-----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, M4PQIj+/JPETrGJVKV/H6Ihz1woBw6YKKF2icpgDaLonAQ62vHg7HW85E3YWaP2X 6gNPeV6MWHlL7Wew5VWGjg== 0000950130-97-002018.txt : 19970501 0000950130-97-002018.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950130-97-002018 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19970430 EFFECTIVENESS DATE: 19970430 SROS: NONE 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: 1933 Act SEC FILE NUMBER: 033-32813 FILM NUMBER: 97590809 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 POST-EFFECTIVE AMENDMENT NO. 5 TO FORM S-6 REGISTRATION NO. 33-32813 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-6 POST-EFFECTIVE AMENDMENT No. 5 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. 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) of Rule 485 [X] on May 1, 1997 pursuant to paragraph (b) of Rule 485 [_] 60 days after filing pursuant to paragraph (a) of Rule 485 [_] on (date), pursuant to paragraph (a) of Rule 485 ---------------- This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment Company Act of 1940 to register interests in Metropolitan Life Separate Account UL which funds certain variable universal life insurance policies. Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant has registered an indefinite amount of securities. THE REGISTRANT'S RULE 24F-2 NOTICE WAS FILED WITH THE COMMISSION ON FEBRUARY 27, 1997. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- METROPOLITAN LIFE SEPARATE ACCOUNT UL METROPOLITAN LIFE INSURANCE COMPANY CROSS-REFERENCE TABLE
ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 1...................... Cover Page 2...................... SUMMARY--About Metropolitan Life 3...................... Inapplicable 4...................... SALES AND ADMINISTRATION OF THE POLICIES; SUMMARY-- Who is the Issuer of the Policies? 5, 6, 7................ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate Account; STATE REGULATION 8...................... FINANCIAL STATEMENTS 9...................... Inapplicable 10(a)................... OTHER POLICY PROVISIONS--Owner; Beneficiary; Collat- eral Assignment 10(c), 10(d)............ DEFINITIONS--Valuation Date; SUMMARY--May the Policy be Surrendered or the Cash Value Partially With- drawn; Is There a "Free Look" Period? POLICY BENE- FITS--Benefit at Final Date; POLICY RIGHTS--Surren- der and Withdrawal Privileges; Exchange Privilege; PAYMENT AND ALLOCATION OF PREMIUMS--Allocation of Premiums and Cash Value, Cash Value Transfers; THE FIXED ACCOUNT--Transfers, Withdrawals, Surrenders, and Policy Loans; OTHER POLICY PROVISIONS--Payment and Deferment 10(e)................... PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termina- tion and Reinstatement 10(f)................... VOTING RIGHTS 10(g)(1)-(3), 10(h)(1)- (3).................... RIGHTS RESERVED BY METROPOLITAN LIFE 10(g)(4), 10(h)(4)...... Inapplicable 10(i)................... POLICY BENEFITS--Death Benefits; Death Benefit Op- tions; Cash Value; Optional Income Plans; Optional Insurance Benefits; PAYMENT AND ALLOCATION OF PRE- MIUMS--Issuance of a Policy; Premiums; Allocation of Premiums and Cash Value; Policy Termination and Reinstatement 11...................... SUMMARY--What are Separate Account UL, the Fixed Ac- count and the Metropolitan Series Fund?; SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan Series Fund 12(a)................... Cover Page 12(b), 12(e)............ Inapplicable
i
ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 12(c), 12(d)............ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met- ropolitan Series Fund 13(a), 13(b), 13(c), SUMMARY--What are Separate Account UL, the Fixed Ac- 13(d).................. count and Metropolitan Series Fund?; What Charges are Assessed in Connection with the Policy? CHARGES AND DEDUCTIONS; SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate Account; POLICY BENE- FITS--Death Benefit Increases 13(e)................... SALES AND ADMINISTRATION OF THE POLICIES 13(f), 13(g)............ Inapplicable 14...................... PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Policy; SALES AND ADMINISTRATION OF THE POLICIES 15...................... PAYMENT AND ALLOCATION OF PREMIUMS 16...................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met- ropolitan Series Fund 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 AND METROPOLITAN SERIES FUND 18(b), 18(d)............ Inapplicable 19...................... SALES AND ADMINISTRATION OF THE POLICIES; VOTING RIGHTS; REPORTS 20(a), 20(b)............ RIGHTS RESERVED BY METROPOLITAN LIFE; SEPARATE AC- COUNT AND METROPOLITAN SERIES FUND--The Separate Account 20(c), 20(d), 20(e), 20(f).................. Inapplicable 21(a), 21(b)............ POLICY RIGHTS--Loan Privileges; OTHER POLICY PROVI- SIONS--Payment and Deferment 21(c), 22............... Inapplicable 23...................... SALES AND ADMINISTRATION OF THE POLICIES 24...................... OTHER POLICY PROVISIONS 25...................... SUMMARY--Who is the Issuer of the Policies? 26...................... CHARGES AND DEDUCTIONS--Other Charges 27...................... SUMMARY--Who is the Issuer of the Policies? 28...................... MANAGEMENT 29...................... Inapplicable 30, 31, 32, 33, 34...... Inapplicable 35...................... STATE REGULATION 36, 37.................. Inapplicable
ii
ITEMS OF FORM N-8B-2 CAPTIONS IN PROSPECTUS - ----------- ---------------------- 38....................... SALES AND ADMINISTRATION OF THE POLICIES; DISTRIBU- TION OF THE POLICIES 39....................... SUMMARY--About Metropolitan Life; SALES AND ADMINIS- TRATION OF THE POLICIES; DISTRIBUTION OF THE POLI- CIES 40(a).................... Inapplicable 40(b).................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met- ropolitan Series Fund; CHARGES AND DEDUCTIONS-- Other Charges 41(a).................... SUMMARY--About Metropolitan Life; SALES AND ADMINIS- TRATION OF THE POLICIES 41(b), 41(c), 42, 43..... Inapplicable 44(a).................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Met- ropolitan Series Fund; POLICY BENEFITS--Cash Value 44(b).................... Inapplicable 44(c).................... CHARGES AND DEDUCTIONS--Monthly Deduction From Cash Value 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 AND METROPOLITAN SERIES FUND--The Separate Account 51(a), 51(b)............. SUMMARY--About Metropolitan Life; Cover Page; POLICY BENEFITS--Optional Insurance Benefits; POLICY RIGHTS--Exchange Privileges 51(c), 51(d), 51(e)...... Captions referenced under Item 10(i) above 51(f).................... PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termina- tion and Reinstatement 51(g).................... Captions referenced under Items 10(i) and 13 above 51(h), 51(j)............. Inapplicable 51(i).................... DISTRIBUTION OF THE POLICIES 52(a), 52(c)............. RIGHTS RESERVED BY METROPOLITAN LIFE 52(b), 52(d)............. Inapplicable 53(a).................... FEDERAL TAX MATTERS 53(b), 54 through 58..... Inapplicable 59....................... FINANCIAL STATEMENTS
iii [LOGO] MetLife(R) FLEXIBLE PREMIUM MULTIFUNDED LIFE .SUPPLEMENT TO THE PROSPECTUS FOR FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN INSURANCE COMPANY .ANNUAL REPORT METROPOLITAN LIFE SEPARATE ACCOUNT UL DECEMBER 31, 1996 .ANNUAL FINANCIAL STATEMENTS METROPOLITAN LIFE INSURANCE COMPANY DECEMBER 31, 1996 .PROSPECTUS METROPOLITAN SERIES FUND, INC. MARCH 3, 1997 [LOGO] MetLife(R) Metropolitan Life Insurance Company MLI-SA-UL (5/97 EDITION) PRINTED IN U.S.A. 97041URS (EXP0598 ) MLIC-LD SUPPLEMENT DATED MAY 1, 1997 to PROSPECTUS DATED APRIL 30, 1993 (AS PREVIOUSLY SUPPLEMENTED ON MAY 1, 1994) for FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES (Minimum Initial Specified Face Amount $50,000) Issued by METROPOLITAN LIFE INSURANCE COMPANY This Supplement updates information contained in the Metropolitan Life Separate Account UL Prospectus dated April 30, 1993 (the "Prospectus"), and its supplement dated May 1, 1994. Please call Metropolitan Life Insurance Company ("Metropolitan Life") at 800-638-5000 if you need another copy of the Prospectus or the supplement. The individual flexible premium multifunded life insurance policies ("Policies") offered by the Prospectus are issued by Metropolitan Life and are designed to provide lifetime insurance coverage on the insureds named in the Policies, as well as maximum flexibility in connection with premium payments and death benefits. This flexibility allows an owner of a Policy to provide for changing insurance needs within the confines of a single insurance policy. These Policies are no longer being sold by Metropolitan Life. The premiums paid, less premium expense charges, will be allocated at the owner's discretion among one or more investment divisions of Metropolitan Life Separate Account UL ("Separate Account") and/or a fixed interest account ("Fixed Account") within the General Account of Metropolitan Life. The assets in each investment division are invested in shares of a corresponding portfolio of the Metropolitan Series Fund, Inc. ("Fund"). The available portfolios of the Fund are the State Street Research Growth, State Street Research Income, State Street Research Diversified, State Street Research Aggressive Growth, MetLife Money Market, MetLife Stock Index, GFM International Stock, Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap, and Scudder Global Equity Portfolios. THIS SUPPLEMENT IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND. THIS SUPPLEMENT SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. 1 Madison Avenue, New York, New York 10010 Telephone 800-638-5000 The names of the following seven portfolios of the Fund and the corresponding divisions of the Separate Account have been changed wherever they appear in the Prospectus:
OLD PORTFOLIO AND DIVISION NAME NEW PORTFOLIO AND DIVISION NAME - ----------------- ------------------------------- Growth State Street Research Growth Income State Street Research Income Money Market MetLife Money Market Diversified State Street Research Diversified Aggressive Growth State Street Research Aggressive Growth Stock Index MetLife Stock Index International Stock GFM International Stock
THE SEPARATE ACCOUNT AND THE METROPOLITAN SERIES FUND Four new investment divisions that correspond to four new portfolios of the Fund have been added to the Separate Account. Policy owners may now allocate net premiums and cash value to these divisions. These divisions are the Loomis Sayles High Yield Bond Division, the T. Rowe Price Small Cap Growth Division, the Janus Mid Cap Division and the Scudder Global Equity Division. The accompanying prospectus for the Fund describes the investment objectives and certain attendant risks of these new portfolios. These investment divisions and corresponding portfolios may not be available in all states. Consult a sales representative registered with Metropolitan Life for additional information. A brief summary of the investment objectives of these new portfolios is set forth below: Loomis Sayles High Yield Bond Portfolio. This portfolio seeks high total investment return through a combination of current income and capital appreciation. The portfolio will normally invest at least 65% of its assets in fixed income securities of below investment grade quality. T. Rowe Price Small Cap Growth Portfolio. This portfolio seeks long-term capital growth by investing in small capitalization companies. Janus Mid Cap Portfolio. This portfolio is a non-diversified portfolio whose investment objective is to provide long-term growth of capital. It pursues this objective by investing primarily in securities issued by medium sized companies. Scudder Global Equity Portfolio. This portfolio seeks long-term growth of capital through a diversified portfolio of marketable securities, primarily equity securities, including common stocks, preferred stocks and debt securities convertible into common stocks. The portfolio invests on a worldwide basis in equity securities of companies which are incorporated in the U.S. or in foreign countries. Metropolitan Life is the investment manager of each of the new portfolios of the Fund. Loomis, Sayles & Company, L.P., whose general partner is indirectly owned by Metropolitan Life, is the sub-investment manager of the Loomis Sayles High Yield Bond Portfolio. T. Rowe Price Associates, Inc. is the sub-investment manager of the T. Rowe Price Small Cap Growth Portfolio. Janus Capital Corporation is the sub-investment manager of the Janus Mid Cap Portfolio. Scudder, Stevens & Clark, Inc. is the sub-investment manager for the Scudder Global Equity Portfolio. Sub-investment manager fees are paid by Metropolitan Life. It is expected that State Street Research & Management Company ("State Street Research") will become the sub-investment manager with respect to the MetLife Money Market Portfolio and the GFM International Stock Portfolio on August 1, 1997. GFM International Investors Limited ("GFM") will become the sub-sub-investment manager and will continue to have day-to-day investment responsibility for the GFM International Stock Portfolio. In the event these changes take place, the name of the portfolios will be changed to the State Street Research Money Market Portfolio and the State Street Research International Stock Portfolio, respectively. The GFM International Stock Portfolio is now available in connection with Policies issued in all states. The Diversified Portfolio was substituted for the Equity Income Portfolio in 1994 and the Equity Income Division therefore is no longer available under any policy. S-2 FUND INVESTMENT MANAGEMENT FEES AND DIRECT EXPENSES For providing investment management services to the Fund, Metropolitan Life receives a fee from the Fund for providing investment management services to each Portfolio. The following chart shows the fee and other Fund expenses for each Portfolio. METROPOLITAN SERIES FUND ANNUAL EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
OTHER EXPENSES AFTER EXPENSE MANAGEMENT REIMBURSEMENT FEES (A) TOTAL ---------- ------------- ----- MetLife Stock Index Portfolio............... .25% .05% .30% State Street Research Income Portfolio(d)... .33% .07% .40% MetLife Money Market Portfolio.............. .25% .18% .43% State Street Research Diversified Portfolio(d)............................... .46% .04% .50% State Street Research Growth Portfolio(d)... .51% .04% .55% State Street Research Aggressive Growth Portfolio(d)............................... .71% .04% .75% T. Rowe Price Small Cap Growth Portfolio(b)............................... .55% .20% .75% Scudder Global Equity Portfolio(b)(c)....... .62% .20% .82% Loomis Sayles High Yield Bond Portfolio(b).. .70% .20% .90% Janus Mid Cap Portfolio(b).................. .75% .20% .95% GFM International Stock Portfolio(d)........ .75% .22% .97%
------- (a) Prior to May 16, 1993, Metropolitan Life paid all expenses of the then existing portfolios of the Fund other than management fees, brokerage commissions, taxes, interest and any extraordinary or non-recurring expenses. (b) The portfolios commenced operations on March 3, 1997. Management fees and other expenses for these portfolios are estimated amounts for the year ending December 31, 1997. Metropolitan Life has agreed to bear all expenses (other than management fees, brokerage commissions, taxes, interest and any extraordinary or non-recurring expenses) in excess of .20% of the net assets for each of the Loomis Sayles High Yield Bond, T. Rowe Price Small Cap Growth, Janus Mid Cap and Scudder Global Equity Portfolios until a portfolio's total net assets are at least $100 million, or March 2, 1999, whichever is earlier. The marginal fee rate for the T. Rowe Price Small Cap Portfolio, Janus Mid Cap Portfolio, and Scudder Global Equity Portfolio will decrease when the dollar amount in each such portfolio reaches certain threshold amounts. (c) Metropolitan Life has agreed to waive a portion of its investment management fee for the Scudder Global Equity Portfolio during the first year of the Portfolio's operations. The waiver of investment management fees during the first six months of the portfolio's operations will be equal to .35% of the average daily value of the aggregate net assets of the portfolio up to $50 million, .175% of such assets on the next $50 million, .15% of such assets on the next $400 million and .1375% of such assets on amounts in excess of $500 million. During the second six months of the portfolio's operations such waiver of the investment management fee will be equal to .175% of assets up to $50 million, .0875% of assets on the next $50 million, .075% of assets on the next $400 million and .06875% of such assets in excess of $500 million. Absent Metropolitan Life's waiver of its investment management fee, Metropolitan Life estimates that the management fee and other expenses for the Scudder Global Equity Portfolio would be .84% and .20%, respectively, for a total of 1.04%. (d) Reflects 1996 fees and expenses, restated for proposed management fee revisions expected to take effect August 1, 1997. For a full description of the Fund, see the prospectus for the Fund, which is attached at the end of this Supplement, and the Fund's Statement of Additional Information referred to therein. POLICY BENEFITS DEATH BENEFIT OPTIONS Increases. The underwriting charge for specified face amount increases has been changed. The maximum guaranteed underwriting charge is $5 for each $1,000 of specified face amount increase. Currently the underwriting charge is a $100 for the first $100,000 of face increase (but no more than $5 per thousand), and $3 per thousand thereafter, to an overall maximum charge of $2,500. The information about or based on the actual investment performance of the portfolios is deleted from the captions "Rates of Return" and "Illustrations" in the Prospectus and the May 1, 1994 supplement. ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES AND ACCUMULATED PREMIUMS The addition of the new portfolios and the revisions to the older portfolios' management fees that are expected to become effective August 1, 1997 would affect the total cash values, total cash surrender values and total death benefits S-3 shown under "Illustrations of Death Benefits, Cash Values, Cash Surrender Values and Accumulated Premiums" in the Prospectus and the May 1, 1994 Supplement. Using a simple average of the eleven available portfolios of the Fund, assuming the maximum management fees contemplated by the August 1, 1997 adjustment, the daily charge to the Fund for investment management services would be increased to the equivalent of a maximum annual rate of .57% of the average daily value of the aggregate net assets of the Fund. The result is that the cash surrender values and cash values would be less for both death benefit options A and B. In addition, if the minimum death benefit applies, the death benefit would be lower for death benefit options A and B. Also, the death benefit will be lower for death benefit option B, even if the minimum death benefit doesn't apply. Upon request, Metropolitan Life will provide a free, personalized hypothetical illustration that reflects these changes in the investment management fees as they become effective. EXPERTS The financial statements included in this Supplement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports appearing herein, and have been so included in reliance upon such reports given upon the authority of such firm as experts in auditing and accounting. FINANCIAL STATEMENTS The financial statements of Metropolitan Life included in this Supplement should be considered only as bearing upon the ability of Metropolitan Life to meet its obligations under the Policies. S-4 INDEPENDENT AUDITORS' REPORT To the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statements of assets and liabilities of the Growth, Income, Money Market, Diversified, International Stock, Stock Index, and Aggressive Growth Divisions of Metropolitan Life Separate Account UL (the "Separate Account") as of December 31, 1996, and the related statements of operations for the year then ended and of changes in net assets for each of the two years in the period then ended. 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, 1996 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 net assets of the Growth, Income, Money Market, Diversified, International Stock, Stock Index and Aggressive Growth Divisions of Metropolitan Life Separate Account UL as of December 31, 1996 and the results of their operations for the year then ended and the changes in their net assets for each of the two years in the period then ended, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP New York, New York February 28, 1997 S-5 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1996
MONEY INTERNATIONAL STOCK AGGRESSIVE GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ------------ ----------- ---------- ------------ ------------- ----------- ----------- ASSETS: Investments in Metropol- itan Series Fund, Inc. at Value (Note 1A): Growth Portfolio (5,208,796 shares; cost $133,325,492).......... $158,920,369 -- -- -- -- -- -- Income Portfolio (2,210,984 shares; cost $27,751,597)........... -- $27,327,760 -- -- -- -- -- Money Market Portfolio (584,077 shares; cost $6,278,669)............ -- -- $6,095,430 -- -- -- -- Diversified Portfolio (6,643,203 shares; cost $100,173,963).......... -- -- -- $110,742,194 -- -- -- International Stock Portfolio (1,991,487 shares; cost $24,907,650)........... -- -- -- -- $23,798,267 -- -- Stock Index Portfolio (1,450,886 shares; cost $27,248,573)........... -- -- -- -- -- $32,253,185 -- Aggressive Growth Port- folio (3,107,005 shares; cost $78,361,229)........... -- -- -- -- -- -- $84,106,614 ------------ ----------- ---------- ------------ ----------- ----------- ----------- Total Investments...... 158,920,369 27,327,760 6,095,430 110,742,194 23,798,267 32,253,185 84,106,614 Cash and Accounts Re- ceivable............... 11,882 3,998 86,448 168 6,129 119,880 28,704 ------------ ----------- ---------- ------------ ----------- ----------- ----------- Total Assets........... 158,932,251 27,331,758 6,181,878 110,742,362 23,804,396 32,373,065 84,135,318 LIABILITIES............. 34,679 74,006 62,023 274,903 135,056 339,551 394,115 ------------ ----------- ---------- ------------ ----------- ----------- ----------- NET ASSETS.............. $158,897,572 $27,257,752 $6,119,855 $110,467,459 $23,669,340 $32,033,514 $83,741,203 ============ =========== ========== ============ =========== =========== ===========
See Notes to Financial Statements. S-6 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 --------------------------------------------------------------------------------- MONEY INTERNATIONAL STOCK AGGRESSIVE GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ----------- ---------- -------- ----------- ------------- ---------- ---------- INVESTMENT INCOME: Income: Dividends (Note 2)..... $15,051,436 $1,723,590 $300,997 $ 9,697,032 $ 200,282 $ 744,725 $2,234,170 Expenses: Mortality and expense charges (Note 3)...... 1,221,219 220,150 37,221 870,631 181,892 185,397 641,863 ----------- ---------- -------- ----------- --------- ---------- ---------- Net investment income... 13,830,217 1,503,440 263,776 8,826,401 18,390 559,328 1,592,307 ----------- ---------- -------- ----------- --------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from security transac- tions.................. 2,929,455 (16,679) (11,231) 532,857 (9,816) 742,061 166,243 Change in unrealized ap- preciation (deprecia- tion) of investments ....................... 9,406,099 (697,499) (90,379) 3,200,410 (559,306) 2,836,911 1,728,894 ----------- ---------- -------- ----------- --------- ---------- ---------- Net realized and unrealized gain (loss) on investments (Note 1B).................... 12,335,554 (714,178) (101,610) 3,733,267 (569,122) 3,578,972 1,895,137 ----------- ---------- -------- ----------- --------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $26,165,771 $ 789,262 $162,166 $12,559,668 ($550,732) $4,138,300 $3,487,444 =========== ========== ======== =========== ========= ========== ==========
See Notes to Financial Statements. S-7 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF CHANGES IN NET ASSETS
GROWTH INCOME MONEY MARKET DIVISION DIVISION DIVISION -------------------------- ------------------------ ------------------------ FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 ------------ ------------ ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS: From operations: Net investment income.. $ 13,830,217 $ 4,694,831 $ 1,503,440 $ 1,147,331 $ 263,776 $ 128,508 Net realized gain (loss) from security transactions.......... 2,929,455 293,233 (16,679) (8,290) (11,231) 35,201 Change in unrealized appreciation (depreci- ation) of investments........... 9,406,099 19,543,807 (697,499) 1,977,261 (90,379) 4,641 ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations........ 26,165,771 24,531,871 789,262 3,116,302 162,166 168,350 ------------ ------------ ----------- ----------- ----------- ----------- From capital transac- tions: Net premiums........... 50,115,276 41,455,659 9,255,854 8,687,776 4,945,669 2,988,786 Redemptions............ (4,742,435) (2,766,288) (764,548) (546,157) (31,149) (89,665) Net portfolio trans- fers.................. (2,214,936) 395,373 (154,542) 36,042 (1,062,557) (3,328,483) Other net transfers.... (22,866,726) (19,059,583) (4,179,745) (4,186,427) (869,014) (1,058,931) ------------ ------------ ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions .......... 20,291,179 20,025,161 4,157,019 3,991,234 2,982,949 (1,488,293) ------------ ------------ ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS................. 46,456,950 44,557,032 4,946,281 7,107,536 3,145,115 (1,319,943) NET ASSETS--BEGINNING OF YEAR................... 112,440,622 67,883,590 22,311,471 15,203,935 2,974,740 4,294,683 ------------ ------------ ----------- ----------- ----------- ----------- NET ASSETS--END OF YEAR................... $158,897,572 $112,440,622 $27,257,752 $22,311,471 $ 6,119,855 $ 2,974,740 ============ ============ =========== =========== =========== ===========
See Notes to Financial Statements. S-8
DIVERSIFIED INTERNATIONAL STOCK STOCK INDEX AGGRESSIVE GROWTH DIVISION DIVISION DIVISION DIVISION - -------------------------- ------------------------ ------------------------ -------------------------- FOR THE YEAR ENDED DECEMBER 31, - ---------------------------------------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 1996 1995 - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ $ 8,826,401 $ 4,695,480 $ 18,390 $ 27,416 $ 559,328 $ 213,805 $ 1,592,307 $ 4,726,548 532,857 248,523 (9,816) 28,349 742,061 29,512 166,243 152,387 3,200,410 10,898,818 (559,306) 136,578 2,836,911 2,271,366 1,728,894 4,188,117 - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ 12,559,668 15,842,821 (550,732) 192,343 4,138,300 2,514,683 3,487,444 9,067,052 - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ 34,025,252 31,888,789 10,992,609 12,024,423 16,930,258 7,870,004 45,233,040 32,859,273 (3,640,372) (2,358,803) (611,355) (392,901) (385,783) (232,828) (2,071,839) (1,185,240) (466,159) (416,768) (688,494) (658,961) 4,466,799 1,324,319 1,106,638 2,162,117 (16,191,671) (15,856,704) (2,768,825) (5,248,525) (6,541,830) (2,897,249) (18,345,877) (14,163,669) - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ 13,727,050 13,256,514 6,923,935 5,724,036 14,469,444 6,064,246 25,921,962 19,672,481 - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ 26,286,718 29,099,335 6,373,203 5,916,379 18,607,744 8,578,929 29,409,406 28,739,533 84,180,741 55,081,406 17,296,137 11,379,758 13,425,770 4,846,841 54,331,797 25,592,264 - ------------ ------------ ----------- ----------- ----------- ----------- ------------ ------------ $110,467,459 $ 84,180,741 $23,669,340 $17,296,137 $32,033,514 $13,425,770 $ 83,741,203 $ 54,331,797 ============ ============ =========== =========== =========== =========== ============ ============
S-9 METROPOLITAN LIFE SEPARATE ACCOUNT UL NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Metropolitan Life Separate Account UL (the "Separate Account") is a multi- division unit investment trust registered under the Investment Company Act of 1940 and presently consists of seven investment divisions used to support variable universal life insurance policies. The assets in each division are invested in shares of the corresponding portfolio of the Metropolitan Series Fund, Inc. (the "Fund"). 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. A summary of significant accounting policies, all of which are in accordance with generally accepted accounting principles, is set forth below: 1. SIGNIFICANT ACCOUNTING POLICIES A. VALUATION OF INVESTMENTS Investments in shares of the Fund are valued at the reported net asset values of the respective portfolios. A summary of investments of the seven designated portfolios of the Fund in which the seven investment divisions of the Separate Account invest as of December 31, 1996 is included as Note 4. The methods used to value the Fund's investments at December 31, 1996 are described in Note 1A of the Fund's 1996 Annual Report. 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 separately 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 reserves 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 or 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 the case of certain of the 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 in connection with certain of the policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. 2. DIVIDENDS On April 25, 1996 and December 16, 1996, the Fund declared dividends for all shareholders of record on April 25, 1996 and December 26, 1996, respectively. The amount of dividends received by the Separate Account was $29,952,232. The dividends were paid to Metropolitan Life on April 26, 1996 and December 27, 1996, 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 Fund held by each of the seven investment divisions increased by the following: Growth Portfolio 488,416 shares, Income Portfolio 139,135 shares, Money Market Portfolio 28,861 shares, Diversified Portfolio 578,116 shares, International Stock Portfolio 16,160 shares, Stock Index Portfolio 33,043 shares, and Aggressive Growth Portfolio 82,174 shares. S-10 NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 3. EXPENSES With respect to assets in the Separate Account that support certain policies, Metropolitan Life applies a daily charge against the Separate Account for the mortality and expense risks assumed by Metropolitan Life. This charge is equivalent to the effective annual rate of .90% of the average daily value of the net assets in the Separate Account which are attributable to such policies. S-11 NOTES TO FINANCIAL STATEMENTS--(CONTINUED) SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996--METROPOLITAN SERIES FUND, INC. 4.
GROWTH INCOME MONEY MARKET DIVERSIFIED PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO -------------- ------- ------------ ------- ------------ ------- -------------- VALUE VALUE VALUE VALUE (NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A) COMMON STOCK Aerospace.............. $ 14,697,375 (0.9%) $ 8,224,562 (0.6%) Automotive............. 38,188,750 (2.4%) 21,290,925 (1.5%) Banking................ 157,307,202 (9.8%) 87,632,900 (6.0%) Broadcasting........... 19,728,750 (1.2%) 11,025,000 (0.8%) Business Services...... 31,078,650 (1.9%) 17,361,575 (1.2%) Chemicals.............. 105,060,638 (6.6%) 58,547,387 (4.0%) Cosmetics.............. 20,924,887 (1.3%) 11,739,188 (0.8%) Drugs & Health Care.... 65,432,344 (4.1%) 36,554,638 (2.5%) Electrical Equipment... 39,896,063 (2.5%) 22,197,437 (1.5%) Electronics............ 147,966,575 (9.3%) 82,595,572 (5.7%) Financial Services..... 34,196,000 (2.1%) 19,078,600 (1.3%) Food & Beverages....... 55,678,225 (3.5%) 31,081,563 (2.1%) Hospital Management.... 26,943,900 (1.7%) 15,140,663 (1.0%) Hospital Supply........ 64,140,600 (4.0%) 35,693,650 (2.5%) Hotel & Restaurant..... 34,541,887 (2.2%) 19,286,312 (1.3%) Household Products..... 27,788,750 (1.7%) 15,490,750 (1.1%) Insurance.............. 58,992,362 (3.7%) 32,934,038 (2.3%) Leisure................ 37,965,054 (2.4%) 21,750,587 (1.5%) Machinery.............. 24,072,650 (1.5%) 13,385,200 (0.9%) Metals--Aluminum....... 45,886,900 (2.9%) 25,661,113 (1.8%) Miscellaneous.......... 17,727,000 (1.1%) 9,861,000 (0.7%) Office & Business Equipment............. 104,763,338 (6.6%) 58,437,513 (4.0%) Oil.................... 27,677,510 (1.7%) 15,646,986 (1.1%) Oil--Domestic.......... 7,318,575 (0.5%) 4,071,375 (0.3%) Oil--International..... 32,374,200 (2.0%) 18,031,200 (1.2%) Oil--Services.......... 46,821,401 (2.9%) 26,157,263 (1.8%) Retail Grocery......... 23,040,750 (1.4%) 13,019,606 (0.9%) Retail Trade........... 74,240,420 (4.7%) 41,373,775 (2.9%) Software............... 19,964,200 (1.3%) 11,203,265 (0.8%) Tobacco................ 22,356,062 (1.4%) 12,602,737 (0.9%) Transportation-- Railroad.............. 8,116,800 (0.5%) 4,548,600 (0.3%) Transportation-- Trucking.............. 0 (0.0%) 5 (0.0%) Utilities--Gas Distribution & Pipelines............. 33,212,237 (2.1%) 18,517,850 (1.3%) -------------- -------------- Total Common Stock..... 1,468,100,055 (91.9%) 820,142,835 (56.6%) -------------- -------------- LONG-TERM DEBT SECURITIES Corporate Bonds: Banking................ $ 17,291,411 (4.5%) $ 13,220,347 (0.9%) Collateralized Mortgage Obligations........... 8,684,394 (2.3%) 9,152,935 (0.6%) Financial Services..... 36,834,715 (9.6%) 60,619,051 (4.2%) Government Sponsored... 5,656,770 (1.5%) 6,496,680 (0.5%) Industrials............ 26,858,935 (7.0%) 33,637,368 (2.3%) Miscellaneous.......... 6,288,068 (1.6%) 8,335,834 (0.6%) Utilities--Electric.... 7,305,058 (1.9%) 5,318,809 (0.4%) Utilities-- Miscellaneous......... 0 (0.0%) 2,838,920 (0.2%) Utilities--Telephone... 0 (0.0%) 5,040,000 (0.3%) ------------ -------------- Total Corporate Bonds.. 108,919,351 (28.4%) 144,659,944 (10.0%) ------------ -------------- Federal Agency Obligations........... 19,701,551 (5.1%) 30,641,236 (2.1%) Federal Treasury Obligations........... 201,495,177 (52.6%) 317,610,213 (21.9%) Foreign Obligations.... 14,393,603 (3.8%) 20,255,361 (1.4%) Yankee Bonds........... 15,352,261 (4.0%) 21,020,607 (1.5%) ------------ -------------- Total Bonds............ 359,861,943 (93.9%) 534,187,361 (36.9%) ------------ -------------- SHORT-TERM OBLIGATIONS Commercial Paper....... $ 125,797,417 (7.9%) $ 17,393,000 (4.5%) $25,926,227 (62.3%) $ 82,989,000 (5.7%) Corporate Note......... 3,998,775 (9.6%) Federal Agency Obligations........... 11,675,628 (28.0%) -------------- ------------ ----------- -------------- Total Short-Term Obligations........... 125,797,417 (7.9%) 17,393,000 (4.5%) 41,600,630 (99.9%) 82,989,000 (5.7%) -------------- ------------ ----------- -------------- TOTAL INVESTMENTS....... 1,593,897,472 (99.8%) 377,254,943 (98.4%) 41,600,630 (99.9%) 1,437,319,196 (99.2%) Other Assets Less Liabilities........... 3,831,003 (0.2%) 6,139,895 (1.6%) 36,001 (0.1%) 11,521,971 (0.8%) -------------- ------------ ----------- -------------- NET ASSETS.............. $1,597,728,475 (100.0%) $383,394,838 (100.0%) $41,636,631 (100.0%) $1,448,841,167 (100.0%) ============== ============ =========== ==============
S-12 NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 4. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996--METROPOLITAN SERIES FUND, INC.--(CONTINUED)
INTERNATIONAL STOCK PORTFOLIO ------------- VALUE (NOTE 1A) COMMON STOCK Automotive.............................................. $ 12,042,055 (4.0%) Banking................................................. 28,537,013 (9.4%) Broadcasting............................................ 1,583,340 (0.5%) Business Services....................................... 1,353,994 (0.5%) Chemicals............................................... 15,831,034 (5.2%) Construction Materials.................................. 4,410,671 (1.5%) Consumer Non-Durables................................... 1,078,633 (0.4%) Drugs & Health Care..................................... 13,669,733 (4.5%) Electrical Equipment.................................... 4,851,913 (1.6%) Electronics............................................. 33,670,645 (11.1%) Financial Services...................................... 16,109,145 (5.3%) Food & Beverages........................................ 4,475,477 (1.5%) Forest Products & Paper................................. 1,650,874 (0.6%) General Business........................................ 81,167 (0.0%) Homebuilders............................................ 2,312,664 (0.8%) Household Products...................................... 1,626,631 (0.5%) Insurance............................................... 12,269,901 (4.0%) Investment Companies.................................... 2,234,375 (0.7%) Leisure................................................. 2,828,608 (0.9%) Machinery............................................... 5,079,733 (1.7%) Metals--Gold............................................ 59,942 (0.0%) Metals--Non-Ferrous..................................... 4,051,349 (1.3%) Metals--Steel & Iron.................................... 6,796,496 (2.2%) Miscellaneous........................................... 5,656,864 (1.9%) Multi-Industry.......................................... 14,979,104 (4.9%) Oil & Gas Exploration................................... 6,073,231 (2.0%) Oil--International...................................... 15,038,125 (4.9%) Printing & Publishing................................... 3,890,524 (1.3%) Real Estate............................................. 15,753,267 (5.2%) Retail Trade............................................ 8,007,127 (2.6%) Textiles & Apparel...................................... 2,385,456 (0.8%) Toys & Amusements....................................... 976,600 (0.3%) Transportation.......................................... 1,745,426 (0.6%) Utilities--Electric..................................... 4,565,840 (1.5%) Utilities--Gas Distribution & Pipelines................. 3,750,981 (1.2%) Utilities--Miscellaneous................................ 3,130,194 (1.0%) Utilities--Telephone.................................... 7,711,745 (2.5%) ------------ Total Common Stock...................................... 270,269,877 (88.9%) ------------ PREFERRED STOCK Retail Trade............................................ 518,032 (0.2%) ------------ Total Equity Securities................................. 270,787,909 (89.1%) TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS....... 19,499,259 (6.4%) ------------ TOTAL INVESTMENTS........................................ 290,287,168 (95.5%) Other Assets Less Liabilities........................... 13,538,315 (4.5%) ------------ NET ASSETS............................................... $303,825,483 (100.0%) ============
S-13 NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 4. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996--METROPOLITAN SERIES FUND, INC.--(CONTINUED)
STOCK INDEX PORTFOLIO ----------- VALUE (NOTE 1A) COMMON STOCK Aerospace.............................................. $ 28,736,048 (2.6%) Automotive............................................. 28,701,626 (2.6%) Banking................................................ 93,714,830 (8.4%) Broadcasting........................................... 11,450,367 (1.0%) Building & Construction................................ 7,528,376 (0.7%) Business Services...................................... 14,455,324 (1.3%) Chemicals.............................................. 34,500,400 (3.1%) Containers & Glass..................................... 1,693,750 (0.2%) Cosmetics.............................................. 3,360,350 (0.3%) Drugs & Health Care.................................... 72,616,988 (6.5%) Electrical Equipment................................... 48,407,363 (4.3%) Electronics............................................ 63,125,007 (5.6%) Financial Services..................................... 35,084,926 (3.1%) Food & Beverages....................................... 68,548,136 (6.1%) Forest Products & Paper................................ 16,456,307 (1.5%) Hospital Management.................................... 10,165,689 (0.9%) Hospital Supply........................................ 30,587,031 (2.7%) Hotel & Restaurant..................................... 10,602,137 (0.9%) Household Appliances & Home Furnishings................ 1,995,625 (0.2%) Household Products..................................... 34,569,100 (3.1%) Insurance.............................................. 38,990,773 (3.5%) Leisure................................................ 9,888,705 (0.9%) Liquor................................................. 2,526,500 (0.2%) Machinery.............................................. 14,790,412 (1.3%) Metals--Aluminum....................................... 4,013,638 (0.4%) Metals--Gold........................................... 5,642,260 (0.5%) Metals--Non-Ferrous.................................... 2,738,985 (0.2%) Metals--Steel & Iron................................... 1,839,738 (0.2%) Mining................................................. 2,180,087 (0.2%) Miscellaneous.......................................... 3,178,900 (0.3%) Multi-Industry......................................... 9,577,826 (0.9%) Newspapers............................................. 6,143,637 (0.5%) Office & Business Equipment............................ 48,538,755 (4.3%) Oil & Gas Exploration.................................. 2,800,313 (0.2%) Oil--Domestic.......................................... 21,819,438 (1.9%) Oil--International..................................... 65,066,563 (5.8%) Oil--Services.......................................... 11,558,751 (1.0%) Photography............................................ 5,953,875 (0.5%) Printing & Publishing.................................. 3,554,968 (0.3%) Retail Grocery......................................... 5,887,863 (0.5%) Retail Trade........................................... 42,490,678 (3.8%) Software............................................... 30,829,784 (2.7%) Textiles & Apparel..................................... 6,880,088 (0.6%) Tires & Rubber......................................... 3,116,200 (0.3%) Tobacco................................................ 21,138,225 (1.9%) Toys & Amusements...................................... 2,450,273 (0.2%) Transportation--Airlines............................... 4,475,875 (0.4%) Transportation--Railroad............................... 11,508,961 (1.0%) Transportation--Trucking............................... 1,006,875 (0.1%) Utilities--Electric.................................... 27,914,283 (2.5%) Utilities--Gas Distribution & Pipelines................ 14,503,806 (1.3%) Utilities--Telephone................................... 72,606,227 (6.5%) -------------- Total Common Stock..................................... 1,121,912,642 (100.0%) PREFERRED STOCK Hospital Supply........................................ 1,774 (0.0%) -------------- Total Equity Securities................................ 1,121,914,416 (100.0%) TOTAL SHORT-TERM OBLIGATIONS--U.S. TREASURY BILLS....... 6,119,501 (0.5%) -------------- TOTAL INVESTMENTS....................................... 1,128,033,917 (100.5%) Other Assets Less Liabilities.......................... (5,736,583) (-0.5%) -------------- NET ASSETS.............................................. $1,122,297,334 (100.0%) ==============
S-14 NOTES TO FINANCIAL STATEMENTS--(CONCLUDED) 4. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1996--METROPOLITAN SERIES FUND, INC.--(CONCLUDED)
