-----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, DDQlybyIy6fCN5A9go1sAHw2BtVc8O7C4YUt1t2OyVkHbcYTXbkHD/viCTktKmXD H8ThsyHgTcMH71vLRGp/5A== 0001193125-04-073993.txt : 20040429 0001193125-04-073993.hdr.sgml : 20040429 20040429162917 ACCESSION NUMBER: 0001193125-04-073993 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20040429 EFFECTIVENESS DATE: 20040429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-91226 FILM NUMBER: 04765437 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL CENTRAL INDEX KEY: 0000858997 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06025 FILM NUMBER: 04765438 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 d485bpos.txt METROPOLITAN LIFE SEPARATE ACCOUNT UL As filed with the Securities and Exchange Commission on April 29, 2004 Registration No. 033-91226 811-06025 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 11 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 10 [X] Metropolitan Life Separate Account UL (Exact Name of Registrant) Metropolitan Life Insurance Company (Name of Depositor) One Madison Avenue New York, NY 10010 (Address of depositor's principal executive offices) --------------------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 (Name and address of agent for service) Copies to: Gary O. Cohen, Esq. and Thomas C. Lauerman, Esq. Foley & Lardner LLP 3000 K Street, N.W. Washington, D.C. 20007 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2004 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 [ ] this post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities Being Registered: Interests in Metropolitan Life Separate Account UL, which funds certain Variable Universal Life Insurance Policies. PROSPECTUS FOR Group Variable Universal Life Insurance Policies ("Group Policies") Issued by Metropolitan Life Insurance Company ("MetLife") May 1, 2004 This Prospectus provides you with important information about MetLife's Group Variable Universal Life Policies and its Certificates. The Group Policies are designed to provide: .. Life insurance coverage for employees (and/or their spouses) of employers who purchase a Group Policy .. Flexible premium payments, including the option of paying premiums through payroll deduction .. A death benefit that varies because it includes the employee's cash value in addition to a fixed insurance amount .. Ownership rights of employees set forth in a certificate ("Certificate") issued in connection with the Group Policy We offer the following funding options for allocating premium payments to and transferring cash value among a fixed interest account ("Fixed Account") and the Metropolitan Life Separate Account UL investment divisions which invest in the following corresponding fund ("Fund") portfolios: Metropolitan Series Fund, Inc. portfolios (Class A): Lehman Brothers(R) Aggregate Bond Index Russell 2000(R) Index State Street Research Diversified T. Rowe Price Small Cap Growth MetLife Stock Index Scudder Global Equity Harris Oakmark Large Cap Value Morgan Stanley EAFE(R) Index State Street Research Investment Trust FI International Stock FI Mid Cap Opportunities (formerly Putnam International Stock) (formerly Janus Mid Cap) State Street Research Bond Income
Met Investors (formerly COVA) Series Trust portfolios (Class A): Lord Abbett Bond Debenture In some cases, the employer may limit which of the above investment options are available. Separate prospectuses for the Metropolitan Series Fund, Inc. and the Met Investors Series Trust are available from us. Those prospectuses are attached at the end of this Prospectus, and they describe in greater detail an investment in the Portfolios listed above. Before purchasing a Certificate, read the information in this prospectus and in the prospectus for each Fund. Keep these prospectuses for future reference. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Group Policy and the Certificate give you more information on the operation of the Fixed Account. Certificates issued in your state may provide different features and benefits from, and impose different costs than, those described in this Prospectus. Your actual Certificate and any endorsements are the controlling documents. You should read the Certificate carefully for any variations in your state. Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. This prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Any representation otherwise is a criminal offense. Interests in the Separate Account and the Fixed Account are not deposits or obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material. TABLE OF CONTENTS
Page in this Subject Prospectus - ------- ---------- Cover Pages Contacting Us............................................... 3 Summary of Benefits and Risks............................... 3 Certificate Benefits..................................... 3 Risks of a Certificate................................... 4 Fee Tables.................................................. 5 Transaction Fees......................................... 5 Periodic Charges Other Than Portfolio Operating Expenses. 6 Periodic Charges Applicable to Any Optional Riders That May be Added to Your Certificate....................... 7 Portfolio Operating Expenses............................. 8 MetLife..................................................... 10 The Fixed Account........................................ 10 Separate Account UL...................................... 11 The Funds................................................ 11 The Portfolio Share Classes that We Offer................ 12 Issuing a Group Policy and a Certificate.................... 13 Payment and Allocation of Premiums.......................... 13 Paying Premiums.......................................... 13 Maximum and Minimum Premium Payments..................... 14 Allocating Net Premiums.................................. 14 Insurance Proceeds.......................................... 14 Death Benefit............................................ 15 Alternate Death Benefit.................................. 15 Specified Face Amount.................................... 15 Income Plans............................................. 16 Cash Value, Transfers and Withdrawals....................... 16 Cash Value............................................... 16 Cash Value Transfers..................................... 17 Surrender and Withdrawal Privileges...................... 19 Benefit at Final Date.................................... 20 Paid-Up Certificate Provision............................... 20 Loan Privileges............................................. 20 Optional Benefits Added By Rider............................ 22 Charges and Deductions...................................... 22 Important Information Applicable to All Certificate Charges and Deductions................................. 22 Charges Deducted from Premiums........................... 23 Charges Included in the Monthly Deduction................ 23 Charges Against the Separate Account..................... 25 Variations in Charges.................................... 25 Portfolio Company Charges................................ 25 Other Charges............................................ 25 Certificate Termination and Reinstatement................... 26 Federal Tax Matters......................................... 26 Rights We Reserve........................................... 28 Other Certificate Provisions................................ 29 Sales of Certificates....................................... 33 Experts..................................................... 34 Financial Statements........................................ 34
2 Contacting Us [SIDEBAR: You can contact us at our Administrative Office.] You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Administrative Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Certificate loan; changing the specified face amount; taking a partial withdrawal; surrendering the Certificate; making transfer requests (including elections with respect to the systematic investment strategies) or changing your premium allocations. Our Administrative Office is our office at 190 Carondelet Plaza, St. Louis, Missouri 63105. We may name additional or alternate Administrative Offices. If we do, we will notify you in writing. Summary of Benefits and Risks This summary gives an overview of the Group Policy and Certificates and is qualified by the more detailed information in the balance of this Prospectus, the Group Policy and the Certificates. MetLife issues the Group Policy and Certificates. Certificate Benefits Premium Payment Flexibility. Generally, if elected by your employer, you may pay premiums through payroll deduction. If payroll deduction is not available, you may pay premiums to us on a monthly, quarterly or annual basis. You may, with certain restrictions, make premium payments in any amount and at any frequency. However, you may also be required to make an unscheduled premium payment so that the Certificate will remain in force. The Certificate will remain in force until its Final Date, as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. Cash Value. Your cash value in the Certificate reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. Transfers and Systematic Investment Strategies. You may transfer cash value among the funding options, subject to certain limits (see "Cash Value, Transfers and Withdrawals"). If elected by your employer, you may also choose among four systematic investment strategies: the Equity Generator/SM/, the Equalizer/SM/, the Allocator/SM/, and the Rebalancer/SM/. Specified Face Amount of Insurance. Within certain limits, you may choose your specified face amount of insurance when the Certificate is issued. You may also increase the amount at certain times determined by your employer and subject to our underwriting requirements. In certain cases, we will automatically increase the specified face amount at each employee's salary increase on dates chosen by the employer. You may also decrease the specified face amount. Death Benefit. The death benefit is the specified face amount of the Certificate plus the Certificate cash value at the date of death of the covered person. 