality risk in excess of $25 and $35 on single and joint survivorship policies, respectively. During 1997, the Company obtained a 100 percent coinsurance policy to provide coverage for contractual payments generated by certain portions of the Company's non-life contingency long-term guaranteed interest contracts and structured settlement lump sum contracts issued during the periods 1991 through 1993. The policy was amended in 1998 to include structured settlement lump sum payments issued during the period 1983 through 1990, 1994 and 1995. Reinsurance recoverables under the contract, which has been accounted for as a financing transaction, were $1,372 and $1,374 at December 31, 1999 and 1998, respectively. See Note 9 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales practices claims. The Company has exposure to catastrophes, which are an inherent risk of the property and casualty insurance business and could contribute to material fluctuations in the Company's results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposure to larger risks. The Company's reinsurance program is designed to limit a catastrophe loss to no more than 10% of the Auto & Home segment's statutory surplus. The effects of reinsurance were as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Direct premiums..................................... $13,249 $12,763 $12,728 Reinsurance assumed................................. 484 409 360 Reinsurance ceded................................... (1,645) (1,669) (1,810) ------- ------- ------- Net premiums........................................ $12,088 $11,503 $11,278 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits.......................................... $ 1,626 $ 1,744 $ 1,648 ======= ======= =======
The effects of reinsurance with GenAmerica Corporation ("GenAmerica") were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1999 1998 1997 ---- ---- ---- Premiums ceded to GenAmerica.............................. $108 $113 $61 ==== ==== === Reinsurance recoveries from GenAmerica netted against policyholder benefits................................... $ 74 $ 28 $24 ==== ==== ===
Reinsurance recoverables, included in other receivables, were $2,898 and $3,134 at December 31, 1999 and 1998, respectively, of which $5 and $5, respectively, were recoverable from GenAmerica. Reinsurance and ceded commissions payables, included in other liabilities, were $148 and $105 at December 31, 1999 and 1998, respectively. 41 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following provides an analysis of the activity in the liability for benefits relating to property and casualty and group accident and non-medical health policies and contracts:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Balance at January 1................................ $ 3,320 $ 3,655 $ 3,345 Reinsurance recoverables.......................... (233) (229) (215) ------- ------- ------- Net balance at January 1............................ 3,087 3,426 3,130 ------- ------- ------- Acquisition of business............................. 204 -- -- ------- ------- ------- Incurred related to: Current year...................................... 3,129 2,726 2,855 Prior years....................................... (16) (245) 88 ------- ------- ------- 3,113 2,481 2,943 ------- ------- ------- Paid related to: Current year...................................... (2,128) (1,967) (1,832) Prior years....................................... (759) (853) (815) ------- ------- ------- (2,887) (2,820) (2,647) ------- ------- ------- Balance at December 31.............................. 3,517 3,087 3,426 Add: Reinsurance recoverables..................... 272 233 229 ------- ------- ------- Balance at December 31.............................. $ 3,789 $ 3,320 $ 3,655 ======= ======= =======
12. OTHER EXPENSES Other expenses were comprised of the following:
YEARS ENDED DECEMBER 31, ----------------------------- 1999 1998 1997 ---- ---- ---- Compensation........................................ $ 2,590 $ 2,478 $ 2,078 Commissions......................................... 937 902 766 Interest and debt issue costs....................... 405 379 453 Amortization of policy acquisition costs (excludes amortization of $(46), $240 and $70, respectively, related to realized investment gains and (losses))......................................... 862 587 771 Capitalization of policy acquisition costs.......... (1,160) (1,025) (1,000) Rent, net of sublease income........................ 239 155 179 Minority interest................................... 55 67 56 Restructuring charge................................ -- 81 -- Other............................................... 2,827 4,395 2,468 ------- ------- ------- $ 6,755 $ 8,019 $ 5,771 ======= ======= =======
During 1998, the Company recorded charges of $81 to restructure headquarters operations and consolidate certain agencies and other operations. These costs have been fully paid at December 31, 1999. 42 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. STATUTORY FINANCIAL INFORMATION The reconciliations of MetLife's statutory surplus and net change in statutory surplus, determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities, with equity and net income determined in conformity with generally accepted accounting principles were as follows:
DECEMBER 31, ------------------ 1999 1998 ---- ---- Statutory surplus........................................... $ 7,630 $ 7,388 GAAP adjustments for: Future policy benefits and policyholder account balances............................................... (4,167) (6,830) Deferred policy acquisition costs......................... 8,381 6,560 Deferred income taxes..................................... 886 (190) Valuation of investments.................................. (2,102) 3,981 Statutory asset valuation reserves........................ 3,189 3,381 Statutory interest maintenance reserves................... 1,114 1,486 Surplus notes............................................. (1,602) (1,595) Other, net................................................ 361 686 ------- ------- Equity...................................................... $13,690 $14,867 ======= =======
YEARS ENDED DECEMBER 31, ------------------------- 1999 1998 1997 ---- ---- ---- Net change in statutory surplus......................... $ 242 $ 10 $ 227 GAAP adjustments for: Future policy benefits and policyholder account balances........................................... 556 127 (38) Deferred policy acquisition costs..................... 379 224 149 Deferred income taxes................................. 154 234 62 Valuation of investments.............................. 473 1,158 (387) Statutory asset valuation reserves.................... (226) (461) 1,136 Statutory interest maintenance reserves............... (368) 312 53 Other, net............................................ (593) (261) 1 ----- ------ ------ Net income.............................................. $ 617 $1,343 $1,203 ===== ====== ======
43 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 14. OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 1999, 1998 and 1997 to avoid double-counting in other comprehensive income (loss) items that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
1999 1998 1997 ---- ---- ---- Holding (losses) gains on investments arising during the year...................................................... $(6,314) $ 1,493 $ 4,257 Income tax effect of holding gains or losses................ 2,262 (617) (1,615) Transfer of securities from held-to-maturity to available-for-sale: Holding gains on investments.............................. -- -- 198 Income tax effect......................................... -- -- (75) Reclassification adjustments: Realized holding (gains) losses included in current year net income............................................. 38 (2,013) (844) Amortization of premium and discount on investments....... (307) (350) (209) Realized holding (losses) gains allocated to other policyholder amounts................................... (67) 608 231 Income tax effect......................................... 120 729 312 Allocation of holding losses (gains) on investments relating to other policyholder amounts............................. 3,788 (351) (2,231) Income tax effect of allocation of holding gains and losses to other policyholder amounts............................. (1,357) 143 846 ------- ------- ------- Net unrealized investment (losses) gains.................... (1,837) (358) 870 ------- ------- ------- Foreign currency translation adjustments arising during the year...................................................... 50 (115) (46) Reclassification adjustment for sale of investment in foreign operation......................................... -- 2 (3) ------- ------- ------- Foreign currency translation adjustment..................... 50 (113) (49) ------- ------- ------- Minimum pension liability adjustment........................ (7) (12) -- ------- ------- ------- Other comprehensive income (loss)........................... $(1,794) $ (483) $ 821 ======= ======= =======
15. BUSINESS SEGMENT INFORMATION The Company provides insurance and financial services to customers in the United States, Canada, Central America, South America, Europe and Asia. The Company's business is divided into six segments: Individual, Institutional, Auto & Home, International, Asset Management and Corporate. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Individual offers a wide variety of individual insurance and investment products, including life insurance, annuities and mutual funds. Institutional offers a broad range of group insurance and retirement and savings products and services, including group life insurance, non-medical health insurance such as short and long-term disability, long-term care and dental insurance and other insurance products and services. Auto & Home provides insurance coverages including private passenger automobile, homeowners and personal excess liability insurance. International provides life insurance, accident and health insurance, annuities and retirement and savings 44 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) products to both individuals and groups, and auto and homeowners coverage to individuals. Asset Management provides a broad variety of asset management products and services to individuals and institutions such as mutual funds for savings and retirement needs, commercial real estate advisory and management services, and institutional and retail investment management. Through its Corporate segment, the Company reports items that are not allocated to any of the business segments. Set forth in the tables below is certain financial information with respect to the Company's operating segments for the years ended December 31, 1999, 1998 and 1997. The accounting policies of the segments are the same as those described in the summary of significant accounting policies, except for the method of capital allocation. The Company allocates capital to each segment based upon an internal capital allocation system that allows the Company to more effectively manage its capital. The Company has divested operations that did not meet targeted rates of return, including its commercial leasing business (Corporate segment) and substantial portions of its Canadian operations (International segment), and insurance operations in the United Kingdom (International segment). The Company evaluates the performance of each operating segment based upon income or loss from operations before provision for income taxes and non-recurring items (e.g. items of unusual or infrequent nature). The Company allocates non-recurring items (primarily consisting of sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products) and prior to its sale in 1998, the results of MetLife Capital Holdings, Inc. to the Corporate segment.