AGGRESSIVE GROWTH PORTFOLIO ---------- VALUE (NOTE 1A) --------- COMMON STOCK Automotive............................................. $ 8,300,475 (0.6%) Banking................................................ 52,161,093 (4.0%) Broadcasting........................................... 1,911,644 (0.1%) Business Services...................................... 111,731,275 (8.5%) Chemicals.............................................. 8,035,150 (0.6%) Drugs & Health Care.................................... 40,531,901 (3.1%) Electronics............................................ 159,063,920 (12.0%) Finance................................................ 1,903,687 (0.1%) Financial Services..................................... 36,782,250 (2.8%) Food & Beverages....................................... 8,800,137 (0.7%) Hospital Supply........................................ 24,680,369 (1.9%) Hotel & Restaurant..................................... 147,865,328 (11.2%) Insurance.............................................. 24,104,063 (1.8%) Leisure................................................ 22,011,718 (1.7%) Machinery.............................................. 5,305,125 (0.4%) Office & Business Equipment............................ 46,756,744 (3.5%) Oil.................................................... 1,795,219 (0.1%) Oil & Gas Exploration.................................. 22,009,875 (1.7%) Oil--Services.......................................... 115,561,562 (8.7%) Personal Care.......................................... 2,647,288 (0.2%) Printing & Publishing.................................. 7,947,212 (0.6%) Retail Trade........................................... 116,932,900 (8.9%) Software............................................... 110,257,289 (8.3%) Textiles & Apparel..................................... 38,388,025 (2.9%) Tobacco................................................ 1,785,938 (0.1%) Transportation--Airlines............................... 19,139,375 (1.4%) Utilities--Miscellaneous............................... 7,936,000 (0.6%) Utilities--Telephone................................... 19,502,387 (1.5%) -------------- Total Common Stock..................................... 1,163,847,949 (88.0%) PREFERRED STOCK Printing & Publishing.................................. 3,590,300 (0.3%) -------------- Total Equity Securities................................. 1,167,438,249 (88.3%) TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS...... 2,312,500 (0.2%) TOTAL SHORT-TERM OBLIGATIONS--COMMERCIAL PAPER.......... 142,773,021 (10.8%) -------------- TOTAL INVESTMENTS....................................... 1,312,523,770 (99.3%) Other Assets Less Liabilities.......................... 9,325,594 (0.7%) -------------- NET ASSETS.............................................. $1,321,849,364 (100.0%) ==============
S-15 Annual Financial Statements of Metropolitan Life Insurance Company December 31, 1996 INDEPENDENT AUDITORS' REPORT Metropolitan Life Insurance Company We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company (the "Company") as of December 31, 1996 and 1995 and the related consolidated statements of earnings, equity and cash flows for each of the three years in the period ended December 31, 1996. 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 the Company at December 31, 1996 and 1995 and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Notes 1 and 13 to the consolidated financial statements, the Company has retroactively adopted applicable generally accepted accounting principles relating to mutual life insurance companies and has changed, as of December 31, 1994, the method of accounting for fixed maturity investments. DELOITTE & TOUCHE LLP New York, New York April 4, 1997 MLI-1 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 (IN MILLIONS)
NOTES 1996 1995 ----- -------- -------- ASSETS Investments: Fixed Maturities: 2,12 Available for Sale, at Estimated Fair Value......... $ 75,039 $ 76,412 Held to Maturity, at Amortized Cost................. 11,322 11,340 Equity Securities..................................... 2,12 2,816 1,749 Mortgage Loans on Real Estate......................... 2,12 18,964 17,216 Policy Loans.......................................... 12 5,842 5,714 Real Estate........................................... 2 7,744 8,761 Real Estate Joint Ventures............................ 4 851 753 Other Limited Partnership Interests................... 4 992 797 Leases and Leveraged Leases........................... 2 1,883 1,503 Short-Term Investments................................ 12 741 1,769 Other Invested Assets................................. 2,692 2,651 -------- -------- Total Investments................................... 128,886 128,665 Cash and Cash Equivalents.............................. 12 2,325 1,930 Deferred Policy Acquisition Costs...................... 7,227 6,508 Accrued Investment Income.............................. 1,611 1,961 Premiums and Other Receivables......................... 2,916 2,533 Deferred Income Taxes Receivable....................... 37 -- Other Assets........................................... 2,094 2,157 Separate Account Assets................................ 43,775 39,384 -------- -------- Total Assets........................................ $188,871 $183,138 ======== ======== LIABILITIES AND EQUITY LIABILITIES Future Policy Benefits................................. 5 $ 69,223 $ 68,256 Policyholder Account Balances.......................... 5,12 47,674 48,133 Other Policyholder Funds............................... 12 4,179 4,006 Policyholder Dividends Payable......................... 1,817 1,825 Short- and Long-Term Debt.............................. 9,12 5,365 5,580 Income Taxes Payable: 6 Current............................................... 599 827 Deferred.............................................. -- 230 Other Liabilities...................................... 4,632 3,666 Separate Account Liabilities........................... 43,399 38,861 -------- -------- Total Liabilities................................... 176,888 171,384 -------- -------- Commitments and Contingencies (Notes 2, 4 and 10) EQUITY Retained Earnings...................................... 10,937 10,084 Net Unrealized Investment Gains........................ 3 1,028 1,646 Foreign Currency Translation Adjustments............... 18 24 -------- -------- Total Equity........................................ 13 11,983 11,754 -------- -------- Total Liabilities and Equity........................ $188,871 $183,138 ======== ========
See accompanying notes to consolidated financial statements. 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 generally accepted accounting principles in making such determination. MLI-2 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (IN MILLIONS)
NOTES 1996 1995 1994 ----- ------- ------- ------- REVENUES Premiums....................................... 5 $11,462 $11,178 $10,078 Universal Life and Investment-Type Product Pol- icy Fee Income................................ 1,173 1,105 883 Net Investment Income.......................... 3 8,848 8,711 8,283 Investment Gains, Net.......................... 3 603 199 4 Commissions, Fees and Other Income............. 1,152 741 636 ------- ------- ------- Total Revenues................................ 23,238 21,934 19,884 ------- ------- ------- BENEFITS AND OTHER DEDUCTIONS Policyholder Benefits.......................... 5 12,525 11,976 11,179 Interest Credited to Policyholder Account Bal- ances......................................... 2,868 3,143 3,040 Policyholder Dividends......................... 1,728 1,786 1,752 Other Operating Costs and Expenses............. 4,711 4,285 3,500 ------- ------- ------- Total Benefits and Other Deductions........... 21,832 21,190 19,471 ------- ------- ------- Earnings from Continuing Operations before In- come Taxes.................................... 1,406 744 413 Income Taxes................................... 6 482 407 380 ------- ------- ------- Earnings from Continuing Operations............ 924 337 33 ------- ------- ------- Discontinued Operations: (Loss) Earnings from Discontinued Operations (Net of Income Tax (Benefit) Expense of $(18) in 1996, $32 in 1995 and $54 in 1994)........ (52) (54) 81 (Loss) Gain on Disposal of Discontinued Opera- tions (Net of Income Tax (Benefit) Expense of $(11) in 1996 and $106 in 1995).............. (19) 416 -- ------- ------- ------- (Loss) Earnings from Discontinued Operations... (71) 362 81 ------- ------- ------- Net Earnings................................... 13 $ 853 $ 699 $ 114 ======= ======= =======
See accompanying notes to consolidated financial statements. MLI-3 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996 ,1995 AND 1994 (IN MILLIONS)
NOTES 1996 1995 1994 ----- ------- ------- ------ Retained Earnings, Beginning of Year........... $10,084 $ 9,385 $9,271 Net Earnings................................... 853 699 114 ------- ------- ------ Retained Earnings, End of Year................. 10,937 10,084 9,385 ------- ------- ------ Net Unrealized Investment Gains (Losses), Beginning of Year.............................. 1,646 (955) 259 Cumulative Effect of Accounting Change......... 1 -- -- (1,247) Change in Unrealized Investment (Losses) Gains. (618) 2,601 33 ------- ------- ------ Net Unrealized Investment Gains (Losses), End of Year........................................ 1,028 1,646 (955) ------- ------- ------ Foreign Currency Translation Adjustments, Beginning of Year.............................. 24 (2) (17) Change in Foreign Currency Translation Adjustments.................................... (6) 26 15 ------- ------- ------ Foreign Currency Translation Adjustments, End of Year........................................ 18 24 (2) ------- ------- ------ Total Equity, End of Year...................... 13 $11,983 $11,754 $8,428 ======= ======= ======
See accompanying notes to consolidated financial statements. MLI-4 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN MILLIONS)
1996 1995 1994 -------- -------- -------- Net Cash Provided by Operating Activities......... $ 3,688 $ 4,823 $ 3,980 Cash Flows from Investing Activities: Sales, Maturities and Repayments of: Fixed Maturities................................ 76,117 64,372 47,658 Equity Securities............................... 2,069 694 795 Mortgage Loans on Real Estate................... 2,380 3,182 2,684 Real Estate..................................... 1,948 1,193 688 Real Estate Joint Ventures...................... 410 387 471 Other Limited Partnership Interests............. 178 42 24 Purchases of: Fixed Maturities................................ (76,225) (66,693) (51,073) Equity Securities............................... (2,742) (781) (812) Mortgage Loans on Real Estate................... (4,225) (2,491) (1,465) Real Estate..................................... (859) (904) (773) Real Estate Joint Ventures...................... (130) (285) (51) Other Limited Partnership Interests............. (307) (87) (164) Net Change in Short-Term Investments............. 1,028 (634) 198 Net Change in Policy Loans....................... (128) (112) (393) Other, Net ...................................... (438) (568) (107) -------- -------- -------- Net Cash Used by Investing Activities............. (924) (2,685) (2,320) -------- -------- -------- Cash Flows from Financing Activities: Policyholder Account Balances Deposits........................................ 17,167 16,017 15,580 Withdrawals..................................... (19,321) (19,142) (16,876) Additions to Long-Term Debt...................... -- 692 148 Repayments of Long-Term Debt..................... (284) (389) (334) Net Increase (Decrease) in Short-Term Debt....... 69 (78) 143 -------- -------- -------- Net Cash Used by Financing Activities............. (2,369) (2,900) (1,339) -------- -------- -------- Change in Cash and Cash Equivalents............... 395 (762) 321 Cash and Cash Equivalents, Beginning of Year...... 1,930 2,692 2,371 -------- -------- -------- Cash and Cash Equivalents, End of Year............ $ 2,325 $ 1,930 $ 2,692 ======== ======== ======== Supplemental Cash Flow Information: Interest Paid.................................... $ 310 $ 280 $ 257 ======== ======== ======== Income Taxes Paid................................ $ 497 $ 283 $ 161 ======== ======== ========
See accompanying notes to consolidated financial statements. MLI-5 METROPOLITAN LIFE INSURANCE COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (IN MILLIONS)
1996 1995 1994 ------ ------ ------ Net Earnings........................................... $ 853 $ 699 $ 114 Adjustments to Reconcile Net Earnings to Net Cash Provided by Operating Activities: Change in Deferred Policy Acquisition Costs, Net..... (391) (376) (538) Change in Accrued Investment Income.................. 350 (191) (70) Change in Premiums and Other Receivables............. (106) (29) (458) Undistributed (Income) Loss of Real Estate Joint Ventures and Other Limited Partnerships............. 100 (95) 150 Gains from Sale of Investments and Businesses, Net... (573) (721) (4) Depreciation and Amortization Expenses............... (18) 30 (25) Interest Credited to Policyholder Account Balances... 2,868 3,143 3,040 Universal Life and Investment-Type Product Policy Fee Income.............................................. (1,173) (1,105) (883) Change in Future Policy Benefits..................... 2,149 2,332 2,089 Change in Other Policyholder Funds................... 181 (66) 65 Change in Policyholder Dividends Payable............. (8) 11 (55) Change in Income Taxes Payable....................... (134) 327 503 Other, Net........................................... (410) 864 52 ------ ------ ------ Net Cash Provided by Operating Activities.............. $3,688 $4,823 $3,980 ====== ====== ======
See accompanying notes to consolidated financial statements. MLI-6 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (collectively, the "Company") principally provide life insurance and annuity products and pension, pension-related and investment-related services to individuals, corporations and other institutions. The Company also provides nonmedical health, disability and property and casualty insurance and offers investment management, investment advisory, and commercial finance services. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION 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 accompanying consolidated financial statements include the accounts of MetLife and its subsidiaries, partnerships and joint venture interests in which MetLife has control. Other equity investments in affiliated companies, partnerships and joint ventures are generally reported on the equity basis. Significant intercompany transactions and balances have been eliminated in consolidation. Minority interest related to subsidiaries, partnership and joint venture interests that are consolidated amounted to $149 million and $137 million at December 31, 1996 and 1995, respectively, and is included in other liabilities. Minority interest in earnings of $30 million, $22 million and $5 million in 1996, 1995 and 1994, respectively, is included in other operating costs and expenses. In August 1996, MetLife completed a merger with New England Mutual Life Insurance Company ("The New England") whereby The New England was merged directly into MetLife. The merger was accounted for as a pooling of interest and, accordingly, the accompanying consolidated financial statements include the accounts and operations of The New England for all periods. Prior to 1996, MetLife, as a mutual life insurance company, prepared its financial statements in conformity with accounting practices prescribed or permitted by the Department (statutory financial statements), which accounting practices were considered to be GAAP for a mutual life insurance company. In 1996, MetLife adopted Interpretation No. 40, Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises (the "Interpretation"), and Statement of Financial Accounting Standards ("SFAS") No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long Duration Participating Policies (the "Standard"), of the Financial Accounting Standards Board ("FASB"). The Interpretation and the Standard required mutual life insurance companies to adopt all standards promulgated by the FASB in their general purpose financial statements. The financial statements of MetLife for 1995 and 1994 have been retroactively restated to reflect the adoption of all applicable authoritative GAAP pronouncements. The effect of such adoption, except for SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," has been reflected in equity at January 1, 1994 (see Note 13). As of December 31, 1994, the Company adopted SFAS No. 115, which expanded the use of fair value accounting for those securities that a company does not have positive intent and ability to hold to maturity. Implementation of SFAS No. 115 decreased consolidated equity at December 31, 1994, by $1,247 million, net of deferred income taxes, amounts attributable to participating pension contractholders and adjustments of deferred policy acquisition costs and future policy benefits. In 1995, the FASB issued implementation guidance for SFAS No. 115 and permitted companies a one-time opportunity, through December 31, 1995, to reassess the appropriateness of the classification of all securities held at that time. On December 31, 1995, the Company transferred $3,058 million of securities classified as held to maturity to the available for sale portfolio. As a result, consolidated equity at December 31, 1995, increased by $135 million, excluding the effects of deferred income taxes, amounts attributable to participating pension contractholders and adjustments of deferred policy acquisition costs and future policy benefits. MLI-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) VALUATION OF INVESTMENTS Fixed maturity securities for which the Company has the positive intent and ability to hold to maturity are stated principally at amortized cost and include bonds and redeemable preferred stock. All other fixed maturity securities are classified as available for sale and are reported at estimated fair value. Equity securities are stated principally at estimated fair value and include common stocks and nonredeemable preferred stocks. Unrealized investment gains and losses on fixed maturity securities available for sale and equity securities are reported as a separate component of equity. Such amounts are net of related deferred income taxes, amounts attributable to participating pension contractholders and adjustments of deferred policy acquisition costs and future policy benefits relating to unrealized gains on available for sale securities. Costs of fixed maturity and equity securities are adjusted for impairments in value deemed to be other than temporary. All security transactions are recorded on a trade date basis. Mortgage loans in good standing are carried at outstanding principal balances less unaccreted discounts. Mortgage loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contract terms of the loan agreement. When the Company determines that a loan is impaired, an allowance for loss is established for the difference between the carrying value of the mortgage loan and the estimated fair value. Estimated fair value is based on either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price or the fair value of the collateral. The provision for losses is reported as a realized investment loss. Mortgage loans deemed to be uncollectible are charged against the allowance for losses and subsequent recoveries, if any, are credited to the allowance for losses. Investment real estate, including real estate acquired in satisfaction of debt, is generally stated at depreciated cost (or amortized cost for capital leases). At the date of foreclosure, real estate acquired in satisfaction of debt is recorded at estimated fair value. Cost is adjusted for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. In performing the review for recoverability, management estimates future cash flows expected from real estate investments including proceeds on disposition. If the sum of such expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the real estate, an impairment loss is recognized. Measurement of impairment losses is based on the estimated fair market value of the real estate, which is generally computed using the present value of expected future cash flows discounted at a rate commensurate with underlying risks. Real estate investments that management intends to sell in the near term are reported at the lower of cost or estimated fair market value less allowances for the estimated cost of sales. Changes in allowances relating to real estate to be disposed of and impairments of real estate are reported as realized investment gains or losses. Depreciation, including charges relating to capital leases, of real estate is computed using the straight-line method over the estimated useful lives of the properties, which generally range from 20 to 40 years or the terms of the lease, if shorter. Accumulated depreciation and amortization on real estate was $2,109 million and $2,187 million at December 31, 1996 and 1995, respectively. Depreciation and amortization expense totaled $348 million, $427 million and $356 million for the years ended December 31, 1996, 1995 and 1994, respectively. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. The Company acts as the lessor of equipment in both direct financing and operating lease transactions. At lease commencement, the Company records the aggregate future minimum lease payments due, the estimated residual value of the leased equipment and unearned lease income for direct financing leases. The unearned lease income represents the excess of aggregate future minimum lease receipts plus the estimated residual value over the cost of the leased equipment or its net capitalized value. Lease income is recognized over the term of the lease in a manner which reflects a level yield on the net investment in the lease. Certain origination fees and costs are deferred and recognized over the term of the lease using the interest method. For operating lease transactions, the cost of equipment or its net realizable value is depreciated on a straight-line basis over its estimated economic life and lease income is recorded as earned. The Company participates in leasing transactions in which it supplies only a portion of the purchase price, but generally has the entire equity interest in the equipment and rentals receivable (leveraged leases). These interests, however, are subordinated to the interests of the lenders supplying the nonequity portion of the repurchase price. The financing is generally in the form of long-term debt that provides for no recourse against the Company and is collateralized by the property. The investment in leveraged leases is recorded net of the nonrecourse debt. Revenue, including related tax benefits, is recorded over the term of the lease at a level rate of return. Management regularly reviews residual values and writes down residuals to expected values as needed. MLI-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INVESTMENT RESULTS Realized investment gains and losses are determined by specific identification and are presented as a component of revenues. Valuation allowances are netted against asset categories to which they apply and provisions for losses for investments are included in investment gains and losses. PROPERTY AND EQUIPMENT Property and equipment and leasehold improvements are included in other assets, and are stated at cost, less accumulated depreciation and amortization. Depreciation, including charges relating to capitalized leases, is provided using the straight-line or sum of the years digits methods over the estimated useful lives of the assets, which generally range from 20 to 40 years for real estate and five to 15 years or the term of the lease, if shorter, for all other property and equipment. Amortization of leasehold improvements is provided using the straight-line method over the lesser of the term of the lease or the estimated useful life of the improvements. RECOGNITION OF INCOME AND EXPENSES Premiums from traditional life and annuity policies with life contingencies are generally recognized as income when due. Benefits and expenses are matched with such income so as to result in the recognition of profits over the life of the contract. This match is accomplished by means of the provision for liabilities for future policy benefits and the deferral and subsequent amortization of policy acquisition costs. For contracts with a single premium, or limited number of premium payments due over a significantly shorter period of time than the total period over which benefits are provided ("limited payment contracts"), premiums are recorded as income when due with any excess profit deferred and recognized in income in a constant relationship to insurance in force or, for annuities, the amount of expected future benefit payments. Premiums from nonmedical health contracts are recognized as income on a pro rata basis over the contract terms. Premiums from universal life and investment-type contracts are reported as deposits to policyholder account balances. Revenues from these contracts consist of amounts assessed during the period against policyholder account balances for mortality, policy administration and surrender charges. Policy benefits and claims that are charged to expenses include benefit claims incurred in the period in excess of related policyholder account balances and interest credited to policyholder account balances. Property and liability premiums are generally recognized as revenue on a pro rata basis over the policy term. Unearned premiums are included in other liabilities and are computed principally by the monthly pro rata method. DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new business, principally commissions, agency and policy issue expenses, all of which vary with and are primarily related to the production of new business, have been deferred. Deferred policy acquisition costs are subject to recoverability testing at the time of policy issue and loss recognition testing at the end of each accounting period. Deferred policy acquisition costs are amortized over 40 years for participating traditional life and 30 years for universal life and investment- type products as a constant percentage of estimated gross margins or profits arising principally from surrender charges and interest, mortality and expense margins based on historical and anticipated future experience, updated regularly. The effects of revisions to experience on previous amortization of deferred policy acquisition costs are reflected in earnings in the period estimated gross margins or profits are revised. For nonparticipating traditional life and annuity policies with life contingencies, deferred policy acquisition costs are amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are estimated at the date of policy issue and are consistently applied during the life of the contracts. Deviations from estimated experience are reflected in earnings in the period such deviations occur. For these contracts, the amortization periods generally are for the estimated life of the policy. For nonmedical health insurance contracts, deferred policy acquisition costs are amortized over the life of the contracts (generally 10 years) in proportion to anticipated premium revenue at the time of issue. MLI-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) For property and liability insurance, deferred policy acquisition costs are amortized over the terms of policies or reinsurance treaties. VALUE OF INSURANCE BUSINESS ACQUIRED AND GOODWILL The cost of insurance acquired of $358 million and $381 million at December 31, 1996 and 1995, respectively, and the excess of purchase price over the fair value of net assets acquired of $17 million and $22 million at December 31, 1996 and 1995, respectively, are included in other assets. The cost of insurance acquired is being amortized over the expected policy or contract duration in relation to the present value of estimated gross profits from such policies and contracts. Accumulated amortization of cost of insurance acquired was $48 million and $18 million at December 31, 1996 and 1995, respectively, and related amortization expense was $30 million, $27 million and $2 million for the years ended December 31, 1996, 1995 and 1994, respectively. The excess of purchase price over the fair value of assets acquired is being amortized generally over a 10 year period using the straight-line method. Accumulated amortization of cost in excess of net assets acquired was $48 million and $43 million at December 31, 1996 and 1995, respectively, and related amortization expense was $5 million, $5 million and $6 million for the years ended December 31, 1996, 1995 and 1994, respectively. FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of net level premium reserves for death and endowment policy benefits, the liability for terminal dividends and premium deficiency reserves. The net level premium reserve is calculated based on the nonforfeiture interest rate, ranging from 2.5 percent to 7.0 percent, and mortality rates guaranteed in calculating the cash surrender values described in such contracts. Premium deficiency reserves are established, if necessary, 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 during the accumulation period are equal to accumulated contractholder fund balances and, after annuitization, are equal to the present value of expected future payments. Interest rates used in establishing future policy benefit liabilities range from 2.5 percent to 7.0 percent for life insurance policies and 6.0 percent to 8.25 percent for annuity contracts. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values. The policy account values represent an accumulation of gross premium payments plus credited interest less expense and mortality charges and withdrawals. Benefit liabilities for nonmedical 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. Benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. For property and liability insurance, the liability for unpaid reported losses is based on a case by case or overall estimate using the Company's past experience. A provision is also made for losses incurred but not reported on the basis of estimates and past experience. INCOME TAXES MetLife and its eligible life insurance and nonlife insurance subsidiaries file a consolidated federal income tax return. The future tax consequences of temporary differences between financial reporting and tax basis of assets and liabilities are measured as of the balance sheet dates and are recorded as deferred tax assets or liabilities. SEPARATE ACCOUNT OPERATIONS 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. Separate Account assets and liabilities also include assets and liabilities relating to unit-linked products sold in the United Kingdom. MLI-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Investments held in the Separate Accounts (stated at estimated fair market value) and liabilities of the Separate Accounts (including participants' corresponding equity in the Separate Accounts) are reported separately as assets and liabilities. Deposits to Separate Accounts are reported as increases in Separate Account liabilities and are not reported in revenues. Mortality, policy administration and surrender charges to all Separate Accounts are included in revenues. POLICYHOLDER DIVIDENDS The amount of policyholder dividends to be paid is determined annually by the Board of Directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year and management's judgment as to the appropriate level of statutory surplus to be retained by the Company. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash on hand, amounts due from banks and highly liquid debt instruments purchased with an original maturity of three months or less. CONSOLIDATED STATEMENTS OF CASH FLOWS--NON CASH TRANSACTIONS For the years ended December 31, 1996, 1995 and 1994, respectively, real estate of $189 million, $429 million and $273 million was acquired in satisfaction of debt. At December 31, 1996 and 1995, the Company owned real estate acquired in satisfaction of debt of $456 million and $649 million, respectively. During 1995 and 1994, respectively, the company assumed liabilities of $1,573 million and $88 million and received assets of $1,573 million and $86 million through assumption of certain businesses from other insurance companies. DISCONTINUED OPERATIONS In January 1995, the Company contributed its group medical benefits businesses to a corporate joint venture, The MetraHealth Companies, Inc. ("MetraHealth"). In October 1995, the Company sold its investment in MetraHealth to United HealthCare Corporation. For its interest in MetraHealth, the Company received $485 million face amount of United HealthCare Corporation convertible preferred stock and $326 million in cash (including additional consideration of $50 million in 1996). The sale resulted in an aftertax loss of $36 million in 1996 and an aftertax gain of $372 million in 1995. Operating losses in 1996 related principally to the finalization of the transfer of group medical contracts to MetraHealth. The Company also has the right to receive from United HealthCare Corporation up to approximately $169 million in cash based on the 1997 consolidated financial results of United HealthCare Corporation. During 1995, the company also sold its real estate brokerage, mortgage banking and mortgage administration operations for an aggregate consideration of $251 million (including additional cash consideration of $25 million in 1996), resulting in aftertax gains of $17 million in 1996 and $44 million in 1995. These operations are accounted for as discontinued operations and, accordingly, are segregated in the accompanying consolidated statements of earnings. FOREIGN CURRENCY TRANSLATION Assets and liabilities of foreign operations and subsidiaries are translated at the exchange rate in effect at year end. Revenues and benefits and other expenses are translated at the average rate prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are charged or credited directly to equity. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. MLI-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 2. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES The cost or amortized cost, gross unrealized gain and loss and estimated fair value of fixed maturity and equity securities, by category, are shown below. HELD TO MATURITY SECURITIES--DECEMBER 31, 1996 (in millions)
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............ $ 48 $ 3 $ 51 States and political subdivisions..... 58 1 59 Foreign governments................... 260 5 265 Corporate............................. 7,520 236 $ 64 7,692 Mortgage-backed securities............ 689 1 16 674 Other................................. 2,746 85 24 2,807 ------- -------- -------- ------- Total bonds......................... 11,321 331 104 11,548 Redeemable preferred stocks............ 1 -- -- 1 ------- -------- -------- ------- Total Fixed Maturities.............. $11,322 $ 331 $ 104 $11,549 ======= ======== ======== ======= HELD TO MATURITY SECURITIES--DECEMBER 31, 1995 (in millions) Fixed Maturities: Bonds: U. S. Treasury securities and obligations of U. S. government corporations and agencies............ $ 63 $ 3 $ 66 States and political subdivisions..... 57 -- 57 Foreign governments................... 194 10 204 Corporate............................. 8,039 398 $ 33 8,404 Mortgage-backed securities............ 860 5 31 834 Other................................. 2,126 128 5 2,249 ------- -------- -------- ------- Total bonds......................... 11,339 544 69 11,814 Redeemable preferred stocks............ 1 -- -- 1 ------- -------- -------- ------- Total Fixed Maturities.............. $11,340 $ 544 $ 69 $11,815 ======= ======== ======== =======
MLI-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AVAILABLE FOR SALE SECURITIES--DECEMBER 31, 1996 (in millions)
GROSS UNREALIZED ESTIMATED AMORTIZED ------------------ FAIR COST GAIN LOSS VALUE --------- --------- ----------------- Fixed Maturities: Bonds: U. S. Treasury securities and obligations of U. S. government corporations and agencies............. $12,949 $ 901 $ 128 $13,722 States and political subdivisions...... 536 13 1 548 Foreign governments.................... 2,597 266 6 2,857 Corporate.............................. 32,520 1,102 294 33,328 Mortgage-backed securities............. 21,200 407 91 21,516 Other.................................. 2,511 90 30 2,571 ------- --------- ------- ------- Total bonds........................... 72,313 2,779 550 74,542 Redeemable preferred stocks............. 500 -- 3 497 ------- --------- ------- ------- Total Fixed Maturities................ $72,813 $ 2,779 $ 553 $75,039 ======= ========= ======= ======= Equity Securities: Common stocks........................... $ 1,882 $ 648 $ 55 $ 2,475 Nonredeemable preferred stocks.......... 371 51 81 341 ------- --------- ------- ------- Total Equity Securities................ $ 2,253 $ 699 $ 136 $ 2,816 ======= ========= ======= ======= AVAILABLE FOR SALE SECURITIES--DECEMBER 31, 1995 (in millions) Fixed Maturities: Bonds: U. S. Treasury securities and obligations of U. S. government corporations and agencies.............................. $15,963 $ 2,194 $ 4 $18,153 States and political subdivisions...... 54 1 -- 55 Foreign governments.................... 1,851 195 -- 2,046 Corporate.............................. 29,742 1,905 124 31,523 Mortgage-backed securities............. 21,255 707 28 21,934 Other.................................. 1,788 235 7 2,016 ------- --------- ------- ------- Total bonds........................... 70,653 5,237 163 75,727 Redeemable preferred stocks............. 593 95 3 685 ------- --------- ------- ------- Total Fixed Maturities................ $71,246 $ 5,332 $ 166 $76,412 ======= ========= ======= ======= Equity Securities: Common stocks........................... $ 1,372 $ 389 $ 134 $ 1,627 Nonredeemable preferred stocks.......... 167 2 47 122 ------- --------- ------- ------- Total Equity Securities................ $ 1,539 $ 391 $ 181 $ 1,749 ======= ========= ======= =======
MLI-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The amortized cost and estimated fair value of bonds classified as held to maturity, by contractual maturity, are shown below.
AMORTIZED ESTIMATED COST FAIR VALUE --------- ---------- DECEMBER 31, 1996 (in millions) Due in one year or less.............................. $ 389 $ 391 Due after one year through five years................ 3,317 3,413 Due after five years through 10 years................ 5,444 5,562 Due after 10 years................................... 1,482 1,508 ------- ------- Subtotal............................................ 10,632 10,874 Mortgage-backed securities........................... 689 674 ------- ------- Total.............................................. $11,321 $11,548 ======= =======
The amortized cost and estimated fair value of bonds classified as available for sale, by contractual maturity, are shown below.
AMORTIZED ESTIMATED COST FAIR VALUE --------- ---------- DECEMBER 31, 1996 (in millions) Due in one year or less.............................. $ 1,842 $ 1,844 Due after one year through five years................ 13,659 13,957 Due after five years through 10 years................ 15,729 16,228 Due after 10 years................................... 19,883 20,997 ------- ------- Subtotal............................................ 51,113 53,026 Mortgage-backed securities........................... 21,200 21,516 ------- ------- Total.............................................. $72,313 $74,542 ======= =======
Bonds not due at a single maturity date have been included in the above tables in the year of final maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. MORTGAGE LOANS Mortgage loans are collateralized by properties principally located throughout the United States and Canada. At December 31, 1996, approximately 16 percent and 7 percent of the properties were located in California and Illinois, 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. The mortgage loan investments were categorized as follows:
1996 1995 ---- ---- DECEMBER 31 Office buildings..................................................... 30% 32% Retail............................................................... 19% 18% Residential.......................................................... 16% 17% Agricultural......................................................... 18% 16% Other................................................................ 17% 17% --- --- Total.............................................................. 100% 100% === ===
Many of the Company's real estate joint ventures have loans with the Company. The carrying values of such mortgages were $869 million and $1,164 million at December 31, 1996 and 1995, respectively. MLI-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Mortgage loan valuation allowances and changes thereto are shown below.
1996 1995 1994 ---- ---- ---- DECEMBER 31 (in millions) Balance, beginning of year.................................... $466 $483 $569 Additions charged to income................................... 144 107 89 Deductions for writedowns and dispositions.................... (166) (124) (175) ---- ---- ---- Balance, end of year.......................................... $444 $466 $483 ==== ==== ====
Impaired mortgage loans and related valuation allowances are as follows:
1996 1995 ------ ------ DECEMBER 31 (in millions) Impaired mortgage loans with valuation allowances............... $1,677 $2,028 Impaired mortgage loans with no valuation allowances............ 165 389 ------ ------ Recorded investment in impaired mortgage loans.................. 1,842 2,417 Valuation allowances............................................ (427) (449) ------ ------ Net impaired mortgage loans..................................... $1,415 $1,968 ====== ======
During the years ended December 31, 1996 and 1995, the Company's average recorded investment in impaired mortgage loans was $2,113 million and $2,365 million, respectively. Interest income recognized on these impaired mortgage loans totaled $122 million and $169 million for the years ended December 31, 1996 and 1995, respectively. Interest income earned on loans where the collateral value is used to measure impairment is recorded on a cash basis. Interest income on loans, where the present value method is used to measure impairment, is accrued on the net carrying value amount of the loan at the interest rate used to discount the cash flows. REAL ESTATE Real Estate valuation allowances and changes thereto are shown below.
1996 1995 1994 ---- ---- ---- YEARS ENDED DECEMBER 31 (in millions) Balance, beginning of year.................................... $743 $622 $674 Additions charged to income................................... 127 358 82 Deductions for writedowns and dispositions.................... (341) (237) (134) ---- ---- ---- Balance, end of year.......................................... $529 $743 $622 ==== ==== ====
The above table does not include valuation reserves of $118 million, $167 million and $95 million at December 31, 1996, 1995 and 1994, respectively, relating to investments in real estate joint ventures. Prior to 1996, the Company established valuation allowances for impaired real estate investments. During 1996, $150 million of valuation allowances relating to real estate held for investment were applied as writedowns to specific properties. The balance in the real estate valuation allowance at December 31, 1996, relates to properties that management has committed to a plan of sale. The carrying value, net of valuation allowances, of properties committed to a plan of sale was $1,844 million at December 31, 1996. Net investment income relating to such properties was $60 million for the year ended December 31, 1996. MLI-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) LEASES AND LEVERAGED LEASES The Company's investment in direct financing leases and leveraged leases is summarized below.