3 Income Plans. The insurance proceeds can be paid under a variety of income plans that are available under the Certificate. Surrenders, Partial Withdrawals and Loans. Within certain limits, you may take partial withdrawals and loans from the Certificate. You may also surrender the Certificate for its cash surrender value. Paid-up Certificate Benefit. You can choose to terminate the death benefit (and any riders in effect) and use all or part of the cash surrender value as a single premium for a "paid-up" benefit within the terms set forth in the Certificate. ("Paid-up" means no further premiums are required.) Tax Advantages. If you meet certain requirements, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Certificate, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. The death benefit may be subject to Federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. Optional Rider Benefits. You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. Risks of a Certificate This Prospectus discusses the risks associated with purchasing the Certificate. Other prospectuses (which are attached at the end of this Prospectus) discuss the risks associated with investment in the Fund described therein. Those prospectuses are being provided to you in addition to this Prospectus because each of the Separate Account UL investment divisions that are available to you under a Certificate invests solely in a corresponding "Portfolio" of a Fund. Investment Risk. MetLife does not guarantee the investment performance of the variable investment options and you should consider your risk tolerance before selecting any of these options. You will be subject to the risk that investment performance will be unfavorable and that your cash value will decrease. In addition, we deduct certain Certificate fees and charges from your Certificate's cash value, which can significantly reduce your Certificate's cash value. During times of poor investment performance, this deduction may have an even greater impact on your Certificate's cash value. It is possible to lose your full investment and your Certificate could terminate without value, unless you pay additional premiums. If you allocate cash value to the Fixed Account, then we credit such cash value with a declared rate of interest. You assume the risk that the rate may decrease, although it will never be lower than the guaranteed minimum annual effective rate stated in your Certificate. Surrender and Withdrawal Risks. The Certificates are designed to provide lifetime insurance protection. They are not offered primarily as an investment, and are not suitable as a short-term savings vehicle. You should purchase a Certificate only if you have the financial ability to keep it in force for a substantial period of time. You should not purchase the Certificate if you intend to surrender all or part of the Certificate's cash value in the near future. 4 Risk of Certificate Termination. Your Certificate may terminate without value if you have paid an insufficient amount of premiums or if the investment experience of the investment divisions is poor. If your cash surrender value is not enough to pay the monthly deduction, your Policy will terminate without value unless you make a premium payment sufficient to cover two monthly deductions within the 61-day grace period. If your Certificate does terminate, your insurance coverage will terminate (although you will be given an opportunity to reinstate your coverage if you satisfy certain requirements). Lapse of a certificate on which there is an outstanding loan may have adverse tax consequences. Certificate Charge and Expense Increase. We have the right to increase certain Certificate charges. Tax Law Risks. To the extent that you purchase a Certificate based on expected tax benefits relative to other financial or investment products or strategies, there is no certainty that such advantages will always continue to exist. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. During the first 15 Certificate years, in certain circumstances a distribution may be subject to tax on an income-out-first basis if there is a gain in the Certificate (which is generally when your cash value exceeds the cumulative premiums you paid). If you pay more than a certain amount of premiums, you may cause your Certificate to become a "modified endowment contract." If it does, you will pay income taxes (on an income-out-first basis) on loans and other amounts we pay out to you (except for payment of insurance proceeds), to the extent of any gains in your Certificate (which is generally the excess of cash value over the premiums paid). In this case, an additional 10% tax penalty may also apply. Tax laws, regulations, and interpretations have often been changed in the past and such changes continue to be proposed. Fee Tables The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Certificate. The charges set forth in the first three tables can vary, pursuant to terms of the Group Policy under which the Certificate is issued. In certain cases, we have the right to increase our charges for new Certificates, as well as for Certificates already outstanding. The maximum charges in such cases are shown in the far right-hand columns of each of the first three tables below. In addition to the following tables, certain charges that we don't currently impose (but which we have the right to impose on your Certificate in the future) are described under "Charges and Deductions--Other Charges," further back in this Prospectus. Transaction Fees This table describes the fees and expenses that you will pay at the time that you buy the Certificate, surrender the Certificate, or transfer cash value among the variable investment options or the Fixed Account. 5 The Current Amount Deducted represents an amount that would be deducted from a hypothetical group that is representative of the groups to whom the Group Policy is offered. The amount may not reflect the actual amount currently deducted for any current Policy owner, since the current amount deducted varies from group to group based on the anticipated experience of the group.
When Charge is Current Amount Maximum Amount Charge Deducted Deducted We Can Deduct - ------------------------------------------------------------------------------- Charge for average On payment of An amount equal to No specific expected state and premium the estimate of taxes maximum local taxes we will actually pay attributable to for your group, premiums/1/ currently up to 2.55% of each premium payment. - ------------------------------------------------------------------------------- Charge for expected On payment of 0.35% of each Same as current federal taxes premium premium payment amount attributable to premiums/1/ - ------------------------------------------------------------------------------- Surrender, On surrender, None Up to $25 per withdrawal and loan withdrawal or loan surrender, transaction fees/2/ withdrawal or loan
- -------- /1/ Rather than deducting this charge from each premium payment you make, we have the option of deducting an equivalent amount as part of the monthly deduction. In that case, the amount of the deduction will be based on the amount of premium payments received under all Certificates issued in connection with the Group Policy. We will waive the state premium tax charge for Internal Revenue Code Section 1035 exchanges from any other policy to a Certificate. We will also waive the state premium tax charge, as well as the charge for expected federal taxes attributable to premiums for 1035 exchanges, from another MetLife policy to a Certificate. /2/ Generally, we will not make any transaction charge for the surrender of a Certificate because of the termination of an employer's participation in the Group Policy. See your Certificate for more details. Periodic Charges Other Than Portfolio Operating Expenses These tables describe other fees and expenses that you will pay periodically during the time that you own the Certificate not including the fees and expenses of the Portfolios. The amounts shown for a 43 year old covered person assume that person is a member of a hypothetical group that has been derived from all groups to whom the Group Policy is offered. These amounts may not reflect the amounts for any actual Certificate owner, since the amounts vary from group to group based on the anticipated experience of the group. The actual charge at that age for your group may be higher or lower than the rate shown. Periodic Charges Applicable to All Certificates
When Charge is Current Amount Maximum Amount Charge Deducted Deducted We Can Deduct - ----------------------------------------------------------------------------------------------- Cost of term insurance* `On each monthly anniversary of the Highest: $30.45 per Highest: $53.24 per Highest and lowest charge Certificate $1,000 of net amount $1,000 of Net among all possible covered at risk Amount at Risk persons Lowest: $.02 per Lowest: $.06 per $1,000 of net amount $1,000 of Net Charge for a hypothetical at risk Amount at Risk 43 year old $.08 per $1,000 of net $.37 per $1,000 of net amount at risk amount at risk - -----------------------------------------------------------------------------------------------
6
When Charge is Current Amount Maximum Amount Charge Deducted Deducted We Can Deduct - ---------------------------------------------------------------------------------------------------- Mortality and expense risk Daily against the Effective annual rate Effective annual rate charge** cash value in the of .45% of the cash of .90% Separate Account value in the Separate Account - ---------------------------------------------------------------------------------------------------- Administration charge*** On each monthly $0 to $3 per $5 per Certificate anniversary of the Certificate Certificate - ---------------------------------------------------------------------------------------------------- Loan interest spread**** Annually (or on loan Annual rate of 0.25% Annual rate of 2% of termination, if of the loan amount the loan amount earlier)
Periodic Charges Applicable to Any Optional Riders That May be Added to Your Certificate*****