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................ $ 4,289 $ 5,525 $1,751 $ 523 $ -- $ -- $ -- $ 12,088 Universal life and investment-type product policy fees... 888 502 -- 48 -- -- -- 1,438 Net investment income... 5,346 3,755 103 206 80 605 (279) 9,816 Other revenues.......... 558 629 21 12 803 59 72 2,154 Net realized investment gains (losses)........ (14) (31) 1 1 -- (41) 14 (70) Policyholder benefits and claims............ 4,625 6,712 1,301 463 -- -- 4 13,105 Interest credited to policyholder account balances.............. 1,359 1,030 -- 52 -- -- -- 2,441 Policyholder dividends............. 1,509 159 -- 22 -- -- -- 1,690 Other expenses.......... 2,719 1,589 514 248 795 1,031 (141) 6,755 Income (loss) before provision for income taxes and extraordinary item.... 855 890 61 5 88 (408) (56) 1,435 Income (loss) after provision for income taxes before extraordinary item.... 555 567 56 21 51 (358) (50) 842 Total assets............ 109,401 88,127 4,443 4,381 1,036 19,834 (1,990) 225,232 Deferred policy acquisition costs..... 8,049 106 93 244 -- -- -- 8,492 Separate account assets................ 28,828 35,236 -- 877 -- -- -- 64,941 Policyholder liabilities........... 72,956 47,781 2,318 2,187 -- 6 (293) 124,955 Separate account liabilities........... 28,828 35,236 -- 877 -- -- -- 64,941
45 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1998 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................ $ 4,323 $ 5,159 $1,403 $ 618 $ -- $ -- $ -- $ 11,503 Universal life and investment-type product policy fees... 817 475 -- 68 -- -- -- 1,360 Net investment income... 5,480 3,885 81 343 75 682 (318) 10,228 Other revenues.......... 474 575 36 33 817 111 (52) 1,994 Net realized investment gains................. 659 557 122 117 -- 679 (113) 2,021 Policyholder benefits and claims............ 4,606 6,416 1,029 597 -- (10) -- 12,638 Interest credited to policyholder account balances.............. 1,423 1,199 -- 89 -- -- -- 2,711 Policyholder dividends............. 1,445 142 -- 64 -- -- -- 1,651 Other expenses.......... 2,577 1,613 386 352 799 2,601 (309) 8,019 Income (loss) before provision for income taxes and extraordinary item.... 1,702 1,281 227 77 93 (1,119) (174) 2,087 Income (loss) after provision for income taxes before extraordinary item.... 1,069 846 161 56 49 (691) (143) 1,347 Total assets............ 103,614 88,741 2,763 3,432 1,164 20,852 (5,220) 215,346 Deferred policy acquisition costs..... 6,194 82 57 205 -- -- -- 6,538 Separate account assets................ 23,013 35,029 -- 26 -- -- -- 58,068 Policyholder liabilities........... 71,571 49,406 1,477 2,043 -- 1 (295) 124,203 Separate account liabilities........... 23,013 35,029 -- 26 -- -- -- 58,068
AUTO AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/ DECEMBER 31, 1997 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL - ------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- ----- Premiums................. $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $ 11,278 Universal life and investment-type product policy fees............ 855 426 -- 137 -- -- -- 1,418 Net investment income.... 4,754 3,754 71 504 78 700 (370) 9,491 Other revenues........... 338 357 25 54 682 19 16 1,491 Net realized investment gains.................. 356 45 9 142 -- 326 (91) 787 Policyholder benefits and claims................. 4,597 5,934 1,003 869 -- -- -- 12,403 Interest credited to policyholder account balances............... 1,422 1,319 -- 137 -- -- -- 2,878 Policyholder dividends... 1,340 305 -- 97 -- -- -- 1,742 Other expenses........... 2,394 1,178 351 497 679 966 (294) 5,771 Income before provision for income taxes....... 877 535 105 145 81 79 (151) 1,671 Income after provision for income taxes....... 599 339 74 126 45 163 (143) 1,203 Total assets............. 95,323 83,473 2,542 7,412 1,136 18,641 (5,745) 202,782 Deferred policy acquisition costs...... 5,912 40 56 428 -- -- -- 6,436 Separate account assets.. 17,345 30,473 -- 520 -- -- -- 48,338 Policyholder liabilities............ 70,686 49,547 1,509 5,615 -- 1 -- 127,358 Separate account liabilities............ 17,345 30,473 -- 520 -- -- -- 48,338
46 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Individual segment includes an equity ownership interest in Nvest Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has been included within the Asset Management segment due to the types of products and strategies employed by the entity. The individual segment's equity in earnings of Nvest, which is included in net investment income, was $48, $49 and $45 for the years ended December 31, 1999, 1998 and 1997, respectively. The investment in Nvest was $196, $252 and $216 at December 31, 1999, 1998 and 1997, respectively. Net investment income and net realized investment gains are based upon the actual results of each segment's specifically identifiable asset portfolio. Other costs and operating costs were allocated to each of the segments based upon: (1) a review of the nature of such costs, (2) time studies analyzing the amount of employee compensation costs incurred by each segment, and (3) cost estimates included in the Company's product pricing. The consolidation/elimination column includes the elimination of all intersegment amounts and the Individual segment's ownership interest in Nvest. The principal component of the intersegment amounts related to intersegment loans, which bore interest at rates commensurate with related borrowings. Revenues derived from any customer did not exceed 10% of consolidated revenues. Revenues from U.S. operations were $24,637, $25,643 and $22,664 for the years ended December 31, 1999, 1998 and 1997, respectively, which represented 97%, 96% and 93%, respectively, of consolidated revenues. 16. SUBSEQUENT EVENTS On January 6, 2000, the Company acquired GenAmerica for $1.2 billion. In connection with this acquisition, the Company incurred $900 of short-term debt. GenAmerica is a holding company which includes General American Life Insurance Company, 48.3% of the outstanding shares of Reinsurance Group of America ("RGA") common stock, a provider of reinsurance, and 61.0% of the outstanding shares of Conning Corporation common stock, an asset manager. On January 18, 2000, the Company announced that it had proposed to acquire all of the outstanding shares of Conning common stock not already owned by it for $10.50 per share in cash, or approximately $55. At December 31, 1999, the Company owned 9.6% of the outstanding shares of RGA common stock which were acquired on November 24, 1999 for $125. Subsequent to the GenAmerica acquisition, the Company owned 57.9% of the outstanding shares of RGA common stock. Total assets, revenues and net loss of GenAmerica were $23,594, $3,916 and $(174), respectively, at or for the year ended December 31, 1999. As part of the acquisition agreement, in September 1999 the Company assumed $5,752 of General American Life funding agreements and received cash of $1,926 and investment assets with a market value of $3,826. In October 1999, as part of the assumption arrangement, the holders of General American Life funding agreements aggregating $5,136 elected to have the Company redeem the funding agreements for cash. General American Life agreed to pay the Company a fee of $120 in connection with the assumption of the funding agreements. The fee will be considered as part of the purchase price to be allocated to the fair value of assets and liabilities acquired. The Company also agreed to make a capital contribution of $120 to General American Life after the completion of the acquisition. At the date of the acquisition agreement, the Company and GenAmerica were parties to a number of reinsurance agreements. In addition, as part of the acquisition, the Company entered into agreements effective as of July 25, 1999, which coinsured new and certain existing business of General American Life and some of its affiliates. See Note 11. PART II CONTENTS OF REGISTRATION STATEMENT REPRESENTATION WITH RESPECT TO FEES AND CHARGES Metropolitan Life represents that the fees and charges deducted under the Policies offered and sold pursuant to this amended Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life under the Policies. Metropolitan Life bases its representation on its assessment of all of the facts and circumstances, including such relevant factors as: the nature and extent of such services, expenses and risks, the need for Metropolitan Life to earn a profit, the degree to which the Policies include innovative features, and regulatory standards for exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. This representation applies to all policies issued pursuant to this Registration Statement, including those sold on the terms specifically described in the prospectuses contained herein, or any variations therein based on supplements, amendments, endorsements or other riders to such policies or prospectuses, or otherwise. This Registration Statement comprises the following papers and documents: The facing sheet. Cross-Reference Table. UL2001 Prospectus consisting of 112 pages. UL11 Prospectus consisting of 108 pages. Undertaking to File Reports (filed with the initial filing of this Registration Statement on May 14, 1992.) Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933 (filed with the initial filing of this Registration Statement on May 14, 1992.) Representation with respect to fees and charges. The signatures. Written Consents of the following persons: Company Actuary (filed with Exhibit 6 below). Independent Auditors The following exhibits: 1.A (1) --Resolution of Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL................................................. ++++ (2) --Not Applicable (3) --(a) Not Applicable --(b) Form of Selected Broker Agreement..................... ++++ --(c) Schedule of Sales Commissions......................... ++ (4) --Not applicable (5) --(a) (i) Specimen Old Product Flexible Premium Multifunded Life Insurance Policy (including application and any alternate pages as required by state law) with form of riders, if any.................................... ++++ (ii) Specimen New Product Flexible Premium Multifunded Life Insurance Policy (including application and any alternate pages required by state law) with form of riders............................................... * --(b) Riders for Disability Waiver Rider, and Accidental Death Benefit......................................... ++++
II-1 --(c) Riders for Accelerated Death Benefit, Children's Term Insurance Benefit and Spouse Term Insurance Benefit... ++++ --(d) New York Endorsement for Old Product to Flexible Premium Multifunded Life Insurance Policy............. ++++ --(e) Additional alternate pages for Old Product required by state law............................................. ++++ --(f) Endorsement adding death benefit Option C for Old Product............................................... ++++ --(g) Forms of illustrations................................ ** (6) --(a) Restated Charter and By-Laws of Metropolitan Life.... + (7) --Not Applicable (8) --Not Applicable (9) --Not Applicable 2. --See Exhibit 1.A(5) above 3. --Opinion and consent of Counsel as to the legality of the securities being registered................................ ++++++ 4. --Not Applicable 5. --Not Applicable 6.a --Opinion and consent of Marian Zeldin relating to the Flexible Premium Multifunded Life Insurance Policies ...... + 8. --Powers of Attorney........................................ +++++ 9. --Method of Computing Exchange pursuant to Rule 6e-3(T)(b)(13)(v)(B) under the Investment Company Act of 1940 (not required because there will be no cash value adjustments) 11. --Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii)........................................ ++++ 27. --Financial Data Schedule (inapplicable)
- -------- + Filed herewith. Exhibit 1.A(6)(a) contingent on the successful completion of the conversion of Metropolitan Life Insurance Company from a mutual life insurance company to a stock life insurance company contemplated to take effect on Friday, April 7, 2000. ++ Incorporated by reference from "Distribution of the Policies" in the Prospectuses included herein. +++ Incorporated by reference to the filing of Post-Effective Amendment No. 4 to the Registration Statement of Separate Account UL (File No. 33-57320) on March 1, 1996. ++++ Included in the filing of Post-Effective Amendment No. 5 to this Registration Statement on April 30, 1997. +++++ Included in the filing of Post-Effective Amendment No. 5 to this Registration Statement on April 30, 1997 except for Robert H. Benmosche's power of attorney, which is incorporated by reference to the Registration Statement of Separate Account UL (File No. 333-40161) filed on November 13, 1997, Stewart G. Nagler's power of attorney which is included in the filing of Post-Effective Amendment No. 6 to this Registration Statement on December 23, 1997, Virginia M. Wilson's power of attorney, which is incorporated by reference to Pre-Effective Amendment No. 2 to the Registration Statement of Metropolitan Life Separate Account E (File No. 333-80547) filed on November 1, 1999, and William C. Steere's power of attorney, which is incorporated by reference to the filing of Post-Effective Amendment No. 8 of Separate Account UL (File no. 33-57320) on April 23, 1999. ++++++ Included in the filing of Post-Effective Amendment No. 6 to this Registration Statement on December 23, 1997. * Included in the filing of Post-Effective Amendment No. 7 to this Registration Statement on February 27, 1998. ** Included in the filing of Post-Effective Amendment No. 10 to this Registration Statement on April 2, 1999. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, METROPOLITAN LIFE INSURANCE COMPANY, certifies that it meets all of the requirements for effectiveness of this amended Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amended Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of New York, State of New York, this 5th day of April, 2000. METROPOLITAN LIFE INSURANCE COMPANY (Seal) /s/ Gary A. Beller By: _________________________________ Gary A. Beller Senior Executive Vice-President & General Counsel /s/ Cheryl D. Martino Attest: _____________________________ Cheryl D. Martino Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this amended Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date * Chairman of the - ------------------------------------- Board, President Robert H. Benmosche and Chief Executive Officer and Director (Principal Executive Officer) * Vice-Chairman of the - ------------------------------------- Board and Chief Gerald Clark Investment Officer and Director * Vice-Chairman of the - ------------------------------------- Board and Chief Stewart G. Nagler Financial Officer (Principal Financial Officer) * Senior Vice- - ------------------------------------- President and Controller Virginia M. Wilson (Principal Accounting Officer) * Director - ------------------------------------- Curtis H. Barnette * Director - ------------------------------------- Joan Ganz Cooney /s/ Christopher P. Nicholas *By _________________________________ April 5, 2000 Christopher P. Nicholas, Esq. Attorney-in-fact II-3 Signature Title Date * Director - ------------------------------------- Burton A. Dole, Jr. * Director - ------------------------------------- James R. Houghton * Director - ------------------------------------- Helene L. Kaplan * Director - ------------------------------------- Charles M. Leighton * Director - ------------------------------------- Allen E. Murray * Director - ------------------------------------- John J. Phelan, Jr. * Director - ------------------------------------- Hugh B. Price * Director - ------------------------------------- Robert G. Schwartz * Director - ------------------------------------- Ruth J. Simmons, Ph.D. Director * - ------------------------------------- William C. Steere, Jr. /s/ Christopher P. Nicholas *By _________________________________ April 5, 2000 Christopher P. Nicholas, Esq. Attorney-in-fact II-4 Pursuant to the requirements of the Securities Act of 1933, the Registrant, METROPOLITAN LIFE SEPARATE ACCOUNT UL, certifies that it meets all of the requirements for effectiveness of this amended Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amended Registration Statement to be signed, on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of New York, State of New York this 5th day of April, 2000. METROPOLITAN LIFE SEPARATE ACCOUNT UL (Registrant) By: METROPOLITAN LIFE INSURANCE COMPANY (Depositor) (Seal) /s/ Gary A. Beller By: _____________________________ Gary A. Beller Senior Executive Vice- President and General Counsel /s/ Cheryl D. Martino Attest: _____________________________ Cheryl D. Martino Assistant Secretary II-5 INDEPENDENT AUDITORS' CONSENT Metropolitan Life Insurance Company: We consent to the use in this Post-Effective Amendment No. 11 to the Registration Statement No. 33-47927 of Metropolitan Life Separate Account UL on Form S-6 of our report dated March 27, 2000 relating to Metropolitan Life Separate Account UL appearing in the Prospectus, which is a part of such Registration Statement, and our report dated February 7, 2000, relating to Metropolitan Life Insurance Company also appearing in the Prospectus, and to the reference to us under the heading "Legal, Accounting and Actuarial Matters" in such Prospectus. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP New York, New York April 3, 2000 II-6 EX-99.1(A)(6)(A) 2 RESTATED CHARTER AND BY-LAWS OF METROPOLITAN LIFE Exhibit 1.A(6)(a) AMENDED AND RESTATED CHARTER OF METROPOLITAN LIFE INSURANCE COMPANY Under Sections 1206 and 7312 of the Insurance Law and Section 807 of the Business Corporation Law The undersigned, being the Chairman of the Board, President and Chief Executive Officer and the Secretary of Metropolitan Life Insurance Company, respectively, hereby certify that: 1. The name of the corporation is Metropolitan Life Insurance Company. 2. The corporation was incorporated on May 4, 1866 under the name "National Travelers Insurance Company." The name of the corporation was changed to "Metropolitan Life Insurance Company" on March 24, 1868. 3. The Charter of the corporation is hereby amended, as authorized by Sections 1206 and 7312 of the Insurance Law of New York (the "Insurance Law") and Section 801 of the Business Corporation Law of New York, in connection with the reorganization of the corporation from a mutual life insurance company to a stock life insurance company pursuant to Section 7312 of the Insurance Law (a) to establish the capital of the corporation in the amount of $10,000,000 and to authorize shares of Common Stock, par value $.01 per share, as the shares of the corporation, (b) to change references in the Charter from "mutual" to "stock" and from "policyholders" to "shareholders", and (c) to eliminate classes of directors and to provide that each director will be elected for a one-year term. 4. The amendment and restatement of the Charter was authorized by the affirmative vote of at least two-thirds of all votes cast on ________, 1999 by policyholders entitled to vote on the plan of reorganization of the corporation pursuant to Section 7312 of the Insurance Law. 5. The text of the Charter, as amended by the filing of this Amended and Restated Charter, is hereby restated to read in full as follows: ARTICLE I CORPORATE NAME The name of the corporation shall continue to be "Metropolitan Life Insurance Company." The corporation may use, in the transaction of any or all of its business and affairs in Canada, including the exercise of any or all of its rights, such name or such name expressed in the French language. Such name when so expressed shall be "La Metropolitaine, compagnie d'assurance vie." ARTICLE II PLACE OF BUSINESS The corporation shall be located and have its principal place of business in the Borough of Manhattan, City of New York, County of New York, and State of New York. ARTICLE III ANNUAL MEETING OF SHAREHOLDERS The annual meeting of the shareholders of the corporation for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on the fourth Tuesday of April, or otherwise, within 60 days thereafter, as the Board may determine, provided that the Superintendent of Insurance of the State of New York (or any governmental officer, body or authority that succeeds the Superintendent as the primary regulator of the corporation's insurance business under applicable law) is given notice of the date determined by the Board prior to such date, at such place, either within or without the State of New York, as may be fixed from time to time by resolution of the Board and set forth in the notice or waiver of notice of the meeting. D-2 ARTICLE IV BUSINESS OF THE CORPORATION The business of the corporation and the kinds of insurance to be undertaken by it are: (1) "life insurance," meaning every insurance upon the lives of human beings, and every insurance appertaining thereto, including the granting of endowment benefits, additional benefits in the event of death by accident, additional benefits to safeguard the contract from lapse, accelerated payments of part or all of the death benefit or a special surrender value upon diagnosis (A) of terminal illness defined as a life expectancy of twelve months or less, or (B) of a medical condition requiring extraordinary medical care or treatment regardless of life expectancy, or upon (C) certification by a licensed health care practitioner of any condition which requires continuous care for the remainder of the insured's life in an eligible facility or at home when the insured is chronically ill as defined by Section 7702(B) of the Internal Revenue Code and regulations thereunder, provided the accelerated payments qualify under Section 101(g)(3) of the Internal Revenue Code and all other applicable sections of federal law in order to maintain favorable tax treatment or provide a special surrender value, upon total and permanent disability of the insured, and optional modes of settlement of proceeds. "Life insurance" also includes additional benefits to safeguard the contract against lapse in the event of unemployment of the insured. Amounts paid the insurer for life insurance and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to Section 4240 of the Insurance Law; (2) "annuities," meaning all agreements to make periodical payments for a period certain or where the making or continuance of all or some of a series of such payments, or the amount of any such payment, depends upon the continuance of human life, except payments made under the authority of paragraph one hereof. Amounts paid the insurer to provide annuities and proceeds applied under optional modes of settlement or under dividend options may be allocated by the insurer to one or more separate accounts pursuant to Section 4240 of the Insurance Law; and D-3 (3) "accident and health insurance," meaning (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date. as heretofore authorized by and under this Charter and paragraphs 1, 2 and 3 of Section 1113(a) of the Insurance Law; together with such reinsurance business (in addition to reinsurance of the kinds of insurance business hereinabove stated) as may be permitted to the corporation by Section 1114 of said Law; together with such business in which the corporation may be authorized to engage pursuant to any amendment to paragraphs 1, 2 and 3 of Section 1113(a) or Section 1114 of said Law which may be hereafter adopted; and together with any other kind or kinds of business to the extent reasonably ancillary or necessarily or properly incidental to the kinds of insurance business which the corporation is so authorized to do. The corporation shall also have the general rights, powers and privileges now or hereafter granted by the Insurance Law or any other law to stock life insurance companies having power to do the kinds of business hereinabove referred to and any and all other rights, powers and privileges of a corporation, as the same may now or hereafter be declared by applicable law. ARTICLE V CORPORATE POWERS Section 1. The business of the corporation shall be managed under the direction of its Board, by committees thereof and by such officers and agents as the Board or such committees may empower. D-4 Section 2. The Board shall consist of not less than thirteen directors (except for vacancies temporarily unfilled) nor more than thirty directors, as may be determined by the Board by resolution adopted by a majority of the authorized number of directors immediately prior to such determination. Not less than one- third of the directors shall be persons who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation, and who are