DIRECT FINANCING LEVERAGED LEASES LEASES TOTAL -------------- ------------ -------------- 1996 1995 1996 1995 1996 1995 ------ ------ ------ ---- ------ ------ DECEMBER 31 (in millions) Investment........................ $1,247 $1,054 $ 507 $298 $1,754 $1,352 Estimated Residual Values......... 238 231 543 445 781 676 ------ ------ ------ ---- ------ ------ Total............................ 1,485 1,285 1,050 743 2,535 2,028 Unearned Income................... (336) (295) (316) (230) (652) (525) ------ ------ ------ ---- ------ ------ Net Investment.................... $1,149 $ 990 $ 734 $513 $1,883 $1,503 ====== ====== ====== ==== ====== ======
The investment amounts set forth above are due primarily in monthly installments. The payment periods generally range from three to eight years, but in certain circumstances are as long as 20 years. Average yields range from 7 percent to 12 percent. These receivables are generally collateralized by the related property. Scheduled aggregate receipts for the investment and estimated residual values in direct financing leases are:
DIRECT FINANCING RESIDUALS TOTAL --------- --------- ------ YEAR ENDING DECEMBER 31 (in millions) 1997.............................................. $ 236 $ 20 $ 256 1998.............................................. 209 9 218 1999.............................................. 189 25 214 2000.............................................. 167 26 193 2001.............................................. 128 23 151 Thereafter.......................................... 318 135 453 ------ ---- ------ Total............................................... $1,247 $238 $1,485 ====== ==== ======
Historical collection experience indicates that a portion of the above amounts will be paid prior to contractual maturity. Accordingly, the future receipts, as shown above, should not be regarded as a forecast of future cash flow. FINANCIAL INSTRUMENTS The Company has a securities lending program whereby large blocks of securities are loaned to third parties, primarily major brokerage firms. Company policy requires a minimum of 102 percent of the fair value of the loaned securities to be separately maintained as collateral for the loans. The collateral is recorded in memorandum records and is not reflected in the accompanying consolidated balance sheets. To further minimize the credit risks related to this lending program, the Company regularly monitors the financial condition of counterparties to these agreements. The Company engages in a variety of derivative transactions. Certain derivatives, such as forwards, futures, options and swaps, which do not themselves generate interest or dividend income, are acquired or sold in order to hedge or reduce risks applicable to assets held, or expected to be purchased or sold, and liabilities incurred or expected to be incurred. The Company may also sell covered call options for income generation purposes from time to time. The Company does not engage in trading of these derivatives. Derivative financial instruments involve varying degrees of market risk resulting from changes in the volatility of interest rates, foreign currency exchange rates or market values of the underlying financial instruments. The Company's risk of loss is typically limited to the fair value of these instruments and not by the notional or contractual amounts which reflect the extent of involvement but not necessarily the amounts subject to risk. Credit risk arises from the MLI-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) possible inability of counterparties to meet the terms of the contracts. Credit risk due to counterparty nonperformance associated with these instruments is the unrealized gain, if any, reflected by the fair value of such instruments. During the three year period ended December 31, 1996, the Company employed several ongoing derivatives strategies. The Company entered into a number of anticipatory hedges using securities forwards, futures and interest rate swaps to limit the interest rate exposure of investments expected to be acquired or sold within one year. The Company also executed swaps and foreign currency forwards to hedge, including on an anticipatory basis, the foreign currency risk of foreign currency denominated investments. The Company also used interest rate swaps and forwards to reduce risks from changes in interest rates and exposures arising from mismatches between assets and liabilities. In addition, the Company has used interest rate caps to reduce the market and interest rate risks relating to certain assets and liabilities. Income and expenses related to derivatives used to hedge or manage risks are recorded on the accrual basis as an adjustment to the yield of the related securities over the periods covered by the derivative contracts. Gains and losses relating to early terminations of interest rate swaps used to hedge or manage interest rate risk are deferred and amortized over the remaining period originally covered by the swap. Gains and losses relating to derivatives used to hedge the risks associated with anticipated transactions are deferred and utilized to adjust the basis of the transaction once it has closed. If it is determined that the transaction will not close, such gains and losses are included in realized investment gains and losses. ASSETS ON DEPOSIT As of December 31, 1996 and 1995, the Company had assets on deposit with regulatory agencies of $4,062 million and $3,917 million, respectively. 3. INVESTMENT INCOME AND INVESTMENT GAINS The sources of investment income are as follows:
1996 1995 1994 ------ ------ ------ YEARS ENDED DECEMBER 31 (in millions) Fixed maturities........................................ $6,042 $6,006 $5,682 Equity securities....................................... 60 45 53 Mortgage loans on real estate........................... 1,523 1,501 1,573 Policy loans............................................ 399 394 359 Real estate............................................. 1,647 1,833 1,870 Real estate joint ventures.............................. 21 41 (99) Other limited partnership interests..................... 70 23 40 Leases and leveraged leases............................. 135 113 92 Cash, cash equivalents and short-term investments....... 214 231 146 Other investment income................................. 281 326 337 ------ ------ ------ Gross investment income................................. 10,392 10,513 10,053 Investment expenses..................................... (1,544) (1,802) (1,770) ------ ------ ------ Investment income, net.................................. $8,848 $8,711 $8,283 ====== ====== ======
MLI-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Investment gains (losses), including changes in valuation allowances, are summarized as follows:
1996 1995 1994 ------ ------ ------- YEARS ENDED DECEMBER 31 (in millions) Fixed maturities...................................... $ 234 $ 621 $ (97) Equity securities..................................... 78 (5) 141 Mortgage loans on real estate......................... (86) (51) (41) Real estate........................................... 165 (375) (20) Real estate joint ventures............................ 206 (16) 18 Other limited partnership interests................... 82 117 28 Other................................................. (76) (92) (25) ------ ------ ------- Investment gains, net................................. $ 603 $ 199 $ 4 ====== ====== ======= Proceeds from the sales of bonds classified as available for sale during 1996, 1995 and 1994 were $74,580 million, $58,537 million and $43,903 million, respectively. During 1996, 1995 and 1994, respectively, gross gains of $1,069 million, $1,013 million and $642 million and gross losses of $842 million, $402 million and $719 million were realized on those sales. Proceeds from the sale of bonds classified as held to maturity during 1996, 1995 and 1994 were $1,281 million, $1,806 million and $1,797 million, respectively. During 1996, 1995 and 1994, respectively, gross gains of $10 million, $17 million and $9 million and gross losses of $1 million, $4 million and $13 million were realized on those sales. Sales of held to maturity bonds were principally due to prepayments and callable features on privately placed bonds. The net unrealized investment gains (losses), which are included in the consolidated balance sheets as a component of equity, and the changes for the corresponding years are summarized as follows: 1996 1995 1994 ------ ------ ------- DECEMBER 31 (in millions) Balance, end of year, comprised of: Unrealized investment gains (losses) on: Fixed maturities.................................... $2,226 $5,166 $(2,328) Equity securities................................... 563 210 41 Other............................................... 474 380 378 ------ ------ ------- 3,263 5,756 (1,909) Amounts of unrealized investment gains (losses) attributable to: Participating pension contracts..................... (9) (350) (92) Loss recognition.................................... (1,219) (2,064) (1) Deferred policy acquisition cost allowances......... (420) (748) 499 Deferred income tax (expense) benefit............... (587) (948) 548 ------ ------ ------- Balance, end of year.................................. $1,028 $1,646 $ (955) ====== ====== ======= 1996 1995 1994 ------ ------ ------- YEARS ENDED DECEMBER 31 (in millions) Balance, beginning of year:........................... $1,646 $ (955) $ 259 Change in unrealized investment gains (losses)....... (2,493) 7,665 50 Unrealized loss at date of adoption of SFAS No. 115.. -- -- (2,449) Change in unrealized investment gains (losses) attributable to: Participating pension contracts..................... 341 (258) (86) Loss recognition.................................... 845 (2,063) 21 Deferred policy acquisition cost allowances......... 328 (1,247) 550 Deferred income tax (expense) benefit............... 361 (1,496) 700 ------ ------ ------- Balance, end of year.................................. $1,028 $1,646 $ (955) ====== ====== =======
MLI-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 4. REAL ESTATE JOINT VENTURES AND OTHER LIMITED PARTNERSHIP INTERESTS Summarized combined financial information of real estate joint ventures and other limited partnership interests accounted for under the equity method, in which the Company has an investment of $10 million or greater and an equity interest of 10 percent or greater, is as follows:
1996 1995 ------ ------ DECEMBER 31 (in millions) Assets: Investments in real estate, at depreciated cost.................. $1,030 $1,409 Investments in securities, generally at estimated fair value..... 621 534 Cash and cash equivalents........................................ 37 33 Other............................................................ 1,030 1,005 ------ ------ Total assets...................................................... $2,718 $2,981 ====== ====== Liabilities: Borrowed funds--third party...................................... $ 243 $ 264 Borrowed funds--MetLife.......................................... 69 133 Other............................................................ 915 933 ------ ------ Total liabilities................................................. 1,227 1,330 ------ ------ Partners' Capital................................................. $1,491 $1,651 ====== ====== MetLife equity in partners' capital included above................ $ 786 $1,103 ====== ======
1996 1995 1994 ---- ---- ---- YEARS ENDED DECEMBER 31 (in millions) Operations: Revenues of real estate joint ventures...................... $275 $364 $357 Revenues of other limited partnerships interests............ 297 417 287 Interest expense--third party............................... (11) (26) (24) Interest expense--MetLife................................... (19) (31) (27) Other expenses.............................................. (411) (501) (499) ---- ---- ---- Net earnings................................................. $131 $223 $ 94 ==== ==== ==== MetLife earnings from real estate joint ventures and other limited partnership interests included above.............................................. $ 34 $ 28 $ 9 ==== ==== ====
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS In the normal course of business, the Company assumes and cedes insurance with other insurance companies. The accompanying consolidated statements of earnings are presented net of reinsurance ceded. The effect of reinsurance on premiums earned is as follows:
1996 1995 1994 ------- ------- ------- YEARS ENDED DECEMBER 31 (in millions) Direct premiums...................................... $12,569 $11,944 $11,309 Reinsurance assumed.................................. 508 812 227 Reinsurance ceded.................................... (1,615) (1,578) (1,458) ------- ------- ------- Net premiums earned.................................. $11,462 $11,178 $10,078 ======= ======= =======
Policyholder benefits in the accompanying consolidated statements of earnings are presented net of reinsurance recoveries of $1,667 million, $1,523 million and $1,328 million for the years ended December 31, 1996, 1995 and 1994, respectively. Premiums and other receivables in the accompanying consolidated balance sheets include reinsurance recoverables of $700 million and $458 million at December 31, 1996 and 1995, respectively. MLI-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A contingent liability exists with respect to reinsurance ceded should the reinsurers be unable to meet their obligations. The Company acquired, in part through reinsurance effective in January 1995, group life, dental, disability, accidental death and dismemberment, vision and long-term care insurance businesses for $403 million, $53 million of which was paid in 1994. In January 1995, the Company received assets with a fair market value equal to the $1,565 million of liabilities assumed under the reinsurance agreements. The reinsured contracts converted to Company contracts at policy anniversary dates. Activity in the liability for unpaid losses and loss adjustment expenses relating to property and casualty and group accident and nonmedical health policies and contracts is summarized as follows:
1996 1995 1994 ------ ------ ------ YEARS ENDED DECEMBER 31 (in millions) Balance at January 1.................................... $3,296 $2,670 $2,553 Less reinsurance recoverables.......................... 214 104 88 ------ ------ ------ Net balance at January 1................................ 3,082 2,566 2,465 ------ ------ ------ Incurred related to: Current year........................................... 2,951 3,420 2,831 Prior years............................................ (114) (68) (75) ------ ------ ------ Total incurred.......................................... 2,837 3,352 2,756 ------ ------ ------ Paid related to: Current year........................................... 1,998 2,053 1,887 Prior years............................................ 791 783 768 ------ ------ ------ Total paid.............................................. 2,789 2,836 2,655 ------ ------ ------ Net balance at December 31.............................. 3,130 3,082 2,566 Plus reinsurance recoverables.......................... 215 214 104 ------ ------ ------ Balance at December 31.................................. $3,345 $3,296 $2,670 ====== ====== ======
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 reduce its catastrophe losses and provide diversification of risk. 6. INCOME TAXES Income tax expense for U.S. operations has been calculated 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 by a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. MetLife and its eligible subsidiaries file a consolidated U. S. income tax return and separate income tax returns as required. The Company uses the liability method of accounting for income taxes. Income tax provisions are based on income reported for financial statement purposes. Deferred income taxes arise from the recognition of temporary differences between income determined for financial reporting purposes and taxable income. MLI-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) INCOME TAX EXPENSE (BENEFIT) OF CONTINUING OPERATIONS
CURRENT DEFERRED TOTAL ------- -------- ----- 1996 (in millions) Federal.................................................. $346 $ 66 $412 State and local.......................................... 25 6 31 Foreign.................................................. 27 12 39 ---- ---- ---- Total.................................................. $398 $ 84 $482 ==== ==== ==== 1995 (in millions) Federal.................................................. $241 $ 65 $306 State and local.......................................... 52 3 55 Foreign.................................................. 22 24 46 ---- ---- ---- Total.................................................. $315 $ 92 $407 ==== ==== ==== 1994 (in millions) Federal.................................................. $443 $(95) $348 State and local.......................................... 15 (5) 10 Foreign.................................................. 17 5 22 ---- ---- ---- Total.................................................. $475 $(95) $380 ==== ==== ====
Reconciliations of the differences between income taxes of continuing operations computed at the federal statutory tax rates and consolidated provisions for income taxes are as follows:
1996 1995 1994 ------ ---- ---- YEARS ENDED DECEMBER 31 (in millions) Income before taxes........................................ $1,406 $744 $413 Income tax rate............................................ 35% 35% 35% ------ ---- ---- Expected income tax expense at federal statutory income tax rate....................................................... 492 260 145 Tax effect of: Tax exempt investment income.............................. (18) (9) (9) Differential earnings amount.............................. 38 67 206 State and local income taxes.............................. 23 37 5 Foreign operations........................................ (7) 25 3 Tax credits............................................... (15) (15) -- Prior year taxes.......................................... (46) (3) 3 Other, net................................................ 15 45 27 ------ ---- ---- Income tax expense......................................... $ 482 $407 $380 ====== ==== ====
The deferred tax asset or liability recorded on the consolidated balance sheets represents the future tax effects of the temporary differences between the tax basis of assets and liabilities and their amounts for financial reporting. Significant components of deferred tax assets relate to policyholder liabilities and unrealized investment losses. The major items associated with deferred tax liabilities relate to policy acquisition costs, the excess of tax over financial statement depreciation, and unrealized investment gains. As of December 31, 1996, the net deferred tax asset includes a benefit of $18 million resulting from foreign net operating loss carryforwards from several foreign affiliates. This benefit is offset by a valuation allowance of $18 million. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred 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 deferred tax asset is realizable. As of December 31, 1996, the deferred tax asset includes a benefit of $12 million resulting from U.S. tax basis net operating loss carryforwards of $34 million. Subject to statutory limitations, these carryforwards are available to offset taxable income through the year 2011. MLI-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. EMPLOYEE BENEFIT PLANS PENSION PLANS The Company has defined benefit pension plans covering all eligible employees and sales representatives of MetLife and certain of its subsidiaries. The Company is both the sponsor and administrator of these plans. Retirement benefits are based on years of credited service and final average earnings history. Components of the net periodic pension cost for the defined benefit qualified and nonqualified pension plans are as follows:
1996 1995 1994 ---- ---- ---- YEARS ENDED DECEMBER 31 (in millions) Service cost.................................................. $ 77 $ 62 $ 93 Interest cost on projected benefit obligation................. 232 222 216 Actual return on assets....................................... (273) (280) (246) Net amortization and deferrals................................ (12) (13) (28) ---- ---- ---- Net periodic pension cost..................................... $ 24 $ (9) $ 35 ==== ==== ====
The funded status of the qualified and nonqualified defined benefit pension plans and a comparison of the accumulated benefit obligation, plan assets and projected benefit obligation are as follows:
1996 1995 ---------------------- ---------------------- OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED ---------- ----------- ---------- ----------- DECEMBER 31 (in millions) Actuarial present value of obligations: Vested.......................... $2,756 $135 $2,682 $121 Nonvested....................... 38 -- 43 1 ------ ---- ------ ---- Accumulated benefit obligation... $2,794 $135 $2,725 $122 ====== ==== ====== ==== Projected benefit obligation..... $3,084 $184 $3,047 $166 Plan assets (principally Company investment contracts) at contract value.................. 3,495 133 3,236 117 ------ ---- ------ ---- Plan assets in excess of (less than) projected benefit obliga- tion............................ 411 (51) 189 (49) Unrecognized prior service cost.. 165 -- 71 (4) Unrecognized net (loss) gain from past experience different from that assumed.................... (5) 38 351 43 Unrecognized net asset at transi- tion............................ (172) (4) (206) (5) ------ ---- ------ ---- Prepaid (accrued) pension cost at December 31..................... $ 399 $(17) $ 405 $(15) ====== ==== ====== ====
The weighted average discount rate used in determining the actuarial present value of the projected benefit obligation ranged from 7.25 percent to 8.0 percent for 1996 and 7.25 percent to 8.5 percent for 1995. The weighted average assumed rate of increase in future compensation levels ranged from 4.0 percent to 8.0 percent in 1996 and 1995. The assumed long-term rate of return on assets used in determining the net periodic pension cost ranged from 8.0 percent to 8.5 percent in 1996 and 8.0 percent to 9.5 percent in 1995. In addition, several other factors, such as expected retirement dates and mortality, enter into the determination of the actuarial present value of the accumulated benefit obligation. SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans available for substantially all employees under which the Company matches a portion of employee contributions. During 1996, 1995 and 1994, the Company contributed $42 million, $49 million and $53 million, respectively, to the plans. MLI-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) OTHER POSTRETIREMENT BENEFITS The Company also provides 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 such benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company. The following table sets forth the postretirement health care and life insurance plans' combined status reconciled with the amount included in the Company's consolidated balance sheets.
1996 1995 ------ ------ DECEMBER 31 (in millions) Accumulated postretirement benefit obligation: Retirees...................................................... $1,170 $1,223 Fully eligible active employees............................... 135 111 Active employees not eligible to retire....................... 378 366 ------ ------ Total........................................................ 1,683 1,700 Plan assets (Company insurance contracts) at contract value.... 897 804 ------ ------ Plan assets less than accumulated postretirement benefit obli- gation........................................................ (786) (896) Unrecognized net (loss) gain from past experience different from that assumed and from changes in assumptions........................................ (20) 108 ------ ------ Accrued nonpension postretirement benefit cost at December 31.. $ (806) $ (788) ====== ======
The components of the net periodic nonpension postretirement benefit cost are as follows:
1996 1995 1994 ---- ---- ---- YEARS ENDED DECEMBER 31 (in millions) Service cost.................................................. $ 41 $28 $ 43 Interest cost on accumulated postretirement benefit obliga- tion......................................................... 127 115 122 Actual return on plan assets (Company insurance contracts).... (58) (63) (56) Net amortization and deferrals................................ 2 (9) (1) ---- --- ---- Net periodic nonpension postretirement benefit cost........... $112 $71 $108 ==== === ====
The assumed health care cost trend rate used in measuring the accumulated nonpension postretirement benefit obligation was generally 9.5 percent in 1996, gradually decreasing to 5.25 percent over 12 years and 10.0 percent in 1995 decreasing to 5.25 percent over 12 years. The weighted average discount rate used in determining the accumulated postretirement benefit obligation ranged from 7.0 percent to 7.75 percent at December 31, 1996 and was 7.25 percent at December 31, 1995. If the health care cost trend rate assumptions were increased 1.0 percent, the accumulated postretirement benefit obligation as of December 31, 1996 would be increased 9.0 percent. The effect of this change on the sum of the service and interest cost components of the net periodic postretirement benefit cost for the year ended December 31, 1996, would be an increase of 13.0 percent. 8. LEASES LEASE INCOME ON REAL ESTATE During 1996, 1995 and 1994, the Company received $1,658 million, $1,523 million and $1,538 million, respectively, in lease income related to its wholly owned real estate portfolio. In accordance with industry practice, certain of the Company's lease agreements with retail tenants result in income that is contingent on the level of the tenants' sales revenues. At December 31, 1996, the minimum future rental income on noncancelable operating leases for wholly owned investments in real estate is $853 million, $783 million, $695 million, $607 million and $526 million for 1997 and each of the succeeding four years, respectively, and $1,609 million thereafter. MLI-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) LEASE EXPENSE The Company has entered into various lease agreements for office space, data processing and other equipment. Future gross minimum rental payments under noncancelable leases for 1997 and the succeeding four years are $129 million, $110 million, $91 million, $70 million and $55 million, respectively, and $74 million thereafter. Minimum future sublease rental income on these noncancelable leases is $30 million, $25 million, $32 million, $23 million and $17 million for 1997 and the succeeding four years, respectively, and $45 million thereafter. 9. DEBT Debt consisted of the following:
1996 1995 ------ ------ DECEMBER 31 (in millions) 6.300% surplus notes scheduled to mature on November 1, 2003..... $ 396 $ 395 7.000% surplus notes scheduled to mature on November 1, 2005..... 248 248 7.700% surplus notes scheduled to mature on November 1, 2015..... 197 197 7.450% surplus notes scheduled to mature on November 1, 2023..... 296 296 7.875% surplus notes scheduled to mature on February 15, 2024.... 148 148 7.800% surplus notes scheduled to mature on November 1, 2025..... 248 247 Mortgage debt, due 1997 through 2015, interest rates ranging from 7.25% to 10.25%.................................................. 96 187 Other............................................................ 425 627 ------ ------ Total long-term debt............................................ 2,054 2,345 Short-term debt.................................................. 3,311 3,235 ------ ------ Total........................................................... $5,365 $5,580 ====== ======
Payments of interest and principal on the surplus notes may be made only with the prior approval of the Superintendent of Insurance of the State of New York ("Superintendent"). Subject to the prior approval of the Superintendent, the 7.45 percent surplus notes may be redeemed, as a whole or in part, at the election of the Company at any time on or after November 1, 2003. At December 31, 1996, aggregate maturities of the long-term debt based on required principal payments at maturity for 1997 and the succeeding four years amounted to $72 million, $22 million, $106 million, $38 million and $9 million, respectively, and $1,828 million thereafter. As of December 31, 1996, the Company had unused lines of credit under agreements with various banks having a principal amount of $1,821 million. 10. CONTINGENCIES Litigation seeking compensatory and/or punitive damages relating to the marketing by the Company of individual life insurance (including putative class and individual actions) has been instituted by or on behalf of policyholders and others, and additional litigation relating to the Company's life insurance marketing may be commenced in the future. In addition, an investigation into certain life insurance marketing, which was commenced by the Office of the United States Attorney for the Middle District of Florida, in conjunction with a grand jury, as early as 1994, has not been terminated. Numerous litigation, claims and assessments against the Company, in addition to the aforementioned, have arisen in the course of the Company's business, operations and activities. In certain of these matters, including actions with multiple plaintiffs, 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 to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome in all such matters, it is the opinion of the Company's management that their outcome, after consideration of the provisions made in the Company's financial statements, is not likely to have a material adverse effect on the Company's financial position. MLI-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 11. OTHER OPERATING COSTS AND EXPENSES Other operating costs and expenses consisted of the following:
1996 1995 1994 ------ ------ ------ YEARS ENDED DECEMBER 31 (in millions) Compensation costs...................................... $1,813 $1,607 $1,553 Commissions............................................. 722 853 700 Interest and debt issue costs........................... 311 285 264 Amortization of policy acquisition costs................ 637 684 601 Capitalization of policy acquisition costs.............. (1,028) (1,060) (1,062) Rent expense, net of sublease........................... 180 184 179 Restructuring charges................................... 18 88 -- Other................................................... 2,058 1,644 1,265 ------ ------ ------ Total.................................................. $4,711 $4,285 $3,500 ====== ====== ======
During 1996 and 1995, the Company recorded restructuring charges primarily related to the consolidation of administration and agency sales force leased office space and costs relating to workforce reductions. 12. FAIR VALUE INFORMATION The estimated fair value amounts of financial instruments presented below have been determined by the Company using market information available as of December 31, 1996 and 1995, and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented below are not necessarily indicative of the amounts the Company could have realized in a market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
ESTIMATED NOTIONAL CARRYING FAIR AMOUNT VALUE VALUE -------- -------- --------- DECEMBER 31, 1996 (in millions) Assets Fixed maturities.................................. $86,361 $86,588 Equity securities................................. 2,816 2,816 Mortgage loans on real estate..................... 18,964 19,342 Policy loans...................................... 5,842 5,796 Short-term investments............................ 741 741 Cash and cash equivalents......................... 2,325 2,325 Liabilities Policyholder account balances..................... 30,470 30,611 Short- and long-term debt......................... 5,365 5,331 Other financial instruments Interest rate swaps............................... $1,242 -- (14) Interest rate caps................................ 1,946 20 14 Foreign currency swaps............................ 207 -- (23) Foreign currency forwards......................... 151 3 3 Covered call options.............................. 25 (2) (2) Unused lines of credit............................ 1,821 -- 1
MLI-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ESTIMATED NOTIONAL CARRYING FAIR AMOUNT VALUE VALUE -------- -------- --------- DECEMBER 31, 1995 (in millions) Assets Fixed maturities.................................. $87,752 $88,227 Equity securities................................. 1,749 1,749 Mortgage loans on real estate..................... 17,216 18,161 Policy loans...................................... 5,714 5,884 Short-term investments............................ 1,769 1,769 Cash and cash equivalents......................... 1,930 1,930 Liabilities Policyholder account balances..................... 31,595 31,974 Short- and long-term debt......................... 5,580 5,594 Other financial instruments Interest rate swaps............................... $2,031 (29) (40) Interest rate caps................................ 2,711 32 15 Foreign currency swaps............................ 89 -- 4 Foreign currency forwards......................... 121 1 1 Covered call options.............................. 25 (2) (2) Futures contracts................................. 1,402 (19) -- Unused lines of credit............................ 1,645 -- 1
For fixed maturities that are publicly traded, estimated fair value was obtained from an independent market pricing service. Publicly traded fixed maturities represented approximately 80 percent of the estimated fair value of the total fixed maturities as of December 31, 1996 and 1995. For all other bonds, estimated fair value was determined by management, based primarily on interest rates, maturity, credit quality and average life. Included in fixed maturities are loaned securities with estimated fair values of $7,293 million and $8,418 million at December 31, 1996 and 1995, respectively. Estimated fair values of equity securities were generally based on quoted market prices. Estimated fair values of mortgage loans were generally based on discounted projected cash flows using interest rates offered for loans to borrowers with comparable credit ratings and for the same maturities. Estimated fair values of policy loans were based on discounted projected cash flows using U.S. Treasury rates to approximate interest rates and Company experience to project patterns of loan accrual and repayment. For cash and cash equivalents and short-term investments, the carrying amount is a reasonable estimate of fair value. The fair values for policyholder account balances are estimated using discounted projected cash flows, based on interest rates being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The estimated fair value of short- and long-term debt was determined using rates currently available to the Company for debt with similar terms and remaining maturities. For interest rate and foreign currency swaps, interest rate caps, foreign currency forwards, covered call options and futures contracts, estimated fair value is the amount at which the contracts could be settled based on estimates obtained from dealers. The estimated fair values of unused lines of credit were based on fees charged to enter into similar agreements. MLI-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. STATUTORY FINANCIAL INFORMATION The FASB Interpretation and the FASB Standard referred to in Note 1 required mutual life insurance companies to adopt all standards promulgated by the FASB in their general purpose financial statements. The effect (except for the adoption of SFAS No. 115 in 1994) of applying the Interpretation and the Standard is as follows:
(IN MILLIONS) DECEMBER 31, 1993, statutory surplus: MetLife historical...... $ 6,406 The New England historical.............. 401 Adjustments to conform statutory accounting policies................ (315) ------- 6,492 Adjustments to GAAP: Future policy benefits and policyholder account balances................ (3,975) Deferred policy acquisition costs....... 6,142 Deferred income taxes... 1,032 Valuation of investments............. (2,216) Statutory asset valuation reserves...... 1,743 Statutory interest maintenance reserve..... 962 Surplus notes........... (629) Other, net.............. (38) ------- January 1, 1994, equity.. $ 9,513 =======
The following reconciles net change in statutory surplus and statutory surplus determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities with net earnings and equity on a GAAP basis.
1996 1995 1994 ---- ---- ----- YEARS ENDED DECEMBER 31 (in millions) Net change in statutory surplus: MetLife historical.......................................... $366 $260 $(102) The New England historical.................................. -- (8) 231 Adjustments to conform statutory accounting policies........ -- (23) (65) ---- ---- ----- 366 229 64 Adjustments to GAAP: Future policy benefits and policyholder account balances.... (165) (17) (464) Deferred policy acquisition costs........................... 391 376 461 Deferred income taxes....................................... (74) (97) 47 Valuation of investments.................................... (84) 106 (53) Statutory asset valuation reserves.......................... 599 30 313 Statutory interest maintenance reserve...................... 19 284 (58) Surplus notes............................................... -- (622) (148) Other, net.................................................. (199) 410 (48) ---- ---- ----- Net Earnings................................................ $853 $699 $ 114 ==== ==== =====
MLI-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1996 1995 ------- ------- DECEMBER 31 (in millions)..................................... Statutory surplus: MetLife historical........................................... $ 7,151 $ 6,564 The New England historical................................... -- 624 Adjustments to conform statutory accounting policies......... -- (403) ------- ------- 7,151 6,785 Adjustments to GAAP: Future policy benefits and policyholder account balances.... (5,742) (6,781) Deferred policy acquisition costs........................... 7,227 6,508 Deferred income taxes....................................... 264 (28) Valuation of investments.................................... 610 3,070 Statutory asset valuation reserves.......................... 2,684 2,085 Statutory interest maintenance reserve...................... 1,208 1,189 Surplus notes............................................... (1,393) (1,391) Other, net.................................................. (26) 317 ------- ------- Equity....................................................... $11,983 $11,754 ======= =======
MLI-28 [LOGO] MetLife(R) Bulk MetLife Customer Service Center--Tulsa Rate P.O. Box 21889 U.S. Tulsa, OK 74121-1889 Postage Paid ADDRESS CORRECTION REQUESTED Rutland, VT FORWARDING AND RETURN Permit POSTAGE GUARANTEED 220 [LOGO] MetLife(R) Bulk MetLife Customer Service Center--Warwick Rate P.O. Box 520 U.S. Warwick, RI 02887-0520 Postage Paid ADDRESS CORRECTION REQUESTED Rutland, VT FORWARDING AND RETURN Permit POSTAGE GUARANTEED 220 UL II MULTIFUNDED UNIVERSAL LIFE PROSPECTUSES FOR . FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN TOWER LIFE INSURANCE COMPANY . METROPOLITAN SERIES FUND, INC. [LOGO] METROPOLITAN LIFE (R) AND AFFILIATED COMPANIES METROPOLITAN TOWER LIFE INSURANCE COMPANY T24029 (5/92 EDITION) PRINTED IN U.S.A. PROSPECTUSES FOR . FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY . METROPOLITAN SERIES FUND, INC. [LOGO] METROPOLITAN LIFE (R) AND AFFILIATED COMPANIES APRIL 30, 1993 PROSPECTUS for FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES (Minimum Initial Specified Face Amount $50,000) Issued by METROPOLITAN LIFE INSURANCE COMPANY The individual flexible premium multifunded life insurance policies ("Policies") offered by this Prospectus are issued by Metropolitan Life Insurance Company ("Metropolitan Life") and are designed to provide lifetime insurance coverage on the insureds named in the Policies, as well as maximum flexibility in connection with premium payments and death benefits. This flexibility allows an owner of a Policy to provide for changing insurance needs within the confines of a single insurance policy. The Policy provides for a death benefit payable at the insured's death as long as the Policy is still in effect. The Policy owner may choose either Death Benefit Option A (the death benefit is fixed in amount) or Death Benefit Option B (the death benefit includes the Policy's cash value in addition to a fixed insurance amount). If greater than the death benefit otherwise payable under Option A or B, a minimum death benefit equivalent to a percentage of the cash value will be paid. The premiums paid, less premium expense charges, will be allocated at the owner's discretion among one or more investment divisions of Metropolitan Life Separate Account UL ("Separate Account") and/or a fixed interest account ("Fixed Account") within the General Account of Metropolitan Life. The assets in each investment division are invested in shares of a corresponding portfolio of the Metropolitan Series Fund, Inc. ("Fund"). The accompanying prospectus for the Fund describes the investment objectives and certain attendant risks of the seven currently available portfolios of the Fund: Growth Portfolio, Income Portfolio, Money Market Portfolio, Diversified Portfolio, Aggressive Growth Portfolio, International Stock Portfolio and Stock Index Portfolio. The International Stock Portfolio is not available in California. The Policy's cash value will vary with the investment experience of the Separate Account investment divisions to which amounts are allocated and the fixed rates of interest earned by allocations to the General Account. The cash value will also be adjusted for other factors, including the amount of charges imposed and the premium payments made. The Policy owner may withdraw a portion of the Policy's cash surrender value, or the Policy may be fully surrendered, at any time, subject to certain limitations. The Policy owner has the flexibility to vary the frequency and amount of premium payments, subject to certain restrictions and conditions. Metropolitan Life is the investment manager of the Fund and the distributor of its shares. Metropolitan Life also distributes and administers the Policies. State Street Research & Management Company ("State Street Research") is the sub-investment manager with respect to the Growth, Income, Diversified and Aggressive Growth Portfolios of the Fund. State Street Research is a wholly- owned subsidiary of Metropolitan Life. GFM International Investors Limited ("GFM") is the sub-investment manager with respect to the International Stock Portfolio of the Fund. GFM is a subsidiary of Metropolitan Life. As in the case of other life insurance policies, it may not be advantageous to purchase flexible premium multifunded life insurance as a replacement for an existing life insurance policy or in addition to an existing flexible premium multifunded life insurance policy. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE FUND. THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. 1 Madison Avenue, New York, New York 10010 Telephone (813) 873-3429 A-1 TABLE OF CONTENTS
PAGE ---- DEFINITIONS.......................... A-3 SUMMARY.............................. A-5 Who is the Issuer of the Policies?.. A-5 What are Separate Account UL, the Fixed Account and the Metropolitan Series Fund?....................... A-5 What Death Benefits are Available under the Policy?.................. A-6 What is the Policy's Cash Value?.... A-6 What Flexibility Does a Policy Owner have to Adjust the Amount of the Death Benefit?..................... A-7 What Flexibility Does a Policy Owner have in Connection with Premium Payments?.......................... A-7 How Long Will the Policy Remain in Force?............................. A-7 How are Net Premiums Allocated?..... A-7 May the Policy be Surrendered or the Cash Value Partially Withdrawn?.... A-8 Is There a "Free Look" Period?...... A-8 What is the Loan Privilege?......... A-8 What Charges are Assessed in Connec- tion with the Policy?.............. A-9 What is the Tax Treatment of Cash Value?............................. A-9 Is the Beneficiary Subject to Fed- eral Income Tax on the Death Bene- fit?............................... A-10 Is the Death Benefit or the Cash Value Subject to Federal Estate Tax?............................... A-10 When are Premium Payments, Policy Owner Requests and Other Communica- tions Deemed to be Received?....... A-10 SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND......................... A-11 The Separate Account................ A-11 Metropolitan Series Fund............ A-11 POLICY BENEFITS...................... A-13 Death Benefits...................... A-13 Death Benefit Options............... A-13 Cash Value.......................... A-16 Benefit at Final Date............... A-24 Optional Income Plans............... A-24 Optional Insurance Benefits......... A-25 PAYMENT AND ALLOCATION OF PREMIUMS... A-25 Issuance of a Policy................ A-25
PAGE ---- Premiums..................................................................................... A-26 Allocation of Premiums and Cash Value........................................................ A-27 Policy Termination and Reinstatement......................................................... A-28 CHARGES AND DEDUCTIONS........................................................................ A-29 Premium Expense Charges...................................................................... A-29 Transfer Charge.............................................................................. A-30 Monthly Deduction From Cash Value............................................................ A-30 Charges Against the Separate Account......................................................... A-32 Surrender Charge............................................................................. A-32 Guarantee of Certain Charges................................................................. A-34 Other Charges................................................................................ A-34 ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS.. A-35 POLICY RIGHTS................................................................................. A-44 Loan Privileges.............................................................................. A-44 Surrender and Withdrawal Privileges.......................................................... A-45 Exchange Privilege........................................................................... A-46 THE FIXED ACCOUNT............................................................................. A-46 General Description.......................................................................... A-47 Fixed Account Benefits....................................................................... A-47 Fixed Account Cash Value..................................................................... A-47 Transfers, Withdrawals, Surrenders and Policy Loans.......................................... A-48 RIGHTS RESERVED BY METROPOLITAN LIFE.......................................................... A-48 OTHER POLICY PROVISIONS....................................................................... A-49 SALES AND ADMINISTRATION OF THE POLICIES...................................................... A-50 DISTRIBUTION OF THE POLICIES.................................................................. A-51 FEDERAL TAX MATTERS........................................................................... A-51 Taxation of the Policy....................................................................... A-51 Taxation of Metropolitan Life................................................................ A-53 MANAGEMENT.................................................................................... A-54 VOTING RIGHTS................................................................................. A-58 Right to Instruct Voting of Fund Shares...................................................... A-58 Disregard of Voting Instructions............................................................. A-58 REPORTS....................................................................................... A-59 STATE REGULATION.............................................................................. A-59 REGISTRATION STATEMENT........................................................................ A-59 LEGAL MATTERS................................................................................. A-59 EXPERTS....................................................................................... A-60 FINANCIAL STATEMENTS.......................................................................... A-60 APPENDIX A.................................................................................... A-85