When Charge is Current Amount Maximum Amount Optional Feature Deducted Deducted We Can Deduct - ---------------------------------------------------------------------------------------------- Disability waiver of monthly On each monthly Since your employer No separate deduction benefit anniversary of the decides for the whole maximum Certificate group whether to elect this benefit, the cost is included in the basic cost of insurance rates for the group. - ---------------------------------------------------------------------------------------------- Accelerated benefits option On each monthly Since your employer No separate anniversary of the decides for the whole maximum Certificate group whether to elect this benefit, the cost is included in the basic cost of insurance rates for the group. - ---------------------------------------------------------------------------------------------- Accidental death benefit On each monthly No maximum anniversary of the Highest: $.04 per applies to this Highest and Lowest charge among Certificate $1,000 of rider benefit all possible Certificates benefit amount Lowest: $.01 per $1,000 of rider Charge for a hypothetical benefit amount 43 year old $.03 per $1,000 of rider benefit amount - ---------------------------------------------------------------------------------------------- Accidental Death or Dismemberment On each monthly No maximum Benefit anniversary of the Highest: $.05 per applies to this Certificate $1,000 of rider benefit Highest and Lowest Charge Among benefit amount All Possible Certificates Lowest: $.02 per $1,000 of rider benefit amount Charge for a hypothetical 43 year old $.03 per $1,000 of rider benefit amount - ----------------------------------------------------------------------------------------------
7
When Charge is Current Amount Maximum Amount Optional Feature Deducted Deducted We Can Deduct - ------------------------------------------------------------------------------------------- Dependent life benefits (spouse On each monthly No maximum coverage only) anniversary of the applies to this Certificate benefit Highest and lowest charge among Highest: $30.34 per all possible certificates $1,000 of rider benefit amount Lowest: $.03 per $1,000 of rider benefit amount Charge for a hypothetical $.07 per $1,000 of 43 year old rider benefit amount - ------------------------------------------------------------------------------------------- Dependent life benefits (children On each monthly No maximum coverage only) anniversary of the applies to this Certificate benefit Highest and lowest charge among Highest: $.18 per all possible certificates $1,000 of rider benefit amount Lowest: $.07 per $1,000 of rider benefit amount Charge for a hypothetical $.13 per $1,000 of 43 year old rider benefit amount
* The cost of insurance charge varies based on anticipated variations in our costs or risks associated with the group or individuals in the group that the charge was intended to cover. The cost of insurance charge may not be representative of the charge that any particular Certificate owner would pay. See "Charges and Deductions--Cost of Insurance" for a more detailed discussion of factors affecting this charge. You can obtain more information about the cost of insurance or other charges that would apply by contacting your insurance sales representative. If you would like, we will provide you with an illustration of the impact of these and other charges under the Certificate based on various assumptions. ** We may determine differences in this charge for different employer groups based on differences in the levels of mortality and expense risks. See "Charges and Deductions--Certificate Charges--Charge Against the Separate Account" below for a fuller description of how this charge may vary. *** This charge for a Certificate may vary based on differences in the levels of administrative services performed by us and by the employer for the specific group under which the Certificate is issued. **** We charge interest on Certificate loans but credit you with interest on the amount of the cash value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. ***** The rider charges may vary based on individual characteristics, or anticipated variations in our costs or risks associated with the group or individuals in the group under which the Certificate is issued. The charge may not be representative of the charge that any particular Certificate owner would pay. You can obtain more information about this and other charges that would apply by contacting your insurance sales representative. Portfolio Operating Expenses Each of the Funds pays an investment management fee. Each of the Funds also incurs other direct expenses (see the applicable Fund Prospectus attached at the end of this Prospectus and the Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. The Funds offer various classes of shares, each of which has a different level of expenses. However, we offer only Class A shares of the Funds under the Certificates. 8 The first table below shows the lowest and highest fees and expenses charged by any of the Portfolios for the fiscal year ended December 31, 2003.
Lowest Highest - ------------------------------------------------------------------------------ Total Annual Portfolio Operating Expenses (expenses that are deducted from Portfolio assets, including management fees, distribution (Rule 12b-1) fees and other expenses) 0.31% 1.09% - ------------------------------------------------------------------------------
The table below describes the annual operating expenses for each Portfolio for the year ended December 31, 2003, as a percentage of the Portfolio's average daily net assets for the year.
Gross Total Fee Waivers and Net Total Management Other 12b-1 Annual Expense Annual Fees Expenses Fees Expenses Reimbursements Expenses - --------------------------------------------------------------------------------------------------------------- Metropolitan Series Fund, Inc. (Class A) - --------------------------------------------------------------------------------------------------------------- Lehman Brothers(R) Aggregate Bond Index .25% .09% 0 .34% 0 .34% - --------------------------------------------------------------------------------------------------------------- State Street Research Diversified/(a)/ .44% .07% 0 .51% 0 .51% - --------------------------------------------------------------------------------------------------------------- MetLife Stock Index .25% .06% 0 .31% 0 .31% - --------------------------------------------------------------------------------------------------------------- Harris Oakmark Large Cap Value/(a)/ .74% .09% 0 .83% 0 .83% - --------------------------------------------------------------------------------------------------------------- State Street Research Investment Trust/(a)/ .49% .07% 0 .56% 0 .56% - --------------------------------------------------------------------------------------------------------------- FI Mid Cap Opportunities/(c)/ .69% .08% 0 .77% 0 .77% - --------------------------------------------------------------------------------------------------------------- Russell 2000(R) Index .25% .22% 0 .47% 0 .47% - --------------------------------------------------------------------------------------------------------------- T. Rowe Price Small Cap Growth .52% .11% 0 .63% 0 .63% - --------------------------------------------------------------------------------------------------------------- Scudder Global Equity .64% .20% 0 .84% 0 .84% - --------------------------------------------------------------------------------------------------------------- Morgan Stanley EAFE(R) Index .30% .41% 0 .71% 0 .71% - --------------------------------------------------------------------------------------------------------------- FI International Stock/(a)(c)/ .86% .23% 0 1.09% 0 1.09% - --------------------------------------------------------------------------------------------------------------- State Street Research Bond Income .40% .07% 0 .47% 0 .47% - --------------------------------------------------------------------------------------------------------------- Met Investors (formerly COVA) Series Trust portfolios (Class A) - --------------------------------------------------------------------------------------------------------------- Lord Abbett Bond Debenture/(b)/ .60% .10% 0 .70% 0 .70% - ---------------------------------------------------------------------------------------------------------------
9 - -------- /(a)/ The Metropolitan Series Fund directed certain of the Portfolio's trades to brokers who paid a portion of the Portfolios' expenses. Net Total Annual Expenses for the Portfolios does not reflect this reduction in expenses. /(b)/ Met Investors Series Trust and its affiliate Met Investors Advisory LLC have entered into an Expense Limitation Agreement under which Met Investors Advisory LLC has agreed to waive or limit its fees and to assume other expenses so that the Net Total Annual Expenses of this Portfolio (other than interest, taxes, brokerage commissions, other expenditures which are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of this Portfolio's business) will not exceed, at any time prior to April 30, 2005, the percentage shown in the far right column. Fees waived or expenses reimbursed by the investment manager of this Portfolio in prior years were repaid in the last fiscal year to the Investment Manager by this Portfolio with the approval of the Fund's Board of Trustees. This amount was included in the "Other Expenses" column. The amount for this Portfolio is 0.03%. /(c)/ On December 16, 2003, Fidelity Management & Research Company became the sub-adviser for the Putnam International Stock Portfolio which changed its name to FI International Stock Portfolio. On May 1, 2004, the FI Mid Cap Opportunities Portfolio of the Metropolitan Series Fund was merged into the Janus Mid Cap Portfolio of the Metropolitan Series Fund which changed its name to FI Mid Cap Opportunities Portfolio. The expense information regarding the Portfolios was provided by those Portfolios. MetLife Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. MetLife has the legal obligation to pay all amounts and other benefits and other amounts to which you are entitled under the terms of your Certificate. The Fixed Account The Fixed Account is part of our general assets that are not in any legally segregated separate accounts. The minimum guaranteed interest rate will vary based on the provisions stated in the Certificate but will never be lower than 3%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account. We credit the guaranteed and excess interest on each "Valuation Date" (as defined below in "Other Certificate Provisions--When Your Requests Become Effective"). We guarantee the credited interest, and it becomes part of the Certificate's cash value in the Fixed Account. We charge the portion of the monthly deduction that is deducted from the Fixed Account against the most recent premiums paid and interest credited thereto. We can delay transfers, withdrawals, surrender and payment of Certificate loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Group Policy and the Certificate give you more information on the operation of the Fixed Account. 