not beneficial owners of a controlling interest in the voting stock of the corporation or any such entity ("Outside Directors"). Section 3. The Board shall have power to make and prescribe such ByLaws, rules and regulations for the transaction of the business of the corporation and the conduct of its affairs, not inconsistent with the laws of the State of New York and this Charter as may be deemed expedient, and to amend or repeal such By-Laws, rules and regulations, except as otherwise provided in such By-Laws. Section 4. The Board shall have the power to declare by by-law what number of directors shall constitute a quorum for the transaction of business; provided, however, that such number shall be no less than a majority of the authorized number of directors, at least one of whom shall be an Outside Director. Section 5. The Board shall elect or appoint a Chairman, a Chief Executive Officer, a President, one or more Vice-Presidents, a Chief Financial Officer, a Secretary, a Treasurer, a Controller and a General Counsel and such other officers as it may deem appropriate, except that officers of the rank of Vice-President and below may be elected or appointed by the Compensation Committee of the Board. Officers shall have such powers and perform such duties as may be authorized by the By-Laws or by or pursuant to authorization of the Board or the Chief Executive Officer. D-5 ARTICLE VI ELECTION OF DIRECTORS AND OFFICERS Section 1. The directors of the corporation shall be elected by the shareholders as prescribed by law and the By-Laws of the corporation. The officers of the corporation shall be elected or appointed as provided in the By-Laws of the corporation. Each director shall be at least 18 years old, at all times a majority of the directors shall be citizens and residents of the United States and not less than three shall be residents of the State of New York. Section 2. Vacancies in the Board, including vacancies resulting from any increase in the authorized number of directors or the removal of any director, except a removal of a director without cause, shall be filled by a vote of the Board until the next annual meeting of shareholders of the corporation, except that if the number of directors then in office is less than a quorum, such vacancies may be filled by a vote of a majority of directors then in office. ARTICLE VII LIABILITY OF DIRECTORS No director shall be personally liable to the corporation or any of its shareholders or any of its policyholders for damages for any breach of duty as a director; provided, however, that the foregoing provision shall not eliminate or limit: (i) the liability of a director if a judgment or other final adjudication adverse to the director establishes that the director personally gained in fact a financial profit or other advantage to which he or she was not legally entitled or establishes that the director's acts or omissions were in bad faith or involved intentional misconduct or were acts or omissions (a) which the director knew or reasonably should have known violated the Insurance Law or (b) which violated a specific D-6 standard of care imposed on directors directly, and not by reference, by a provision of the Insurance Law (or any regulations promulgated thereunder), or (c) which constituted a knowing violation of any other law; or (11) the liability of a director for any act or omission prior to April 26, 1990. ARTICLE VIII STOCK The amount of capital of the corporation shall be $10,000,000 and shall consist of 1,000,000,000 authorized shares of Common Stock, par value $.01 per share. ARTICLE IX DURATION The duration of the corporation shall be perpetual. D-7 AMENDED AND RESTATED BY-LAWS OF METROPOLITAN LIFE INSURANCE COMPANY ARTICLE I SHAREHOLDERS Section 1.1 Annual Meetings. The annual meeting of the shareholders of the corporation for the election of directors and for the transaction of such other business as properly may come before such meeting shall be held on the fourth Tuesday of April, or otherwise, within 60 days thereafter, as the Board may determine, provided that the Superintendent of Insurance of the State of New York (or any governmental officer, body or authority that succeeds the Superintendent as the primary regulator of the corporation's insurance business under applicable law) is given notice of the date determined by the Board prior to such date, at such place, either within or without the State of New York, as may be fixed from time to time by resolution of the Board and set forth in the notice or waiver of notice of the meeting. Section 1.2 Special Meetings. Special meetings of the shareholders may be called at any time by the Chief Executive Officer (or, in the event of such Chief Executive Officer's absence or disability, by the President), or by the Board. A special meeting shall be called by the Chief Executive Officer (or, in the event of such Chief Executive Officer's absence or disability, by the President), or by the Secretary, immediately upon receipt of a written request therefor by shareholders holding in the aggregate not less than 25% of the outstanding shares of the corporation at the time entitled to vote at any meeting of the shareholders, which request shall state the purpose or purposes of such meeting. If such officers shall fail to call such meeting within 20 days after receipt of such request, any shareholder executing such request may call such meeting. Such special meetings of the shareholders shall be held at such places, within or without the State of New York, as shall be specified in the respective notices or waivers of notice thereof. Section 1.3 Notice of Meetings. The Secretary or any Assistant Secretary shall cause written notice of the place, date and hour of each meeting of the shareholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called and by or at whose direction such notice is being issued, to be given personally or by first class mail, not fewer than ten nor more than sixty days before the date of the meeting. G-1 Amended and Restated By-Laws Metropolitan Life Insurance Company No notice of any meeting of shareholders need be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in a written waiver of notice. The attendance of any shareholder, in person or by proxy, at a meeting of shareholders shall constitute a waiver of notice of such meeting, except when the shareholder attends a meeting for the express purpose of objecting, prior to the conclusion of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened. Section 1.4 Quorum. Except as otherwise required by law or by the Charter, the presence in person or by proxy of the holders of record of a majority of the votes of shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business at such meeting. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. Section 1.5 Voting. Every holder of record of shares entitled to vote at a meeting of shareholders shall be entitled to one vote for each share standing in such shareholder's name on the books of the corporation on the record date set therefor. Except as otherwise required by law or by the Charter or by Section 1.7 hereof (regarding the election of directors), any corporate action shall be authorized by a majority of the votes cast in favor of or against such action by the holder of record of shares represented at any meeting at which a quorum is present. An abstention shall not constitute a vote cast. Section 1.6 Proxies. Every shareholder entitled to vote at any meeting of the shareholders or to express consent to or dissent from corporate action without a meeting may, in any legally valid manner, authorize another person or persons to vote at any such meeting and express such consent or dissent for such shareholder by proxy. No such proxy shall be voted or acted upon after the expiration of eleven months from the date of such proxy, unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where applicable law provides that a proxy shall be irrevocable. Section 1.7 Election and Term of Directors. The directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting of shareholders. Each director shall hold office until the expiration of the term for which he or she is elected and until such director's successor has been duly elected and qualified, or until his or her earlier death, resignation or removal. At each annual meeting of the share holders of the corporation, at which a quorum is present, the directors shall be elected by a plurality of the votes cast by the holders of shares entitled to vote in such election. G-2 Amended and Restated By-Laws Metropolitan Life Insurance Company Section 1.8 Organization; Procedure. The Board shall determine whom from among the officer directors shall preside at the meeting of shareholders. The order of business and all other matters of procedure at every meeting of shareholders may be determined by such presiding officer. The Secretary, or in the event of the Secretary's absence or disability, an Assistant Secretary or, in the Assistant Secretary's absence, an appointee of the presiding officer, shall act as Secretary of the meeting. Section 1.9 Consent of Shareholders in Lieu of Meeting. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by law, by the Charter or by these By-Laws, the meeting and vote of shareholders may be dispensed with, if all of the shareholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. ARTICLE II BOARD OF DIRECTORS Section 2.1 Regular Board Meetings. Regular meetings of the Board for the transaction of any business shall be held at such times and places, either within or without the State of New York, as may be fixed from time to time by resolution of the Board; provided, however, that at least one regular meeting of the Board shall be held in each calendar year. One regular meeting of the Board in each calendar year shall be designated as the Annual Organization Meeting. Except as otherwise required by law or these ByLaws, notice of regular meetings need not be given. Section 2.2 Special Board Meetings, Waiver of Notice. Special meetings of the Board shall be held whenever called by the chief executive officer or by any three directors. Notice of each such special meeting shall be mailed to each director at such director's residence or usual place of business or other address filed with the Secretary for such purpose, or shall be sent to such director by any form of telecommunication, or be delivered or given to such director personally or by telephone, not later than the second day preceding the day on which such meeting is to be held. Notice of any meeting of the Board need not, however, be given to any director who submits a signed waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice. Every such notice shall state the time, place and purpose of the meeting. Section 2.3 Participation by Telephone. Any one or more members of the Board or any committee thereof may participate in any meeting of the Board or such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. G-3 Amended and Restated By-Laws Metropolitan Life Insurance Company Participation by such means shall constitute presence in person at a meeting of the Board or such committee for quorum and voting purposes. Section 2.4 Action Without a Meeting. Any action which is required or permitted to be taken by the Board or any committee thereof may be taken without a meeting if all members of the Board or such committee consent in writing to the adoption of a resolution authorizing the action; provided, however, that the Annual Organization Meeting of the Board may not be conducted by such unanimous written consent. The resolution and the written consents thereto by the members of the Board or such committee shall be filed with the minutes of the proceedings of the Board or committee. Section 2.5 Number, Quorum and Adjournments. The Board shall consist of not less than thirteen directors (except for vacancies temporarily unfilled) nor more than thirty directors, as may be determined by the Board by resolution adopted by a majority of the authorized number of directors immediately prior to any such determination. The authorized number of directors of the corporation may be increased or decreased at any time by a vote of the majority of the authorized number of directors immediately prior to such vote; provided, however, that no such decrease in the authorized number of directors shall shorten the term of any incumbent director. Not less than one-third of the directors shall be persons who are not officers or employees of the corporation or of any entity controlling, controlled by, or under common control with the corporation and who are not beneficial owners of a controlling interest in the voting stock of the corporation or any such entity ("Outside Directors"). At any meeting of the Board, the presence of at least a majority of the authorized number of directors, at least one of whom shall be an Outside Director, shall constitute a quorum for the transaction of business. Except as otherwise provided by law or these By-Laws, the vote of a majority of the directors present at the time of the vote, if a quorum is present at such time, shall be the act of the Board. A majority of the directors present, whether or not a quorum shall be present, may adjourn any meeting. Notice of the time and place of an adjourned meeting of the Board shall be given if and as determined by a majority of the directors present at the time of the adjournment. Section 2.6 Presiding Officer. The Board shall determine whom from among the officer directors shall preside at meetings of the Board. In the event of the absence or disability of all such officer directors, the Board shall select one of its members present to preside. Section 2.7 Board Vacancies. Any vacancy in the Board, including any vacancy resulting from any increase in the authorized number of directors or the removal of any director, except a removal of a director without cause, shall be filled by a vote of the Board until the next annual meeting of shareholders of the corporation and until such director's successor shall have been elected and qualified; provided, however, that if the G-4 Amended and Restated By-Laws Metropolitan Life Insurance Company number of directors then in office is less than a quorum, any vacancy may be filled by a vote of a majority of directors then in office. ARTICLE III COMMITTEES Section 3.1 Standing Committees. The Board shall have the following standing committees, each consisting of not less than five directors, as shall be determined by the Board: Executive Committee Investment Committee Compensation Committee Audit Committee Nominating and Corporate Governance Committee Section 3.2 Designation of Members and Chairmen of Standing Committees. At its first meeting following the annual meeting of shareholders of the corporation, the Board shall, by resolution adopted by a majority of the then authorized number of directors, designate from among the directors the members of the standing committees and from among the members of each such committee a chairman thereof, which members shall serve as such, at the pleasure of the Board, so long as they shall continue in office as directors, until the meeting following the next annual meeting of shareholders of the corporation and thereafter until the appointment of their successors. Each member of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee shall be an Outside Director, and not less than one-third of the members of each other committee shall be Outside Directors. The Board may by similar resolution designate one or more directors as alternate members of such committees, who may replace any absent member or members at any meeting of such committees; provided, however, that the membership of the committee shall satisfy the preceding sentence following such designation. Vacancies in the membership or chairmanship of any standing committee may be filled in the same manner as original designations at any regular or special meeting of the Board, and the chief executive officer may designate from among the remaining members of any standing committee whose chairmanship is vacant a chairman who shall serve until a successor is designated by the Board. Section 3.3 Notices of Times of Meetings of Standing Committees and Presiding Officers. Meetings of each standing committee shall be held upon call of the chief executive officer, or upon call of the chairman of such standing committee or two members of such standing