THE POLICY IS NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. METROPOLITAN LIFE DOES NOT AUTHORIZE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED PROSPECTUS OR ANY SUPPLEMENT THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY METROPOLITAN LIFE. A-2 DEFINITIONS Age--The age in full years of the insured at issue of the Policy plus the number of full Policy years completed since issue. A full Policy year is completed upon the commencement of the next succeeding Policy year. Base Administration Charge--The portion of the first year monthly administration charge which is determined by the Age of the insured under a Policy and not by the specified face amount. Beneficiary--The beneficiary is the person or persons designated by the owner of the Policy to receive the insurance proceeds upon the death of the insured. Cash Surrender Value--The cash value less any indebtedness and any applicable surrender charge (computed from the tables set forth under "Surrender Charge" on page A-32) and, if the Policy is surrendered in the first Policy year, less the Base Administration Charge for each full Policy month remaining to the end of the first Policy year. Cash Value--The sum of the Policy cash values in the Fixed Account, the investment divisions of the Separate Account and the Policy Loan Account. Date of Policy--The date set forth in the Policy that is used to determine Policy years and Policy months. Policy anniversaries are measured from the Date of Policy. Designated Office--The home office of Metropolitan Life at 1 Madison Avenue, New York, New York 10010, to which all Policy owner communications are to be sent. Metropolitan Life may, by written notice, name other locations within the United States to serve as designated offices, in place of or in addition to the home office. Final Date--The policy anniversary on which the insured is age 95. Fixed Account--An account which is part of the General Account and to which Metropolitan Life will allocate net premiums as directed by the owner of a Policy and credit certain fixed rates of interest. General Account--The assets of Metropolitan Life other than those allocated to the Separate Account or any other separate account. Guideline Annual Premium--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 premiums were fixed by Metropolitan Life as to both timing and amount and were 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. Indebtedness--The total of any unpaid Policy loan and loan interest. Insured--The person upon whose life the Policy is issued. Investment Start Date--The date the first premium is applied to the Fixed Account and/or the Separate Account. It is the later of (1) the Date of Policy and (2) the date the first premium for a Policy is received at the Designated Office. A-3 Investment Division--A subdivision of the Separate Account. The assets in each investment division are invested exclusively in the shares of a specified portfolio. Loan Value--The maximum amount that may be borrowed under the Policy. The loan value equals the Policy's cash surrender value less two monthly deductions, or, if greater, 75% (90% in Virginia and Maryland) of the cash surrender value (or, in Texas, the Policy's cash surrender value less the monthly deductions to the end of the Policy year, if greater). Minimum Initial Specified Face Amount--The minimum specified face amount of insurance for which a Policy may be issued. Currently, the amount is $100,000 for insureds in the preferred rate class and $50,000 for all other insureds. Monthly Anniversary--The same date in each month as the Date of Policy. For purposes of the Separate Account, whenever the monthly anniversary date falls on a date other than a valuation date, the next valuation date will be deemed to be the monthly anniversary. Monthly Deduction--Charges deducted monthly from the cash value of a Policy and which include the monthly cost of term insurance, the monthly cost of any benefits provided by riders, and the monthly policy charges. Planned Periodic Premium--The Policy owner's self-determined level-amount premium planned to be paid at fixed intervals over a specified period of time. The Policy owner is not required to follow this schedule after the first two Policy years unless the guaranteed minimum death benefit rider is in effect. Policy--The flexible premium multifunded life insurance policy offered by Metropolitan Life and described in this Prospectus. Policy Loan Account--An account within the General Account to which cash value from the Separate Account and/or the Fixed Account in an amount equal to a Policy loan requested by a Policy owner is transferred. Policy Month--The month beginning on the monthly anniversary. Policy owner ("Owner")--The person so designated in the application or as subsequently changed. Portfolio--A portfolio represents a different class (or series) of stock of Metropolitan Series Fund, Inc., a mutual fund in which the Separate Account assets are invested. Separate Account--Metropolitan Life Separate Account UL, a separate investment account of Metropolitan Life through which premiums paid under the Policy are invested to the extent allocated to the Separate Account by the Policy owner. Specified Face Amount--The amount set forth on the face of the Policy. Target Premium--The estimated annual amount which would keep a Policy in force to maturity based on the insured's attained age and sex, the specified face amount of insurance and reasonable estimates of mortality and interest. Valuation Date--Each day on which the New York Stock Exchange is open for trading or, on days other than when the New York Stock Exchange is open, on which it is determined that there is a sufficient degree A-4 of trading in the Fund's portfolio securities that the current net asset value of its redeemable securities might be materially affected. Valuations for any date other than a Valuation Date will be determined as of the next Valuation Date. Valuation Period--The period between two successive Valuation Dates, commencing at 4:00 p.m., New York City time, on each valuation date and ending at 4:00 p.m., New York City time, on the next succeeding Valuation Date. This Prospectus describes only those aspects of the Policy that relate to the Separate Account since only interests in the Separate Account are being offered by this Prospectus. Aspects of the Fixed Account are briefly summarized in order to give a better understanding of how the Policy functions (see "The Fixed Account," page A-46). SUMMARY Unless the context indicates otherwise, this summary and the discussion in the rest of this Prospectus assume that cash surrender values are sufficient to pay all charges deducted on monthly anniversaries, that no Policy loans have been made and that no riders are in effect (see "Loan Privileges--Effect of a Policy Loan," page A-44, "Payment and Allocation of Premiums--Policy Termination and Reinstatement," page A-28, and Appendix A, page A-85). WHO IS THE ISSUER OF THE POLICIES? Metropolitan Life, the issuer of the Policies, is a mutual life insurance company. It was incorporated under the laws of the State of New York in 1866 and since 1868 it has been engaged in the life insurance business under the name Metropolitan Life Insurance Company. Its Home Office is located at 1 Madison Avenue, New York, New York 10010. It is authorized to transact business in all states of the United States, the District of Columbia, Puerto Rico and all Provinces of Canada. On December 31, 1992, Metropolitan Life had total life insurance in force of over $1.06 trillion and total assets of over $118 billion. WHAT ARE SEPARATE ACCOUNT UL, THE FIXED ACCOUNT AND THE METROPOLITAN SERIES FUND? The owner of a Policy may allocate the net premiums paid under the Policy to one or more of the investment divisions of the Separate Account, a separate investment account of Metropolitan Life (see "The Separate Account," page A-11) and/or to a Fixed Account established by Metropolitan Life. There are currently seven investment divisions in the Separate Account. The assets in each division are invested in a separate class (or series) of stock of the Fund, a "series" type of mutual fund (see "Metropolitan Series Fund," page A-11). Each class of stock represents a separate portfolio within the Fund. The seven portfolios of the Fund which are currently available to owners of a Policy are the Growth Portfolio, the Income Portfolio, the Money Market Portfolio, the Diversified Portfolio, the Aggressive Growth Portfolio, the International Stock Portfolio and the Stock Index Portfolio. The International Stock Portfolio is not available in California. As of April 30, 1993, the Equity Income investment division is no longer available for allocation of net premiums or for cash value transfers from other investment divisions or the Fixed Account, except that Owners whose allocation instructions currently direct net premiums to the Equity Income investment division may continue such allocation instructions until July 1, 1993. Any such allocation instructions directing net premiums to the Equity Income investment division will be automatically changed to direct net premiums received on and after July 1, 1993 to the Diversified investment division unless and until Metropolitan Life has received a different allocation instruction from the Owner. The Owner may provide different allocation instructions by completing and returning to Metropolitan Life the Reallocation Request Card attached to this Prospectus. Amounts currently invested in the Equity Income investment division will remain in the division unless withdrawn or transferred from the investment division in the manner described in this Prospectus. Net premiums allocated to the Fixed Account are held in the General Account of Metropolitan Life. A-5 Each portfolio of the Fund has a different investment objective and is managed by Metropolitan Life. For providing investment management services to the Fund, Metropolitan Life receives a fee from the Fund equivalent to an annual rate of .25% of the average daily value of the aggregate net assets of the Growth, Income, Money Market, Diversified, and Stock Index Portfolios and an annual rate of .75% of the average daily value of the aggregate net assets of the International Stock and Aggressive Growth Portfolios. State Street Research provides sub-investment management services with respect to the Growth, Income, Aggressive Growth and Diversified Portfolios. GFM provides sub- investment management services with respect to the International Stock Portfolio. For these services, State Street Research and GFM receive an annual percentage fee from Metropolitan Life. The fees paid to State Street Research and GFM are the sole responsibility of Metropolitan Life, and not the Fund. In addition to the investment management fees, other direct expenses are charged against assets of the Fund. For a full description of the Fund, see the prospectus for the Fund, which is attached at the end of this Prospectus, and the Fund's Statement of Additional Information referred to therein. WHAT DEATH BENEFITS ARE AVAILABLE UNDER THE POLICY? The Policy provides for the payment of a benefit upon the death of the insured. The Policy contains two death benefit options. The Policy owner must select one of the options to be in effect at issue. The Policy owner can change options while the insured is living. Under Death Benefit Option A, the death benefit is the specified face amount of the Policy. Under Death Benefit Option B, the death benefit is the specified face amount of the Policy plus the cash value on the date of death. If greater than the death benefit otherwise payable under Option A or Option B, a minimum death benefit equivalent to a percentage, determined by age at death, of the cash value will be paid. The insurance proceeds payable will be reduced by any outstanding indebtedness and any due and unpaid charges accrued during the grace period (see "Policy Benefits--Death Benefits," page A-13). In addition, a Policy owner has the flexibility to add optional insurance benefits by rider. These include a spouse term insurance benefit rider; a children's term insurance benefit rider; an accidental death benefit rider; a disability waiver benefit rider; an accelerated death benefit rider and a long term care rider (see "Policy Benefits--Optional Insurance Benefits," page A- 25). The cost of these optional insurance benefits will be deducted from the cash value as part of the monthly deduction (see "Charges and Deductions-- Monthly Deduction From Cash Value," page A-30). Proceeds under the Policy may be received in cash or under one of the optional income plans set forth in the Policy (see "Policy Benefits--Optional Income Plans," page A-25). WHAT IS THE POLICY'S CASH VALUE? The Policy's cash value in the Separate Account will reflect the amount and frequency of premium payments allocated to the Separate Account, transfers from the Fixed Account, loan repayments, the investment experience of the chosen investment divisions of the Separate Account, any partial withdrawals, any Policy indebtedness and any charges imposed in connection with the Policy (see "Policy Benefits--Cash Value," page A-16). There is no minimum guaranteed cash value with respect to amounts allocated to the Separate Account. The Policy's total cash value will also reflect any amounts allocated to the Fixed Account (see "The Fixed Account," page A-46) and the Policy Loan Account (see "Loan Privileges--Effect of a Policy Loan," page A-44). A-6 WHAT FLEXIBILITY DOES A POLICY OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH BENEFIT? Subject to certain limitations, the Policy owner may at any time after the second Policy year change the death benefit option or increase or decrease the specified face amount of the Policy (see "Policy Benefits--Change in Death Benefit Option," page A-15). Any increases in the death benefit may require additional evidence of insurability satisfactory to Metropolitan Life (see "Policy Benefits--Change in Specified Face Amount," page A-14), and result in additional charges (see "Policy Benefits--Increases," and "Effect of Changes in Specified Face Amount on Charges," page A-15). An increase or decrease in the death benefit may have tax consequences (see "Federal Tax Matters," page A-51). WHAT FLEXIBILITY DOES A POLICY OWNER HAVE IN CONNECTION WITH PREMIUM PAYMENTS? A Policy owner has considerable flexibility concerning the amount and frequency of premium payments. A minimum premium at least equal to the target premium must be paid during each of the first two Policy years (see "Premiums-- Premium Limitations," page A-26). The Policy owner elects in the application when the Policy is first purchased to pay premiums annually or on a monthly "check-o-matic" (or payroll deduction plan if provided by the employer of the Policy owner) or semi-annual basis, which will be the planned periodic premium schedule. The schedule will provide for a premium payment of a level amount determined by the Policy owner at fixed intervals over a specified period of time (see "Payment and Allocation of Premiums," page A-25). Significantly, after the first two Policy years, a Policy owner need not adhere to the planned periodic premium payment schedule. Instead, a Policy owner may, subject to certain restrictions, make premium payments in any amount and at any frequency. However, the Policy owner may be required to make an unscheduled premium payment in order to keep the Policy in force (see "Payment and Allocation of Premiums," page A-25). HOW LONG WILL THE POLICY REMAIN IN FORCE? The Policy will terminate only when its cash surrender value is insufficient to pay the monthly deduction (see "Charges and Deductions--Monthly Deduction from Cash Value," page A-30), and the grace period expires without a sufficient payment being made (see "Policy Termination and Reinstatement--Termination," page A-28) or, in the first two Policy years, if the cash surrender value on any monthly anniversary is insufficient to pay the monthly deduction and the total premiums paid as of such monthly anniversary do not equal at least the minimum premiums required as of that date. Therefore, the failure to pay a planned periodic premium after the first two Policy years will not automatically cause the Policy to terminate. Nevertheless, after the first two Policy years, under the circumstances described above, the Policy can terminate, even if planned periodic premiums have been paid. Thus, the payment of planned premiums does not guarantee that the Policy will remain in force until its final date. HOW ARE NET PREMIUMS ALLOCATED? The portion of the premium available for allocation ("net premium") equals the premium paid less premium expense charges (see "Charges and Deductions-- Premium Expense Charges," page A-29). The Policy owner determines in the application what portions, if any, of net premiums are to be allocated to the investment divisions of the Separate Account and/or to the Fixed Account. A Policy owner may change allocations of future net premiums at any time without charge by notifying Metropolitan Life in writing, subject to certain limitations (see "Payment and Allocation of Premiums--Allocation of Premiums and Cash Value," page A-27). Because investment performance of a Separate Account investment division (unlike that of the A-7 Fixed Account) is not guaranteed by Metropolitan Life, allocation of net premiums to the Separate Account investment divisions increases the amount of investment risk to the Policy owner, and allocation to the Fixed Account decreases such risk. On the other hand, the potential benefit of the Fixed Account is limited to the return guaranteed by Metropolitan Life plus any discretionary return declared by Metropolitan Life from time to time. A Policy owner may transfer amounts among the investment divisions of the Separate Account or between the Separate Account and the Fixed Account up to four times a Policy year without charge (see "Charges and Deductions--Transfer Charge," page A-30). In the first 24 Policy months, a Policy owner may transfer the entire amount in the Separate Account to the Fixed Account without charge (see "Policy Rights--Exchange Privilege," page A-46 and "The Fixed Account-- Transfers, Withdrawals, Surrenders, and Policy Loans," page A-48). MAY THE POLICY BE SURRENDERED OR THE CASH VALUE PARTIALLY WITHDRAWN? The Policy owner may surrender the Policy at any time and receive the cash surrender value of the Policy. Subject to certain limitations, the Policy owner also may make partial withdrawals from the cash surrender value at any time prior to the final date. The Policy owner must notify Metropolitan Life in writing requesting a surrender or partial withdrawal (see "Surrender and Withdrawal Privileges," page A-45). No charge will be imposed on partial withdrawals. A sales charge will be imposed on surrenders during the first fifteen Policy years and during the fifteen Policy years after an increase in the specified face amount (see "Charges and Deductions--Surrender Charge," page A-32). In addition, the remaining Base Administration Charge will be imposed upon surrender in the first Policy year (see "Charges and Deductions--Monthly Policy Charges," page A-31). If Death Benefit Option A is in effect, partial withdrawals will reduce the Policy's specified face amount by the amount of the partial withdrawal. If Death Benefit Option B is in effect, partial withdrawals will not reduce the Policy's specified face amount (see "Death Benefits," page A-13). Payment of surrenders and withdrawals may be delayed under certain circumstances (see "Other Policy Provisions--Payment and Deferment," and "The Fixed Account--Transfers, Withdrawals, Surrenders, and Policy Loans," pages A- 50 and A-48). Surrenders and withdrawals may have certain tax consequences (see "Federal Tax Matters," page A-51). IS THERE A "FREE LOOK" PERIOD? The Policy provides for a free-look period. During the free-look period, the Policy owner may return the Policy within 10 days after receipt (except where state law requires a longer period for replacement policies), within 45 days after Part A of the application has been completed, or within 10 days after Metropolitan Life mails the owner a notice of cancellation right, whichever is later. Metropolitan Life will send the Policy owner a complete refund of any premiums paid within 7 days. The refund of any premium paid by check, however, may be delayed until the check has cleared the Policy owner's bank. WHAT IS THE LOAN PRIVILEGE? A Policy owner may obtain a Policy loan at any time that the Policy has a loan value. The loan value equals the cash surrender value of the Policy less two monthly deductions, or if greater, 75% (90% for Policies issued in Virginia and Maryland) of the cash surrender value (or, for Policies issued in Texas, the Policy's cash surrender value less the monthly deductions to the end of the Policy year, if greater). The interest rate on a loan will be at a fixed rate currently in the amount of 8% per year. Loan interest is payable at the end of each Policy year. Loans and accrued interest may be repaid at any time prior to the Final Date (see "Loan Privileges," page A-44). A-8 WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE POLICY? Premium Expense Charges. Total premium expense charges of 4% are deducted from all premium payments. These charges consist of a sales charge of 2% of premiums paid and a state premium tax charge of 2% of premiums paid (see "Charges and Deductions--Premium Expense Charges," page A-29). There is also a sales charge upon the surrender of a Policy in certain circumstances (see "Charges and Deductions--Surrender Charge," page A-32). Transfer Charges. At the present time, there is no charge assessed the first four times in a Policy year that amounts are transferred among the different investment divisions of the Separate Account and between the investment divisions and the Fixed Account. For each subsequent transfer in that Policy year, a charge of $25 is assessed (see "Charges and Deductions--Transfer Charge," page A-30). Monthly Deduction. Cash value will be reduced by a monthly deduction equal to the sum of (1) a monthly cost of term insurance charge, (2) the cost of any optional insurance benefits added by rider, and (3) a monthly administration charge (see "Charges and Deductions--Monthly Deduction from Cash Value," page A-30). During the first Policy year, there will be a Base Administration Charge as described below plus a monthly charge equal to $0.25 per thousand dollars of specified face amount of the Policy. The Base Administration Charge is equal to $5 per month at Ages less than eighteen, $15 per month at Ages eighteen to forty-nine, and $20 per month at Ages fifty and above. After the first Policy year, the monthly administration charge is $5 per month for Policies with a specified face amount of $250,000 or more, $7 per month for Policies with a specified face amount of $100,000 to $249,999, and $9 per month for Policies with a specified face amount of less than $100,000. No profit is expected to be derived from the administration charges set forth in (3) above. Any increases in specified face amount requested by a Policy owner will result in a one-time underwriting expense charge of $5.00 per thousand dollars of increase (see "Policy Benefits--Increases," page A-15). The monthly deduction will vary in amount from month to month. Charges Against the Separate Account. A daily charge equivalent to an effective annual rate of .90% of the average daily net asset value of each investment division of the Separate Account is imposed to compensate Metropolitan Life for its assumption of certain mortality and expense risks (see "Charges and Deductions--Charge for Mortality and Expense Risks," page A- 32). No charges are currently made against the Separate Account for federal or state income taxes. Should Metropolitan Life determine that such taxes will be imposed, Metropolitan Life may make deductions from the Separate Account to pay these taxes (see "Federal Tax Matters," page A-51). The imposition of such taxes would result in a reduction of the cash value in the Separate Account. Surrender Charge. A sales charge will be deducted in the form of a surrender charge from the cash value if the Policy is surrendered during the first fifteen Policy years or during the first fifteen Policy years after an increase in the specified face amount of a Policy. The surrender charge is based on a charge per thousand dollars of specified face amount depending on the death benefit option and the Age of the insured at the time of issue of the Policy or at the time of an increase in the specified face amount, and declines over the fifteen Policy years to zero after the fifteenth year (see "Charges and Deductions--Surrender Charge," page A-32). WHAT IS THE TAX TREATMENT OF CASH VALUE? Cash value under a Policy is subject to the same federal income tax treatment as cash value under a conventional fixed benefit life insurance policy. Under existing tax law, if a Policy is not a modified endowment A-9 contract as discussed in the following paragraphs, a Policy owner generally will be taxed on cash value withdrawn from the Policy and cash value received upon surrender of the Policy only to the extent these amounts, when added to previous distributions, exceed the total premiums paid. Amounts received upon surrender or withdrawal in excess of premiums paid will be treated as ordinary income. Special rules govern pre-death withdrawals from life insurance contracts referred to as modified endowment contracts. In short, if your Policy fails the "7-pay test" described on page A-51, your Policy would be classified as a modified endowment contract. Pre-death withdrawals (including policy loans) from modified endowment contracts are treated differently than withdrawals from other life insurance contracts in the following ways: --amounts withdrawn would be treated as income first and taxed accordingly; --an additional 10% income tax would generally be imposed on the taxable portion of amounts received before age 59 1/2. For more information, see "Federal Tax Matters," pages A-51 to A-53. IS THE BENEFICIARY SUBJECT TO FEDERAL INCOME TAX ON THE DEATH BENEFIT? Like death benefits payable under conventional fixed benefit life insurance policies, death benefit proceeds payable under the Policy under current law are generally completely excludable from the gross income of the beneficiary. As a result, the beneficiary generally will not be taxed on death benefit proceeds (see "Federal Tax Matters," page A-51). IS THE DEATH BENEFIT OR THE CASH VALUE SUBJECT TO FEDERAL ESTATE TAX? The death benefit under the Policy or the cash value may be subject to federal estate tax (see "Federal Tax Matters," page A-51). WHEN ARE PREMIUM PAYMENTS, POLICY OWNER REQUESTS AND OTHER COMMUNICATIONS DEEMED TO BE RECEIVED? Premium payments and other communications (such as transfer requests, loan requests, loan repayments, withdrawal requests, surrender requests, changes of beneficiary, changes of the specified face amount of insurance or death benefit option, or changes of premium allocation) should be sent to the Designated Office for the Policy. Metropolitan Life may name different Designated Offices for different transactions. Premium payments and communications will be deemed to be received at the Designated Office on the date they are actually received at such office ("Date of Receipt"), with two exceptions: (1) when they are received on any day that is not a Valuation Date and (2) when they are received by means other than U.S. mail after 4:00 p.m. New York City time. In these two cases, the Date of Receipt will be deemed to be the next Valuation Date. In the future Metropolitan Life may permit transfer and withdrawal or other requests to be made by telephone. To exercise rights under a Policy, the owner must follow the procedures stated in the Policy. To request a payment, change the allocation among the investment divisions, change the beneficiary, change the specified face amount of insurance or death benefit option, change an address or request any other action by Metropolitan Life, the owner should utilize the forms prepared by Metropolitan Life for each purpose. The forms are available from a Metropolitan Life sales representative or from the Designated Offices. A-10 SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND THE SEPARATE ACCOUNT The Separate Account, which is a separate investment account of Metropolitan Life, was established by Metropolitan Life pursuant to the New York Insurance Law on December 13, 1988. The Separate Account also receives premium payments in connection with another form of the flexible premium multifunded life insurance policy and a flexible premium variable universal life insurance policy issued by Metropolitan Life. The assets allocated to the Separate Account are the property of Metropolitan Life, and Metropolitan Life is not a trustee by reason of the Separate Account. Metropolitan Life may accumulate in the Separate Account mortality and expense risk charges, mortality gains and investment gains on those assets (which represent such charges) in the Separate Account and other amounts in excess of Metropolitan Life's liabilities and reserves with respect to the Separate Account. The Separate Account meets the definition of "separate account" under the federal securities laws. All income, gains and losses, whether or not realized, from assets allocated to the Separate Account are credited to or charged against the Separate Account without regard to other income, gains or losses of Metropolitan Life. Each Policy provides that such portion of the assets in the Separate Account as equals the liabilities (and reserves) of Metropolitan Life with respect to the Separate Account shall not be chargeable with liabilities arising out of any other business of Metropolitan Life. Metropolitan Life may from time to time transfer to its General Account any assets in the Separate Account in excess of such reserves and liabilities. The liabilities are Metropolitan Life's total commitments under the Policies; the reserves are the assets allocated to pay these commitments. Although the Separate Account is an integral part of Metropolitan Life, the Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"). Registration does not involve supervision of management or investment practices or policies of the Separate Account or of Metropolitan Life by the Commission. There currently are seven investment divisions in the Separate Account. The assets in each investment division are invested in a separate class (or series) of stock issued by the Fund. Each class of stock represents a separate portfolio within the Fund. New investment divisions may be added as new portfolios are added to the Fund and made available to Policy owners. In addition, investment divisions may be eliminated from the Separate Account. The owner of a Policy may designate how the net premiums under the Policy are to be allocated among the then current investment divisions. METROPOLITAN SERIES FUND The Fund is a "series" type of mutual fund which is registered with the Securities and Exchange Commission as a diversified open-end management investment company under the 1940 Act. The Fund has served as the investment medium for the Separate Account since the Separate Account commenced operations. A brief summary of the investment objectives of each Fund portfolio presently available to Policy owners is set forth below. Growth Portfolio. The investment objective of this portfolio is to achieve long-term growth of capital and income, and moderate current income, by investing primarily in common stocks that are believed to be of good quality or to have good growth potential or which are considered to be undervalued based on historical investment standards. A-11 Income Portfolio. The investment objective of this portfolio is to achieve the highest possible total return, by combining current income with capital gains, consistent with prudent investment risk and the preservation of capital, by investing primarily in fixed-income, high-quality debt securities. Money Market Portfolio. The investment objective of this portfolio is to achieve the highest possible current income consistent with the preservation of capital and maintenance of liquidity, by investing primarily in short-term money market instruments. Diversified Portfolio. The investment objective of this portfolio is to achieve a high total return while attempting to limit investment risk and preserve capital by investing in equity securities, fixed-income debt securities, or short-term money market instruments, or any combination thereof, at the discretion of State Street Research. Aggressive Growth Portfolio. The investment objective of this portfolio is to achieve maximum capital appreciation by investing primarily in common stocks (and equity and debt securities convertible into or carrying the right to acquire common stocks) of emerging growth companies, undervalued securities or special situations. International Stock Portfolio. The investment objective of this portfolio is to achieve long-term growth of capital by investing primarily in common stocks and equity-related securities of non-United States companies. This portfolio is not available in connection with Policies issued in California. Stock Index Portfolio. The investment objective of this portfolio is to equal the performance of the Standard & Poor's 500 Composite Stock Price Index (adjusted to assume reinvestment of dividends) by investing in the common stock of companies which are included in the index. There are other portfolios of the Fund that are not currently available for use in connection with the Policies. Metropolitan Life acts as the investment manager for the Fund; State Street Research, a wholly-owned subsidiary of Metropolitan Life, provides sub- investment management services with respect to the Growth, Income, Diversified and Aggressive Growth Portfolios; and GFM, a subsidiary of Metropolitan Life, provides sub-investment management services with respect to the International Stock Portfolio. Metropolitan Life purchases and redeems Fund shares for the Separate Account at their net asset value without the imposition of any sales or redemption charges. Such shares represent an interest in one of the portfolios of the Fund which correspond to the investment divisions of the Separate Account. Any dividend or capital gain distributions received from the Fund are likewise reinvested in Fund shares at net asset value as of the dates paid. The distributions have the effect of reducing the value of each share of the Fund and increasing the number of Fund shares outstanding. However, the total cash value in the Separate Account does not change as a result of such distributions. On each Valuation Date, shares of each portfolio are purchased or redeemed by Metropolitan Life for the Separate Account, based on, among other things, the amounts of net premiums allocated to the Separate Account, dividends and distributions reinvested, transfers to and among investment divisions, Policy loans, loan repayments and benefit payments to be effected pursuant to the terms of the Policies as of that date. Such purchases and redemptions for the Separate Account are effected at the net asset value per share for each portfolio determined as of 4:00 p.m., New York City time, on that same Valuation Date. A full description of the Fund, its investment policies and restrictions, its charges and other aspects of its operation is contained in the prospectus for the Fund, which is attached at the end of this Prospectus, and in the Statement of Additional Information referred to therein. See "The Fund and its Purpose," in the prospectus for the Fund for a discussion of the different separate accounts for Metropolitan Life and its affiliates that invest in the Fund and the risks related thereto. A-12 POLICY BENEFITS The discussion below assumes that no riders under the Policy are in effect. See Appendix A, page A-85, for a discussion of how certain riders can affect benefits under the Policy. DEATH BENEFITS As long as the Policy remains in force (see "Policy Termination and Reinstatement--Termination," page 28), Metropolitan Life will, upon due proof of the insured's death, pay the insurance proceeds of the Policy to the named beneficiary. The proceeds may be received by the beneficiary in a single sum or under one or more of the optional income plans set forth in the Policy (see "Optional Income Plans," page A-24). The insurance proceeds are: The death benefit provided under Option A or Option B, whichever is elected and in effect on the date of death; plus (b) any additional insurance on the insured's life that is provided by rider; minus (c) any outstanding indebtedness and any due and unpaid charges accruing during the grace period. DEATH BENEFIT OPTIONS The Policy provides two death benefit options: Option A and Option B, as described below. The Policy owner designates the desired option in the application and can change the option by written request (see "Change in Death Benefit Option," page A-15). Option A--The death benefit is equal to the specified face amount of insurance. Option B--The death benefit is equal to the specified face amount of insurance plus the cash value. Minimum Death Benefit--Under either Option A or Option B, there is a minimum death benefit equal to the greater of (1) the death benefit option chosen and (2) a percentage of the cash value as set forth in the table below. The minimum death benefit is determined in accordance with federal income tax laws, to ensure that the Policy qualifies as a life insurance contract and that the insurance proceeds will be excluded from the gross income of the beneficiary. TABLE
AGE OF INSURED ON PERCENTAGE OF DATE OF DEATH CASH VALUE - ------------- ------------- 40 and less: ........... 250% 45: .................... 215% 50: .................... 185% 55: .................... 150% 60: .................... 130% 65: .................... 120%
AGE OF INSURED ON PERCENTAGE OF DATE OF DEATH CASH VALUE - ------------- ------------- 70: .................... 115% 75: .................... 105% 80: .................... 105% 85: .................... 105% 90: .................... 105% 95: .................... 100%
For the ages not listed, the progression between the listed ages is linear. Both Option A and Option B provide insurance protection as well as possible build-up of cash value. Under Option A, the insurance coverage remains level unless the minimum death benefit applies. Under Option B, the insurance protection varies as the cash value changes. A-13 For any specified face amount, the amount of the death benefit will be greater under Option B than under Option A, since the cash value is added to the specified face amount and included in the death benefit under Option B but not under Option A. By the same token, the cost of term insurance included in the monthly deduction (see "Charges and Deductions--Cost of Term Insurance," page A-30) will be greater, and thus the accumulation of cash value will be lower, under Option B than under Option A, assuming the same specified face amount and the same actual premiums paid. Illustration of Option A. For purposes of this illustration, assume that the insured is under the age of 40, that there is no outstanding indebtedness and that the insured has not died during a grace period (see "Policy Termination and Reinstatement--Termination," page A-28). Under Option A, a Policy with a $100,000 specified face amount will generally pay $100,000 in death benefits. However, because the death benefit must be equal to or be greater than 250% of cash value, any time the cash value of this Policy exceeds $40,000, the death benefit will exceed the $100,000 specified face amount. Each additional dollar of cash value above $40,000 will increase the death benefit (assuming the insured is age 40 or less) by $2.50. Thus a Policy with a cash value of $50,000 will have a death benefit of $125,000 (250% X $50,000); a cash value of $60,000 will yield a death benefit of $150,000 (250% X $60,000); and a cash value of $100,000 will yield a death benefit of $250,000 (250% X $100,000). Similarly, so long as cash value exceeds $40,000, each dollar reduction in cash value will reduce the death benefit (assuming the insured is age 40 or less) by $2.50. If at any time, however, the cash value multiplied by the applicable percentage is less than the specified face amount, the death benefit will equal the specified face amount of the Policy. Illustration of Option B. For purposes of this illustration, assume that the insured is under the age of 40, that there is no outstanding indebtedness and that the insured has not died during a grace period. Under Option B, a Policy with a specified face amount of $100,000 will generally pay a death benefit of $100,000 plus the cash value. Thus, for example, a Policy with a cash value of $25,000 will have a death benefit of $125,000 ($100,000 + $25,000); a cash value of $50,000 will yield a death benefit of $150,000 ($100,000 + $50,000); and a cash value of $65,000 will yield a death benefit of $165,000 ($100,000 + $65,000). The death benefit, however, must be at least 250% of cash value. As a result, if the cash value of the Policy exceeds $66,666.67, the death benefit will be greater than the specified face amount plus cash value. Each additional dollar of cash value above $66,666.67 will increase the death benefit (assuming the insured is age 40 or less) by $2.50. A Policy with a cash value of $75,000 will therefore have a death benefit of $187,500 (250% X $75,000); a cash value of $85,000 will yield a death benefit of $212,500 (250% X $85,000); a cash value of $100,000 will yield a death benefit of $250,000 (250% X $100,000). Similarly, any time cash value exceeds $66,666.67, each dollar taken out of cash value will reduce the death benefit (assuming the insured is age 40 or less) by $2.50. Whenever cash value is less than $66,666.67 each dollar taken out of cash value will reduce the death benefit by one dollar and the death benefit will be the specified face amount plus the cash value of the Policy. If the insured dies on a date that is not a Valuation Date, the amount of death benefit proceeds payable will be determined as of the next Valuation Date. Change in Specified Face Amount. Subject to certain limitations, a Policy owner, after the second Policy year and before the insured reaches Age 80, may increase or decrease the specified face amount of A-14 a Policy (see "Decreases" and "Increases," below). Any increase or decrease in the specified face amount requested by the Policy owner will become effective on the monthly anniversary on or next following the Date of Receipt of the request, or, if evidence of insurability is required, the date of approval of the request. Decreases. The specified face amount remaining in force after any requested decrease may not be less than the Minimum Initial Specified Face Amount during the first five Policy years nor less than one-half the Minimum Initial Specified Face Amount thereafter. No decrease in the specified face amount will be permitted if it would result in total premiums paid exceeding the then current maximum premium limitations determined by Internal Revenue Code rules (see "Premiums--Premium Limitations," page A-26). For purposes of determining the cost of term insurance charge (see "Charges and Deductions--Cost of Term Insurance"; "Cost of Term Insurance Rate"; and "Rate Class," pages A-30 and A- 31), a decrease in the specified face amount will reduce the specified face amount in the following order: (a) the specified face amount provided by the most recent increase; (b) the next most recent increases successively; and (c) the specified face amount when the Policy was issued. Increases. Any change in the specified face amount requested by the Policy owner which results in an increase in the death benefit may be made only if the cash surrender value after the change is large enough to cover at least two monthly deductions based on the most recent cost of term insurance charge deducted. The minimum amount of an increase is $5,000. Any such change will require that additional evidence of insurability be submitted to Metropolitan Life and will be subject to a one-time underwriting charge at a rate of $5.00 for each $1,000 of specified face amount increase. For example, if the specified face amount increase amounted to $25,500, the charge would be $127.50. Metropolitan Life will deduct this charge from the existing cash value in the Fixed Account and the investment divisions of the Separate Account in the same proportion that the Policy's cash value in the Fixed Account and the Policy's cash value in each investment division bear to the Policy's total cash value (except for the cash value in the Policy Loan Account) as of the Date of Receipt of the request (this method hereinafter referred to as the "Pro Rata Basis"). Effect of Changes in Specified Face Amount on Charges. A change in the specified face amount may affect the cost of term insurance and the net amount at risk, both of which may affect a Policy owner's cost of term insurance charge and the monthly administration charge (see "Charges and Deductions--Cost of Term Insurance;" "Cost of Term Insurance Rate," "Rate Class," and "Monthly Policy Charges," pages A-30 and A-31). This in turn can affect the level of subsequent cash values and death benefits. A change in the specified face amount may also affect the Policy's status as a modified endowment contract for tax purposes (see "Federal Tax Matters," page A-51). Finally, an increase in the specified face amount can result in additional surrender charges (see "Charges and Deductions--Surrender Charge," page A-32). Change in Death Benefit Option. Generally, the death benefit option in effect may be changed at any time after the second Policy year while the insured is alive by sending a written request for change to the Designated Office. A change in death benefit option will not be permitted unless the cash surrender value of a Policy after the change is effected would be sufficient to pay at least two monthly deductions. Changing death benefit options will not require evidence of insurability satisfactory to Metropolitan Life and the effective date of any such change will be the monthly anniversary on or following the Date of Receipt of the request. If the death benefit option is changed from Option B to Option A, the specified face amount will be increased to equal the death benefit which would have been payable under Option B on the effective date of the change. The death benefit will not be altered at the time of the change. However, the change in death A-15 benefit option will affect the determination of the death benefit from that point on since the cash value will no longer be added to the specified face amount in determining the death benefit. From that point on, the death benefit will equal the new specified face amount (or, if higher, the minimum death benefit). This will mean that the cost of term insurance may be higher or lower than it otherwise would have been since any increases or decreases in cash values will, respectively, reduce or increase the term insurance amount under Option A (see "Charges and Deductions--Cost of Term Insurance," page A-30). If the death benefit option is changed from Option A to Option B, the specified face amount will be decreased to equal the death benefit less the cash value on the effective date of the change. This change may not be made if it would result in a specified face amount which is less than the Minimum Initial Specified Face Amount during the first five Policy years and one-half the Minimum Initial Specified Face Amount thereafter. As with a change from Option B to Option A, a change from Option A to Option B will not alter the death benefit at the time of the change, but will affect the determination of the death benefit from that point on. Since, from that point on, the cash value will be added to the new specified face amount, the death benefit will vary with the cash value. Moreover, under Option B, the term insurance amount will not vary unless the minimum death benefit is in effect. Therefore, the cost of term insurance may be higher or lower than it otherwise would have been without the change in death benefit option (see "Charges and Deductions--Cost of Term Insurance," page A-30). A change in death benefit option will not be permitted if it results in total premiums paid exceeding the then current maximum premium limitations determined by Internal Revenue Service Rules (see "Premiums-- Premium Limitations," page A-26). Under both Option A and Option B, cost of term insurance rates generally increase as the insured's age increases. Nevertheless, assuming a positive cumulative net investment return with respect to any amounts in the Separate Account, changing the death benefit option from Option B to Option A will reduce the term insurance amount and therefore the cost of term insurance charge for all subsequent monthly deductions compared to what such charge would have been if no such change were made. A change in the death benefit option may also affect the monthly administration charge (see "Charges and Deductions--Monthly Policy Charges," page A-31). CASH VALUE The total cash value of a Policy at any time is the sum of the Policy's cash values in the Fixed Account (see "The Fixed Account," page A-46), the Policy Loan Account (see "Policy Rights--Loan Privileges," page A-44), and the investment divisions of the Separate Account at such time. The Policy's cash value in the Separate Account may increase or decrease on each Valuation Date depending on the investment return of the chosen investment divisions of the Separate Account (see "Separate Account Net Investment Return," page A-17). There is no guaranteed minimum cash value in the Separate Account. Calculation of Separate Account Cash Value. On the Investment Start Date, the Policy's cash value in an investment division will equal the portion of any net premium allocated to the investment division, reduced by the portion of the first monthly deduction allocated to the Policy's cash value in that investment division (see "Payment and Allocation of Premiums--Allocation of Premiums and Cash Value," page A-27). Thereafter, on each Valuation Date, the Policy's cash value in an investment division of the Separate Account will equal: (1) The cumulative net premium payments allocated to the investment division; plus A-16 (2) All cash values transferred to the investment division from the Fixed Account, from the Policy Loan Account upon loan repayment (including all interest credited on loaned amounts) or from another investment division; minus (3) Any cash value transferred from the investment division to the Fixed Account, to the Policy Loan Account upon taking out a loan or to another investment division; minus (4) Any partial cash withdrawal from the investment division; minus (5) The portion of the cumulative monthly deductions allocated to the Policy's cash value in the investment division (see "Charges and Deductions--Monthly Deduction from Cash Value," page A-30); minus (6) The portion of any transfer charge allocated to the Policy's cash value in the investment division (see "Charges and Deductions--Transfer Charge," page A-30); plus (7) The cumulative net investment return (discussed below) on the net amount of cash value in the investment division. The Policy's total cash value in the Separate Account equals the sum of the Policy's cash value in each investment division. Separate Account Net Investment Return. A Separate Account investment division's net investment return is determined as of 4:00 p.m., New York City time, on each Valuation Date. All transactions and calculations with respect to the Policies as of any Valuation Date are determined as of such time. Each Separate Account division is credited with a rate of net investment return equal to its gross rate of investment return during the Valuation Period less (1) an adjustment for the Separate Account's charge for mortality and expense risks (equivalent to .90% on an annual basis) and (2) a charge for Metropolitan Life's taxes, if any such tax charge becomes necessary in the future (see "Charges and Deductions--Charges Against the Separate Account," page A-32). The investment division's gross rate of investment return is equal to 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 paid by the portfolio during the period. Depending primarily on the investment experience of the underlying Fund portfolio, a Separate Account investment division's net investment return may be either positive or negative during a Valuation Period. Index of Investment Experience. The index of investment experience measures changes in each investment division's investment experience during a Valuation Period. Each investment division has its own distinct index. The index for each investment division was set at $10.00 when it first began operations. On May 1, 1990, all the divisions except the division which invests in the International Stock Portfolio of the Fund, the division which invests in the Stock Index Portfolio of the Fund and the division which invests in the Aggressive Growth Portfolio of the Fund were available to receive net premium payments. The division which invests in the International Stock Portfolio was available (except in California) to receive net premium payments on July 1, 1991, the division which invests in the Stock Index Portfolio was available to receive net premium payments on May 1, 1992 and the division which invests in the Aggressive Growth Portfolio was available to receive net premium payments on April 30, 1993. In determining an investment division's index for a Valuation Period, the index for the preceding Valuation Period is multiplied by the net investment return of the investment division for the current period. As indicated in "Calculation of Separate Account Cash Value," page A-16, other factors in addition to investment experience affect the cash value and death benefit of a particular Policy. Thus, the index of investment experience for each investment division does not reflect charges against premiums and cost of term insurance and monthly Policy charges. See "Charges and Deductions--Premium Expense Charges," and "Monthly Deduction from Cash Value," pages A-29 and A-30. Also, the index of investment experience is based on historical information and does not represent what may happen in the future. A-17 Rates of Return. The average rates of return for each of the investment divisions of the Separate Account shown below reflect all charges against the Separate Account and the Fund but do not reflect charges against premiums or cost of term insurance and monthly Policy charges (see "Charges and Deductions--Premium Expense Charges," and "Monthly Deduction from Cash Value," pages A-29 and A-30). The rate of return is computed in each case by subtracting the value of the index of investment experience of the investment division (see above) at the beginning of the period from the value of said index at the end of the period and dividing the result by the value of said index at the beginning of the period and multiplying by 100 to obtain a percentage for rate of return. The first date shown for each investment division is the later of the date the portfolio of the Fund in which it invests began operations and the date the first registration statement relating to such portfolio was declared effective by the Securities and Exchange Commission. Thus the rates of return are based on the actual historical experience of the Fund as if the Separate Account investment division had been in existence on the dates indicated. The computation of index values for an investment division prior to the time it was first available to receive net premium payments is based on annualized figures. Hypothetical index value of $10.00 was assumed for April 29, 1992 for the Aggressive Growth investment division in order to provide a basis for determining rates of return for that division.