10 Separate Account UL The Separate Account receives premium payments from the Group Policies and Certificates described in this Prospectus and other variable life insurance policies that we issue. The assets in the Separate Account legally belong to us, but they are held solely for the benefit of investors in the Separate Account and no one else, including our other policyholders and creditors. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. [SIDEBAR: Each Separate Account investment division invests in a corresponding Portfolio of a Fund.] The Separate Account has subdivisions, called "investment divisions." Each investment division invests its assets exclusively in shares of a corresponding Portfolio of a Fund. We can add new investment divisions to or eliminate investment divisions from the Separate Account. You can designate how you would like your net premiums and cash value to be allocated among the available investment divisions and our Fixed Account. In some cases, your employer retains the right to allocate the portion of any net premiums it pays (rather than any premiums you pay). If so, the Certificate will state this. Amounts you allocate to each investment division receive the investment experience of the investment division, and you bear this investment risk. The Funds [SIDEBAR: You should carefully review the investment objectives, strategies, and risks of each Portfolio which are described in the prospectus for each Fund that is attached at the end of this Prospectus.] Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the 1940 Act. Each Fund is divided into Portfolios, each of which represent a different class of stock in which a corresponding investment division of the Separate Account invests. Not all of the Portfolios of a Fund are available in connection with the Certificates. You should read each Fund prospectus, which is attached at the end of this Prospectus. It contains information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. It also contains information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. Some of the Portfolios have names and investment objectives that are very similar to certain publicly available mutual funds that are managed by the same money managers. These Portfolios are not those publicly available mutual funds and will not have the same performance. Different performance will result from such factors as different implementation of investment policies, different cash flows into and out of the Portfolios, different fees and different sizes. As of the end of each Valuation Period (see "Valuation period" description below in "Other Certificate Provisions--When Your Requests Become Effective"), we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of any of the following transactions that take effect at the end of the Valuation Period: .. The allocation of net premiums to the Separate Account. .. Dividends and distributions on Fund shares that are reinvested as of the dates paid (which reduces the value of each share of the Fund and increases the number of Fund shares outstanding, but has no effect on the cash value in the Separate Account). 11 .. Certificate loans and loan repayments allocated to the Separate Account. .. Transfers to and among investment divisions. .. Withdrawals and surrenders taken from the Separate Account. The adviser, any sub-adviser and the investment objective of each Portfolio are as follows:
Metropolitan Series Fund, Inc. Adviser: MetLife Advisers, LLC - ------------------------------------------------------------------------------------------- Portfolio Sub-Adviser Investment Objective - ------------------------------------------------------------------------------------------- Lehman Brothers(R) Metropolitan Life To equal the performance of the Lehman Aggregate Bond Index Insurance Company Brothers(R) Aggregate Bond Index. - ------------------------------------------------------------------------------------------- MetLife Stock Index Metropolitan Life To equal the performance of the Standard & Insurance Company Poor's 500(R) Composite Stock Price Index. - ------------------------------------------------------------------------------------------- State Street Research State Street Research High total return while attempting to limit Research Diversified & Management investment risk and preserve capital. Company - ------------------------------------------------------------------------------------------- Harris Oakmark Large Harris Associates L.P. Long-term capital appreciation. Cap Value - ------------------------------------------------------------------------------------------- State Street Research State Street Research Long-term growth of capital and income. Investment Trust & Management Company - ------------------------------------------------------------------------------------------- FI Mid Cap Fidelity Management Long-term growth of capital. Opportunities & Research Company - ------------------------------------------------------------------------------------------- Russell 2000(R) Index Metropolitan Life To equal the return of the Russell 2000 Insurance Company Index. - ------------------------------------------------------------------------------------------- T. Rowe Price Small T. Rowe Price Long-term capital growth. Cap Growth Associates Inc. - ------------------------------------------------------------------------------------------- Scudder Global Equity Deutsche Investment Long-term growth of capital. Management Americas Inc. - ------------------------------------------------------------------------------------------- Morgan Stanley Metropolitan Life To equal the performance of the MSCI EAFE EAFE(R) Index Insurance Company Index. - ------------------------------------------------------------------------------------------- FI International Stock Fidelity Management Long-term growth of capital. & Research Company - ------------------------------------------------------------------------------------------- State Street Research State Street Research A competitive total return primarily from Bond Income & Management investing in fixed-income securities. Company - ------------------------------------------------------------------------------------------- Met Investors (formerly COVA) Series Trust (Class A) Adviser: Met Investors Advisory, LLC - ------------------------------------------------------------------------------------------- Lord Abbett Bond Lord, Abbett & Co. To provide high current income and the Debenture opportunity for capital appreciation to produce a high total return. - -------------------------------------------------------------------------------------------
The Portfolio Share Classes That We Offer The Funds offer various classes of shares, each of which has a different level of expenses. The Fund prospectuses may provide information for share classes or Portfolios that are not available through the Certificate. When you consult the Fund prospectus for a Portfolio, you should be careful to refer only to the information regarding the Portfolio and class of shares that is available through the Certificate: .. For the Metropolitan Series Fund, Inc. and the Met Investors Series Trust, we offer Class A shares only. 12 Voting Rights [SIDEBAR: You can give us voting instructions on shares of each Portfolio of a Fund that are attributed to your Certificate.] The Funds have shareholder meetings from time to time to, for example, elect directors and approve some changes in investment management arrangements. We will vote the shares of each Portfolio that are attributed to your Certificate based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. Issuing a Group Policy and a Certificate [SIDEBAR: We will issue a Certificate to you as owner. Unless your employer has reserved otherwise, you will have all the rights under the Certificate including the ability to name a new owner or contingent owner.] We may issue a Group Policy to an employer or association ("employer") or to a trust through which an employer participates. Generally, the minimum number of people in a group that is required before we will issue a Group Policy directly to an employer is 200 lives. However, we reserve the right to issue a Group Policy or provide coverage to an employer that does not meet this minimum. Employees of employers and members of associations ("employees") may own Certificates issued under their employer's Group Policy. If you want to own a Certificate, then you must complete an enrollment form, which must be received by the Administrative Office. We reserve the right to reject an enrollment form for any reason permitted by law, and our acceptance of an enrollment form is subject to our underwriting rules. Generally, we will issue a Certificate only to an eligible employee, or a spouse of an eligible employee when permitted by the employer. The person upon whose life the Certificate is issued is called the covered person. The owner is generally the employee unless the enrollment form designates someone else as owner. For the purpose of computing the covered person's age under the Certificate, we start with the covered person's age on a day selected by your employer. Age can be measured from December 31st in a given year, or from any other date agreed to by your employer and us. The Date of Certificate is set forth in the Certificate and is the effective date for life insurance protection under the Certificate. We use the Date of Certificate to calculate the Certificate years (and Certificate months and monthly anniversaries). Payment and Allocation of Premiums [SIDEBAR: You can make planned periodic premium payments and unscheduled premium payments.] The payment of a given premium will not necessarily guarantee that your Certificate will remain in force. Rather, this depends on the Certificate's cash surrender value. Paying Premiums You can make premium payments, subject to certain limitations