committee. Meetings of each standing committee may also be held at such other times as it may determine. Meetings of a standing committee shall be G-5 Amended and Restated By-Laws Metropolitan Life Insurance Company held at such places and upon such notice as it shall determine or as shall be specified in the calls of such meetings. Any such chairman, if present, or such member or members of each committee as may be designated by the chief executive officer, shall preside at meetings thereof or, in the event of the absence or disability of any thereof or failing such designation, the committee shall select from among its members present a presiding officer. Section 3.4 Quorum. At each meeting of any standing committee there shall be present to constitute a quorum for the transaction of business at least a majority of the members but in no event less than three members, at least one of whom shall be an Outside Director. Subject to the preceding sentence, any alternate member who is replacing an absent member shall be counted in determining whether a quorum is present. The vote of a majority of the members present at a meeting of any standing committee at the time of the vote, if a quorum is present at such time, shall be the act of such committee. Section 3.5 Standing Committee Minutes. Each of the standing committees shall keep minutes of its meetings which shall be reported to the Board at its regular meetings and, if called for by the Board, at any special meeting. Section 3.6 Executive Committee. The Executive Committee shall make recommendations to the Board with respect to the policyholder dividend and surplus policies and practices of the corporation and, during the intervals between meetings of the Board, except as otherwise provided in Section 3.12, shall have and may exercise the authority of the Board in the management of the property, business and affairs of the corporation, including the authority to declare dividends in respect of the corporation's stock. Section 3.7 Investment Committee. The Investment Committee, subject to and as may be provided in any resolution of the Board, shall have and may exercise the authority of the Board with respect to the management of the assets of the corporation, including purchases and sales thereof, the manner of designating depositaries for all monies received by the corporation, which shall be deposited in the name of the corporation, and the manner of disposition of the funds of the corporation so deposited. Section 3.8 Compensation Committee. The Compensation Committee shall recommend to the Board the selection of all principal officers (as determined by the Committee) and such other officers as the Committee may determine to elect or appoint as officers, shall evaluate the performance and recommend to the Board the compensation of such principal officers and such other officers as the Committee may determine, and shall recommend to the Board any plan to issue options for the purchase of shares of the corporation's stock to its officers or employees. Except as otherwise provided in any resolution of the Board, the Committee shall have and may exercise all the authority of the Board with respect to compensation, benefits and personnel administration of the G-6 Amended and Restated By-Laws Metropolitan Life Insurance Company employees of the corporation and may elect or appoint officers as provided in Section 4.2 of these By-Laws. Section 3.9 Audit Committee. The Audit Committee shall have and may exercise the authority of the Board: to recommend to the Board the selection of the corporation's independent certified public accountants; to review the scope, plans and results relating to the internal and external audits of the corporation and its financial statements; and to review the financial condition of the corporation. Except as otherwise provided in any resolution of the Board, the Committee shall have and may exercise the authority of the Board: to monitor and evaluate the integrity of the corporation's financial reporting processes and procedures; to assess the significant business and financial risks and exposures of the corporation and to evaluate the adequacy of the corporation's internal controls in connection with such risks and exposures, including, but not limited to, accounting and audit controls over cash, securities, receipts, disbursements and other financial transactions; and to review the corporation's policies on ethical business conduct and monitor compliance therewith. Section 3.10 Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee shall nominate candidates for Director for election by shareholders and for filling vacancies on the Board, and may recommend to the Board any plan to issue options for the purchase of shares of the corporation's stock to its non-employee directors. Except as otherwise provided in any resolution of the Board, the Committee shall review and make recommendations to the Board with respect to the organization, structure, size, composition and operation of the Board and its Committees, including, but not limited to, the compensation for non-employee directors and shall review and make recommendations with respect to other corporate governance matters and matters that relate to the corporation's status as a member of a publicly-traded group of companies. Section 3.11 Special Committees. The Board may, by resolution adopted by a majority of the then authorized number of directors, designate special committees, each consisting of three or more directors of the corporation, which committees, except as otherwise prescribed by law or by Section 3.12, shall have and may exercise the authority of the Board to the extent provided in the resolutions designating such committees. Nothing herein shall be deemed to prevent the chief executive officer from appointing one or more special committees of directors for the purpose of advising the chief executive officer; provided, however, that no such committee shall have or may exercise any authority of the Board. Section 3.12 Limitations of the Authority of Committees. Notwithstanding any other provisions of these By-Laws, no committee shall have authority as to the following matters: G-7 Amended and Restated By-Laws Metropolitan Life Insurance Company (1) the submission to shareholders of any action that needs shareholder approval under applicable law; (2) the filling of vacancies in the Board or in any committee; (3) the fixing of compensation of the directors for serving on the Board or on any committee; (4) the amendment or repeal of these By-Laws or adoption of new By-Laws; and (5) the amendment or repeal of any resolution of the Board which by its terms shall not be so amendable or repealable. ARTICLE IV OFFICERS Section 4.1 Chief Executive Officer. The Board shall determine whom from among the officer directors shall act as Chief Executive Officer. Subject to the control of the Board and to the extent not otherwise prescribed by these By-Laws, the Chief Executive Officer shall supervise the carrying out of the policies adopted or approved by the Board, shall manage the business of the Company and shall possess such other powers and perform such other duties as may be incident to the office of chief executive officer. Section 4.2 Other Officers. In addition to the Chief Executive Officer, the Board shall elect or appoint a Chairman, a President, one or more Vice-Presidents, a Chief Financial Officer, a Secretary, a Treasurer, a Controller and a General Counsel, and such other officers as it may deem appropriate, except that officers of the rank of Vice-President and below may be elected or appointed by the Compensation Committee of the Board. Officers other than the Chief Executive Officer shall have such powers and perform such duties as may be authorized by these By-Laws or by or pursuant to authorization of the Board or the Chief Executive Officer. All officers shall hold office at the pleasure of the Board. G-8 Amended and Restated By-Laws Metropolitan Life Insurance Company ARTICLE V EXECUTION OF PAPERS Section 5.1 Instruments. Any officer, or any employee or agent designated for the purpose by the Chief Executive Officer, or a designee of the Chief Executive Officer, shall have power to execute all