AVERAGE 6/24/83- 6/24/83- 6/24/84- 6/24/85- 6/24/86- 6/24/87- 6/24/88- 6/24/89- 6/24/90- 6/24/91- ANNUAL 6/24/92 6/24/84 6/24/85 6/24/86 6/24/87 6/24/88 6/24/89 6/24/90 6/24/91 6/24/92 RETURN -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- ------- Growth.............. 148.89% -11.42% 28.41% 24.78% 23.09% -9.51% 24.48% 13.28% -2.52% 14.53% 10.65% Income.............. 160.84% -0.49% 28.37% 25.94% 3.28% 5.45% 9.58% 7.10% 10.39% 14.91% 11.23% Money Market........ 79.88% 8.63% 8.70% 6.63% 5.05% 5.87% 7.83% 7.65% 6.44% 3.97% 6.73%
INDEX VALUE AT
6/24/83 6/24/84 6/24/85 6/24/86 6/24/87 6/24/88 6/24/89 6/24/90 6/24/91 6/24/92 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Growth.................. $4.82 $4.27 $5.49 $6.85 $8.43 $7.63 $ 9.49 $10.75 $10.48 $12.01 Income.................. $5.08 $5.06 $6.49 $8.17 $8.44 $8.90 $ 9.75 $10.45 $11.53 $13.25 Money Market............ $6.22 $6.76 $7.34 $7.83 $8.23 $8.71 $ 9.39 $10.11 $10.76 $11.19
AVERAGE 7/25/86- 7/25/86- 7/25/87- 7/25/88- 7/25/89- 7/25/90- 7/25/91- ANNUAL 7/25/92 7/25/87 7/25/88 7/25/89 7/25/90 7/25/91 7/25/92 RETURN -------- -------- -------- -------- -------- -------- -------- ------- Diversified.. 70.92% 16.38% -5.17% 18.87% 8.97% 4.25% 14.68% 9.34% INDEX VALUE AT 7/25/86 7/25/87 7/25/88 7/25/89 7/25/90 7/25/91 7/25/92 -------- -------- -------- -------- -------- -------- ------- Diversified........... $7.50 $8.73 $8.28 $9.84 $10.73 $11.18 $12.82
INDEX VALUE AT
AVERAGE 5/1/90- 5/1/90- 5/1/91- ANNUAL 5/1/92 5/1/91 5/1/92 RETURN 5/1/90 5/1/91 5/1/92 ------- ------- ------- ------- ------ ------ ------ Stock In- dex....... 29.80% 17.63% 10.35% 13.91% $7.70 $9.06 $10.00
INDEX VALUE AT
AVERAGE 4/29/88- 4/29/88- 4/29/89- 4/29/90- 4/29/91- ANNUAL 4/29/92 4/29/89 4/29/90 4/29/91 4/29/92 RETURN 4/29/88 4/29/89 4/29/90 4/29/91 4/29/92 -------- -------- -------- -------- -------- ------- ------- ------- ------- ------- ------- Aggressive Growth.. 80.89% 20.57% 9.36% 14.36% 19.96% 15.96% $5.53 $6.67 $7.29 $8.34 $10.00
INDEX VALUE AT
5/1/91- 5/1/92 5/1/91 5/1/92 ------- ------ ------ International Stock....................................... -8.42% $10.87 $9.95
A-18 Illustrations. In order to demonstrate how the investment experience of the Separate Account investment divisions will affect the death benefit, cash value and cash surrender value of a Policy, the following hypothetical illustrations showing the hypothetical net return of each investment division are set forth below. These hypothetical illustrations are based on the actual historical experience of the Fund as if the Separate Account had been in existence and a Policy had been issued on the dates indicated. They do not represent what may happen in the future. The illustrations are based on the payment of annual planned premiums of $1,000 for a specified face amount of $100,000 for a male aged 25. The illustrations assume that the insured is in Metropolitan Life's standard nonsmoker underwriting risk classification. The periods illustrated are based on the periods set forth in "Rates of Return" on page A-18. The amounts shown for the death benefits, cash values and cash surrender values take into account the charges against premiums and cost of term insurance and monthly Policy charges, as well as the daily charge against the Separate Account for mortality and expense risks equivalent to an effective annual rate of .90% of the average daily value of the assets in the Separate Account attributable to the Policies and the daily charge to the Fund for investment management services equivalent to an annual rate of .25% of the average daily value of the aggregate net assets of the Fund. (See "Charges and Deductions," page A-29). For each investment division, one illustration is based on the guaranteed cost of term insurance rates, the other illustration is based as if the current cost of term insurance rates (i.e., the rates in effect as of May 1, 1992) were in effect during the period illustrated (see "Monthly Deduction From Cash Value--Cost of Term Insurance Rate," page A-31). These examples of policy performance are for a specific age, sex, risk class, premium payment pattern and policy anniversary as set forth above. The benefits are calculated for a specific policy anniversary. The amount and timing of premium payments would affect individual policy benefits as would any withdrawals or Policy loans. From time to time the Separate Account may advertise its performance ranking and rating information among similar investments as compiled by Lipper Analytical Services, Inc., Morningstar, Inc. and other independent organizations. This Prospectus also contains illustrations based on assumed rates of return. See "'Illustrations Of Death Benefits, Cash Values, Cash Surrender Values And Accumulated Premiums," on pages A-35 to A-43. The following examples show how the hypothetical net return of the investment division which invests in the Growth Portfolio of the Fund would have affected benefits for a Policy dated June 24, 1983 (the effective date for the Growth Portfolio). These examples assume that net premiums and related cash values were in this investment division for the entire period. A-19 GROWTH ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,284 $ 285 $ 284 $ 43* $ 18* 1985................... 100,000 101,349 1,351 1,349 1,051* 857* 1986................... 100,000 102,637 2,641 2,637 2,341 2,037 1987................... 100,000 104,186 4,194 4,186 3,894 3,586 1988................... 100,000 104,458 4,470 4,458 4,170 3,858 1989................... 100,000 106,501 6,521 6,501 6,321 6,001 1990................... 100,000 108,223 8,252 8,223 8,052 7,723 1991................... 100,000 108,744 8,780 8,744 8,580 8,344 1992................... 100,000 110,884 10,933 10,884 10,733 10,484
GROWTH ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,284 $ 285 $ 284 $ 43* $ 18* 1985................... 100,000 101,243 1,246 1,243 946* 751* 1986................... 100,000 102,401 2,409 2,401 2,109 1,801 1987................... 100,000 103,794 3,810 3,794 3,510 3,194 1988................... 100,000 104,016 4,038 4,016 3,738 3,416 1989................... 100,000 105,843 5,881 5,843 5,681 5,343 1990................... 100,000 107,370 7,427 7,370 7,227 6,870 1991................... 100,000 107,807 7,877 7,807 7,677 7,407 1992................... 100,000 109,685 9,785 9,685 9,585 9,285
The following examples show how the hypothetical net return of the investment division which invests in the Income Portfolio of the Fund would have affected benefits for a Policy dated June 24, 1983. These examples assume that the net premiums and related cash values were in this investment division for the entire period. INCOME ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,350 $ 351 $ 350 $ 109* $ 84* 1985................... 100,000 101,433 1,435 1,433 1,135* 941* 1986................... 100,000 102,768 2,773 2,768 2,473 2,168 1987................... 100,000 103,635 3,643 3,635 3,343 3,035 1988................... 100,000 104,627 4,639 4,627 4,339 4,027 1989................... 100,000 105,899 5,916 5,899 5,716 5,399 1990................... 100,000 107,125 7,150 7,125 6,950 6,625 1991................... 100,000 108,700 8,734 8,700 8,534 8,300 1992................... 100,000 110,869 10,918 10,869 10,718 10,469
- ------- * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. A-20 INCOME ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,350 $ 351 $ 350 $ 109* $ 84* 1985................... 100,000 101,327 1,331 1,327 1,031* 835* 1986................... 100,000 102,531 2,539 2,531 2,239 1,931 1987................... 100,000 103,297 3,312 3,297 3,012 2,697 1988................... 100,000 104,176 4,199 4,176 3,899 3,576 1989................... 100,000 105,304 5,339 5,304 5,139 4,804 1990................... 100,000 106,384 6,433 6,384 6,233 5,884 1991................... 100,000 107,768 7,837 7,768 7,637 7,368 1992................... 100,000 109,674 9,772 9,674 9,572 9,274
The following examples show how the hypothetical net return of the investment division which invests in the Money Market Portfolio of the Fund would have affected benefits for a Policy dated June 24, 1983. These examples assume that net premiums and related cash values were in this investment division for the entire period. MONEY MARKET ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,406 $ 407 $ 406 $ 165* $ 140* 1985................... 100,000 101,262 1,264 1,262 964* 770* 1986................... 100,000 102,149 2,153 2,149 1,853 1,549 1987................... 100,000 103,049 3,055 3,049 2,755 2,449 1988................... 100,000 104,025 4,035 4,025 3,735 3,425 1989................... 100,000 105,154 5,169 5,154 4,969 4,654 1990................... 100,000 106,360 6,381 6,360 6,181 5,860 1991................... 100,000 107,572 7,601 7,572 7,401 7,172 1992................... 100,000 108,654 8,691 8,654 8,491 8,254
MONEY MARKET ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JUNE ----------------- ----------------- ----------------------- 24TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1984................... $100,000 $100,406 $ 407 $ 406 $ 165* $ 140* 1985................... 100,000 101,166 1,169 1,166 869* 674* 1986................... 100,000 101,951 1,958 1,951 1,658 1,351 1987................... 100,000 102,747 2,759 2,747 2,459 2,147 1988................... 100,000 103,611 3,630 3,611 3,330 3,011 1989................... 100,000 104,608 4,636 4,608 4,436 4,108 1990................... 100,000 105,668 5,709 5,668 5,509 5,168 1991................... 100,000 106,724 6,781 6,724 6,581 6,324 1992................... 100,000 107,654 7,728 7,654 7,528 7,254
- ------- * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. A-21 The following examples show how the hypothetical net return of the investment division which invests in the Diversified Portfolio of the Fund would have affected benefits for a Policy dated July 25, 1986 (the effective date for the Diversified Portfolio). These examples assume that net premiums and related cash values were in this investment division for the entire period. DIVERSIFIED ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JULY ----------------- ----------------- ----------------------- 25TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1987................... $100,000 $100,454 $ 455 $ 454 $ 213* $ 188* 1988................... 100,000 101,137 1,139 1,137 839* 645* 1989................... 100,000 102,256 2,260 2,256 1,960 1,656 1990................... 100,000 103,282 3,289 3,282 2,989 2,682 1991................... 100,000 104,205 4,216 4,205 3,916 3,605 1992................... 100,000 105,693 5,710 5,693 5,510 5,693
DIVERSIFIED ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON JULY ----------------- ----------------- ----------------------- 25TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1987................... $100,000 $100,454 $ 455 $ 454 $ 213* $ 188* 1988................... 100,000 101,048 1,050 1,048 750* 556* 1989................... 100,000 102,049 2,056 2,049 1,756 1,449 1990................... 100,000 102,961 2,973 2,961 2,673 2,361 1991................... 100,000 103,776 3,796 3,776 3,496 3,176 1992................... 100,000 105,098 5,130 5,098 4,930 4,598
The following examples show how the hypothetical net return of the investment division which invests in the Stock Index Portfolio of the Fund would have affected benefits for a Policy dated May 1, 1990 (the effective date for the Stock Index Portfolio). These examples assume that net premiums and related cash values were in this investment division for the entire period. STOCK INDEX ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON MAY ----------------- ----------------- ------------------------ 1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ----------- ---------- 1991................... $100,000 $100,462 $ 462 $ 462 $ 220* $ 196* 1992................... 100,000 101,344 1,346 1,344 1,046* 852*
- ------- * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. A-22 STOCK INDEX ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON MAY ----------------- ----------------- ------------------------ 1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1991................... $100,000 $100,462 $ 462 $ 462 $ 220* $ 196* 1992................... 100,000 101,247 1,250 1,247 950* 755*
The following examples show how the hypothetical net return of the investment division which invests in the Aggressive Growth Portfolio of the Fund would have affected benefits for a Policy dated April 29, 1988 (the effective date for the Aggressive Growth Portfolio). These examples assume that net premiums and related cash values were in this investment division for the entire period. AGGRESSIVE GROWTH ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON APRIL ----------------- ----------------- ----------------------- 29TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1989................... $100,000 $100,480 $ 481 $ 480 $ 239* $ 214* 1990................... 100,000 101,351 1,353 1,351 1,053* 859* 1991................... 100,000 102,413 2,417 2,413 2,117 1,813 1992................... 100,000 103,809 3,817 3,809 3,517 3,209
AGGRESSIVE GROWTH ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON APRIL ----------------- ----------------- ----------------------- 29TH OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1989................... $100,000 $100,480 $ 481 $ 480 $ 239* $ 214* 1990................... 100,000 101,255 1,258 1,255 958* 763* 1991................... 100,000 102,203 2,211 2,203 1,911 1,603 1992................... 100,000 103,457 3,472 3,457 3,172 2,857
- ------- * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. A-23 The following examples show how the hypothetical net return of the investment division which invests in the International Stock Portfolio of the Fund would have affected benefits for a Policy dated May 1, 1991 (the effective date for the International Stock Portfolio). These examples assume that the net premiums and related cash values were in this investment division for the entire period. INTERNATIONAL STOCK ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON CURRENT CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON MAY ----------------- ----------------- ------------------------- 1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1992................... $100,000 $100,302 $303 $302 $61* $36*
INTERNATIONAL STOCK ($100,000 SPECIFIED FACE AMOUNT, STANDARD NONSMOKER RISK) BASED ON GUARANTEED CHARGES
POLICY NNIVERSARYA DEATH BENEFIT CASH VALUE CASH SURRENDER VALUE ON MAY ----------------- ----------------- ------------------------- 1ST OF OPTION A OPTION B OPTION A OPTION B OPTION A OPTION B - ----------- -------- -------- -------- -------- ---------- ---------- 1992................... $100,000 $100,302 $303 $302 $ 61* $ 36*
- ------- * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. BENEFIT AT FINAL DATE If the insured is living, Metropolitan Life will pay to the Policy owner the cash value of the Policy on the Final Date, reduced by any outstanding indebtedness (see "Policy Benefits--Cash Value," page A-16). The Final Date of a Policy is the Policy anniversary on which the insured is 95 (see "Federal Tax Matters," page A-51). OPTIONAL INCOME PLANS During the insured's lifetime, the Policy owner may arrange for the insurance proceeds to be paid in a single sum, in an account that earns interest or under one or more of the available optional income plans. For more specifics regarding optional income plans, see Appendix A, page A-85. These choices are also available at the Final Date and if the Policy is surrendered. If no election is made, Metropolitan Life will place the amount in an account that earns interest. The payee will have immediate access to all or any part of the account. When the insurance proceeds are payable in a single sum, the beneficiary may, within one year of the insured's death, select one or more of the optional income plans, if no payments have yet been made. If the insurance proceeds become payable under an optional income plan and the beneficiary has the right to withdraw the entire amount, the beneficiary may name and change contingent beneficiaries. A-24 OPTIONAL INSURANCE BENEFITS Subject to certain requirements, one or more of the optional insurance benefits described in Appendix A, page A-85, may be included with a Policy by rider. The cost of any optional insurance benefits will be deducted as part of the monthly deduction (see "Charges and Deductions--Monthly Deduction From Cash Value," page A-30). See Appendix A, page A-85, for a discussion of how certain riders affect the benefits and the exercise of certain rights under the Policy. PAYMENT AND ALLOCATION OF PREMIUMS ISSUANCE OF A POLICY Individuals wishing to purchase a Policy must complete an application which will be sent to the Designated Office. A Policy will not be issued with a specified face amount less than the Minimum Initial Specified Face Amount. A Policy will generally be issued only to insureds 80 years of age or under who supply evidence of insurability satisfactory to Metropolitan Life. Metropolitan Life may, however, at its sole discretion, issue a Policy to an individual above the age of 80. Acceptance is subject to Metropolitan Life's underwriting rules, and Metropolitan Life reserves the right to reject an application for any reason permitted by law. The Date of Policy is the date used to determine Policy years and Policy months regardless of when the Policy is delivered. The Date of Policy will ordinarily be the date the application is approved. Within limits, Metropolitan Life may establish an earlier Date of Policy (but no earlier than the date the application is completed) if desired to preserve a younger age at issue for the insured. Individuals may also request that the Date of Policy be the date the application is completed if a payment of at least $2,500.00 is received with the application. In these instances, the Policy owner will incur a charge for insurance protection prior to the time that insurance coverage under the Policy is in force (except under any temporary insurance agreement described below). However, an earlier Date of Policy has the potential advantage, to the Policy owner, of an earlier Investment Start Date if a payment is received with the application. In the case of certain payroll deduction plans or other automatic investment plans, the Date of Policy may be earlier or later than the date the first premium payment is received, pursuant to established administrative rules. If a premium payment equivalent to at least one "check-o-matic" payment is received with the application, and there has been no material misrepresentation in the application, fixed, temporary insurance equal to the specified face amount applied for up to a maximum amount of $500,000, provided at no additional charge, will start as of the date the application was completed and will continue for a maximum of 90 days. However, if a medical examination of a person to be insured is initially required by the underwriting rules of Metropolitan Life, coverage on that person will not start until completion of the examination. If it is not completed within 90 days from the date of the application, there will be no coverage, except that, if the person to be insured dies from an accident within 30 days from the date of the application and before the examination is completed, temporary insurance will be in effect if it has not already ended under the terms of the temporary insurance agreement. In no event will a death benefit be provided under the temporary insurance agreement if death is by suicide. Metropolitan Life will allocate net premiums to the Separate Account and/or the Fixed Account on the Investment Start Date (see "Allocation of Premiums and Cash Value," page A-27). The Investment Start Date is the later of (i) the Date of Policy and (ii) the date the first premium for a Policy is received at the Designated Office. A-25 Except as otherwise provided in any temporary insurance agreement, there will be no insurance coverage under a Policy unless at the time the Policy is delivered the insured's health is the same as stated in the application and, in most states, the insured has not sought medical advice or treatment subsequent to the date of the application. PREMIUMS Payment of Premiums. Each Policy owner will determine a planned periodic premium schedule that provides for the payment of a level premium at fixed intervals for a specified period of time. During the first two Policy years, premium payments must be at least equal to a minimum allowable planned premium schedule. After the first two Policy years, the Policy owner is not required to pay premiums in accordance with the planned periodic premium schedule. MOREOVER THE PAYMENT OF PLANNED PERIODIC PREMIUMS WILL NOT GUARANTEE THAT THE POLICY REMAINS IN FORCE AFTER THE FIRST TWO POLICY YEARS. Instead, the duration of the Policy after the first two Policy years depends upon the Policy's cash surrender value (see "Policy Termination and Reinstatement--Termination," page A-28). The Policy owner must designate in the application one of the following ways to pay the planned periodic premium. The Policy owner may elect to pay the planned periodic premium annually, semi-annually, or monthly through "check-o- matic" payments. Monthly "check-o-matic" payments are automatically made by preauthorized transfers from a bank checking account. A Policy owner may also elect to pay monthly planned periodic premiums through various payroll deduction plans if provided by the employer of the Policy owner. Subject to the minimum and maximum premium limitations described below, a Policy owner may make unscheduled premium payments at any time in any amount. The Policy, therefore, provides the owner with the flexibility to vary the frequency and amount of premium payments to reflect changing financial conditions. All premium payments after the initial premium payment are credited to the Separate Account or Fixed Account as of the Date of Receipt. Premium Limitations. During the first two Policy years, premium payments by a Policy owner must at least equal the minimum allowable planned premium for the particular Policy or the Policy will terminate after a grace period commencing on a monthly anniversary when the total premiums paid as of that date are not at least equal to the minimum premiums required as of that date and the cash surrender value is insufficient to pay the monthly deduction on that date. The minimum allowable planned premium is equal to the then current annual target premium for the Policy. Except as described below, the total of all premiums paid, both planned and unplanned, can never exceed the then current maximum premium limitation determined by Internal Revenue Code rules relating to the definition of life insurance. If at any time a premium is paid that would result in total premiums exceeding the then current maximum premium limitations, Metropolitan Life will accept only that portion of the premium that will make total premiums equal the limit. Any part of the premium in excess of that amount will be refunded, and no further premiums will be accepted until allowed by the maximum premium limitations. These limitations will not apply to any premium that is required to be paid in order to prevent the Policy from terminating. A-26 There may be cases where the total of all premiums paid could cause the Policy to be classified as a modified endowment contract (see "Federal Tax Matters," page A-51). The annual statement (see "Reports," page A-59) sent to each Policy owner will include information regarding the modified endowment contract status of a Policy. In cases where a Policy is not an irrevocable modified endowment contract, the annual statement will indicate what action the Policy owner can take to reverse the modified endowment contract status of the Policy. Every planned premium payment after the first Policy year must be at least $200 on an annual basis, $100 on a semi-annual basis and $15 on a "check-o- matic" or other pre-authorized transfer basis. Every unplanned premium payment must be at least $250. Premium payments less than these minimum amounts will be refunded to the Policy owner. ALLOCATION OF PREMIUMS AND CASH VALUE Net Premiums. The net premium equals the premium paid less premium expense charges (see "Charges and Deductions--Premium Expense Charges," page A-29). Allocation of Net Premiums. In the application for a Policy, the Policy owner indicates the initial allocation of net premiums among the Fixed Account and the investment divisions of the Separate Account. The minimum percentage of each premium that may be allocated to the Fixed Account or any investment division of the Separate Account is 10%. Allocation percentages must be in whole numbers; for example, 33 1/3% may not be chosen. The Policy owner may change the allocation of future net premiums without charge at any time by providing Metropolitan Life with written notification at the Designated Office. The change will be effective as of the Date of Receipt of the notice at the Designated Office. The Policy's cash value in the investment divisions of the Separate Account will vary with the investment experience of these investment divisions, and the Policy owner bears this investment risk. Policy owners should periodically review their allocations of net premiums and cash values in light of market conditions and their overall financial planning requirements. Cash Value Transfers. The Policy owner may transfer cash value between the Fixed Account and the investment divisions of the Separate Account and among the investment divisions of the Separate Account. At the present time, there is no charge for transfers. Metropolitan Life reserves the right in the future to assess a charge of up to $25 against each transfer. A transfer must be made in either dollar amounts or a percentage in whole numbers. The minimum amount that may be transferred is the lesser of $50 or the total amount in an investment division or, if the transfer is from the Fixed Account the total amount in the Fixed Account. Transferring cash value from one or more investment divisions and/or the Fixed Account into one or more other investment divisions and/or the Fixed Account counts as one transfer. Metropolitan Life reserves the right to delay the transfer, withdrawal, surrender and payment of policy loans of amounts from the Fixed Account for up to six months (see "The Fixed Account-- Transfers, Withdrawals, Surrenders, and Policy Loans," page A-48). Metropolitan Life will effectuate transfers and determine all values in connection with transfers as of the Date of Receipt of written notice at the Designated Office. A-27 Transfers are not taxable transactions under current law. Transfer requests must be in writing, in a form acceptable to Metropolitan Life. POLICY TERMINATION AND REINSTATEMENT Termination. If, during the first two Policy years, the cash surrender value on any monthly anniversary is insufficient to cover the monthly deduction and the total premiums paid as of such monthly anniversary are not equal to the minimum premiums required as of that date, Metropolitan Life will notify the Policy owner and any assignee of record of that difference. Also, if, after the first two Policy years, the cash surrender value on any monthly anniversary is insufficient to cover the monthly deduction, Metropolitan Life will notify the Policy owner and any assignee of record of that shortfall. In either case, the Policy owner will then have a grace period of 61 days, measured from the monthly anniversary, to make sufficient payment. In the first two Policy years, the minimum necessary premium payment will be an amount equal to the difference between the total premiums previously paid and the minimum required premiums. After the first two Policy years, the minimum necessary payment must be an amount sufficient to keep the Policy in force for two months after the premium expense charges have been deducted. Failure to make a sufficient payment within the grace period will result in termination of the Policy. In the first two Policy years after issue or after an increase in the specified face amount, any excess sales charges (see "Surrender Charge--Excess Sales Charge," page A-34) will be returned to the Policy owner. Otherwise, a Policy terminates without any cash surrender value. If the insured dies during the grace period, the insurance proceeds will still be payable, but any due and unpaid monthly deductions will be deducted from the proceeds. Reinstatement. A terminated Policy may be reinstated anytime within 3 years (5 years in Missouri) after the end of the grace period and before the Final Date by submitting the following items to Metropolitan Life: (1) a written application for reinstatement; (2) evidence of insurability satisfactory to Metropolitan Life; and (3) a premium that, after the deduction of the premium expense charges (see "Charges and Deductions--Premium Expense Charges," page A- 29), is large enough to cover: (a) the monthly deductions for at least the two Policy months commencing with the effective date of reinstatement; (b) any due and unpaid monthly Policy charges incurred during the first Policy year; (c) any portion of the surrender charge which was not paid at termination because the cash value at termination was insufficient to pay such portion of the charge; (d) for terminations occurring in the two Policy years after issue or after an increase in the specified face amount, an amount equal to the excess, if any, of (i) the portion of the surrender charge applicable to the issue or the increase which would be payable (without regard to any excess sales charge limitations as described on page A-34) if the Policy were surrendered in the Policy year of reinstatement and as if the Policy had not been terminated earlier over (ii) the amount of the applicable surrender charge paid at termination; and (e) interest at the rate of 6% per year on the amount set forth in (b) from the commencement of the grace period to the date of reinstatement. Metropolitan Life reserves the right to waive the interest due set forth in (e) above. Notwithstanding the above, at the present time, with respect to the reinstatement of a Policy that is terminated during the first two Policy years, Metropolitan Life will accept as the premium required for reinstatement the lesser of the amount as defined in the immediately preceding paragraph and the following: the excess of the sum of (a) the monthly deductions for at least the two Policy months commencing with the effective date of reinstatement; (b) the total of the minimum required premiums that would have been payable under the Policy from the date of the Policy until the effective date of reinstatement had no termination A-28 occurred; and (c) an amount that after the deduction of the premium expense charges would equal any amount previously refunded to the Policy owner as an Excess Sales Charge (see "Surrender Charge-- Excess Sales Charge," page A-34), over the sum of all premiums paid by the Policy owner to the effective date of the termination before any charges or deductions were applied. Metropolitan Life offers this alternative calculation of the premium required for reinstatement at present but reserves the right to modify or rescind this offer at its sole discretion. Indebtedness on the date of termination will be cancelled and need not be repaid and will not be reinstated. The amount of cash surrender value on the date of reinstatement will be equal to two monthly deductions plus any amount of net premiums paid at reinstatement in excess of the amount of premium required above to reinstate the Policy. The date of reinstatement will be the date of approval of the application for reinstatement. The terms of the original Policy, including the insurance rates provided therein, will apply to the reinstated Policy. However, a Policy which was terminated and reinstated during the first two Policy years will be subject to termination after a grace period when the cash surrender value is insufficient to pay a monthly deduction even if all minimum premiums required to be paid during the first two Policy years have been paid. A reinstated Policy is subject to a new two year period of contestability (see "Other Policy Provisions--Incontestability," page A-49). CHARGES AND DEDUCTIONS PREMIUM EXPENSE CHARGES Sales Load. A charge (which may be deemed to be a sales load as defined in the 1940 Act) is deducted from each premium payment received by Metropolitan Life as described below. A charge of 2% of premiums paid is deducted from all premium payments. There is also a charge (which may be deemed to be a sales load) upon the surrender of a Policy during the first fifteen Policy years or during the first fifteen Policy years after an increase in the specified face amount of a Policy (see "Surrender Charge," page A-32). The amount of the sales load (whether from either the premium expense charge or upon surrender of the Policy) in any Policy year cannot be specifically related to actual sales expenses for that year, which include sales commissions and costs of prospectuses, other sales material and advertising. To the extent that sales expenses are not recovered from the charges for sales load, such expenses will be recovered from other sources, including any excess accumulated charges for mortality and expense risks under the Policies, any other gains attributable to operations with respect to the Policies and Metropolitan Life's general assets and surplus. Metropolitan Life does not anticipate that all its total sales expenses will be recovered from the sales charges. State Premium Tax Charge. An additional charge is made for state premium taxes of 2% of each premium payment. Premium taxes vary from state to state, and the 2% rate approximates the average tax rate expected to be paid on premiums from all states. Special Rules. Special rules apply to the deduction of premium expense charges in the case of a payment of a premium for a Policy at its issue or within six months of its issue when such payment is made in a lump sum with all or a portion of the proceeds of a cash surrender from a non-flexible permanent life policy or an unmatured endowment policy issued by Metropolitan Life or any of its affiliates. Under such A-29 special rules, which apply only to the amount derived from such proceeds, Metropolitan Life will waive the 4% premium expense charges. These special rules apply only if the surrendered policy is a single owner policy on the life of the primary insured under the Policy being purchased. For purposes of computing the sales load, in the event that a lump sum consists of an amount derived from such proceeds and an amount not so derived, the lump sum will be treated as two separate payments, with the amount derived from proceeds being deemed as the first payment. TRANSFER CHARGE At the present time, no charge will be assessed against the cash value of a Policy when amounts are transferred among the investment divisions of the Separate Account and between the investment divisions and the Fixed Account. Metropolitan Life reserves the right in the future to assess a charge of up to $25 against each transfer. If made, the charge would be allocated among the Fixed Account and each investment division of the Separate Account from which amounts are transferred in the same proportion that the amounts transferred from the Fixed Account and the amounts transferred from each investment division bear to the total amount transferred, when the requested transfer is effected. Thus, for example, if a request is received for a transfer of $100, cash value in the amount of $100 would be deducted from the particular investment division(s), with $100 being transferred to the requested new investment division(s). The $25 would be deducted based on the cash value in each investment division from which amounts are transferred at the time of the transfer. MONTHLY DEDUCTION FROM CASH VALUE The monthly deduction from cash value includes the cost of term insurance charge, the charge for optional insurance benefits added by rider (see "Policy Benefits--Optional Insurance Benefits," page A-25) and monthly Policy charges. The cost of term insurance charge and the monthly Policy charges are discussed separately in the paragraphs that follow. The monthly deduction will also include a charge for requested increases in the death benefit for the month in which the increase occurs, as discussed more fully under "Policy Benefits-- Increases," page A-15. The monthly deduction will be deducted as of each monthly anniversary commencing with the Date of Policy. It will be allocated among the Fixed Account and each investment division on the Separate Account on a Pro Rata Basis. See "Payment and Allocation of Premiums--Issuance of a Policy," page A- 25, regarding when insurance coverage starts under a newly issued Policy. Cost of Term Insurance. Because the cost of term insurance depends upon a number of variables, it can vary from month to month. Metropolitan Life will determine the monthly cost of term insurance charge by multiplying the applicable cost of term insurance rate or rates by the term insurance amount for each Policy month. The term insurance amount for a Policy month is (a) the death benefit at the beginning of the Policy month divided by 1.0032737 (a discount factor to account for return deemed to be earned during the month), less (b) the cash value at the beginning of the Policy month. A-30 The term insurance amount may be affected by changes in the cash value or in the specified face amount of the Policy and will be greater for owners who have selected Death Benefit Option B than for those who have selected Death Benefit Option A (see "Policy Benefits--Death Benefits," page A-13), assuming the same specified face amount in each case and assuming that the minimum death benefit is not in effect. Since the death benefit under Option A remains constant while the death benefit under Option B varies with the cash value, cash value increases will generally reduce the term insurance amount under Option A but not under Option B. If the term insurance amount is greater, the cost of insurance will be greater. If the minimum death benefit is in effect (see "Death Benefit Options--Minimum Death Benefit," page A-13), then the cost of term insurance will vary directly with the cash value under both death benefit options. If more than one rate class is in effect under a Policy (see "Rate Class," page A-31), the cost of term insurance will decrease if a Policy owner converts from Option A to Option B and will increase if a Policy owner converts from Option B to Option A. Cost of Term Insurance Rate. Cost of term insurance rates are based on the sex (except in Montana and Massachusetts, in the case of group conversions which require unisex rates and in the case of Policies sold in connection with executive bonus and split dollar deferred compensation plans), age and rate class of the insured. The actual monthly cost of term insurance rates will be based on Metropolitan Life's expectations as to future experience. They will not, however, be greater than the guaranteed cost of term insurance rates set forth in the Policy. These guaranteed rates are based on certain of the 1980 Commissioners Standard Ordinary Mortality Tables and the insured's sex and age. The Tables used for this purpose set forth different mortality estimates for males and females. Any change in the cost of term insurance rates will apply to all persons of the same insuring age, sex, and rate class whose Policies have been in force for the same length of time. Metropolitan Life is adjusting the current cost of term insurance rates it charges a Policy as of the next Monthly Anniversary for the Policy occurring after April 30, 1992. The new rates represent an increase from the prior rates. The amount of the increase depends on the insured's age, sex (except where unisex rates apply) and rate class as well as the specified face amount of the Policy. Metropolitan Life's new rates for the Policies reflect actual mortality experience. Metropolitan Life reviews its cost of term insurance rates periodically and may adjust the rates from time to time again in the future. Rate Class. The rate class of an insured affects the cost of term insurance rate. Metropolitan Life currently places insureds into a standard rate class or rate classes involving a higher or lower mortality risk. For Ages 18 and over, each such rate class is further divided into a smoker division and a nonsmoker division. In an otherwise identical Policy, insureds in the standard rate class will have a lower cost of term insurance than those in the rate class with the higher mortality risk, and a higher cost of term insurance than those in the rate class with the lower mortality risk. Also, those insureds in the nonsmoker division of a rate class will have a lower cost of term insurance than those in the smoker division of the same rate class. If a Policy owner requests a specified face amount increase at a time when the insured is in a less favorable rate class or division than previously, a correspondingly higher cost of insurance rate will apply to that portion of the term insurance amount attributable to the increase. On the other hand, if the insured's rate class or division improves, the lower cost of insurance rate will apply to the entire term insurance amount. Monthly Policy Charges. During the first Policy year, there will be a Base Administration Charge as described below plus a monthly charge equal to $0.25 per thousand dollars of specified face amount of the A-31 Policy. The Base Administration Charge is equal to $5 per month at Ages less than eighteen, $15 per month at Ages eighteen to forty-nine, and $20 per month at Ages fifty and above. After the first Policy year, the monthly administration charge is $5 per month for Policies with a specified face amount of $250,000 or more, $7 per month for Policies with a specified face amount of $100,000 to $249,999, and $9 per month for Policies with a specified face amount of less than $100,000. The monthly administration charge will be determined by the specified face amount of the Policy at the time the monthly deduction is made. Thus, any change in the specified face amount of a Policy may result in a change in the monthly administration charge. These charges will be used to compensate Metropolitan Life for expenses incurred in the administration of the Policy as a multifunded policy. The first year charge will also compensate Metropolitan Life for first year underwriting and other start-up expenses incurred in connection with the Policy. These expenses include the cost of processing applications, conducting medical examinations, determining insurability and the insured's risk class, and establishing Policy records. Metropolitan Life does not expect to derive a profit from these charges. If a Policy is surrendered in the first Policy year, the remaining Base Administration Charge for each of the full Policy months remaining in the first Policy year will be deducted from the cash value of the Policy in addition to any applicable surrender charge (see "Surrender Charge," below). CHARGES AGAINST THE SEPARATE ACCOUNT Charge for Mortality and Expense Risks. A daily charge is made against the Separate Account for mortality and expense risks assumed by Metropolitan Life. The amount of the charge is equivalent to an effective annual rate of .90% of the average daily value of the assets in the Separate Account which are attributable to the Policies. The mortality risk assumed is that insureds may live for a shorter period of time than estimated (i.e., the period of time based on the appropriate 1980 Commissioners Standard Ordinary Mortality Table) and, thus, a greater amount of death benefits than expected will be payable. The expense risk assumed is that expenses incurred in issuing and administering the Policies will be greater than estimated. Metropolitan Life will realize a gain if the charges prove ultimately to be more than sufficient to cover its actual costs of such mortality and expense commitments. If the charges are not sufficient, the loss will fall on Metropolitan Life. If its estimates of future mortality and expense experience are accurate, Metropolitan Life anticipates that it will realize a profit from the mortality and expense risk charge; however if such estimates are inaccurate, Metropolitan Life could incur a loss. Charge for Income Taxes. Currently, no charge is made against the Separate Account for income taxes. However, Metropolitan Life may decide to make such a charge in the future (see "Federal Tax Matters--Taxation of Metropolitan Life," page A-53). SURRENDER CHARGE A sales charge will be deducted in the form of a surrender charge from the cash value if the Policy is surrendered or terminated after a grace period during the first fifteen Policy years. A sales charge will also be deducted upon surrender or termination of a Policy during the first fifteen Policy years after an increase in the specified face amount of a Policy. In each case, the amount of the surrender charge is based on a charge per thousand dollars of specified face amount which varies with the Age of the insured at the time of the A-32 issue of the Policy or of the increase in the specified face amount and the death benefit option chosen at the time of issue or increase by the Policy owner. The surrender charges per thousand dollars of specified face amount are as follows: Option A:
AGE AT POLICY YEARS SINCE ISSUE OR INCREASE 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
Option B:
AGE AT POLICY YEARS SINCE ISSUE OR INCREASE 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
A total surrender charge at surrender or termination of a Policy will equal the sum of any surrender charge based on the specified face amount at issue and any surrender charges based on any increases in the specified face amount. Thus, a surrender charge may apply to a surrender made more than fifteen years A-33 after issue of a Policy where a specified face amount increase has occurred within fifteen years prior to the surrender. No surrender charge applies to any increase in the specified face amount resulting from a change in the death benefit option. Also, surrender charges are not reduced by a decrease in the specified face amount. No surrender charges are assessed against partial withdrawals or loans, but the amount of the applicable surrender charge indicated above which would be deducted (disregarding the effect of the excess sales charge limits discussed below) if the Policy were surrendered reduces the amount of cash value which may be withdrawn or borrowed. For example, if a Policy owner who is 25 years old purchases a Policy with a specified face amount of $100,000 and chooses death benefit Option A, the surrender charge in year five, assuming no increases in the specified face amount, would be $300 ($3 X 100). If the Policy owner increases the specified face amount by $50,000 in year 10 (when the Policy owner is 35 years old), the surrender charge in year 15 would be $350, consisting of $100 ($1 X 100) relating to the specified face amount at issue, and $250 ($5 X 50) relating to the increase in the specified face amount. In year 20, the surrender charge would be $150, consisting of 0 relating to the specified face amount at issue (since the surrender takes place more than 15 years after the original issuance of the Policy), and $150 ($3 X 50) relating to the increase in the specified face amount. During the first Policy year, in addition to the applicable surrender charge, the remaining monthly Base Administration Charges will also be imposed upon surrender of a Policy (see "Charges and Deductions--Monthly Policy Charges," page A-31). Excess Sales Charge. With respect to the surrender or termination of a Policy during the first two Policy years after issue or after an increase in the specified face amount, the applicable surrender charge, together with all sales charges previously deducted from premium payments, may not exceed the sum of (i) 30% of premium payments in aggregate amount less than or equal to one guideline annual premium, plus (ii) 10% of premium payments in aggregate amount greater than one guideline annual premium but not more than two guideline annual premiums, plus (iii) 9% of each premium payment in excess of two guideline annual premiums. The cash surrender value of an in force Policy is not affected by these limits. GUARANTEE OF CERTAIN CHARGES Metropolitan Life guarantees, and may not increase, the charges deducted from premiums, the monthly administration charge, the surrender charge and the charge against the Separate Account for mortality and expense risks with respect to the Policies. OTHER CHARGES Fund Investment Management Fee. Shares of the Fund are purchased for the Separate Account at their net asset value. The net asset value of Fund shares is determined after deduction of the fee paid by the Fund at the annual rate of .25% (.75% for the International Stock Portfolio and the Aggressive Growth Portfolio) of the average daily value of the aggregate net assets of the portfolios for the investment management services provided by Metropolitan Life, as described more fully under "What are Separate Account UL, the Fixed Account and the Metropolitan Series Fund?", page A-5 and in the attached prospectus for the Fund. The net asset value of Fund shares also reflects deduction of direct expenses from the assets of the Fund as more fully described in the attached prospectus for the Fund. A-34 ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES, CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS The tables on pages A-36 to A-43 illustrate the way in which a Policy's death benefit, cash value and cash surrender value could vary over an extended period of time assuming that all premiums are allocated to and remain in the Separate Account for the entire period shown and hypothetical gross investment rates of return for the Fund (i.e., investment income and capital gains and losses, realized or unrealized) equivalent to constant gross (after tax) annual rates of 0%, 6% and 12%. The tables are based on the payment of annual planned premiums (see "Premiums--Premium Limitations," page A-26), for a specified face amount of $100,000 for males aged 25 and 40. Each illustration assumes that the insured is in Metropolitan Life's standard nonsmoker underwriting risk classification. Illustrations for an insured in Metropolitan Life's standard smoker underwriting risk classification would show, for the same age and premium payments, lower cash values and cash surrender values and, therefore, for the minimum death benefit and death benefit Option B, lower death benefits. The differences between the cash values and the cash surrender values in the first fifteen years are the surrender charges. The death benefits, cash values and cash surrender values would be different from those shown if the actual gross investment rates of return averaged 0%, 6% or 12% over a period of years, but fluctuated above or below such averages for individual policy years. The values would also be different depending on the allocation of a Policy's total cash value among the investment divisions of the Separate Account, if the actual rates of return averaged 0%, 6% or 12% but the rates for each portfolio of the Fund varied above and below such averages. The amounts shown for the death benefits, cash values and cash surrender values take into account the deductions from premiums and the monthly deduction from cash value, as well as the daily charge against the Separate Account for mortality and expense risks equivalent to an effective annual rate of .90% of the average daily value of the assets in the Separate Account attributable to the Policies and the daily charge to the Fund for investment management services equivalent to an annual rate of .392857% of the average daily value of the aggregate net assets of the Fund (an average of the five available portfolios of the Fund that have an investment management fee of .25% and the two portfolios that have an investment management fee of .75%) and .283319% for direct fund expenses. (See "Charges and Deductions," page A-29). Columns on pages A-36, A-37, A-40 and A-41 are based on the guaranteed cost of term insurance rates; columns on pages A-38, A-39, A-42 and A-43 are based on the current cost of term insurance rates as presently in effect (see "Monthly Deduction From Cash Value--Cost of Term Insurance Rate," page A-31). Taking account of the charges for mortality and expense risks, investment management services and other Fund expenses, the gross annual investment rates of return of 0%, 6% and 12% correspond to actual (or net) annual rates of: - 1.55%, 4.36% and 10.26%, respectively. The hypothetical returns shown in the tables do not reflect any charges for income taxes against the Separate Account since no such charges are currently made. However, if in the future such charges are made, in order to produce the death benefits and cash values illustrated, the gross annual investment rate of return would have to exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges. (See "Federal Tax Matters--Taxation of Metropolitan Life," page A- 53). The second column of the tables shows the amount which would accumulate if an amount equal to the annual planned premium were invested to earn interest, after taxes, at 5% compounded annually. Upon request, Metropolitan Life will furnish an illustration reflecting the proposed insured's age, sex, the specified face amount or premium amount requested, frequency of planned periodic premium payments, death benefit option selected and any available rider requested. A-35 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL DEATH TOTAL CASH VALUE(2) SURRENDER VALUE(2) BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ----------------------- -------------------------- -------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------ ------- -------- ------- ------- -------- -------- -------- -------- 1...................... $ 998 $ 344 $ 380 $ 417 $ 102* $ 138* $ 175* $100,000 $100,000 $100,000 2...................... 2,045 986 1,090 1,198 686* 790* 898* 100,000 100,000 100,000 3...................... 3,145 1,618 1,831 2,061 1,318 1,531 1,761 100,000 100,000 100,000 4...................... 4,299 2,243 2,608 3,016 1,943 2,308 2,716 100,000 100,000 100,000 5...................... 5,512 2,859 3,418 4,069 2,559 3,118 3,769 100,000 100,000 100,000 6...................... 6,785 3,462 4,262 5,229 3,262 4,062 5,029 100,000 100,000 100,000 7...................... 8,122 4,053 5,140 6,505 3,853 4,940 6,305 100,000 100,000 100,000 8...................... 9,525 4,628 6,050 7,908 4,428 5,850 7,708 100,000 100,000 100,000 9...................... 10,999 5,188 6,994 9,449 4,988 6,794 9,249 100,000 100,000 100,000 10...................... 12,546 5,732 7,972 11,143 5,532 7,772 10,943 100,000 100,000 100,000 15...................... 21,525 8,132 13,354 22,453 8,032 13,254 22,353 100,000 100,000 100,000 20...................... 32,983 9,845 19,537 40,580 9,845 19,537 40,580 100,000 100,000 100,000 25...................... 47,608 10,667 26,551 69,754 10,667 26,551 69,754 100,000 100,000 133,230(3) 40...................... 120,498 1,693 51,870 306,321 1,693 51,870 306,321 100,000 100,000 373,711(3)