discussed below, through: .. Payroll Deduction: Where provided by your employer, you may pay premiums through payroll deduction. Your employer may require that you pay a minimum monthly amount in order to use payroll deduction. Your employer may send payroll deductions to us as much as 30 days after the deduction is made. 13 .. Planned periodic payments: If there is no payroll deduction available, you may elect to pay premiums monthly, quarterly or annually. .. Unscheduled premium payment option: You also can make other premium payments at any time. Maximum and Minimum Premium Payments .. The first premium may not be less than the planned premium. .. Unscheduled premium payments must be at least $100 each. We may change this minimum amount on 90 days notice to you. .. You may not pay premiums that exceed tax law premium limitations for life insurance policies. We will return any amounts that exceed these limits except that we will keep any amounts that are required to keep the Certificate from terminating. We will let you make premium payments that would turn the Certificate into a modified endowment contract, but we will promptly tell you of this status, and if possible, we will tell you how to reverse the status. ("See Tax Matters--Modified Endowment Contracts.") Allocating Net Premiums [SIDEBAR: Net premiums are your premiums minus the charges deducted from your premiums.] Generally, you indicate on your enrollment form the initial allocation of net premiums (your premiums minus the charges deducted from your premiums) among the Fixed Account and the investment divisions of the Separate Account. In some cases, your employer has the right to allocate the portion of any net premiums it pays (but not any premiums that you pay) until the covered person retires (if the covered person is employed by your employer) or the Certificate becomes portable. (See "Portable Certificate" under "Other Certificate Provisions--Effect of Termination of Employer Participation in the Group Policy.") The Certificate includes a description of your right to allocate net premiums. The percentage of your net premium allocation into each of these investment options must be a minimum of 10% and in whole numbers. You can change your allocations at any time by giving us written notification at our Administrative Office or in any other manner that we permit. Insurance Proceeds If the Certificate is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the covered person's date of death. We will pay this amount after we receive documents that we request as due proof of the covered person's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the covered person's lifetime. If no selection is made, we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. The beneficiary has one year from the date the insurance proceeds are paid to change the selection from a single sum payment to an income plan, as long as we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. 14 The insurance proceeds equal: .. The death benefit provided on the date of death or the alternate death benefit; plus .. Any additional insurance proceeds provided by rider; minus .. Any unpaid Certificate loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. Death Benefit [SIDEBAR: The Certificate provides a death benefit which includes the cash value of the Certificate.] The death benefit varies and equals the specified face amount of insurance of the Certificate plus the cash value on the date of death. Alternate Death Benefit In order to ensure that the Certificate qualifies as life insurance under the federal income tax laws, the beneficiary will receive an alternate death benefit if it is greater than the amount that the beneficiary would have received under the death benefit described above. The alternate death benefit is calculated by multiplying the Certificate's cash value by a prescribed percentage. The prescribed percentage is determined by the covered person's age at the time of the calculation and declines as the covered person grows older. The alternate death benefit is as follows:
Age of Covered Person at Death % of Cash Value* ----------------------------------------------- 40 and less 250% 45 215% 50 185% 55 150% 60 130% 65 120% 70 115% 75 to 90 105% 95 100%
- -------- * For the ages not listed, the percentage decreases by a ratable portion for each full year. During any period when your cash value is high enough that the alternate death benefit applies, your charges for insurance costs will be higher, since the effective amount of your coverage will be greater. In no event will the death benefit be less than the minimum insurance amount required under current Federal income tax rules applicable to the definition of life insurance as in effect on the date your Certificate is issued. Specified Face Amount [SIDEBAR: You can generally increase or decrease the Certificate's specified face amount.] The specified face amount is the basic amount of life insurance specified in the Certificate. The Minimum Specified Face Amount is the smallest amount of specified face amount for which a Certificate may be issued, and is set forth in the Certificate. This amount will never be less than $10,000. Generally, you may change your specified face amount subject to certain limitations. Any change you request will be effective on the monthly anniversary on or next following our approval of your request. You are permitted to decrease the specified face amount to as low as the Minimum Specified Face Amount set forth in the Certificate. 15 You may request an increase on dates determined by your employer and set forth in the Certificate. If you are a qualifying employee, we will make automatic increases in the specified face amount when your salary increases on a date or dates determined by your employer. However, you can notify us in writing at any time that you do not desire such automatic increases in the future. Any requirements as to the minimum amount of an increase are set forth in the Certificate. Any increase is subject to our underwriting rules which may include a requirement for evidence satisfactory to us of the covered person's insurability. Before you change your specified face amount you should consider the following: .. The insurance portion of your death benefit will change. This will affect the insurance charges, cash value and death benefit levels; .. Reducing your specified face amount may result in our returning an amount to you which, if it occurs during the first 15 Certificate years, could then be taxed on an income first basis, even if the Certificate is not a modified endowment contract; .. The amount of additional premiums that the tax laws permit you to pay into the Certificate may increase or decrease. The additional amount you can pay without causing the Certificate to be a modified endowment contract for tax purposes may also increase or decrease (see "Tax Matters--Modified Endowment Contracts"); and .. The Certificate could become a modified endowment contract in certain circumstances. Income Plans [SIDEBAR: Generally you can receive the Certificate's insurance proceeds under an income plan instead of in a lump sum.] The insurance proceeds can generally be paid under a variety of income plans. We currently make the following income plans available: .. Interest Income .. Installment Income for a Stated Period .. Installment Income of a Stated Amount .. Single Life Income-Guaranteed Payment Period .. Joint and Survivor Life Income .. Single Life Income-Guaranteed Return Before you choose an income plan you should consider: .. The tax consequences associated with the Certificate proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax advisor about tax consequences; and .. That the rates of return we credit under these plans are not based on the investment performance of any of the Portfolios. Cash Value, Transfers and Withdrawals Cash Value [SIDEBAR: The Certificate is designed to accumulate cash value.] The Certificate's cash value equals: .. The Fixed Account cash value, plus .. The Loan Account cash value, plus .. The Separate Account cash value. The Certificate's cash surrender value equals your cash value minus: .. Any outstanding Certificate loans (plus any accrued and unpaid loan interest); .. Any accrued and unpaid monthly deduction; and .. Any surrender transaction fee. 16 Unless the Group Policy is still in its first year, we will, on the Investment Start Date for the Certificate, allocate your cash value among the investment divisions as you requested your net premiums to be allocated in your enrollment form or a subsequent reallocation request. See "Investment Start Date" description below in "Other Certificate Provisions--When Your Requests Become Effective." If the Group Policy is still in its first year, we will make this allocation 20 days after the Investment Start Date. Thereafter, at the end of each Valuation Period the cash value in an investment division will equal: .. The cash value in the investment division at the beginning of the Valuation Period; plus .. All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus .. All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus .. The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus .. The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the portfolio during the period. Cash Value Transfers The minimum amount you may transfer is $200 or, if less, the total amount in an investment option. You may make transfers at any time after the Investment Start Date. In some cases, your employer retains the right to transfer the portion of any net premiums it pays (but not any premiums you pay). The Certificate will set forth any such employer rights. In some cases, the maximum amount that you may transfer or withdraw from the Fixed Account in any Certificate year is the greater of .. $200 and .. 