instruments in writing necessary or desirable for the corporation to execute in the transaction and management of its business and affairs (including, without limitation, contracts and agreements, transfers of bonds, stocks, notes and other securities, proxies, powers of attorney, deeds, leases, releases, satisfactions and instruments entitled to be recorded in any jurisdiction, but excluding, to the extent otherwise provided for in these By-Laws, authorizations for the disposition of the funds of the corporation deposited in its name and policies, contracts, agreements, amendments and endorsements of, for or in connection with insurance or annuities) and to affix the corporate seal. Section 5.2 Disposition of Funds. All funds of the corporation deposited in its name shall be subject to disposition by check or other means, in such manner as the Investment Committee may determine. Section 5.3 Policies. All policies, contracts, agreements, amendments and endorsements, executed by the corporation as insurer, of, for or in connection with insurance or annuities shall bear such signature or signatures of such officer or officers as may be designated for the purpose by the Board. Section 5.4 Facsimile Signatures. All instruments necessary or desirable for the corporation to execute in the transaction and management of its business and affairs, including those set forth in Sections 5.2 and 5.3 of these By-Laws, may be executed by use of or bear facsimile signatures as and to the extent authorized by the Board or a committee thereof or the chief executive officer. If any officer or employee whose facsimile signature has been placed upon any form of instrument shall have ceased to be such officer or employee before an instrument in such form is issued, such instrument may be issued with the same effect as if such person had been such officer or employee at the time of its issue. ARTICLE VI CAPITAL STOCK Section 6.1 Certificates of Shares. Every holder of shares in the corporation shall be entitled to have a certificate (unless such shares shall be uncertificated shares) signed by, or in the name of the corporation by (i) the Chairman of the Board, the President or a Vice-President, and (ii) by the Treasurer or an Assistant Treasurer, or the G-9 Amended and Restated By-Laws Metropolitan Life Insurance Company Secretary or an Assistant Secretary, certifying the number of shares owned by him or her in the corporation. Such certificate shall be in such form as the Board may determine, to the extent consistent with applicable provisions of law, the Charter and these By-Laws. Within a reasonable time after the issuance of uncertificated shares, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates. Section 6.2 Lost, Stolen or Destroyed Certificates. The Board may direct that a new certificate be issued in place of any certificate previously issued by the corporation alleged to have been lost, stolen or destroyed, upon delivery to the Board of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Board may require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. Section 6.3 Transfers of Stock; Registered Shareholders. Shares of stock of the corporation shall be transferable only upon the books of the corporation kept for such purpose upon surrender to the corporation or its transfer agent or agents of a certificate (unless such shares shall be uncertificated shares) representing shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer. Within a reasonable time after the transfer of uncertificated shares, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates. The Board, subject to these By-laws, may make such rules, regulations and conditions as it may deem expedient concerning the subscription for, issue, transfer and registration of, shares of stock. Except as otherwise provided by law, the corporation, prior to due presentment for registration of transfer, may treat the registered owner of shares as the person exclusively entitled to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 6.4 Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal or corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than fifty days prior to any other action. Section 6.5 Transfer Agent and Registrar. The Board may appoint one or more transfer agents and one or more registrars, and may require all certificates representing G-10 Amended and Restated By-Laws Metropolitan Life Insurance Company shares to bear the signature of any such transfer agents or registrar. The same person may act as transfer agent and registrar for the corporation. Section 6.6 Dividends. Subject to any applicable provisions of law and the Charter, dividends or other distributions upon the outstanding shares of the corporation may be declared by the Board at any regular or special meeting of the Board, or by the Executive Committee as provided in Section 3.6, and any such dividend or distribution may be paid in cash, property, bonds or shares of the corporation, including the bonds or shares of other corporations, except as limited by applicable law. ARTICLE VII GENERAL Section 7.1 Indemnification of Directors and Officers. To the full extent permitted by the laws of the State of New York, the corporation shall indemnify any person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that such person, or such person's testator or intestate, (1) is or was a director or officer of the corporation, or (2) serves or served another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity at the request of the corporation, and also is or was a director or officer of the corporation, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with or as a result of such action or proceeding, or any appeal therein. ARTICLE VIII AMENDMENT OF BY-LAWS Section 8.1 Amendments. These By-Laws or any of them may be amended, altered or repealed by the Board at any regular or special meeting if written notice setting forth the proposed amendment, alteration or repeal shall have been mailed to all directors at least five days before the meeting or upon the affirmative vote by the holders of a majority of the outstanding shares; provided, however, that Section 7.1 of these By-Laws may not be amended, altered or repealed by the Board or the shareholders so as to affect adversely any then existing rights of any director or officer. G-11 Amended and Restated By-Laws Metropolitan Life Insurance Company EX-99.6A 3 OPINION AND CONSENT OF MARTIN ZELDIN Exhibit 6(a) March 24, 2000 Metropolitan Life Insurance Company One Madison Avenue New York, New York 10010 Dear Sirs: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 11 to Registration Statement No. 33-47927 on Form S-6 ("Registration Statement"), which covers premiums received under the Flexible Premium Multifunded Life Insurance policies (FPMLI) offered by Metropolitan Life Insurance Company ("MLIC") in each State where they have been approved by appropriate State insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed the FPMLI forms and I am familiar with the Registration Statement and Exhibits thereto. In my opinion the illustrations of FPMLI death benefits, cash values and cash surrender values in Exhibit 1(A)(5)(g) included in the Registration Statement, based on the assumptions stated therein, are consistent with the provisions of the FPMLI forms. Also, in my opinion, the amounts assumed in the illustrations for current policy charges (including UL- 2001's decrease in mortality and expense risk charge after 10 years) remain reasonable, based on MLIC's current expectations. The policies have not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations, appear to be disproportionately more favorable to a prospective purchaser of the FPMLI for standard risk males age 35, than to prospective purchasers of FPMLI for a male at other ages or in other underwriting classes or for a female. Nor have the particular illustrations shown been selected for the purpose of making that relationship appear more favorable. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Legal, Accounting and Actuarial Matters" in the prospectuses contained in the Registration Statement. Very truly yours, /s/ Marian Zeldin Marian Zeldin Vice President and Actuary -----END PRIVACY-ENHANCED MESSAGE-----