- -------- (1) Assumes annual planned premium payments of $950 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. (3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death Benefit," on page A-13 for further details. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-36 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST --------------------------- ---------------------------- ----------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- -------- 1...................... $ 998 $ 344 $ 380 $ 416 $ 78* $ 114* $ 150* $100,344 $100,380 $100,416 2...................... 2,045 983 1,087 1,195 491* 595* 703* 100,983 101,087 101,195 3...................... 3,145 1,613 1,825 2,055 1,013 1,225 1,455 101,613 101,825 102,055 4...................... 4,299 2,234 2,597 3,003 1,634 1,997 2,403 102,234 102,597 103,003 5...................... 5,512 2,845 3,401 4,048 2,245 2,801 3,448 102,845 103,401 104,048 6...................... 6,785 3,442 4,236 5,196 2,942 3,736 4,696 103,442 104,236 105,196 7...................... 8,122 4,025 5,103 6,457 3,525 4,603 5,957 104,025 105,103 106,457 8...................... 9,525 4,592 6,000 7,840 4,192 5,600 7,440 104,592 106,000 107,840 9...................... 10,999 5,143 6,928 9,355 4,743 6,528 8,955 105,143 106,928 109,355 10...................... 12,546 5,675 7,887 11,017 5,375 7,587 10,717 105,675 107,887 111,017 15...................... 21,525 7,988 13,094 21,980 7,888 12,994 21,880 107,988 113,094 121,980 20...................... 32,983 9,540 18,865 39,073 9,540 18,865 39,073 109,540 118,865 139,073 25...................... 47,608 10,094 24,995 65,764 10,094 24,995 65,764 110,094 124,995 165,764 40...................... 120,498 0(3) 37,741 273,677 0(3) 37,741 273,677 0(3) 137,741 373,677
- -------- (1) Assumes annual planned premium payments of $950 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. (3) Zero values in cash value, cash surrender value and death benefit indicate termination of insurance coverage in the absence of a sufficient additional premium payment; see "Payment and Allocation of Premiums--Termination," on page A-28 for further details. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-37 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ------------------------ -------------------------- -------------------------- ----------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- -------- 1.............. $ 998 $ 344 $ 380 $ 417 $ 102* $ 138* $ 175* $100,000 $100,000 $100,000 2.............. 2,045 1,076 1,183 1,294 776* 883* 994* 100,000 100,000 100,000 3.............. 3,145 1,797 2,021 2,263 1,497 1,721 1,963 100,000 100,000 100,000 4.............. 4,299 2,508 2,896 3,331 2,208 2,596 3,031 100,000 100,000 100,000 5.............. 5,512 3,208 3,811 4,510 2,908 3,511 4,210 100,000 100,000 100,000 6.............. 6,785 3,897 4,766 5,811 3,697 4,566 5,611 100,000 100,000 100,000 7.............. 8,122 4,577 5,763 7,247 4,377 5,563 7,047 100,000 100,000 100,000 8.............. 9,525 5,246 6,805 8,831 5,046 6,605 8,631 100,000 100,000 100,000 9.............. 10,999 5,906 7,893 10,580 5,706 7,693 10,380 100,000 100,000 100,000 10.............. 12,546 6,541 9,014 12,493 6,341 8,814 12,293 100,000 100,000 100,000 15.............. 21,525 9,539 15,374 25,442 9,439 15,274 25,342 100,000 100,000 100,000 20.............. 32,983 12,149 23,106 46,488 12,149 23,106 46,488 100,000 100,000 103,204(3) 25.............. 47,608 14,252 32,431 80,484 14,252 32,431 80,484 100,000 100,000 153,725(3) 40.............. 120,498 14,872 73,626 364,746 14,872 73,626 364,746 100,000 100,000 444,990(3)
- -------- (1) Assumes annual planned premium payments of $950 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. (3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death Benefit," on page A-13 for further details. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-38 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 25 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ------------------------ -------------------------- -------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- ------- -------- ------- ------- -------- -------- -------- -------- 1...................... $ 998 $ 344 $ 380 $ 416 $ 78* $ 114* $ 151* $100,344 $100,380 $100,416 2...................... 2,045 1,075 1,181 1,292 583* 689* 800* 101,075 101,181 101,292 3...................... 3,145 1,794 2,018 2,259 1,194 1,418 1,659 101,794 102,018 102,259 4...................... 4,299 2,503 2,891 3,324 1,903 2,291 2,724 102,503 102,891 103,324 5...................... 5,512 3,200 3,802 4,499 2,600 3,202 3,899 103,200 103,802 104,499 6...................... 6,785 3,887 4,752 5,794 3,387 4,252 5,294 103,887 104,752 105,794 7...................... 8,122 4,563 5,745 7,222 4,063 5,245 6,722 104,563 105,745 107,222 8...................... 9,525 5,228 6,780 8,797 4,828 6,380 8,397 105,228 106,780 108,797 9...................... 10,999 5,884 7,861 10,533 5,484 7,461 10,133 105,884 107,861 110,533 10...................... 12,546 6,512 8,971 12,430 6,212 8,671 12,130 106,512 108,971 112,430 15...................... 21,525 9,470 15,248 25,215 9,370 15,148 25,115 109,470 115,248 125,215 20...................... 32,983 12,005 22,792 45,792 12,005 22,792 45,792 112,005 122,792 145,792 25...................... 47,608 13,969 31,692 78,824 13,969 31,692 78,824 113,969 131,692 178,824 40...................... 120,498 13,232 65,447 352,617 13,232 65,447 352,617 113,232 165,447 452,617
- -------- (1) Assumes annual planned premium payments of $950 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-39 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A GUARANTEED COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ------------------------- --------------------------- -------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- -------- -------- ------- -------- -------- -------- -------- -------- 1...................... $ 1,313 $ 581 $ 632 $ 684 $ 231* $ 282* $ 334* $100,000 $100,000 $100,000 2...................... 2,691 1,337 1,483 1,636 821* 967* 1,120* 100,000 100,000 100,000 3...................... 4,138 2,055 2,345 2,658 1,355 1,645 1,958 100,000 100,000 100,000 4...................... 5,657 2,735 3,216 3,758 2,035 2,516 3,058 100,000 100,000 100,000 5...................... 7,252 3,374 4,095 4,940 2,774 3,495 4,340 100,000 100,000 100,000 6...................... 8,928 3,971 4,981 6,214 3,371 4,381 5,614 100,000 100,000 100,000 7...................... 10,686 4,525 5,872 7,586 4,025 5,372 7,086 100,000 100,000 100,000 8...................... 12,533 5,035 6,768 9,069 4,535 6,268 8,569 100,000 100,000 100,000 9...................... 14,472 5,498 7,667 10,670 5,098 7,267 10,270 100,000 100,000 100,000 10...................... 16,508 5,911 8,564 12,401 5,511 8,164 12,001 100,000 100,000 100,000 15...................... 28,322 7,026 12,832 23,397 6,926 12,732 23,297 100,000 100,000 100,000 20...................... 43,399 5,948 16,073 39,979 5,948 16,073 39,979 100,000 100,000 100,000 25...................... 62,642 1,412 16,911 66,574 1,412 16,911 66,574 100,000 100,000 100,000
- -------- (1) Assumes annual planned premium payments of $1,250 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-40 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B GUARANTEED COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ------------------------- -------------------------- -------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- -------- -------- ------- -------- -------- -------- -------- -------- 1...................... $ 1,313 $ 580 $ 631 $ 683 $ 230* $ 281* $ 333* $100,580 $100,631 $100,683 2...................... 2,691 1,331 1,476 1,628 631* 776* 928* 101,331 101,476 101,628 3...................... 4,138 2,041 2,327 2,639 741 1,027 1,339 102,041 102,327 102,639 4...................... 5,657 2,709 3,184 3,720 1,509 1,984 2,520 102,709 103,184 103,720 5...................... 7,252 3,332 4,042 4,876 2,132 2,842 3,676 103,332 104,042 104,876 6...................... 8,928 3,910 4,901 6,112 2,810 3,801 5,012 103,910 104,901 106,112 7...................... 10,686 4,440 5,758 7,434 3,440 4,758 6,434 104,440 105,758 107,434 8...................... 12,533 4,921 6,610 8,849 4,021 5,710 7,949 104,921 106,610 108,849 9...................... 14,472 5,351 7,453 10,362 4,551 6,653 9,562 105,351 107,453 110,362 10...................... 16,508 5,726 8,284 11,978 5,026 7,584 11,278 105,726 108,284 111,978 15...................... 28,322 6,559 11,951 21,741 6,459 11,851 21,641 106,559 111,951 121,741 20...................... 43,399 5,053 13,871 34,643 5,053 13,871 34,643 105,053 113,871 134,643 25...................... 62,642 137 12,207 51,047 137 12,207 51,047 100,137 112,207 151,047
- -------- (1) Assumes annual planned premium payments of $1,250 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-41 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION A CURRENT COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUE(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST ------------------------ -------------------------- ------------------------ YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- ------- ------- -------- ------- ------- -------- -------- ------- ------- 1...................... $ 1,313 $ 581 $ 632 $ 684 $ 231* $ 282* $ 334* $100,000 100,000 100,000 2...................... 2,691 1,546 1,699 1,858 1,030* 1,183* 1,342* 100,000 100,000 100,000 3...................... 4,138 2,483 2,798 3,138 1,783 2,098 2,438 100,000 100,000 100,000 4...................... 5,657 3,392 3,931 4,535 2,692 3,231 3,835 100,000 100,000 100,000 5...................... 7,252 4,272 5,099 6,061 3,672 4,499 5,461 100,000 100,000 100,000 6...................... 8,928 5,125 6,305 7,732 4,525 5,705 7,132 100,000 100,000 100,000 7...................... 10,686 5,952 7,552 9,563 5,452 7,052 9,063 100,000 100,000 100,000 8...................... 12,533 6,754 8,841 11,571 6,254 8,341 11,071 100,000 100,000 100,000 9...................... 14,472 7,531 10,175 13,776 7,131 9,775 13,376 100,000 100,000 100,000 10...................... 16,508 8,268 11,541 16,185 7,868 11,141 15,785 100,000 100,000 100,000 15...................... 28,322 11,424 18,983 32,231 11,324 18,883 32,131 100,000 100,000 100,000 20...................... 43,399 13,362 27,311 57,967 13,362 27,311 57,967 100,000 100,000 100,000 25...................... 62,642 13,722 36,606 100,431 13,722 36,606 100,431 100,000 100,000 122,526(3)
- -------- (1) Assumes annual planned premium payments of $1,250 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. (3) Minimum death benefit applies; see "Death Benefit Options--Minimum Death Benefit," on page A-13 for further details. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-42 FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICY(1) MALE ISSUE AGE 40 STANDARD NONSMOKER UNDERWRITING RISK SPECIFIED FACE AMOUNT: $100,000--DEATH BENEFIT OPTION B CURRENT COST OF TERM INSURANCE CHARGES
TOTAL CASH TOTAL CASH VALUES(2) SURRENDER VALUE(2) TOTAL DEATH BENEFIT(2) PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF POLICY INTEREST -------------------------------------------------- -------------------------- YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12% ------ ----------- -- ------- --------------- ------- -------- -------- -------- -------- 1...................... $1,313 $ 580 $ 631 $ 683 $ 230* $ 281* $ 333* $100,580 $100,631 $100,683 2...................... 2,691 1,543 1,695 1,854 843* 995* 1,154* 101,543 101,695 101,854 3...................... 4,138 2,476 2,790 3,129 1,176 1,490 1,829 102,476 102,790 103,129 4...................... 5,657 3,379 3,916 4,518 2,179 2,716 3,318 103,379 103,916 104,518 5...................... 7,252 4,252 5,075 6,031 3,052 3,875 4,831 104,252 105,075 106,031 6...................... 8,928 5,096 6,268 7,684 3,996 5,168 6,584 105,096 106,268 107,684 7...................... 10,686 5,911 7,497 9,490 4,911 6,497 8,490 105,911 107,497 109,490 8...................... 12,533 6,698 8,764 11,465 5,798 7,864 10,565 106,698 108,764 111,465 9...................... 14,472 7,457 10,070 13,626 6,657 9,270 12,826 107,457 110,070 113,626 10...................... 16,508 8,173 11,400 15,975 7,473 10,700 15,275 108,173 111,400 115,975 15...................... 28,322 11,150 18,491 31,340 11,050 18,391 31,240 111,150 118,491 131,340 20...................... 43,399 12,725 25,905 54,809 12,725 25,905 54,809 112,725 125,905 154,809 25...................... 62,642 12,467 33,129 90,832 12,467 33,129 90,832 112,467 133,129 190,832
- -------- (1) Assumes annual planned premium payments of $1,250 paid in full at beginning of each Policy year. The values would vary from those shown if the amount or frequency of payments varies. (2) Assumes no policy loan or partial withdrawal has been made. Excessive loans or withdrawals, adverse investment performance or insufficient premium payments may cause the Policy to terminate because of insufficient cash value. * The values indicated take into account the Securities and Exchange Commission limits on sales charges (see "Surrender Charge--Excess Sales Charge" on page A-34). As discussed on page A-34, the Cash Surrender Value for purposes of determining whether a Policy will terminate and the amount a Policy owner may borrow or partially withdraw is not affected by such limits, may be less than stated above and could be zero. IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER AND THE DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT, CASH VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY METROPOLITAN LIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. A-43 POLICY RIGHTS The description of rights under the Policy set forth below assumes that no riders are in effect. See Appendix A, page A-85, for a discussion of how these rights may be affected by certain riders under the Policy. LOAN PRIVILEGES Policy Loan. At any time, the Policy owner may borrow money from Metropolitan Life using the Policy as the only security for the loan. The smallest amount the Policy owner can borrow at any one time is $250. The maximum amount that may be borrowed at any time is the loan value. The loan value equals the cash surrender value less two monthly deductions or, if greater, 75% (90% for Policies issued in Virginia or Maryland) of the cash surrender value (or, in Texas, the Policy's cash surrender value less the monthly deductions to the end of the Policy year, if greater). For situations where a Policy loan may be treated as a taxable distribution, see "Federal Tax Matters," page A-51. Allocation of Policy Loan. Metropolitan Life will allocate a Policy loan among the Fixed Account and the investment divisions of the Separate Account on a Pro Rata Basis. Interest. The interest charged on a Policy loan accrues daily. The interest rate is currently 8% per year. Interest payments are due at the end of each Policy year. If unpaid within 31 days after it is due, interest will be treated as a new loan subject to the interest rates applicable at that time and an amount equal to such interest due will be transferred from the Fixed Account and the investment divisions of the Separate Account on a Pro Rata Basis to the Policy Loan Account. The Tax Reform Act of 1986 phased out the consumer interest deduction for federal income tax purposes. Thus, for individuals, interest paid to Metropolitan Life in connection with policy loans used for consumer purposes is no longer deductible. The Tax Reform Act of 1986 also changed the law with respect to the deductibility of interest on policyholder loans on life insurance policies owned by businesses. In the case of life insurance policies owned by a taxpayer covering the life of an individual who is an officer or employee, or is financially interested in the taxpayer's trade or business, the interest paid on the policy loan is not deductible to the extent that the aggregate indebtedness, under all the policies covering such person, exceeds $50,000. Counsel and other competent advisors should be consulted with respect to the deductibility of Policy loan interest for income tax purposes. See "Federal Tax Matters," page A-51. Effect of a Policy Loan. As of the Date of Receipt of the loan request, cash value equal to the portion of the Policy loan allocated to the Fixed Account and to each investment division will be transferred from the Fixed Account and/or such investment divisions to a Policy Loan Account within the General Account, reducing the Policy's cash value in the accounts from which the transfer was made. Cash value in the Policy Loan Account equal to indebtedness will be credited with interest at a rate equal to the fixed rate charged less a percentage charge, based on expenses associated with Policy loans, determined by Metropolitan Life. Presently, this charge is 2%. Thus, the interest rate presently credited is 6%. The minimum rate credited to the Policy Loan Account will be 4% per year. NO ADDITIONAL INTEREST WILL BE CREDITED TO THE CASH VALUE IN THE POLICY LOAN ACCOUNT, NOR WILL THE CASH VALUE IN THE POLICY LOAN ACCOUNT PARTICIPATE IN ANY INVESTMENT EXPERIENCE APPLICABLE TO THE SEPARATE ACCOUNT. The Policy's cash value in the Policy Loan Account will be the outstanding indebtedness on the valuation date plus any interest credited to the Policy Loan Account which has not yet been allocated to the Fixed A-44 Account or the investment divisions of the Separate Account as of the Valuation Date. Interest credited to amounts in the Policy Loan Account will be allocated at least once a year among the Fixed Account and the investment divisions of the Separate Account in the same proportion as the net premiums are then being allocated. Indebtedness. Indebtedness equals the outstanding Policy loan plus accrued interest thereon. If, on a monthly anniversary, indebtedness exceeds the cash value minus the monthly deduction, Metropolitan Life will notify the Policy owner and any assignee of record. If a sufficient payment is not made to Metropolitan Life within 61 days from the monthly anniversary, the Policy will terminate without value. The Policy may, however, later be reinstated, subject to certain conditions (see "Policy Termination and Reinstatement," page A-28). Repayment of Indebtedness. Indebtedness may be repaid any time before the Final Date while the insured is living. The minimum repayment is $50. If not repaid, Metropolitan Life will deduct indebtedness from any amount payable under the Policy. As of the Date of Receipt of the repayment, the Policy's cash value in the Policy Loan Account securing indebtedness will be allocated among the Fixed Account and the investment divisions of the Separate Account in the same proportion that net premiums are being allocated to those accounts at the time of repayment. The Policy owner must designate whether a payment is intended as a loan repayment or a premium payment. Any payment for which no designation is made will be treated as a premium payment. SURRENDER AND WITHDRAWAL PRIVILEGES Subject to the limitations set forth below, at any time before the earlier of the death of the insured and the Final Date, the Policy owner may make a partial withdrawal or totally surrender the Policy by sending a written request to Metropolitan Life. The maximum amount available for surrenders or withdrawal is the cash surrender value on the Date of Receipt of the request. No charge will be imposed on partial withdrawals. See "Charges and Deductions--Surrender Charge," page A-32 for a discussion of surrender charges. For any tax consequences in connection with a partial withdrawal or surrender, see "Federal Tax Matters," page A-51. Surrenders. The Policy owner may surrender the Policy for its cash surrender value. If the Policy is being surrendered, Metropolitan Life may require that the Policy itself be returned along with the request. A Policy owner may elect to have the proceeds paid in a single sum or applied under an optional income plan (see "Appendix A," page A-85). If the insured dies after the surrender of the Policy and payment to the Policy owner of the cash surrender value but before the end of the Policy month in which the surrender occurred, a death benefit will be payable to the beneficiary in an amount equal to the difference between the Policy's death benefit and cash value, both computed as of the surrender date. Partial Withdrawals. The Policy owner may make a partial withdrawal from the Policy's cash surrender value. The minimum partial withdrawal is $250. There is no charge for a partial withdrawal. The amount withdrawn will be deducted from the Policy's cash value as of the Date of Receipt. The amount will be deducted from the Fixed Account and the investment divisions of the Separate Account on a Pro Rata Basis. When death benefit Option A is in effect, any partial withdrawal will reduce the specified face amount, and thus the death benefit, by the amount withdrawn. When death benefit Option B is in effect, the amount withdrawn will not reduce the specified face amount. However, the death benefit will be reduced by the amount withdrawn. If increases in the specified face amount previously have occurred, a partial withdrawal A-45 when Death Benefit Option A is in effect will reduce the specified face amount in the same manner as would a direct request by the Policy owner to reduce the specified face amount (see "Policy Benefits--Decreases," page A-15). A Policy owner will not be permitted to make any partial withdrawal that would reduce the specified face amount of the Policy below the Minimum Initial Specified Face Amount in the first five Policy years or one-half the Minimum Initial Specified Face Amount thereafter (see "Policy Benefits--Decreases," page A-15), or that would result in total premiums paid exceeding the then current maximum premium limitation determined by Internal Revenue Code rules (see "Premiums--Premium Limitations," page A-26). A partial withdrawal will also not be permitted unless the resulting cash surrender value would be sufficient to pay at least two monthly deductions. Any time a request for a partial withdrawal is received that would reduce the specified face amount below the minimum face amount, result in total premiums paid exceeding maximum premium limitations, or reduce the cash surrender value below two monthly deductions, Metropolitan Life will not implement the partial withdrawal request, but will contact the Policy owner as to whether the request should be withdrawn or reduced to a smaller amount or changed to a request for the full cash surrender value. EXCHANGE PRIVILEGE During the first 24 Policy months following the issuance of the Policy, the Policy owner may exercise the Policy exchange privilege, which results in the transfer at any one time of the entire amount in the Separate Account to the Fixed Account, and the allocation of all future net premiums to the Fixed Account. This will, in effect, serve as an exchange of the Policy for the equivalent of a flexible premium fixed benefit life insurance policy. No charge will be imposed on such transfer in exercising this exchange privilege. Moreover, the Policy owner may subsequently transfer amounts back to one or more of the investment divisions of the Separate Account at any time, within the limitations described in "Allocation of Premiums and Cash Value--Cash Value Transfers," on page A-27. In those states which require it, the Policy owner may also, during the first 24 Policy months following the issuance of the Policy, without charge, on one occasion exchange any Policy still in force for a flexible premium fixed benefit life insurance policy issued by Metropolitan Life. Upon such exchange, the Policy's cash value will be transferred to the general account of Metropolitan Life. THE FIXED ACCOUNT A Policy owner may allocate net premiums and transfer cash value to the Fixed Account, which is part of the General Account of Metropolitan Life. Because of exemptive and exclusionary provisions, interests in the Fixed Account have not been registered under the Securities Act of 1933 and neither the Fixed Account nor the General Account has been registered as an investment company under the 1940 Act. Accordingly, neither the General Account, the Fixed Account nor any interests therein are generally subject to the provisions of these Acts and Metropolitan Life has been advised that the staff of the Securities and Exchange Commission has not reviewed the disclosures in this Prospectus relating to the Fixed Account. Disclosures regarding the Fixed Account may, however, be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses. A-46 GENERAL DESCRIPTION This Prospectus is generally intended to serve as a disclosure document only for the aspects of the Policy involving the Separate Account and contains only selected information regarding the Fixed Account. For complete details regarding the Fixed Account, see the Policy itself. The General Account consists of all assets owned by Metropolitan Life other than those in the Separate Account and other separate accounts. Subject to applicable law, Metropolitan Life has sole discretion over the investment of the assets of the General Account, including those in the Fixed Account. Unlike the assets of the Separate Account, the assets in the Fixed Account, as a part of the General Account, are chargeable with liabilities arising out of any other business of Metropolitan Life. A Policy owner may elect to allocate net premiums to the Fixed Account or to transfer cash value from the investment divisions of the Separate Account to the Fixed Account. The allocation or transfer of funds to the Fixed Account does not entitle a Policy owner to share in the investment experience of the General Account. Instead, Metropolitan Life guarantees that cash value in the Fixed Account will accrue interest at an effective annual rate of at least 4%, independent of the actual investment experience of the General Account. Metropolitan Life is not obligated to credit interest at any higher rate, although Metropolitan Life may, in its sole discretion, do so. FIXED ACCOUNT BENEFITS The Policy owner may select either death benefit Option A or B under the Policy and may change such option or the Policy's specified face amount, subject to satisfactory evidence of insurability where required and subject to all the conditions and limitations applicable to such transactions generally (see "Policy Benefits--Death Benefits," page A-13). FIXED ACCOUNT CASH VALUE Net premiums allocated to the Fixed Account are credited to the Policy. Metropolitan Life guarantees that interest credited to each Policy owner's cash value in the Fixed Account will not be less than an effective annual rate of at least 4% per year. This is the rate that will be credited to the first $1,000 of cash value in the Fixed Account. Metropolitan Life may declare any rate of interest in excess of 4% at any time to be credited to amounts of cash value in the Fixed Account in excess of $1,000, subject to the following conditions: Metropolitan Life will not change the rate of excess interest on any premiums paid during any month of the year before the first day of the same month of the subsequent year; thereafter, Metropolitan Life will not change the rate of excess interest for a period of twelve months from the date declared. Metropolitan Life may also establish multiple bands of excess interest. This means that different rates of excess interest may apply to premium payments made in different months of the year and at the end of each twelve-month period, and different rates of excess interest may apply to cash value related to premiums received in a given month of each prior year. Transfers made into the Fixed Account will be treated as new premium payments for these purposes. The guaranteed and excess interest are credited each Valuation Date. Once credited, that interest will be guaranteed and become part of the Policy's cash value in the Fixed Account. The monthly deduction will be charged against the most recent premiums paid and interest credited thereto. A-47 ANY INTEREST METROPOLITAN LIFE CREDITS ON THE POLICY'S CASH VALUE IN THE FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF METROPOLITAN LIFE. THE POLICY OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO AMOUNTS OF CASH VALUE IN THE FIXED ACCOUNT IN EXCESS OF $1,000 MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR. The cash value in the Fixed Account will be calculated on each Valuation Date. The Policy's cash value in the Fixed Account will reflect the amount and frequency of premium payments allocated to the Fixed Account, the amount of interest credited to amounts in the Fixed Account, any partial withdrawals, any transfers from or to the investment divisions of the Separate Account, any Policy indebtedness and any charges imposed on amounts in the Fixed Account in connection with the Policy. The portion of the monthly deduction attributable to the Fixed Account will be determined as of the actual monthly anniversary, even if the monthly anniversary does not fall on a Valuation Date. TRANSFERS, WITHDRAWALS, SURRENDERS, AND POLICY LOANS Amounts in the Fixed Account are subject to the same rights and limitations as are amounts allocated to the investment divisions of the Separate Account with respect to transfers, withdrawals, surrenders and Policy loans (see "Allocation of Premiums and Cash Value--Cash Value Transfers;" "Loan Privileges," "Surrender and Withdrawal Privileges," pages A-27, A-44 and A-45). Metropolitan Life reserves the right to delay transfers, withdrawals, surrenders and the payment of the Policy loans allocated to the Fixed Account for up to six months (see "Other Policy Provisions--Payment and Deferment," page A-50). Payments to pay premiums on another policy with Metropolitan Life will not be delayed. RIGHTS RESERVED BY METROPOLITAN LIFE Metropolitan Life reserves the right to make certain changes if, in its judgment, they would best serve the interests of the Policy owners or would be appropriate in carrying out the purposes of the Policies. Any changes will be made only to the extent and in the manner permitted by applicable laws. Also, when required by law, Metropolitan Life will obtain Policy owner approval of the changes and approval from any appropriate regulatory authority. Examples of the changes Metropolitan Life may make include: . To operate the Separate Account in any form permitted under the 1940 Act or in any other form permitted by law. . To take any action necessary to comply with or obtain and continue any exemptions from the 1940 Act. . To transfer any assets in any investment division to another investment division, or to one or more separate accounts, or to the Fixed Account; or to add, combine or remove investment divisions in the Separate Account. . To substitute, for the Fund shares held in any investment division, the shares of another portfolio of the Fund or the shares of another investment company or any other investment permitted by law. A-48 . To change the way Metropolitan Life assesses charges, but without increasing the aggregate amount charged to the Fixed Account, the Separate Account and any currently available portfolio of the Fund in connection with the Policies. . To make any other necessary technical changes in the Policy in order to conform with any action the above provisions permit Metropolitan Life to take. If any of these changes result in a material change in the underlying investments of an investment division to which the net premiums of a Policy are allocated. Metropolitan Life will notify the Policy owner of such change, and the owner may then make a new choice of investment divisions or the Fixed Account without charge. OTHER POLICY PROVISIONS Owner. The owner of a Policy is the insured unless another owner has been named in the application for the Policy. The owner is entitled to exercise all rights under a Policy while the insured is alive, including the right to name a new owner or a contingent owner who would become the Policy owner if the owner should die before the insured dies. Beneficiary. The beneficiary is the person or persons to whom the insurance proceeds are payable upon the insured's death. The owner may name a contingent beneficiary to become the beneficiary if all the beneficiaries die while the insured is alive. If no beneficiary or contingent beneficiary is alive when the insured dies, the owner (or the owner's estate) will be the beneficiary. While the insured is alive, the owner may change any beneficiary or contingent beneficiary. If more than one beneficiary is alive when the insured dies, they will be paid in equal shares, unless the owner has chosen otherwise. Incontestability. Metropolitan Life will not contest the validity of a Policy after it has been in force during the insured's lifetime for two years from the Date of Policy (or date of reinstatement if a terminated Policy is reinstated) except with respect to certain optional insurance benefits that may be added subsequent to the Date of Policy. Metropolitan Life will not contest the validity of any increase in the death benefit after such increase has been in force during the insured's lifetime for two years from its effective date. Suicide. The insurance proceeds will not be paid if the insured commits suicide, while sane or insane, within two years (one year in Colorado and North Dakota) from the Date of Policy. Instead, Metropolitan Life will pay the beneficiary an amount equal to all premiums paid for the Policy, without interest, less any outstanding Policy loan and accrued loan interest and less any partial cash withdrawal. If the insured commits suicide, while sane or insane, more than two years after the Date of Policy but within two years (one year in Colorado and North Dakota) from the effective date of any increase in the death benefit, Metropolitan Life's liability with respect to such increase will be limited to the cost thereof. Age and Sex. If the insured's age or sex as stated in the application for a Policy is not correct, benefits under a Policy will be adjusted to reflect the correct age and sex. Collateral Assignment. The owner may assign a Policy as collateral. All rights under the Policy will be transferred to the extent of the assignee's interest. Metropolitan Life is not bound by an assignment or A-49 release thereof, unless it is in writing and is recorded at the Designated Office. Metropolitan Life is not responsible for the validity of any assignment or release thereof. Payment and Deferment. With respect to amounts in the investment divisions of the Separate Account, payment of the death benefit, all or a portion of the cash surrender value, free look proceeds or a loan will ordinarily be made within seven days after the Date of Receipt of all documents required for such payment. Metropolitan Life will pay interest on the amount of death benefit at a rate which is currently 6% per year (or such higher rate as may be required by state law) from the date of death until the date of payment of the death benefit. However, Metropolitan Life may defer the determination, application or payment of any such amount or any transfer of cash value for any period during which the New York Stock Exchange is closed (other than customary weekend and holiday closings), for any period during which any emergency exists as a result of which it is not reasonably practicable for Metropolitan Life to determine the investment experience for a Policy or for such other periods as the Securities and Exchange Commission may by order permit for the protection of Policy owners. Metropolitan Life will not defer a loan used to pay premiums on other policies issued by it. As with traditional life insurance, Metropolitan Life can delay payment of the entire insurance proceeds or other Policy benefits if entitlement to payment is being questioned or is uncertain. Dividends. The Policies are nonparticipating. This means that they are not eligible for dividends, and they do not participate in any distribution of Metropolitan Life's surplus. The description throughout this Prospectus of the features of the Policies is subject to the specific terms of the Policies. SALES AND ADMINISTRATION OF THE POLICIES Metropolitan Life performs the sales and administrative services relating to the Policies. The offices of Metropolitan Life which may administer the Policies are located in: Aurora, Illinois; Johnstown, Pennsylvania; Pearl River, New York; Princeton, New Jersey; San Ramon, California; Tampa, Florida; Tulsa, Oklahoma; and Warwick, Rhode Island. Each Policy owner will be notified which office will be the Designated Office for servicing the Policy. Metropolitan Life may name different Designated Offices for different transactions. Metropolitan Life acts as the principal underwriter (distributor) of the Policies as defined in the 1940 Act (see "Distribution of the Policies," page A-51). In addition to selling insurance and annuities, Metropolitan Life also serves as investment adviser to certain other advisory clients, and is also principal underwriter for Metropolitan Tower Separate Accounts One and Two of Metropolitan Tower Life Insurance Company, a wholly-owned subsidiary of Metropolitan Life, and Metropolitan Life Separate Account E of Metropolitan Life, each of which is registered as a unit investment trust under the 1940 Act. Finally, Metropolitan Life acts as principal underwriter for a different form of the flexible premium multifunded life insurance policy and for a flexible premium variable universal life insurance policy, premiums for which may also be allocated to the Separate Account. Bonding. The directors, officers and employees of Metropolitan Life are bonded in the amount of $50,000,000, subject to a $5,000,000 deductible. A-50 DISTRIBUTION OF THE POLICIES The Policies will be sold by individuals who are licensed life insurance sales representatives and registered representatives of Metropolitan Life, the principal underwriter of the Policies. Metropolitan Life is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. The Policies may in the future be sold through other registered broker-dealers, including MetLife Securities, Inc., a wholly owned broker- dealer subsidiary of Metropolitan Life. Maximum commissions payable during the first policy year to writing representatives will be 45% of the target premium for a Policy where the Policy owner chooses death benefit Option A at issue and 55% of the Option A target premium for a Policy where Option B is chosen, plus, in either case, 3% of the excess of the premium paid over the Option A target premium. In no event will first year commissions for a Policy exceed 41.25% of the federal guideline annual premium set forth in Section 7702 of the Internal Revenue Code. Writing representatives may be required to return all or part of the first year commission if the Policy is not continued through the second Policy year. Renewal commissions in Policy years 2 through 4 will be 5% of premiums paid and are payable to the writing representative. Renewal commissions in Policy years 5 through 10 will be 2% of premiums paid. Renewal commissions in Policy years 11 and after will be 1% of premiums paid. The sales manager receives (i) a commission not to exceed 16% of first year commissions credited to the writing representative and (ii) a commission not to exceed 16% of renewal commissions paid to the writing representative in Policy years 2 and later. The commissions are paid by Metropolitan Life. They do not result in any charges against the Policy in addition to those set forth under "Charges and Deductions," page A-29. During 1992, such commissions aggregated approximately $5,300,000. FEDERAL TAX MATTERS The following description is a brief summary of some of the tax rules, primarily related to federal income and estate taxes, which in the opinion of Metropolitan Life are currently in effect. TAXATION OF THE POLICY The Policy receives the same federal income and estate tax treatment as fixed benefit life insurance. The death benefit payable under either death benefit option in the Policy is generally excludable from the gross income of the beneficiary under Section 101 of the Internal Revenue Code ("Code") and the Policy owner is not deemed to be in constructive receipt of the cash values under the Policy until actual withdrawal or surrender. Under existing tax law, unless a Policy is a modified endowment contract as discussed below, a Policy owner generally will be taxed on cash value withdrawn from the Policy and cash value received upon surrender of the Policy. Under most circumstances, only the amount withdrawn or received upon surrender that exceeds the total premiums paid will be treated as ordinary income. The United States Treasury Department has adopted regulations which set diversification rules for the investments underlying the Policies, in order for the Policies to be treated as life insurance. Metropolitan Life believes that these diversification standards will be satisfied. There is a provision in the regulations which allows for the correction of an inadvertent failure to diversify. Failure to comply with the rules found in the regulations would result in immediate taxation to Policy owners of all positive investment experience credited to a Policy. A-51 There is a possibility that regulations may be proposed in the future describing the extent to which Policy owner control over allocation of cash value may cause Policy owners to be treated as the owners of Separate Account assets for tax purposes. Metropolitan Life reserves the right to amend the Policies in any way necessary to avoid any such result. Metropolitan Life also believes that loans received under the Policy will be treated as indebtedness of an owner for federal tax purposes, and, unless the Policy is or becomes a modified endowment contract as described below, that no part of any loan received under a Policy will constitute income to the owner. A partial withdrawal may have tax consequences depending on the circumstances of such withdrawal. A total surrender or cancellation of the Policy also may have tax consequences depending on the circumstances. The Technical and Miscellaneous Revenue Act of 1988 amended the federal income tax treatment of pre-death withdrawals from a class of life insurance contracts referred to as modified endowment contracts. Unlike other life insurance contracts, amounts received before death from a modified endowment contract, including policy loans, are treated first as income (to the extent of gain) and then as recovered investment. For purposes of determining the amount includible in income, all modified endowment contracts issued by the same company (or affiliate) to the same policyholder during any calendar year will be treated as one modified endowment contract. Finally, an additional 10% income tax is generally imposed on the taxable portion of amounts received before age 59 1/2. In general, a modified endowment contract is a life insurance contract entered into or materially changed after June 20, 1988 that fails to meet a "7- pay test". Under the 7-pay test, if the amount of premiums paid under the life insurance contract at any time during the first 7 policy years exceeds the sum of the net level premiums which would have been paid if the contract provided for paid-up future benefits after the payment of 7 level annual payments, the contract is a modified endowment contract. A policy may have to be reviewed under the 7-pay test even after the first seven policy years in the case of certain events such as a material modification of the policy as discussed below. If there is a reduction in benefits under the contract during any 7-pay testing period, the 7-pay test is applied using the reduced benefits level. Any distribution made within two years before a policy fails the 7-pay test is treated as made in anticipation of such failure. Whether or not a particular policy meets these definitional requirements is dependent on the date the contract was entered into, premium payments made and the periodic premium payments to be made, the level of death benefits, any changes in the level of death benefits, the extent of any prior cash withdrawals, and other factors. Generally, a life insurance policy which is received in exchange for a modified endowment contract will also be considered a modified endowment contract. A Policy should be reviewed upon issuance, upon making a cash withdrawal, upon making a change in future benefits and upon making a material modification to the Policy to determine to what extent, if any, these tax rules apply. A material modification to a Policy includes, but is not limited to, any increase in the future benefits provided under the Policy. However, in general, increases that are attributable to the payment of premiums necessary to fund the lowest death benefit payable in the first 7 Policy years will not be considered material modifications. The annual statement sent to each Policy owner will include information regarding the modified endowment contract status of a Policy (see "Premiums--Premium Limitations," page A-26). Counsel and other competent advisors should be consulted to determine how these rules apply to an individual situation and before making unscheduled premium payments, increasing or decreasing the specified face amount, or adding or removing a rider. A-52 Congress may, in the future, consider other legislation that, if enacted, could adversely affect the tax treatment of life insurance policies. In addition, the Treasury Department may by regulation or interpretation modify the above described tax effects. Any legislative or administrative action could be applied retroactively. The death benefit payable under the Policy is includable in the insured's gross estate for federal estate tax purposes if the death benefit is paid to the insured's estate or if the death benefit is paid to a beneficiary other than the estate and the insured either possessed incidents of ownership in the Policy at the time of death or transferred incidents of ownership in the Policy to another person within three years of death. Whether or not any federal estate tax is payable with respect to the death benefit of the Policy which is included in the insured's gross estate depends on a variety of factors including the following. A smaller size estate may be exempt from federal estate tax because of a current estate tax credit which generally is equivalent to an exemption of $600,000. In addition, a death benefit paid to a surviving spouse may not be taxable because of a 100% estate tax marital deduction. Furthermore, a death benefit paid to a tax-exempt charity may not be taxable because of the allowance of an estate tax charitable deduction. If the owner of the Policy is not the insured, and the owner dies before the insured, the value of the Policy, as determined under Internal Revenue Service regulations, is includable in the federal gross estate of the owner for federal estate tax purposes. Whether a federal estate tax is payable depends on a variety of factors, including those listed in the preceding paragraph. State and local income, estate, inheritance and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each insured, owner or beneficiary. The foregoing summary does not purport to be complete or to cover all situations. Counsel and other competent advisors should be consulted for more complete information. TAXATION OF METROPOLITAN LIFE Metropolitan Life does not initially expect to incur any federal income tax upon the earnings or the realized capital gains attributable to the Separate Account. Based upon these expectations, no charge is currently being made against the Separate Account for federal income taxes with respect to earnings or capital gains which may be attributable to the Separate Account. If, however, Metropolitan Life determines that it may incur such taxes, it may assess a charge against or make provisions in the Separate Account for those taxes. Under present laws, Metropolitan Life may incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If they increase, however, Metropolitan Life may decide to make charges for such taxes against or provisions for such taxes in the Separate Account. However, there is a 2% charge on premiums paid imposed for state premium taxes. A-53 MANAGEMENT The present directors and the senior officers and secretary of Metropolitan Life are listed below, together with certain information concerning them: DIRECTORS, OFFICERS-DIRECTORS
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE - ---- ---------------------- ---------------------- Theodossios Athanassiades.......... President and Chief Operating Officer, President, Chief Operating Metropolitan Life Insurance Company, Officer and Director One Madison Avenue, New York, NY 10010. Joan Ganz Cooney........ Chairman, Executive Committee, Director Children's Television Workshop, One Lincoln Plaza, New York, NY 10023. John J. Creedon......... Retired President Director and Chief Executive Officer, Metropolitan Life Insurance Company, 200 Park Avenue, Suite 5700 New York, NY 10166. A. Luis Ferre........... President, El Nuevo Dia, Director P.O. Box 297, San Juan, PR 00902. James R. Houghton....... Chairman of the Board and Director Chief Executive Officer, Corning Incorporated, Corning, NY 14830. Harry P. Kamen.......... Chairman of the Board and Chairman of the Board, Chief Chief Executive Officer, Executive Officer Metropolitan Life Insurance Company, and Director One Madison Avenue, New York, NY 10010. Helene L. Kaplan........ Of Counsel, Skadden, Arps, Slate, Director Meagher & Flom, 919 Third Avenue, New York, NY 10022.