25% of the largest amount in the Fixed Account over the last four Certificate years (or since the Date of Certificate if the Certificate has been in effect for less than four years). Any such limit does not apply to .. a full surrender .. any loans taken .. any transfers under a systematic investment strategy The Certificate includes a description of your cash value transfer rights. We do not charge for transfers. Currently, transfers are not taxable transactions. We have policies and procedures that attempt to detect transfer activity that may adversely affect other Certificate owners or Fund shareholders in situations where there is potential for pricing inefficiencies or that involve relatively large single or grouped transactions by one or more Certificate owners (i.e., market timing). We employ various means to try to detect such transfer activity, such as periodically examining the number of transfers and/ 17 or the number of "round trip" transfers into and out of particular subaccounts made by Certificate owners within given periods of time and/or investigating transfer activity identified by our Administrative Office or the Funds on a case-by-case basis. We may revise these policies and procedures in our sole discretion at any time without prior notice. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective. Our ability to detect such transfer activity may be limited by operational and technological systems, as well as our ability to predict strategies employed by Certificate owners to avoid such detection. Our ability to restrict such transfer activity may be limited by provisions of the Certificate. We apply our policies and procedures without exception, waiver, or special arrangement, although we may vary our policies and procedures among our variable contracts and subaccounts and may be more restrictive with regard to certain contracts or subaccounts than others. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Certificate owners or Fund shareholders. In addition, we cannot guarantee that the Portfolios will not be harmed by transfer activity related to other insurance companies and/or retirement plans that may invest in the Portfolios. Our policies and procedures may result in restrictions being applied to Certificate owner(s). These restrictions may include: .. requiring you to send us by U.S. mail a signed, written request to make transfers; .. limiting the number of transfers you may make each Certificate Year; .. limiting the dollar amount that may be transferred at any one time; .. charging a transfer or collecting a Fund redemption fee; .. denying a transfer request from an authorized third party acting on behalf of multiple Certificate owners; and .. imposing other limitations and modifications where we determine that exercise of the transfer privilege may create a disadvantage to other Certificate owners (including, but not limited to, imposing a minimum time period between each transfer). If restrictions are imposed on a Certificate owner, we will reverse upon discovery any transaction inadvertently processed in contravention of such restrictions. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities. You should read the Fund Prospectuses for more details. Systematic Investment Strategies. For certain groups, you can choose one of four currently available strategies described below. Your employer can inform you whether these investment strategies are available. You can also change or cancel your choice at any time. Equity Generator /SM/. Allows you to transfer an amount equal to the interest earned in the Fixed Account in any Certificate month equal to at least $20 to the MetLife Stock Index investment division. The transfer will be made at the beginning of the Certificate month following the Certificate month in which the interest was earned. 18 Equalizer /SM/. Allows you to periodically equalize amounts in your Fixed Account and the MetLife Stock Index investment division. We currently make equalization each quarter. We will terminate this strategy if you make a transfer out of the investment division or the Fixed Account that isn't part of the strategy. You may then reelect the Equalizer on your next Certificate anniversary. Rebalancer/SM/. Allows you to periodically redistribute amounts in the Fixed Account and investment divisions in the same proportion that the net premiums are then being allocated. We currently make the redistribution each quarter. Allocator/SM/. Allows you to systematically transfer money from the Fixed Account to any investment division(s). You must have enough cash value in the Fixed Account to enable the election to be in effect for three months. The election can be to transfer each month: .. A specific amount, until the cash value in the Fixed Account is exhausted; .. A specific amount for a specific number of months; or .. Amounts in equal installments until the total amount you have requested has been transferred. Transfers by Telephone. We may, if permitted by state law, decide in the future to allow you to make transfer requests, changes to Systematic Investment Strategies and changes to allocations of future net premium by phone. The following procedures would apply: .. We must have received your authorization in writing satisfactory to us, to act on instructions from any person that claims to be you, as long as that person follows our procedures. .. We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. .. All telephone calls will be recorded. .. You will receive a written confirmation of any transaction. .. Neither the Separate Account nor we will be liable for any loss, expense or cost arising out of a telephone request if we reasonably believed the request to be genuine. Surrender and Withdrawal Privileges [SIDEBAR: You can surrender the Certificate for its cash surrender value.] We may ask you to return the Certificate before we honor your request to surrender the Certificate. The proceeds will be paid in a single sum. If the covered person dies after you surrender the Certificate but before the end of the Certificate month in which you surrendered the Certificate, we will pay your beneficiary an amount equal to the difference between the Certificate's death benefit and its cash value, computed as of the surrender date. You can make partial withdrawals if: .. the withdrawal is at least $200; and .. in some cases, the amount you request to withdraw from the Fixed Account is not more than the greater of (a) $200, and (b) 25% of the largest amount in the Fixed Account over the last four Certificate years (or since the Date of Certificate if the Certificate has been in effect for less than four years). The Certificate includes a description of your rights to make partial withdrawals. If you make a request for a partial withdrawal that is not 19 permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Certificate. We will deduct your withdrawal from the Fixed Account and each of the investment divisions of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. As regards payment of amounts attributable to a check, we can wait for a reasonable time (15 days or less) to let the check clear. Before surrendering the Certificate or requesting a partial withdrawal you should consider the following: .. Transaction fees of up to $25 (but not greater than 2% of the amount withdrawn) may apply, if the Certificate so states. .. At least some amounts received may be taxable as income and, if your Certificate is a modified endowment contract, subject to certain tax penalties. (See "Tax Matters--Modified Endowment Contracts.") .. If you also decrease your specified face amount at the time of the withdrawal, the Certificate could become a modified endowment contract. .. For partial withdrawals, your death benefit will decrease, generally by the amount of the withdrawal. In some cases you may be better off taking a Certificate loan, rather than a partial withdrawal. Benefit at Final Date The Final Date is the Certificate anniversary on which the covered person reaches age 95. Subject to certain conditions, we will allow you to extend that date where permitted by state law. If the covered person is living on the Final Date, we will pay the cash surrender value of the Certificate to the Certificate owner (generally the employee). The Certificate owner will receive the cash surrender value in a single sum. Paid-Up Certificate Provision Under this provision, you can choose to terminate the Certificate's usual death benefit (and any riders in effect) and use all or part of the cash surrender value as a single premium for a "paid-up" benefit under the Certificate. ("Paid-up" means no further premiums are required.) Thereafter, you may no longer allocate cash value to the Separate Account or the Fixed Account. You will receive in cash any remaining cash surrender value that is not used to elect a paid-up benefit. The paid-up benefit must not be: .. more than can be purchased using the Certificate's cash surrender value; .. more than the death benefit under the Certificate at the time you choose to use this provision; or .. less than $10,000. Loan Privileges [SIDEBAR: You can borrow from us and use the Certificate as security for the loan.] The amount of each loan must be: .. At least $200; and 20 .. No more than 75% of the cash surrender value (unless state law requires a different percentage to be applied, as set forth in your Certificate) when added to all other outstanding Certificate loans. For certain Group Policies, we may charge a transaction fee of up to $25 for each loan if the Certificate so states. As of your loan request's Date of Receipt, we will: .. Remove an amount equal to the loan from your cash value in the Fixed Account and each investment division of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. .. Transfer such cash value to the Loan Account, where it will be credited with interest at a rate equal to the loan rate charged less a percentage charge, based on expenses associated with Certificate loans, determined by us. This percentage charge will not exceed 2%, and the minimum rate we will credit to the Loan Account will be 3% per year (for Group Policies issued prior to March 1, 1999, the minimum rate is 4%). At least once a year, we will transfer any interest earned in your Loan Account to the Fixed Account and the investment divisions, according to the way that we then allocate your net premiums. .. Charge you interest, which will accrue daily at a rate of up to 8% per year (which is the maximum rate we will ever charge). We will determine the current interest rate applicable to you at the time you take a loan. Your interest payments are generally due at the beginning of each Certificate year. However, we reserve the right to make interest payments due in a different manner. If you do not pay the amount within 31 days after it is due, we will treat it as a new Certificate loan. Repaying your loans (plus accrued interest) is done by sending in payments at any time before the Final Date while the covered person is living. You should designate whether a payment is intended as a loan repayment or a premium payment, since we will treat any payment for which no designation is made as a premium payment. We will allocate your repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated. Before taking a Certificate loan you should consider the following: .. Interest payments on loans are generally not deductible for tax purposes. .. Under certain situations, Certificate loans could be considered taxable distributions. .. Amounts held in your Loan Account do not participate in the investment experience of the investment divisions or receive the interest rate credited to the Fixed Account either of which may be higher than the interest rate credited on the amount you borrow. .. If you surrender the Certificate or if we terminate the Certificate, or at the Final Date, any outstanding loan amounts (plus accrued interest) may be taxed as a distribution. (See "Federal Tax Matters--Loans" below.) .. A Certificate loan increases the chances of our terminating the Certificate due to insufficient cash surrender value. We will terminate your Certificate with no value if: (a) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (b) we tell you of the insufficiency and you do not make a sufficient payment within the greater of (i) 61 days of the monthly anniversary, or (ii) 30 days after the date notice of the start of the grace period is mailed to you. .. The Certificate's death proceeds will be reduced by any unpaid loan (plus any accrued and unpaid loan interest). 21 Optional Benefits Added By Rider You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. Each rider contains important information, including limits and conditions that apply to the benefits. Generally, we currently make the following benefits available by rider: .Disability Waiver of Monthly .Accidental Death or Deduction Benefit/1,2/ Dismemberment Benefit/1/ ----------------------------------------------------------------- .Accelerated Benefits Option/1,3/ .Dependent Life Benefits/1/ ----------------------------------------------------------------- .Accidental Death Benefit/1/
- -------- /1/ Provided to you only if elected by your employer. /2/ An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Certificate's termination. For this reason, it may be advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /3/ Payment under this rider may affect eligibility for benefits under state or federal law. Each rider contains important information, including limits and conditions that apply to the benefits. If you decide to purchase any of the riders, you should carefully review their provisions to be sure the benefit is something that you want. You should also consider: .. That the addition of certain riders can restrict your ability to exercise certain rights under the Certificate. .. That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Certificate terminates because of poor investment performance or any other reason, the rider generally will also terminate. .. The tax consequences. You should consult with your tax advisor before purchasing one of the riders. Charges and Deductions [SIDEBAR: Carefully review the "Fee Tables" in this Prospectus which set forth the charges that you pay under the Certificate.] Important Information Applicable to all Certificate Charges and Deductions The charges discussed in the paragraphs that follow are all included in the Fee Tables on pages 5 to 10 of this Prospectus. You should refer to those Fee Tables for information about the rates of and amounts of such charges, as well as other information that is not covered below. The Certificate charges compensate us for our expenses and risks. Any distinctions we make about the specific purposes of the different charges are imprecise, and we are free to keep and use our revenues or profits for any other purpose, including paying any of our costs and expenses in connection with the Certificates under the Group Policies. Our revenue from any particular charge may be more or less than any costs or expenses that charge is intended primarily to cover. The following sets forth additional information about some (but not all) of the Certificate charges. 22 Charges Deducted From Premiums Charge for average expected state taxes attributable to premiums: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Although premium taxes vary from state to state, we will charge one rate for each employer group. We estimate the initial charge for each employer group based on anticipated taxes to be incurred on behalf of each group during its first year of coverage. Thereafter, we will base this charge on anticipated taxes taking into account actual state and local premium taxes we incur on behalf of each employer group in the prior year and known factors affecting the coming year's taxes. This charge may vary based on changes in the law or changes in the residence of the Certificate owners. We may deduct this charge, as well as the charge for expected federal taxes attributable to premiums, either as a percent of premium or as part of the monthly deduction. In the latter case, the amount we deduct would depend on the amount of premiums paid by the group as a whole rather than the amount paid by you. Currently, we are charging covered employer groups rates up to 2.55%, which reflect the average state premium taxes currently being charged for the group. There is no specific maximum rate we may charge. Charge for expected federal taxes attributable to premiums. Federal income tax law requires us to pay certain amounts of taxes that are related to the amount of premiums we receive. We deduct 0.35% of each premium payment to offset the cost to us of those additional taxes, which may be more or less than the amount we pay in respect of your premiums. Charges included in the Monthly Deduction The Certificate describes the charges that are applicable to you as part of the monthly deduction. The monthly deduction accrues on each monthly anniversary starting with the Date of Certificate. However, we may make the actual deduction up to 45 days after each such monthly anniversary. We allocate the monthly deduction among the Fixed Account and each of the investment divisions of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. Cost of insurance: This charge varies based on many factors. Each month, we determine the charge by multiplying your cost of insurance rate by the insurance amount. This is the amount we are at risk if the insured dies, and the Fee Table earlier in this Prospectus calls it our "Net Amount at Risk." The insurance amount (or Net Amount at Risk) is the death benefit at the beginning of the Certificate month, minus the cash value at the beginning of the Certificate month. The insurance amount will be affected by changes in the specified face amount of the Certificate. The insurance amount and therefore the cost of insurance will be greater if the specified face amount is increased. If the alternate death benefit is in effect, then the insurance amount will increase and thus your cost of insurance will be higher. The cost of insurance rate is based on: .. The age and rate class of the covered person .. Group mortality characteristics 23 .. The particular characteristics that are agreed to by your employer and us, such as: 1. The rate class structure; 2. The degree of stability in the charges sought by your employer; and 3. Portability features. .. The amount of any surplus or reserves to be transferred to us from any previous insurer or from another of our policies (see "Other Certificate Provisions--Retrospective Experience Rating and Dividends"). The actual monthly cost of insurance rates will be based on our expectations as to future experience. The rates, however, will never exceed the guaranteed cost of insurance rates set forth in the Certificate. These guaranteed rates may be up to 150% of the rates that could be charged based on the 1980 Commissioners Standard Ordinary Mortality Table, Males, age last birthday ("1980 CSO Table"). The maximum guaranteed rates may be higher than the 1980 CSO Table because we use simplified underwriting and non-medical issue procedures whereby we may not require the covered person to submit to a medical or paramedical examination, and may provide coverage to groups that present substandard risk characteristics according to our underwriting criteria. Our current rates are lower than 100% of the 1980 CSO Table in most cases. We review our rates periodically and may adjust them based on our expectations of future experience. We will apply the same rates to everyone in a group who has had their Certificate for the same amount of time and who is the same age and rate class. We adjust the rates from time to time based on several factors, including: .. the number of Certificates in force for each group; .. the number of Certificates in the group surrendered or becoming portable during the period; and .. the actual experience of the group. As a general rule, the cost of insurance rate increases each year you own the Certificate, as the covered person's age increases. Our use of simplified underwriting and non-medical issue procedures may result in higher cost of insurance charges for some healthy individuals. Rate class relates to the level of mortality risk we assume with respect to a covered person. We and your employer will agree to the number of classes and characteristics of each class. The classes may vary by smoker and nonsmokers, active and retired status, Owners of portable Certificates and other Owners, and/or any other non-discriminatory classes we and your employer agree to. The covered person's rate class will affect your cost of insurance. Administration charge: We make this monthly charge primarily to compensate us for expenses we incur in the administration of the Certificates, including our underwriting and start-up expenses. The Certificate will describe your administration charge. The charge will never exceed $5 per Certificate. We will determine differences in the administration charge rates applicable to different Certificates under the Group Policies based on expected differences in the administrative costs under the Certificates or in the amount of revenues that we expect to derive from the charge. Such differences may result, for example, from: .. features that are agreed to by your employer and us; .. the extent to which certain administrative functions are to be performed by us or by your employer; and .. the expected average Certificate death benefit. 