A-54
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE ---- ---------------------- ---------------------- George M. Keller........ Retired Chairman of the Board, Director Chevron Corporation, 555 Market Street, Suite 1429, San Francisco, CA 94105-2870. Melvin R. Laird......... Senior Counsellor for National and Director International Affairs, Reader's Digest 1730 Rhode Island Ave., N.W., Suite 212, Washington, DC 20036. Richard J. Mahoney...... Chairman of the Board and Director Chief Executive Officer, Monsanto Company, 800 N. Lindbergh Blvd., St. Louis, MO 63167. Allen E. Murray......... Chairman of the Board Director and Chief Executive Officer, Mobil Corporation, P.O. Box 2072 New York, NY 10163. John J. Phelan, Jr. .... Retired Chairman and Chief Executive Director Officer, New York Stock Exchange, Inc., 237 Park Avenue, 21st Floor, New York, NY 10017. John B. M. Place........ Former Chairman of the Board, Director Crocker National Corporation, 111 Sutter Street, 4th Fl., San Francisco, CA 94104. Roscoe Robinson, Jr. ... General, U.S. Army (retired) , Director 7440 Mason Lane, Falls Church, VA 22042 Robert G. Schwartz...... Retired Chairman of the Board, Director President and Chief Executive Officer, Metropolitan Life Insurance Company, 200 Park Avenue, Suite 5700 New York, NY 10166
A-55
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES NAME BUSINESS ADDRESS WITH METROPOLITAN LIFE ---- ---------------------- ---------------------- William S. Sneath....... Retired Chairman of the Board, Director Union Carbide Corporation, 41 Leeward Lane, Riverside, CT 06878. John R. Stafford........ Chairman of the Board Director and Chief Executive Officer, American Home Products Corporation, 685 Third Avenue, New York, NY 10017.
OFFICERS*
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE --------------- ------------------------------- Stewart G. Nagler.............. Senior Executive Vice-President Gerald Clark................... Executive Vice-President Robert J. Crimmins............. Executive Vice-President John D. Moynahan, Jr. ......... Executive Vice-President William G. Poortvliet.......... Executive Vice-President Catherine A. Rein.............. Executive Vice-President Richard M. Blackwell........... Senior Vice-President and General Counsel Anthony C. Cannatella.......... Senior Vice-President Paul R. Crotty................. Senior Vice-President James B. Digney................ Senior Vice-President John J. Falzon................. Senior Vice-President William T. Friedewald.......... Senior Vice-President and Chief Medical Director Bruce J. Goodman............... Senior Vice-President Frederick P. Hauser............ Senior Vice-President & Controller C. Robert Henrikson............ Senior Vice-President Jeffrey J. Hodgman............. Senior Vice-President David A. Levene................ Senior Vice-President and Chief Actuary Francis P. Lynch............... Senior Vice-President
- -------- * The principal occupation of each officer during the last five years has been as an officer of Metropolitan Life. The business address of each officer is 1 Madison Avenue, New York, New York 10010. A-56
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE --------------- ------------------------------- Richard N. Maurer.......................... Senior Vice-President John C. Morrison........................... Senior Vice-President Mwafak S. Peress........................... Senior Vice-President Dominick A. Prezzano....................... Senior Vice-President Leo T. Rasmussen........................... Senior Vice-President Vincent P. Reusing......................... Senior Vice-President Robert E. Sollmann, Jr..................... Senior Vice-President Thomas L. Stapleton........................ Senior Vice-President & Tax Director George B. Trotta........................... Senior Vice-President Arthur G. Typermass........................ Senior Vice-President & Treasurer James A. Valentino......................... Senior Vice-President Richard S. Walsh........................... Senior Vice-President Judy E. Weiss.............................. Senior Vice-President Harvey M. Young............................ Senior Vice-President Nicholas D. Latrenta....................... Vice-President and Secretary
A-57 VOTING RIGHTS RIGHT TO INSTRUCT VOTING OF FUND SHARES In accordance with its view of present applicable law, Metropolitan Life will vote the shares of each of the portfolios of the Fund which are deemed attributable to Policies at regular and special meetings of the shareholders of the Fund based on instructions received from persons having the voting interest in corresponding investment divisions of the Separate Account. However, if the 1940 Act or any rules thereunder should be amended or if the present interpretation thereof should change, and as a result Metropolitan Life determines that it is permitted to vote such shares of the Fund in its own right, it may elect to do so. Accordingly, the Policy owner will have a voting interest under a Policy. The number of shares held in each Separate Account investment division deemed attributable to each owner is determined by dividing a Policy's cash value in that division, if any, by the net asset value of one share in the corresponding Fund portfolio in which the assets in that Separate Account investment division are invested. Fractional votes will be counted. The number of shares concerning which a Policy owner has the right to give instructions will be determined as of the record date for the meeting. Fund shares held in each registered separate account of Metropolitan Life or any affiliate that are or are not attributable to life insurance policies (including the Policies) or annuity contracts and for which no timely instructions are received will be voted in the same proportion as the shares for which voting instructions are received by that separate account. Fund shares held in the general accounts or unregistered separate accounts of Metropolitan Life or its affiliates will be voted in the same proportion as the aggregate of (i) the shares for which voting instructions are received and (ii) the shares that are voted in proportion to such voting instructions. However, if Metropolitan Life or an affiliate determines that it is permitted to vote any such shares of the Fund in its own right, it may elect to do so subject to the then current interpretation of the 1940 Act or any rules thereunder. The Policy owners may give instructions regarding, among other things, the election of the Board of Directors of the Fund, ratification of the selection of the Fund's independent auditors, and the approval of the Fund's investment manager and sub-investment manager. Each Policy owner having a voting interest will be sent voting instruction soliciting material and a form for giving voting instructions to Metropolitan Life. DISREGARD OF VOTING INSTRUCTIONS Notwithstanding contrary Policy owner voting instructions, Metropolitan Life may vote Fund shares in any manner necessary to enable the Fund to (1) make or refrain from making any change in the investments or investment policies for any portfolio of the Fund, if required by any insurance regulatory authority; (2) refrain from making any change in the investment policies or any investment adviser or principal underwriter of any portfolio which may be initiated by Policy owners or the Fund's Board of Directors, provided Metropolitan Life's disapproval of the change is reasonable and, in the case of a change in investment policies or investment adviser, based on a good faith determination that such change would be contrary to state law or otherwise inappropriate in light of the portfolio's objective and purposes; or (3) enter into or refrain from entering into any advisory agreement or underwriting contract, if required by any insurance regulatory authority. In the event that Metropolitan Life does disregard voting instructions, a summary of the action and the reasons for such action will be included in the next semiannual report to Policy owners. A-58 REPORTS Policy owners will receive promptly statements of significant transactions such as change in specified face amount, change in death benefit option, transfers among investment divisions, partial withdrawals, increases in loan principal by the Policy owner, loan repayments, termination for any reason, reinstatement and premium payments. Policy owners whose premiums are automatically remitted under a check-o-matic allotment deduction or certain payroll deduction plans do not receive confirmation of premium payments from Metropolitan Life apart from that provided by their bank or employer. An annual statement will also be sent to the Policy owner within thirty days after a Policy year summarizing all of the above transactions and deductions of charges occurring during that Policy year and setting forth the status of the death benefit, cash and cash surrender values, amounts in the investment divisions and Fixed Account, any policy loan and unpaid loan interest added to loan principal. The annual statement will also discuss the modified endowment contract status of a Policy (see "Premiums--Premium Limitations," page A-26). In addition, an owner will be sent semiannual reports containing financial statements for the Fund, as required by the 1940 Act. STATE REGULATION Metropolitan Life is subject to regulation and supervision by the Insurance Department of the State of New York, which periodically examines its affairs. It is also subject to the insurance laws and regulations of all jurisdictions where it is authorized to do business. Where required, a copy of the form of Policy has been filed with, and approved by, insurance officials in each jurisdiction where the Policies are sold. Metropolitan Life intends to satisfy the necessary requirements to sell the Policies in all fifty states and the District of Columbia as soon as possible. Metropolitan Life is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which is does business, for the purposes of determining solvency and compliance with local insurance laws and regulations. Such statements are available for public inspection at state insurance department offices. REGISTRATION STATEMENT A registration statement under the Securities Act of 1933 has been filed with the Securities and Exchange Commission relating to the offering described in this Prospectus. This Prospectus does not contain all the information set forth in the registration statement and amendments thereto and the exhibits filed as a part thereof, to all of which reference is hereby made for additional information concerning the Separate Account, Metropolitan Life and the Policies. The additional information may be obtained at the Commission's main office in Washington, D.C., upon payment of the prescribed fees. LEGAL MATTERS The legality of the Policies described in this Prospectus has been passed upon by Christopher P. Nicholas, Associate General Counsel of Metropolitan Life. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have acted as special counsel on certain matters relating to the federal securities laws. A-59 EXPERTS The financial statements included in this Prospectus have been audited by Deloitte & Touche, independent auditors, as stated in their reports appearing herein, and have been so included in reliance upon such opinions given upon the authority of such firm as experts in auditing and accounting. Actuarial matters included in this Prospectus have been examined by Pamela J. Duffy, FSA, MAAA, Vice-President of Metropolitan Life, as stated in her opinion filed as an exhibit to the registration statement. FINANCIAL STATEMENTS The financial statements of Metropolitan Life included in this Prospectus should be considered only as bearing upon the ability of Metropolitan Life to meet its obligations under the Policies. A-60 INDEPENDENT AUDITORS' REPORT Metropolitan Life Insurance Company: We have audited the accompanying balance sheets of Metropolitan Life Insurance Company (the Company) as of December 31, 1992 and 1991 and the related statements of operations and surplus and of cash flow for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1992 and 1991 and the results of its operations and its cash flow for the years then ended in conformity with accounting practices prescribed or permitted by insurance regulatory authorities and generally accepted accounting principles. As described in Note 1, in 1992 the Company changed its method of computing investment valuation reserves as prescribed by the Insurance Department of the State of New York. DELOITTE & TOUCHE New York, N.Y. February 11, 1993 A-61 METROPOLITAN LIFE INSURANCE COMPANY BALANCE SHEETS DECEMBER 31, 1992 AND 1991
NOTES 1992 1991 ----- -------- -------- (IN MILLIONS) ASSETS Bonds................................................... 3 $ 57,477 $ 52,432 Stocks.................................................. 2,3 3,168 4,489 Mortgage loans.......................................... 2,3 17,422 20,232 Real estate............................................. 8,672 7,942 Policy loans............................................ 3 3,099 2,661 Cash and short-term Investments......................... 1,224 1,432 Other Invested assets................................... 2 4,389 3,899 Premiums deferred and uncollected....................... 1,405 1,286 Investment income due and accrued....................... 1,369 1,383 Separate Account assets................................. 19,512 14,591 Other assets............................................ 441 452 -------- -------- TOTAL ASSETS.................................. $118,178 $110,799 ======== ======== LIABILITIES AND SURPLUS Reserves for life and health insurance and annuities.... 4,5 $ 66,539 $ 63,266 Policy proceeds and dividends left with the Company..... 4 2,728 2,635 Dividends due to policyholders.......................... 1,380 1,481 Premium deposit funds................................... 4 16,717 17,725 Other policy liabilities................................ 3,699 3,677 Investment valuation reserves........................... 1,506 1,515 Separate Account liabilities............................ 19,260 14,423 Other liabilities....................................... 1,332 1,311 -------- -------- Total liabilities................................. 113,161 106,033 -------- -------- SURPLUS: Special contingency reserves......................... 585 739 Unassigned funds..................................... 4,432 4,027 -------- -------- Total surplus..................................... 5,017 4,766 -------- -------- TOTAL LIABILITIES AND SURPLUS................. $118,178 $110,799 ======== ========
See accompanying notes to financial statements. A-62 METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS AND SURPLUS FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
NOTES 1992 1991 ----- ------- ------- (IN MILLIONS) INCOME: Premiums, annuity considerations and deposit funds.... 5 $19,933 $19,462 Considerations for supplementary contracts and divi- dend accumulations.................................... 1,582 1,447 Net investment income................................. 7,332 7,585 Other income.......................................... 5 145 (6) ------- ------- Total income.......................................... 28,992 28,488 ------- ------- BENEFITS AND EXPENSES: Benefit payments (other than dividends)............... 20,501 21,689 Changes to reserves, deposit funds and other policy liabilities........................................... 587 (124) Insurance expenses and taxes.......................... 2,454 2,333 Net transfers to Separate Accounts.................... 3,501 2,691 ------- ------- Total benefits and expenses before dividends to poli- 27,043 26,589 cyholders............................................. ------- ------- NET GAIN FROM OPERATIONS BEFORE DIVIDENDS TO POLICY- HOLDERS AND FEDERAL INCOME TAXES...................... 1,949 1,899 DIVIDENDS TO POLICYHOLDERS............................. 1,600 1,779 ------- ------- NET GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES... 349 120 FEDERAL INCOME TAXES (EXCLUDING TAX ON CAPITAL GAINS).. 6 210 56 ------- ------- NET GAIN FROM OPERATIONS............................... 139 64 NET REALIZED CAPITAL GAINS............................. 6 86 173 ------- ------- NET INCOME............................................. 225 237 SURPLUS ADDITIONS (DEDUCTIONS):........................ Change in General Account net unrealized capital gains or (losses)........................................... (151) 134 Change in investment valuation reserves............... 8 (471) Other adjustments--net................................ 169 560 ------- ------- NET CHANGE IN SURPLUS.................................. 251 460 SURPLUS AT BEGINNING OF YEAR........................... 4,766 4,306 ------- ------- SURPLUS AT END OF YEAR................................. $ 5,017 $ 4,766 ======= =======
See accompanying notes to financial statements. A-63 METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOW FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
1992 1991 ------- ------- (IN MILLIONS) CASH PROVIDED: Premiums, annuity considerations and deposit funds received. $19,835 $20,098 Considerations for supplementary contracts and dividend ac- cumulations received........................................ 1,582 1,447 Net investment income received.............................. 7,050 7,143 Other income received....................................... 158 19 ------- ------- Total receipts......................................... 28,625 28,707 ------- ------- Benefits paid (other than dividends)........................ 18,975 20,025 Insurance expenses and taxes paid........................... 2,462 2,300 Net transfers to Separate Accounts.......................... 3,532 2,692 Dividends paid to policyholders............................. 1,650 1,804 Federal income taxes paid (excluding tax on capital gains).. 53 (189) Other--net.................................................. 443 (492) ------- ------- Total payments......................................... 27,115 26,140 ------- ------- Net cash from operations.................................... 1,510 2,567 Proceeds from long-term investments sold, matured or repaid after deducting tax on capital gains of $392 for 1992 and $289 for 1991....... 47,151 26,529 Other cash provided......................................... 183 261 ------- ------- Total cash provided......................................... 48,844 29,357 ------- ------- CASH APPLIED: Cost of long-term investments acquired...................... 48,779 31,562 Other cash applied.......................................... 273 359 ------- ------- Total cash applied.......................................... 49,052 31,921 ------- ------- NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS................ (208) (2,564) CASH AND SHORT-TERM INVESTMENTS: BEGINNING OF YEAR............................................ 1,432 3,996 ------- ------- END OF YEAR.................................................. $ 1,224 $ 1,432 ======= =======
See accompanying notes to financial statements. A-64 METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS For The Years Ended December 31, 1992 and 1991 1. ACCOUNTING POLICIES Metropolitan Life Insurance Company (the Company) is primarily engaged in the sale of insurance and annuity products. The Company's financial statements are prepared on the basis of accounting practices prescribed or permitted by the Insurance Department of the State of New York, which practices are generally accepted accounting principles for mutual life insurance companies. The primary interest of insurance authorities is the ability of the Company to fulfill its obligations to policyholders; therefore, the financial statements are oriented to the insuring public. Significant accounting policies applied in preparing the financial statements follow. Invested Assets and Related Reserves Bonds qualifying for amortization are stated at amortized cost, all other bonds at prescribed values. Unaffiliated preferred stocks are principally stated at cost; unaffiliated common stocks are carried at market value. Mortgage loans are stated at their amortized indebtedness. Short-term investments generally mature within a year and are carried at amortized cost which approximates estimated fair value. Policy loans are stated at unpaid principal balances. Investments in subsidiaries are stated at equity in net assets and are included in stocks. Changes in net assets, excluding additional amounts invested, are included in unrealized capital gains or losses. Dividends from subsidiaries are reported by the Company as earnings in the year the dividends are declared. Also, in accordance with New York State Insurance Law and regulations, non- insurance company acquisitions are valued in accordance with generally accepted accounting principles under the purchase method of accounting. The purchase price is allocated to the subsidiary's net assets based on its fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired is amortized on a straight-line basis. Investment real estate, other than joint ventures and real estate subsidiaries, is stated at depreciated cost, with such depreciation calculated by the constant yield method if purchased prior to December 1990 and the straight-line method if purchased thereafter. Investments in real estate joint ventures, included in other invested assets, and real estate subsidiaries, included in stocks, are reported on the equity method and adjusted to reflect the constant yield method of depreciation for real estate assets acquired by such entities prior to December 1990. Investments in non-real estate partnerships are included in other invested assets and are generally carried on the equity basis. In 1992 the Company changed the method of determining the carrying value of such partnerships. Under the new method, the carrying value reflects the Company's share of unrealized gains and losses relating to the market value of publicly traded common stock held by the partnerships. The A-65 1991 carrying value reflected only the Company's share of operating income or losses from the partnerships. This change had the effect of increasing other invested assets by $317 million at December 31, 1992 which was substantially offset by an increase in investment valuation reserves. Impairments of individual assets that are considered to be other than temporary are recognized when incurred. Mandatory reserves have been established for general account investments in accordance with guidelines prescribed by insurance regulatory authorities. For 1992 such reserves consisted of an Asset Valuation Reserve (AVR) for all invested assets and an Interest Maintenance Reserve (IMR), which defers the recognition of realized capital gains and losses (net of tax) attributable to interest rate fluctuations on fixed income investments over the estimated remaining duration of the investments sold. Prior to 1992, mandatory investment valuation reserves consisted of a Mandatory Securities Valuation Reserve (MSVR) for bonds and stocks in accordance with a prescribed formula. The Company also establishes voluntary investment valuation reserves for certain general account invested assets. Changes to the MSVR, AVR and voluntary investment reserves are reported as direct additions to or deductions from surplus. Transfers to the IMR are deducted from realized capital gains; IMR amortization is included in net investment income. Net realized capital gains are presented net of federal capital gains tax and transfers to the IMR on the accompanying statements of operations and surplus. Policy Reserves Reserves for life insurance policies are computed generally on the net level premium method or, for permanent plans of individual life insurance sold after 1976 and certain term plans sold after 1982, on the Commissioners' Reserve Valuation Method. Reserves for individual annuity contracts are computed on the net level premium method, the net single premium method or the Commissioners' Annuity Reserve Valuation Method, as appropriate. Reserves for group annuity contracts are computed on the net single premium method. The reserves are based on mortality, morbidity and interest rates permitted by New York State Insurance Law. Such reserves are sufficient to provide for contractual surrender values. Periodically, to reflect changes in circumstance, the Company may change the assumptions or methodologies used to calculate reserves. During 1992, the Company and certain of its wholly-owned life insurance subsidiaries changed their bases of determining certain life insurance policy reserves. These changes in reserve valuation bases increased the Company's surplus by $131 million during 1992. Income and Expenses Premiums are generally recognized when due. Investment income is reported as earned. Expenses, including acquisition costs and federal income taxes, are charged to operations as incurred. Separate Account Operations Investments held in the Separate Accounts (stated at market value) and liabilities of the Separate Accounts (including participants' corresponding equity in the Separate Accounts) are reported separately as assets and liabilities in the accompanying balance sheets. The Separate Accounts' operating results are reflected in the changes to these assets and liabilities in the accompanying balance sheets. A-66 Fair Value Information The estimated fair value amounts of financial instruments included herein have been determined by the Company using market information available as of December 31, 1992 and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data to develop the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. 2. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES The Company's subsidiary operations primarily include insurance, real estate investment and brokerage activities, investment management and advisory services, mortgage originations and servicing, and commercial financing. At December 31, 1992, subsidiary assets, liabilities and revenues were $18,271 million, $16,469 million and $4,491 million, respectively. Comparable amounts for 1991 were $17,279 million, $15,541 million and $3,889 million. Dividends from subsidiaries amounted to $58 million in 1992 and $68 million in 1991. The unamortized excess of the purchase price of non-insurance subsidiaries over the fair value of assets acquired was $133 million at December 31, 1992 and $137 million at December 31, 1991. The Company incurs charges on behalf of its subsidiaries which are reimbursed pursuant to agreements for shared use of property, personnel and facilities. Charges under such agreements were approximately $299 million and $234 million in 1992 and 1991, respectively. The Company's net equity in joint ventures and other partnerships was $4,372 million and $3,872 million at December 31, 1992 and 1991, respectively. The Company's share of income from such entities was $64 million and $118 million for 1992 and 1991, respectively. Many of the Company's real estate joint ventures have loans with the Company. The carrying values of such mortgages were $2,022 million and $3,141 million at December 31, 1992 and 1991, respectively. The Company had other loans outstanding to its affiliates with carrying values of $1,944 million and $1,429 million at December 31, 1992 and 1991, respectively. 3. INVESTMENTS Debt Securities The carrying value, gross unrealized gain (loss) and estimated fair value of bonds and redeemable preferred stocks (debt securities), by category, as of December 31, 1992 and 1991 are shown below. For debt securities that are publicly traded, estimated fair value was obtained from an independent market pricing service. Publicly traded securities represented approximately 70 percent of the carrying value and estimated fair value of the total debt securities as of December 31, 1992 and 70 percent of the carrying value and 71 percent of the estimated fair value of the total debt securities as of December 31, 1991. For all other debt securities, estimated fair value was determined by management, based on interest rates, maturity, credit quality and average life. A-67
GROSS ESTIMATED CARRYING UNREALIZED FAIR VALUE GAIN (LOSS) VALUE -------- ------- ------ --------- (IN MILLIONS) December 31, 1992: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agen- cies.................... $11,305 $ 575 $ (117) $11,763 States and political sub- divisions............... 1,151 126 -- 1,277 Foreign governments...... 918 72 (2) 988 Corporate................ 26,437 1,651 (129) 27,959 Mortgage-backed securi- ties.................... 14,877 794 (85) 15,586 Other.................... 2,789 142 (21) 2,910 ------- ------- ------ ------- Total bonds................ $57,477 $ 3,360 $ (354) $60,483 ======= ======= ====== ======= Redeemable preferred $ 67 $ 18 $ (1) $ 84 stocks.................... ======= ======= ====== ======= December 31, 1991: Bonds: U.S. Treasury securities and obligations of U.S. government corporations and agen- cies.................... $11,900 $ 700 $ (106) $12,494 States and political sub- divisions............... 886 96 -- 982 Foreign governments...... 593 72 -- 665 Corporate................ 23,019 1,655 (121) 24,553 Mortgage-backed securi- ties.................... 13,855 1,203 (41) 15,017 Other.................... 2,179 129 (8) 2,300 ------- ------- ------ ------- Total bonds................ $52,432 $ 3,855 $ (276) $56,011 ======= ======= ====== ======= Redeemable preferred $ 99 $ -- $ (29) $ 70 stocks.................... ======= ======= ====== =======
The carrying value and estimated fair value of bonds, by contractual maturity, at December 31, 1992 are shown below. Bonds not due at a single maturity date have been included in the table in the year of final maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.
ESTIMATED CARRYING FAIR VALUE VALUE -------- --------- (IN MILLIONS) Due in one year or less................................ $ 2,256 $ 2,307 Due after one year through five years.................. 13,115 13,587 Due after five years through ten years................. 11,103 11,554 Due after ten years.................................... 16,126 17,449 ------- ------- Subtotal............................................. 42,600 44,897 Mortgage-backed securities............................. 14,877 15,586 ------- ------- Total.............................................. $57,477 $60,483 ======= =======
Proceeds from the sales of debt securities during 1992 and 1991 were $41,460 million and $23,493 million, respectively. During 1992 and 1991, respectively, gross gains of $676 million and $379 million, and gross losses of $152 million and $54 million were realized on those sales. A-68 Mortgage Loans As of December 31, 1992, the carrying value and estimated fair value of mortgage loan investments were $17,422 million and $18,312 million, respectively. The fair value was estimated based on discounted projected cash flows using interest rates currently being offered for loans to borrowers with comparable credit ratings and for the same maturities. Mortgage loans are collateralized by properties located throughout the United States and Canada. Approximately 15% and 12% of the properties are located in California and Illinois, 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. As of December 31, 1992 and 1991, the mortgage loan investments were categorized as follows:
1992 1991 ---- ---- Office Buildings............................................... 37% 39% Retail......................................................... 18% 17% Residential.................................................... 22% 22% Agricultural................................................... 12% 10% Other.......................................................... 11% 12% --- ---- 100% 100% === ====
Policy Loans As of December 31, 1992, the carrying value and estimated fair value of policy loans were $3,099 million and $2,793 million, respectively. Estimated fair value was based on discounted projected cash flows using U. S. Treasury rates to approximate current interest rates and Company experience to project patterns of loan accrual and repayment. Off-Balance Sheet Financial Instruments The Company has a securities lending program whereby large blocks of securities are loaned to third parties, primarily major brokerage firms. As of December 31, 1992 and 1991, the estimated fair values of loaned securities were $4,693 million and $3,980 million, respectively. Company policy requires a minimum of 102 percent of the fair value of the loaned securities to be separately maintained as collateral for the loans. The collateral is recorded in memorandum records and not reflected in the accompanying balance sheets. To further minimize the credit risks related to this lending program, the Company regularly monitors the financial condition of counterparties to these agreements. During the normal course of business, the Company agrees with independent parties to purchase or sell bonds over fixed or variable periods of time. The off-balance sheet risks related to changes in the quality of the underlying bonds and to fluctuations in interest rates are mitigated by the fact that commitment periods are generally short in duration and provisions in the agreements release the Company from its commitments in case of significant changes in the financial condition of the independent party or the issuer of the bond. As of December 31, 1992, the principal amount of purchase agreements outstanding was $696 million. There were no sales agreements outstanding as of December 31, 1992. The net estimated fair value of the purchase agreements outstanding as of December 31, 1992 was a $1 million off-balance sheet unrealized gain. The estimated fair value was based on fees currently charged to enter into similar arrangements or on the estimated cost to terminate the outstanding agreements. As of December 31, 1991, the principal amounts of purchase and sales agreements outstanding were $1,657 million and $13 million, respectively. A-69 Assets on Deposit As of December 31, 1992, the Company had $4,818 million of assets on deposit with regulatory agencies. 4. INVESTMENT CONTRACT LIABILITIES Investment contracts represent policies or contracts that do not incorporate significant insurance risk as of the reporting date. Included in reserves for life and health insurance and annuities, policy proceeds and dividends left with the Company and premium deposit funds are amounts classified as investment contracts. The carrying values and estimated fair values of such investment contracts were $30,715 million and $31,979 million, respectively, as of December 31, 1992. The fair values for these liabilities are estimated using discounted projected cash flows, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. Premium deposit funds and policy proceeds and dividends left with the Company also include other liabilities without defined durations. The estimated fair value of such liabilities, which generally are of short duration or have periodic adjustments of interest rates, approximated the carrying value of $2,404 million at December 31, 1992. 5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS The Company has entered into reinsurance agreements with certain of its life insurance subsidiaries. Reserves for insurance assumed pursuant to these agreements are included in reserves for life and health insurance and annuities and amounted to $1,083 million and $1,005 million at December 31, 1992 and 1991, respectively. In the normal course of business, the Company assumes and cedes reinsurance with other insurance companies. The financial statements are shown net of reinsurance ceded. The amounts related to reinsurance agreements, including agreements described above but excluding certain agreements for which the Company provides administrative services, are as follows:
1992 1991 ---- ---- (IN MILLIONS) Reinsurance premiums assumed $331 $326 Reinsurance ceded: Premiums..................................................... 90 63 Other income................................................. 51 1 Reduction in insurance liabilities (at December 31).......... 36 35
A contingent liability exists with respect to reinsurance ceded should the reinsurers be unable to meet their obligations. During 1992, the Company entered into an assumption and exchange agreement with the Insurance Department of the State of New York as rehabilitator of a New York life insurance company. Under the terms of the agreement, subject to final court and policyholder approval, in 1993 the Company may take over as much as $1,460 million of life insurance and annuity reserves from the life insurance company and will receive assets having a fair value equal to the reserves transferred. A-70 During 1991, the Company entered into two arrangements with Mutual Life Insurance Company of New York (MONY). Under one arrangement, the Company agreed to assume a portion of MONY's guaranteed interest contract (GIC) business and the Company received mortgage loans, other assets and cash totalling $300 million and recorded liabilities of an equal amount. In addition, during 1991 MONY's GIC customers were offered the opportunity to exchange their GIC contracts for those of the Company. $385 million of assets and liabilities were transferred to the Company under the exchange agreement. 6. FEDERAL INCOME TAXES The Company's federal income tax return is consolidated with certain affiliates. The consolidating companies have executed a tax allocation agreement. Under this agreement, the federal income tax provision is computed on a separate return basis. Members receive reimbursement to the extent that their losses and other credits result in a reduction of the current year's consolidated tax liability. Federal income tax expense has been calculated in accordance with the provisions of the Internal Revenue Code, as amended (the Code). Under the Code, the amount of federal income tax expense includes an equity tax calculated by a prescribed formula that incorporates a differential earnings rate between stock and mutual life insurance companies. In addition, certain policy acquisition costs are deferred and amortized over a ten-year period for tax purposes. As of January 1, 1992, the Company's U.S. non-insurance subsidiaries adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under SFAS No. 109, such subsidiaries recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in their financial statements. The adoption of SFAS No. 109 had the effect of increasing the Company's investment in its subsidiaries by $101 million at December 31, 1992, which was substantially offset by an increase in investment valuation reserves. Total income taxes on operations and realized capital gains of $545 million and $413 million were incurred in 1992 and 1991, respectively. 7. PENSION PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS The Company has defined benefit pension plans covering all eligible employees and sales representatives. The Company is both the sponsor and administrator of these plans and makes annual contributions equal to the amounts accrued for pension expense during the period. In 1992 and 1991, the United States tax- qualified plan was fully funded under the Employee Retirement Income Security Act of 1974 (ERISA). As a result, the Company did not make a contribution to the plan in either year. Total pension expense of other plans of the Company amounted to $10 million in 1992 and $9 million in 1991. A comparison of accumulated plan benefits and plan net assets for the Company is presented below:
JANUARY 1 ------------- 1992 1991 ------ ------ (IN MILLIONS) Actuarial present value of accumulated plan benefits: Vested................................................... $1,135 $1,050 Nonvested................................................ 86 107 ------ ------ Total...................................................... $1,221 $1,157 ====== ====== Plan assets available for benefits......................... $2,102 $1,813 ====== ======
A-71 The assumed rates of return used in determining the actuarial present value of accumulated plan benefits were 8.5 percent (for both 1992 and 1991) in the United States and 7 percent (for 1992) and 8 percent (for 1991) in Canada. Several factors in addition to assumed rates of return, such as expected retirement dates and mortality, enter into the determination of the actuarial present value of accumulated plan benefits. In addition to these pension plans, the Company sponsors a Savings and Investment Plan available for substantially all employees under which the Company matches a portion of employee contributions. During 1992 and 1991, the Company contributed $45.7 million and $38.4 million, respectively, to the plan. The Company also provides certain 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 such benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company. During 1991, $33 million was added to the reserve previously established to provide for a portion of the future costs of postretirement health care. At December 31, 1992 and 1991, the balances of such reserves were approximately $265 million and $300 million, respectively. 8. LEASES Lease Income During 1992 and 1991, the Company received $1,343 million and $1,063 million, respectively, in lease income related to its real estate portfolio. In accordance with standard industry practice, certain of the Company's lease agreements with retail tenants result in income that is contingent on the level of the tenants' sales revenues. Lease Expense The Company has entered into various lease agreements for office space, data processing and other equipment. Rental expense under such leases was $193 million and $188 million for the years ended December 31, 1992 and 1991, respectively. Future gross minimum rental payments under non-cancelable leases are as follows:
(IN MILLIONS) ------------- Year ending December 31, 1993......................... $ 95 1994......................... 83 1995......................... 63 1996......................... 45 1997......................... 27 Thereafter................... 49 ---- Total...................... $362 ====
9. OTHER COMMITMENTS AND CONTINGENCIES Guarantees The Company has entered into a support agreement with a subsidiary whereby the Company has agreed to maintain the subsidiary's net worth at one dollar or more. At December 31, 1992, the subsidiary's assets, which principally consist of loans to affiliates, amounted to $1,994 million and its net worth amounted to $10 million. A-72 The Company has entered into arrangements with certain of its subsidiaries and affiliates to assist such subsidiaries and affiliates in meeting various jurisdictions' regulatory requirements regarding capital and surplus. The Company has also entered into a support arrangement with respect to the reinsurance obligations of a subsidiary. No material payments have been made under these arrangements and it is the opinion of management that any payments required pursuant to these arrangements would not likely have a material adverse effect on the Company's financial position. Litigation Various litigation, claims and assessments against the Company, in addition to those otherwise provided for in the financial statements, have arisen in the course of the Company's business, including its activities as an insurer, employer, investor and taxpayer. In certain of these matters, very large and/or indeterminate amounts are sought. While it is not feasible to predict or determine the ultimate outcome of these matters, it is the opinion of management that their outcome is not likely to have a material adverse effect on the Company's financial position or the results of its operations. Unused Lines of Credit As of December 31, 1992, the Company had unused lines of credit under agreements with various banks having a principal amount of $700 million and an estimated fair value of $.8 million. The estimated fair value was based on fees currently charged to enter into similar agreements. A-73 INDEPENDENT AUDITORS' REPORT Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statement of assets and liabilities of the Growth, Income, Money Market, Diversified, Equity Income, International Stock and Stock Index Divisions of Metropolitan Life Separate Account UL as of December 31, 1992 and the related statements of operations and of changes in net assets for the periods presented. 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 at December 31, 1992 by correspondence with the custodian. 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 net assets of the Growth, Income, Money Market, Diversified, Equity Income, International Stock and Stock Index Divisions of Metropolitan Life Separate Account UL at December 31, 1992 and the results of their operations and the changes in their net assets for the periods presented in conformity with generally accepted accounting principles. DELOITTE & TOUCHE New York, New York February 25, 1993 A-74 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 1992
MONEY EQUITY INTERNATIONAL STOCK GROWTH INCOME MARKET DIVERSIFIED INCOME STOCK INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ----------- ---------- -------- ----------- ---------- ------------- -------- ASSETS: Investments in Metropol- itan Series Fund,Inc. at Value (Note 1A): Growth Portfolio (659,717 shares; cost $14,095,027)........... $14,327,067 -- -- -- -- -- -- Income Portfolio (220,213 shares; cost $2,795,212)............ -- $2,691,440 -- -- -- -- -- Money Market Portfolio (30,075 shares; cost $326,110).............. -- -- $316,418 -- -- -- -- Diversified Portfolio (620,846 shares; cost $8,409,253)............ -- -- -- $8,429,230 -- -- -- Equity Income Portfolio (104,785 shares; cost $1,133,308)............ -- -- -- -- $1,170,029 -- -- International Stock Portfolio (23,261 shares; cost $205,878). -- -- -- -- -- $200,722 -- Stock Index Portfolio (16,143 shares; cost -- -- -- -- -- -- $214,223 $214,252).............. ----------- ---------- -------- ---------- ---------- -------- -------- Total Investments... 14,327,067 2,691,440 316,418 8,429,230 1,170,029 200,722 214,223 Receivable from Metro- politan Life Insurance Co. ......... -- -- -- -- -- 602 -- Total Assets........ 14,327,067 2,691,440 316,418 8,429,230 1,170,029 201,324 214,223 LIABILITIES............. 7,310 2,810 333 4,361 1,815 -- 70 ----------- ---------- -------- ---------- ---------- -------- -------- NET ASSETS.............. $14,319,757 $2,688,630 $316,085 $8,424,869 $1,168,214 $201,324 $214,153 =========== ========== ======== ========== ========== ======== ========
See Notes to Financial Statements. A-75 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF OPERATIONS
FOR THE PERIOD MAY 1, 1992 (COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, FOR THE YEAR ENDED DECEMBER 31, 1992 1992 ------------------------------------------------------------------ ------------- MONEY EQUITY INTERNATIONAL STOCK GROWTH INCOME MARKET DIVERSIFIED INCOME STOCK INDEX DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION ---------- -------- -------- ----------- -------- ------------- ------------- INVESTMENT INCOME: Income: Dividends (Note 2).... $1,314,382 $189,175 $11,961 $683,704 $57,122 $ 1,922 $6,180 Expenses: Mortality and expense charges (Note 3)...... 63,110 11,810 1,835 36,254 5,084 823 285 ---------- -------- ------- -------- ------- ------- ------ Net investment income... 1,251,272 177,365 10,126 647,450 52,038 1,099 5,895 ---------- -------- ------- -------- ------- ------- ------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVEST- MENTS: Net realized gain (loss) from security transactions.......... 4,423 16,886 (1,185) 2,283 3,455 (1,739) 32 Unrealized appreciation (depreciation) of in- vestments............. (34,881) (111,828) (3,474) (143,759) 30,691 (5,221) (30) ---------- -------- ------- -------- ------- ------- ------ Net realized and unrealized gain (loss) on investments (Note 1B)................... (30,458) (94,942) (4,659) (141,476) 34,146 (6,960) 2 ---------- -------- ------- -------- ------- ------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $1,220,814 $ 82,423 $ 5,467 $505,974 $86,184 ($5,861) $5,897 ========== ======== ======= ======== ======= ======= ======
See Notes to Financial Statements. A-76 METROPOLITAN LIFE SEPARATE ACCOUNT UL STATEMENTS OF CHANGES IN NET ASSETS
MONEY EQUITY GROWTH INCOME MARKET DIVERSIFIED INCOME DIVISION DIVISION DIVISION DIVISION DIVISION ----------------------- -------------------- ------------------ ---------------------- -------------------- FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------------------------------- 1992 1991 1992 1991 1992 1991 1992 1991 1992 1991 ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- INCREASE (DE- ASSETS: From operations: Net investment income (loss).. $ 1,251,272 $ 147,240 $ 177,365 $ 33,237 $ 10,126 $ 9,135 $ 647,450 $ 76,224 $ 52,038 $ 13,918 Net realized from security transactions... 4,423 (2,671) 16,886 (18) (1,185) (217) 2,283 (1,146) 3,455 (968) Unrealized ap- preciation (de- preciation) of (34,881) 277,810 (111,828) 9,611 (3,474) (4,136) (143,759) 177,000 30,691 10,633 investments.... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- Net increase (decrease) in net assets re- sulting from 1,220,814 422,379 82,423 42,830 5,467 4,782 505,974 252,078 86,184 23,583 operations..... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- From capital transactions: Net premiums.... 14,877,419 3,029,706 2,842,164 714,759 286,372 197,154 8,546,771 1,860,889 1,155,039 303,255 Portfolio Trans- fers........... (673,200) (160,491) (289,538) (27,533) (55,434) (13,629) (501,159) (113,162) (82,431) (10,602) Other transfers. (3,942,387) (1,043,672) (577,407) (140,790) (76,734) (80,090) (1,915,484) (722,539) (257,683) (107,801) ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- Net increase in net assets re- sulting from capital transac- 10,261,832 1,825,543 1,975,219 546,436 154,204 103,435 6,130,128 1,025,188 814,925 184,852 tions........... ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- NET CHANGE IN NET ASSETS.......... 11,482,646 2,247,922 2,057,642 589,266 159,671 108,217 6,636,102 1,277,266 901,109 208,435 Net Assets--be- ginning of peri- 2,837,111 589,189 630,988 41,722 156,414 48,197 1,788,767 511,501 267,105 58,670 od.............. ----------- ---------- ---------- -------- -------- -------- ---------- ---------- ---------- -------- Net Assets--end $14,319,757 $2,837,111 $2,688,630 $630,988 $316,085 $156,414 $8,424,869 $1,788,767 $1,168,214 $267,105 of period....... =========== ========== ========== ======== ======== ======== ========== ========== ========== ======== INTERNATIONAL STOCK STOCK INDEX DIVISION DIVISION --------------------------- ------------- FOR THE PERIOD FOR THE PERIOD MAY 1, 1992 JULY 1, 1991 (COMMENCEMENT FOR THE (COMMENCEMENT OF YEAR OF OPERATIONS) OPERATIONS) ENDED TO TO DECEMBER 31, DECEMBER 31, DECEMBER 31, 1992 1991 1992 ------------ -------------- ------------- INCREASE (DE- CREASE) IN NET ASSETS: From operations: Net investment income (loss).. $ 1,099 $ 150 $ 5,895 Net realized gain (loss) from security transactions... (1,739) 7 32 Unrealized ap- preciation (de- preciation) of (5,221) 65 (30) investments.... -------- ------- -------- Net increase (decrease) in net assets re- sulting from (5,861) 222 5,897 operations..... -------- ------- -------- From capital transactions: Net premiums.... 248,940 15,874 247,746 Portfolio Trans- fers........... 5,334 (103) (6,357) Other transfers. (59,497) (3,585) (33,133) -------- ------- -------- Net increase in net assets re- sulting from capital transac- 194,777 12,186 208,256 tions........... -------- ------- -------- NET CHANGE IN NET ASSETS.......... 188,916 12,408 214,153 Net Assets--be- ginning of peri- 12,408 -- -- od.............. -------- ------- -------- Net Assets--end $201,324 $12,408 $214,153 of period....... ======== ======= ========
See Notes to Financial Statements. A-77 METROPOLITAN LIFE SEPARATE ACCOUNT UL NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1992 Metropolitan Life Separate Account UL (the "Separate Account") is a multi- division unit investment trust registered under the Investment Company Act of 1940 and presently consists of seven investment divisions. The assets in each division are invested in shares of the corresponding portfolio of the Metropolitan Series Fund, Inc. (the "Fund"). 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. A summary of significant accounting policies, all of which are in accordance with generally accepted accounting principles, is set forth below: 1. SIGNIFICANT ACCOUNTING POLICIES A. VALUATION OF INVESTMENTS Investments in shares of the Fund are valued at the reported net asset values of the respective portfolios. A summary of investments of the seven designated portfolios of the Fund in which the seven investment divisions of the Separate Account invest as of December 31, 1992 is included as Note 5. The methods used to value the Fund's investments at December 31, 1992 are described in Note 1A of the Fund's 1992 Annual Report. 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 separately 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 reserves for taxes, attributable to the maintenance or operation of the Separate Account. Metropolitan Life does not anticipate, under existing law, that any federal income taxes will be charged against the Separate Account in determining the value of amounts under a policy. 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. A charge is also imposed in connection with certain of the policies to recover a portion of the Federal income taxes imposed. A-78 2. DIVIDENDS On April 23, 1992 and December 14, 1992 the Fund declared dividends for all shareholders of record on April 27, 1992 and December 22, 1992, respectively. The amount of dividends received by the Separate Account was $2,264,446. The dividends were paid to Metropolitan Life on April 28, 1992 and December 23, 1992, 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 Fund held by each of the seven investment divisions increased by the following: Growth Portfolio 60,978 shares, Income Portfolio 15,455 shares, Money Market Portfolio 1,138 shares, Diversified Portfolio 50,572 shares, Equity Income Portfolio 5,156 shares, International Stock Portfolio 218 shares, and Stock Index Portfolio 461 shares. 3. EXPENSES Metropolitan Life applies a daily charge against the Separate Account for the mortality and expense risks assumed by Metropolitan Life. This charge is equivalent to an effective annual rate of .90% of the average daily value of the net assets in the Separate Account which are attributable to the policies. 4. NEW DIVISION On May 1, 1992, the Separate Account commenced the operation of the Stock Index Division. A-79 5. METROPOLITAN SERIES FUND, INC. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1992
GROWTH INCOME MONEY MARKET DIVERSIFIED PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO ---------------------- ---------------------- -------------------- ---------------------- VALUE VALUE VALUE VALUE (NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A) COMMON STOCK Automotive............. $ 2,420,475 (0.7%) $ 1,292,288 (0.4%) Banking................ 28,899,969 (8.2%) 15,156,651 (4.5%) Building............... 4,038,925 (1.1%) 2,148,150 (0.6%) Business Services...... 33,618,422 (9.6%) 17,887,797 (5.3%) Chemical............... 5,376,525 (1.5%) 2,849,525 (0.9%) Drug................... 14,674,775 (4.2%) 7,529,475 (2.3%) Electronics............ 21,454,132 (6.1%) 11,538,251 (3.5%) Financial Services..... 8,208,300 (2.3%) 4,357,025 (1.3%) Food & Beverage........ 7,718,700 (2.2%) 4,021,525 (1.2%) Forest Products........ 8,345,775 (2.4%) 4,353,775 (1.3%) Hospital Supply........ 16,975,713 (4.8%) 8,918,038 (2.7%) Hotel & Restaurant..... 10,452,913 (3.0%) 5,589,075 (1.7%) Insurance.............. 26,025,406 (7.4%) 13,700,619 (4.1%) Metal & Mining......... 3,967,300 (1.1%) 2,085,500 (0.6%) Oil.................... 19,046,375 (5.4%) 9,752,925 (2.9%) Oil Service............ 11,748,438 (3.3%) 6,165,176 (1.8%) Personal Care.......... 4,100,688 (1.2%) 2,235,188 (0.7%) Printing & Publishing.. 9,848,963 (2.8%) 5,193,175 (1.6%) Recreation............. 25,528,415 (7.3%) 13,415,919 (4.0%) Retail Trade........... 26,189,193 (7.5%) 13,846,729 (4.1%) Telephone.............. 20,969,600 (6.0%) 10,893,600 (3.3%) Textile & Apparel...... 5,460,225 (1.6%) 3,493,725 (1.0%) Tobacco................ 6,330,700 (1.8%) 3,396,300 (1.0%) Utilities--Electric.... 5,913,600 (1.7%) 3,062,400 (0.9%) ------------ ------------ Total Common Stock..... 327,313,527 (93.2%) 172,882,831 (51.7%) ------------ ------------ CONVERTIBLE PREFERRED STOCKS.................. LONG-TERM DEBT SECURI- TIES Corporate Bonds........ Banking................ $ 4,385,447 (2.8%) 1,160,148 (0.3%) Electric Utility....... 522,040 (0.3%) Financial Services..... 17,600,617 (11.3%) 17,983,633 (5.4%) Government Backed...... 2,722,789 (1.8%) 4,062,900 (1.2%) Industrials............ 12,358,042 (7.9%) 10,817,744 (3.2%) Mortgage Backed........ 3,730,682 (2.4%) 3,915,493 (1.2%) Telephone.............. 2,564,855 (1.6%) 1,360,944 (0.4%) ------------ ------------ Total Corporate Bonds.. 43,884,472 (28.1%) 39,300,862 (11.7%) ------------ ------------ Foreign Obligations.... 15,355,765 (9.8%) 6,888,402 (2.1%) Federal Agency Obliga- tions.................. 39,461,987 (25.3%) 39,276,347 (11.8%) Federal Treasury Obli- gations................ 48,496,384 (31.0%) 45,551,127 (13.6%) Federal Treasury Obli- gations Zero Coupon 5,633,722 (1.7%) ------------ ------------ Total Long-Term Debt Securities............. 147,198,608 (94.2%) 136,650,460 (40.9%) ------------ ------------ SHORT-TERM OBLIGATIONS Bankers Acceptances.... $ 5,962,175 (10.7%) Commercial Paper....... 26,266,317 (7.5%) 14,395,000 (9.2%) 31,959,869 (57.7%) 34,563,000 (10.3%) Federal Agency Obliga- tions.................. 4,702,311 (8.5%) Federal Treasury Obli- gations................ 12,677,093 (22.9%) Federal Treasury Obli- gations Zero Coupon.... ------------ ------------ ----------- ------------ Total Short Term Obli- gations................ 26,266,317 (7.5%) 14,395,000 (9.2%) 55,301,448 (99.8%) 34,563,000 (10.3%) ------------ ------------ ----------- ------------ TOTAL INVESTMENTS....... 353,579,844 (100.7%) 161,593,608 (103.4%) 55,301,448 (99.8%) 344,096,291 (102.9%) ------------ ------------ ----------- ------------ Other Assets Less Lia- bilities............... (2,552,014) (0.7%) (5,348,484) (3.4%) 110,056 (0.2%) (9,616,248) (2.9%) ------------ ------------ ----------- ------------ NET ASSETS.............. $351,027,830 (100.0%) $156,245,124 (100.0%) $55,411,504 (100.0%) $334,480,043 (100.0%) ============ ============ =========== ============
A-80
EQUITY INCOME PORTFOLIO -------------------- VALUE (NOTE 1A) COMMON STOCK Business Services........................................ $ 590,538 (3.4%) Chemical................................................. 189,525 (1.1%) Diversified.............................................. 286,600 (1.7%) Drug..................................................... 410,000 (2.4%) Electronics.............................................. 511,750 (3.0%) Food & Beverage.......................................... 75,375 (0.4%) Forest Products.......................................... 550,525 (3.2%) Hospital Supply.......................................... 208,000 (1.2%) Hotel & Restaurant....................................... 355,875 (2.0%) Insurance................................................ 947,475 (5.5%) Machinery................................................ 369,450 (2.1%) Natural Gas.............................................. 203,400 (1.2%) Oil...................................................... 1,025,785 (5.9%) Oil Service.............................................. 380,125 (2.2%) Paper.................................................... 177,000 (1.0%) Recreation............................................... 172,500 (1.0%) Retail Trade............................................. 1,353,263 (7.8%) Telephone................................................ 336,600 (1.9%) Tobacco.................................................. 163,200 (0.9%) Utilities--Electric...................................... 1,620,263 (9.4%) ----------- Total Common Stock....................................... 9,927,249 (57.3%) ----------- PREFERRED STOCKS Metals & Mining.......................................... 173,438 (1.0%) Office Equipment......................................... 185,500 (1.1%) Retail Trade............................................. 448,625 (2.6%) ----------- Total Preferred Stocks................................... 807,563 (4.7%) ----------- CONVERTIBLE PREFERRED STOCKS Automotive............................................... 475,800 (2.8%) Banking.................................................. 693,854 (4.0%) Machinery................................................ 159,250 (0.9%) Metal & Mining........................................... 348,800 (2.0%) Oil...................................................... 334,225 (1.9%) Oil Service.............................................. 246,925 (1.4%) Retail Trade............................................. 185,632 (1.1%) ----------- Total Convertible Preferred Stocks....................... 2,444,486 (14.1%) -----------
A-81
EQUITY INCOME PORTFOLIO --------------------- VALUE (NOTE 1A) LONG-TERM DEBT SECURITIES Corporate Bonds Industrials.............................................. $ 1,329,777 (7.7%) ----------- Total Corporate Bonds.................................... 1,329,777 (7.7%) ----------- CONVERTIBLE BONDS Banking.................................................. 582,000 (3.4%) Metal & Mining........................................... 243,125 (1.4%) Oil Services............................................. 730,750 (4.2%) Recreation............................................... 154,500 (0.9%) ----------- Total Convertible Bonds.................................. 1,710,375 (9.9%) ----------- VARIABLE RATE EXCHANGE DEBT............................... 462,000 (2.6%) ----------- SHORT-TERM OBLIGATIONS Commercial Paper......................................... 785,000 (4.5%) ----------- Total Short Term Obligations............................. 785,000 (4.5%) ----------- TOTAL INVESTMENTS......................................... 17,466,450 (100.8%) Other Assets Less Liabilities............................ (138,949) (0.8%) ----------- NET ASSETS................................................ $17,327,501 (100.0%) ===========
A-82
STOCK INDEX PORTFOLIO ----------- VALUE (NOTE 1A) COMMON STOCK Aerospace................................................ $ 2,343,264 (1.6%) Airlines................................................. 583,813 (0.4%) Automotive............................................... 3,513,714 (2.4%) Banking.................................................. 7,077,561 (4.9%) Beverages................................................ 9,193,311 (6.4%) Building & Construction.................................. 1,531,146 (1.1%) Chemical................................................. 5,534,058 (3.8%) Coal..................................................... 47,600 (0.0%) Container................................................ 350,836 (0.2%) Cosmetics................................................ 1,047,488 (0.7%) Drug..................................................... 9,355,121 (6.5%) Electrical Connectors.................................... 299,000 (0.2%) Electrical Equipment..................................... 4,702,133 (3.2%) Electronics.............................................. 3,752,595 (2.6%) Financial Services....................................... 2,795,042 (1.9%) Foods.................................................... 5,057,705 (3.5%) Hospital Management...................................... 500,601 (0.4%) Hospital Supply.......................................... 3,878,564 (2.7%) Hotel and Restaurant..................................... 1,180,400 (0.8%) Insurance................................................ 4,437,083 (3.1%) Leisure.................................................. 149,763 (0.1%) Machinery & Tools........................................ 2,233,552 (1.5%) Metals--Aluminum......................................... 484,151 (0.3%) Metals--Gold............................................. 277,088 (0.2%) Metals--Miscellaneous.................................... 725,347 (0.5%) Metals--Steel & Iron..................................... 200,100 (0.1%) Miscellaneous............................................ 2,882,726 (2.0%) Office & Business Equipment.............................. 4,311,721 (3.0%) Oil--Crude Producers..................................... 146,863 (0.1%) Oil--Domestic............................................ 3,578,450 (2.5%) Oil--International....................................... 8,330,775 (5.8%) Oil Services............................................. 1,101,115 (0.8%) Paper.................................................... 1,940,131 (1.3%) Photography.............................................. 591,863 (0.4%) Printing & Publishing.................................... 2,303,820 (1.6%) Railroad................................................. 1,699,878 (1.2%) Retail Trade............................................. 10,828,423 (7.5%) Services................................................. 929,251 (0.6%) Shoes.................................................... 493,125 (0.3%) Soaps.................................................... 2,878,975 (2.0%) Textiles & Apparel....................................... 421,363 (0.3%) Tire & Rubber............................................ 446,013 (0.3%) Toys & Musical Instruments............................... 120,836 (0.1%) Transportation--Trucking................................. 238,250 (0.2%) Utilities--Electric...................................... 6,009,990 (4.2%) Utilities--Gas Distribution.............................. 980,314 (0.7%) Utilities--Gas Pipeline.................................. 481,418 (0.3%) Utilities--Telephone..................................... 11,597,293 (8.0%) Video.................................................... 2,761,793 (1.9%) ------------ Total Common Stock....................................... 136,325,422 (94.2%) ------------ SHORT-TERM OBLIGATIONS Federal Treasury Obligations............................. 3,088,742 (2.2%) ------------ TOTAL SHORT-TERM OBLIGATIONS............................. 3,088,742 (2.2%) ------------ TOTAL INVESTMENTS........................................ 139,414,164 (96.4%) Other Assets Less Liabilities............................ 5,277,464 (3.6%) ------------ NET ASSETS................................................ $144,691,628 (100.0%) ============
A-83
INTERNATIONAL STOCK PORTFOLIO --------------------- VALUE (NOTE 1A) COMMON STOCK Automotive............................. $ 226,470 (1.2%) Banking................................ 1,500,270 (7.9%) Broadcasting........................... 121,741 (0.6%) Building & Construction................ 1,363,029 (7.2%) Chemical............................... 973,194 (5.1%) Computers and Business Equipment....... 91,306 (0.5%) Conglomerates.......................... 270,278 (1.4%) Drug and Healthcare.................... 243,889 (1.3%) Electrical Equipment................... 1,045,394 (5.5%) Electronics............................ 522,351 (2.7%) Financial Services..................... 444,166 (2.3%) Foods and Beverage..................... 183,938 (1.0%) Household Appliances................... 139,602 (0.7%) Insurance.............................. 1,340,239 (7.1%) Leisure................................ 202,227 (1.1%) Machinery & Tools...................... 223,979 (1.2%) Metals--Gold........................... 401,452 (2.1%) Metals--Steel & Iron................... 287,395 (1.5%) Mining................................. 374,305 (2.0%) Miscellaneous........................... 3,568,091 (18.8%) Non-Ferrous Metals..................... 75,207 (0.4%) Oil and Gas............................ 768,925 (4.0%) Paper.................................. 189,820 (1.0%) Railroad............................... 116,335 (0.6%) Retail Grocery......................... 343,211 (1.8%) Retail Trade........................... 401,240 (2.1%) Transportation--Trucking............... 91,624 (0.5%) Utilities--Telephone................... 469,557 (2.5%) ----------- Total Common Stock..................... 15,979,235 (84.1%) ----------- Foreign Currency........................ 2,779,691 (14.6%) ----------- Convertible Bonds....................... 202,013 (1.1%) ----------- ----------- SHORT-TERM OBLIGATIONS Repurchase Agreement................... 340,000 (1.8%) ----------- Total Short-Term Obligations........... 340,000 (1.8%) ----------- TOTAL INVESTMENTS....................... 19,300,939 (101.6%) Other Assets Less Liabilities.......... (302,917) (1.6%) ----------- NET ASSETS.............................. $18,998,022 (100.0%) ===========
A-84 APPENDIX A OPTIONAL INCOME PLANS The insurance proceeds when the insured dies, the proceeds payable on the Final Date, or the cash surrender value payable on full surrender of a Policy, instead of being paid in one lump sum, may be applied under one or more of the following income plans. Values under the income plans do not depend upon the investment experience of a separate account. OPTION 1. Interest income The amount applied will earn interest which will be paid monthly. Withdrawals of at least $500 each may be made at any time by written request. OPTION 2. Installment Income for a Stated Period Monthly installment payments will be made so that the amount applied, with interest, will be paid over the period chosen (from 1 to 30 years). OPTION 2A. Installment Income of a Stated Amount Monthly installment payments of a chosen amount will be made until the entire amount applied, with interest, is paid. OPTION 3. Single Life Income--Guaranteed Payment Period Monthly payments will be made during the lifetime of the payee with a chosen guaranteed payment period of 10, 15 or 20 years. OPTION 3A. Single Life Income--Guaranteed Return Monthly payments will be made during the lifetime of the payee. If the payee dies before the total amount applied under this plan has been paid, the remainder will be paid in one sum as a death benefit. OPTION 4. Joint and Survivor Life Income Monthly payments will be made jointly to two persons during their lifetime and will continue during the remaining lifetime of the survivor. A total payment period of 10 years is guaranteed. Other Frequencies and Plans. Instead of monthly payments, the owner may elect to have payments made quarterly, semiannually or annually. Other income plans may be arranged with Metropolitan Life's approval. Choice of Income Plans. See "Policy Benefits--Optional Income Plans," page A- 24 and "Policy Rights--Surrenders," page A-45, regarding how optional income plans may be chosen. When an income plan starts, a separate contract will be issued describing the terms of the plan. Specimen contracts may be obtained from Metropolitan Life sales representatives, and reference should be made to these forms for further details. A-85 Limitations. If the payee is not a natural person, the choice of an income plan will be subject to Metropolitan Life's approval. A collateral assignment will modify a prior choice of income plan. The amount due the assignee will be payable in one sum and the balance will be applied under the income plan. A choice of an income plan will not become effective unless each payment under the plan would be at least $50. Income plan payments may not be assigned and, to the extent permitted by law, will not be subject to the claims of creditors. Income Plan Rates. Amounts applied under the interest income and installment income plans will earn interest at a rate set from time to time by Metropolitan Life but never less than 3% per year. Life income payments will be based on a rate set by Metropolitan Life and in effect on the date the amount to be applied becomes payable, but never less than the minimum payments guaranteed in the Policy. Such minimum guaranteed payments are based on certain assumed mortality rates and an interest rate of 3%. OPTIONAL INSURANCE BENEFITS Optional insurance benefit riders may be attached to a Policy, subject to certain insurance underwriting requirements and the payment of additional premiums. These riders are described in general terms below. Limitations and conditions are contained in the riders, and the description below is subject to the specific terms of the riders. A prospective purchaser may obtain a specimen Policy with riders from a Metropolitan Life sales representative. The duration, but not the amount, of rider benefits may depend on the investment experience of a separate account. Disability Waiver Benefit. This rider waives the entire monthly deduction during the total disability of the insured if the insured is totally and continuously disabled for at least six months beginning prior to age 60. If the total disability continues without interruption to the Policy anniversary at age 65, it will be deemed permanent and all further monthly deductions will be waived as they fall due. If there has been an increase in the death benefit resulting from a request by the Policy owner and the Policy owner at the time of the increase did not request or did not qualify for this rider with respect to such increase, monthly deductions for charges related to such increase will continue to be made against the cash value of the Policy. This could result in the cash value being insufficient to cover the monthly deductions related to the increase. In such a case, the grace period and termination provisions of the Policy would apply only to such increase in death benefit. Since the monthly deduction with respect to the increase in the death benefit could reduce the cash value of the Policy to zero, it may be advantageous for the Policy owner, at the time of the total disability, to reduce the death benefit to that amount which is subject to this rider. At the present time, this rider is not available if the long term care benefit rider has been selected. Accidental Death Benefit. This rider provides additional insurance equal to an amount stated in the Policy if the insured dies from an accident prior to age 70. It also provides an additional amount equal to twice the stated amount if the insured dies from an accident occurring while the insured is a fare- paying passenger on a common carrier. This rider is available at issue only. Children's Term Insurance Benefit. This rider provides term insurance on each insured child payable to the child's beneficiary if an insured child dies before the end of coverage on that child (generally at the child's twenty-fifth birthday). Spouse Term Insurance Benefit. This rider provides term insurance on the life of the spouse payable to the spouse's beneficiary if the spouse dies prior to age 65 while the rider is in effect. A-86 Long Term Care Benefit. This rider provides for the accelerated payment of a portion of the death benefit for the long term care of the insured. Such care can be provided either in a qualified convalescent facility or at home when the insured has a qualifying disability. The benefit payments are made each month and continue as long as the insured remains disabled, the maximum benefit under the rider has not been paid and, once payments start, no change in either the death benefit option or the specified face amount of the Policy is elected by the Policy owner. Exercising certain rights under the Policy (including the existence of a Policy loan) may affect the benefits payable under this rider, and receipt of payments under this rider may limit exercise of certain Policy rights. These effects as well as the size of the monthly benefit payment and the maximum benefit are stated in the rider. The rider is available at issue only. Each time a benefit payment is made, the death benefit under the Policy is reduced by the amount of the payment. In addition, the specified face amount, the cash value, the cash surrender value and any outstanding Policy loan are reduced by the same proportion as the benefit payment divided by the death benefit prior to the payment. Such reduction in the outstanding Policy loan is effected by deducting that proportionate amount from the monthly benefit payment. The benefit payments under this rider may be taxable or may affect eligibility for benefits under state or federal law. Counsel and other competent advisors should be consulted to determine the effect on an individual situation. Accelerated Death Benefit. This rider provides for a one-time discounted payment of all or a portion of the death benefit to the Policy owner once the insured has been determined to be terminally ill with twelve months or less to live. The size of the benefit payment and the maximum benefit are stated in the rider. There are no premiums or rider fees for this rider. A payment of all the discounted death benefit will not be subject to any surrender charges. Upon payment of a portion of the death benefit, the death benefit under the Policy is reduced to reflect the amount of the payment. In addition, the specified face amount, the cash value and the cash surrender value are reduced by the same proportion as the amount of the reduction of the death benefit divided by the death benefit prior to the payment. Any outstanding loan is reduced and paid out of the proceeds of the portion only if such reduction is necessary to keep the Policy in force. Moreover, in the case of payment of all of the death benefit, the amount of any outstanding Policy loan will be deducted from the payment. The payment under this rider may be taxable or may affect eligibility for benefits under state or federal law. Counsel and other competent advisors should be consulted to determine the effect on an individual situation. A-87 Bulk Rate Zip+4 Barcoded U.S. Postage Paid MetLife Customer Service Center--Warwick Rutland, P.O. Box 520 VT Warwick, RI 02887-0520 Permit ADDRESS CORRECTION REQUESTED 220 FORWARDING AND RETURN POSTAGE GUARANTEED UL II FLEXIBLE PREMIUM MULTIFUNDED LIFE PROSPECTUSES FOR . FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY . METROPOLITAN SERIES FUND, INC. [LOGO] METROPOLITAN LIFE (R) AND AFFILIATED COMPANIES ML-FP2 (4/93 EDITION) PRINTED IN U.S.A. Bulk Rate Zip+4 Barcoded U.S. Postage Paid Rutland, VT MetLife Customer Service Center--Tulsa Permit P.O. Box 21889 220 Tulsa, OK 74121-1889 ADDRESS CORRECTION REQUESTED FORWARDING AND RETURN POSTAGE GUARANTEED UL II FLEXIBLE PREMIUM MULTIFUNDED LIFE PROSPECTUSES FOR . FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY . METROPOLITAN SERIES FUND, INC. [LOGO] METROPOLITAN LIFE (R) AND AFFILIATED COMPANIES ML-FP2 (4/93 EDITION) PRINTED IN U.S.A. UL II FLEXIBLE PREMIUM MULTIFUNDED LIFE PROSPECTUSES FOR . FLEXIBLE PREMIUM MULTIFUNDED LIFE INSURANCE POLICIES ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY . METROPOLITAN SERIES FUND, INC. [LOGO] METROPOLITAN LIFE (R) AND AFFILIATED COMPANIES ML-FP2 (4/93 EDITION) PRINTED IN U.S.A. PART II REPRESENTATION WITH RESPECT TO FEES AND CHARGES Metropolitan Life represents that the fees and charges deducted under the Policies described in 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. CONTENTS OF REGISTRATION STATEMENT This amended Registration Statement comprises the following papers and documents: The facing sheet. Cross-Reference Table. The Supplement to Prospectus, consisting of 44 pages. The Prospectus, consisting of 87 pages. Undertaking to File Reports as filed with the initial filing of this Registration Statement on January 5, 1990. Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933 as filed with the initial filing of this Registration Statement on January 5, 1990. Representation with respect to fees and charges filed herewith. The signatures. Written Consents of the following persons: Anthony E. Amodeo (filed with Exhibit 6 below). Freedman, Levy, Kroll & Simonds as filed with Pre-Effective Amendment No. 1 to this Registration Statement on April 6, 1990. Deloitte & Touche LLP. The following exhibits:
1.A (1) --Resolution of Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Accounts................................................... **** (2) --Not Applicable (3) --(a) Not Applicable --(b) Form of Selected Broker Agreement..................... * --(c) Schedule of sales commissions......................... * (4) --Not applicable (5) --(a) Specimen Flexible Premium Multifunded Life Insurance Policy (including any alternate pages as required by state law) with form of riders, if any.................. ** --(b) New York Endorsement to Flexible Premium Multifunded Life Insurance Policy................................... * --(c) Riders for Long-term Care and Accelerated Death Benefit..................................................... *** --(d) Additional alternate pages required by state law...... *** --(e) Additional alternate pages required by state law...... ***** (6) --(a) Charter and By-Laws of Metropolitan Life.............. ***** --(b) Amendment to By-laws.................................. ***** (7) --Not Applicable (8) --Not Applicable (9) --Not Applicable (10) --Application Form for Flexible Premium Multifunded Life Insurance Policy and Form of Receipt and Temporary Insurance Agreement........................................ *
II-1
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. --Opinion and consent of Anthony E. Amodeo.................. @ 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)............................................... 12. --Memoranda describing certain procedures filed pursuant to Rule 6e--3(T)(b)(12)(iii).................................. ** 27. --Financial Data Schedule................................... +
- -------- + Filed herewith. * Incorporated by reference to the initial filing of this Registration Statement on January 5, 1990. ** Incorporated by reference to the filing of Pre-Effective Amendment No. 1 to this Registration Statement on April 6, 1990. *** Incorporated by reference to the filing of Post-Effective Amendment No. 1 to this Registration Statement on March 1, 1991. **** Incorporated by reference to the filing of Post-Effective Amendment No. 5 to the Registration Statement of Separate Account UL (File No. 33- 47927) on April 30, 1997. ***** Incorporated by reference to the filing of Post-Effective Amendment No. 2 to this Registration Statement on February 28, 1992. @ Incorporated by reference to the filing of Post-Effective Amendment No. 4 to this Registration Statement on April 22, 1994. 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 30TH DAY OF APRIL, 1997. METROPOLITAN LIFE INSURANCE COMPANY (Seal) /s/ Gary A. Beller By: ________________________________ GARY A. BELLER EXECUTIVE VICE- PRESIDENT & GENERAL COUNSEL /s/ Ruth Gluck Attest: _____________________________ RUTH GLUCK, ESQ. 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, President, - ------------------------------------- Chief Executive HARRY P. KAMEN Officer and Director (Principal Executive Officer) * Senior Executive - ------------------------------------- Vice-President and STEWART G. NAGLER Chief Financial Officer (Principal Financial Officer) * Senior Vice- - ------------------------------------- President and FREDERICK P. HAUSER Controller (Principal Accounting Officer) * Director - ------------------------------------- CURTIS H. BARNETTE * Director - ------------------------------------- GERALD CLARK * Director - ------------------------------------- JOAN GANZ COONEY /s/ Christopher P. Nicholas *By _________________________________ April 30, 1997 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 - ------------------------------------- RICHARD J. MAHONEY * Director - ------------------------------------- ALLEN E. MURRAY * Director - ------------------------------------- JOHN J. PHELAN, JR. * Director - ------------------------------------- JOHN B. M. PLACE * Director - ------------------------------------- HUGH B. PRICE * Director - ------------------------------------- ROBERT G. SCHWARTZ * Director - ------------------------------------- RUTH J. SIMMONS, PH.D. * Director - ------------------------------------- WILLIAM S. SNEATH Director - ------------------------------------- WILLIAM C. STEERE, JR. /s/ Christopher P. Nicholas *By _________________________________ April 30, 1997 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 30TH DAY OF APRIL, 1997. METROPOLITAN LIFE SEPARATE ACCOUNT UL (REGISTRANT) By: METROPOLITAN LIFE INSURANCE COMPANY (DEPOSITOR) (Seal) /s/ Gary A. Beller By: _____________________________ GARY A. BELLER EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL /s/ Ruth Gluck Attest: _____________________________ RUTH GLUCK, ESQ. ASSISTANT SECRETARY II-5 INDEPENDENT AUDITORS' CONSENT Metropolitan Life Insurance Company: We consent to the use in this Post-Effective Amendment No. 5 to the Registration Statement No. 33-32813 of Metropolitan Life Separate Account UL on Form S-6 of our report dated February 28, 1997 relating to Metropolitan Life Separate Account UL appearing in the Prospectus Supplement, which is a part of such Registration Statement, our report dated April 4, 1997 relating to Metropolitan Life Insurance Company also appearing in the Prospectus Supplement, and to the reference to us under the heading "Experts" in such Prospectus Supplement. Deloitte & Touche LLP New York, New York April 28, 1997 II-6 EX-27.1 2 FINANCIAL DATA SCHEDULE - GROWTH
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 GROWTH YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 133,325,492 158,920,369 0 0 11,882 158,932,251 0 0 34,679 34,679 0 0 5,208,796 0 0 0 0 0 0 158,897,572 15,051,436 0 0 111,019 14,940,417 2,929,455 9,406,099 27,275,971 0 0 0 0 0 0 0 46,456,950 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE - INCOME
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 2 INCOME YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 27,751,597 27,327,760 0 0 3,998 27,331,758 0 0 74,006 74,006 0 0 2,210,984 0 0 0 0 0 0 27,257,752 1,723,590 0 0 23,450 1,700,140 (16,679) (697,499) 985,962 0 0 0 0 0 0 0 4,946,281 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.3 4 FINANCIAL DATA SCHEDULE - MONEY MARKET
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3 MONEY MARKET YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 6,278,669 6,095,430 0 0 86,448 6,181,878 0 0 62,023 62,023 0 0 584,077 0 0 0 0 0 0 6,119,855 300,997 0 0 9,321 291,676 (11,231) (90,379) 190,066 0 0 0 0 0 0 0 3,145,115 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.4 5 FINANCIAL DATA SCHEDULE - DIVERSIFIED
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 4 DIVERSIFIED YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 100,173,963 110,742,194 0 0 168 110,742,362 0 0 274,903 274,903 0 0 6,643,203 0 0 0 0 0 0 110,467,459 9,697,032 0 0 74,131 9,622,901 532,857 3,200,410 13,356,168 0 0 0 0 0 0 0 26,286,718 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.5 6 FINANCIAL DATA SCHEDULE - INTERNATIONAL STOCK
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 5 INTERNATIONAL STOCK YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 24,907,650 23,798,267 0 0 6,129 23,804,396 0 0 135,056 135,056 0 0 1,991,487 0 0 0 0 0 0 23,669,340 200,282 0 0 28,892 171,390 (9,816) (559,306) (397,732) 0 0 0 0 0 0 0 6,373,203 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.6 7 FINANCIAL DATA SCHEDULE - STOCK INDEX
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6 STOCK INDEX YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 27,248,573 32,253,185 0 0 119,880 32,373,065 0 0 339,551 339,551 0 0 1,450,886 0 0 0 0 0 0 32,033,514 744,725 0 0 52,997 691,728 742,061 2,836,911 4,270,700 0 0 0 0 0 0 0 18,607,744 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27.7 8 FINANCIAL DATA SCHEDULE - AGGR. GROWTH
6 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 7 AGGRESSIVE GROWTH YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 78,361,229 84,106,614 0 0 28,704 84,135,318 0 0 394,115 394,115 0 0 3,107,005 0 0 0 0 0 0 83,741,203 2,234,170 0 0 116,563 2,117,607 166,243 1,728,894 4,012,744 0 0 0 0 0 0 0 29,409,406 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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