24 Charge Against the Separate Account We make this daily Mortality and Expense Risk charge against the assets in the Separate Account primarily to compensate us for: .. mortality risks that covered persons may live for a shorter period than we expect; and .. expense risks that our issuing and administrative expenses may be higher than we expect. The maximum rate we may charge is equivalent to an effective annual rate of ..90% of the Cash Value in the Separate Account. We may determine differences in this charge for different employer groups based on differences in the levels of mortality and expense risks. These differences arise mainly from the fact that: .. the factors discussed above on which the cost of insurance and administration charges are based are more uncertain in some cases than others; and .. our ability to recover any unexpected costs from Certificate charges varies from case to case depending on the maximum rates for such charges we agree to with employers. We reserve the right, if permitted by law, to change the structure of this charge so that it is charged on a monthly basis as a percentage of cash value in the Separate Account or so that it is charged as a part of the monthly deduction. Our right to change the structure of this charge does not permit us to increase the maximum rate that is stated in the Policy. Variations In Charges We will determine Certificate charge rates pursuant to our established actuarial procedures, and we will not discriminate unreasonably or unfairly against owners of Certificates under any Group Policy. Portfolio Company Charges Each of the Portfolios pays an investment management fee to its investment manager. Each Portfolio also incurs other direct expenses. See the fuller description contained in the Fee Table section of this Prospectus (also see the Fund Prospectus and Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. Other Charges Additional Taxes. In general, we don't expect to incur federal, state or local taxes upon the earnings or realized capital gains attributable to the assets in the Separate Account relating to the cash surrender value of the Policies. If we do incur such taxes, we reserve the right to charge cash value allocated to the Separate Account for these taxes. Transaction Fee for Surrenders or Partial Withdrawals. Your Certificate may provide that we may charge a transaction fee of up to $25 for each surrender or partial withdrawal. In no event, however, will the charge be greater than 2% of the amount withdrawn. 25 Loan Interest Spread: We charge interest on Certificate loans but credit you with interest on the amount of the Cash Value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. This charge is primarily to cover our expense in providing the loan. The spread is guaranteed to never exceed 2%. Certificate Termination and Reinstatement Termination: We will terminate the Certificate without any cash surrender value if: .. The cash surrender value on any monthly anniversary is less than the monthly deduction; and .. We do not receive a sufficient premium payment within the grace period to cover the monthly deduction. We will mail you notice if any grace period starts. The grace period is the greater of (a) 61 days measured from the monthly anniversary and (b) 30 days after the notice is mailed. Reinstatement: The following applies unless the Group Policy has been terminated and you would not have been permitted to retain your Certificate on a portable or paid-up basis. Upon your request, we will reinstate the Certificate, subject to certain terms and conditions that the Certificate provides. We must receive your request within 3 years (or within a longer period if required by state law) after the end of the grace period and before the Final Date. You also must provide us with: .. A written request for reinstatement. .. Evidence of insurability that we find satisfactory. .. An additional premium amount that the Certificate prescribes for this purpose. Your Certificate can also terminate in some cases if your employer ends its participation in the group Policy. This is discussed in detail under "Other Certificate Provisions--Effect of Termination of Employer Participation in the Group Policy" below. Federal Tax Matters [SIDEBAR: You should consult with your own tax advisor to find out how taxes can affect your benefits and rights under the Certificate.] The following is a brief summary of some tax rules that may apply to the Certificate. Such discussion does not purport to be complete or to cover every situation. You must consult with and rely on the advice of your own tax or ERISA counsel where the Certificate is being purchased in connection with an employee benefit plan, such as a death benefit or deferred compensation plan, or is being purchased for estate, tax planning or similar purposes. You should also consult with your own tax advisor to find out how taxes can affect your benefits and rights under the Certificate. Such consultation is especially important before you make unscheduled premium payments, change your specified face amount, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the Certificate. Under current federal income tax law, the taxable portion of distributions from variable annuities or variable life contracts is taxed at ordinary income tax rates and does not qualify for the reduced tax rate applicable to long-term capital gains and dividends. Insurance proceeds .. Insurance proceeds are generally excludable from your beneficiary's gross income. 26 .. The proceeds may be subject to federal estate tax: (i) if paid to the covered person's estate or (ii) if paid to a different beneficiary if the covered person possessed incidents of ownership at or within three years before death. .. If you die before the covered person, the value of the Certificate (determined under IRS rules) is included in your estate and may be subject to federal estate tax. .. Whether or not any federal estate tax is due is based on a number of factors including the estate size. Cash value (if the Certificate is not a modified endowment contract) .. You are generally not taxed on your cash value until you withdraw it or surrender the Certificate or receive a distribution such as when your Certificate terminates or on the Final Date. In these cases, you are generally permitted to take withdrawals and receive other distributions up to the amount of premiums paid without any tax consequences. However, withdrawals and other distributions will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules may apply if there is a death benefit reduction in the first 15 Certificate years, when a distribution may be subject to tax on an income-out-first basis if there is a gain in the Certificate (which is generally when your cash value exceeds the cumulative premiums you paid). Loans .. Loan amounts you receive will generally not be subject to income tax, unless your Certificate is or becomes a modified endowment contract or terminates. .. Interest on loans is generally not deductible. .. If the Certificate terminates (upon surrender, cancellation, lapse, or the Final Date of replacement by your employer of your group coverage with other group coverage) while any Certificate loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Certificate distribution. Thus, there will generally be federal income tax payable on the amount by which withdrawals and loans exceed the premiums paid to date. Please be advised that amounts borrowed and withdrawn reduce the Certificate's cash value and any remaining cash value of the Certificate may be insufficient to pay the income tax on your gains. Modified Endowment Contracts These contracts are life insurance contracts where the premiums paid during the first 7 years after the Certificate is issued, or after a material change in the Certificate, exceed tax law limits referred to as the "7-pay test." Material changes in the Certificate include changes in the level of benefits and certain other changes to the Certificate after the issue date. Reductions in benefits during a 7-pay period also may cause the Certificate to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. The IRS has promulgated a procedure for the correction of inadvertent modified endowment contracts. If your Certificate is considered a modified endowment contract the following applies: .. The death benefit will still generally be income tax free to your beneficiary, as discussed above. 27 .. Amounts withdrawn or distributed before the covered person's death, including (without limitation) loans, assignments and pledges, are treated as income first and subject to income tax (to the extent of any gain in the Certificate). All modified endowment contracts you purchase from us and our affiliates during the same calendar year are treated as a single contract for purposes of determining the amount of any such income. .. An additional 10% income tax generally applies to the taxable portion of the amounts received before age 59 1/2, except generally if you are disabled or if the distribution is part of a series of substantially equal periodic payments made over life expectancy. Diversification In order for the Certificate to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Certificate. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Certificate owners of gains under their Certificates. Changes to tax rules and interpretations Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Certificate. These changes may take effect retroactively. We reserve the right to amend the Certificate in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: .. Possible taxation of cash value transfers between investment funds. .. Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. .. Possible limits on the number of investment funds available or the frequency of transfers among them. .. Possible changes in the tax treatment of Certificate benefits and rights. Other issues relating to group variable universal life While "employee pay all" group variable universal life should generally be treated as separate from any Internal Revenue Code Section 79 Group Term Life Insurance Plan also in effect, in some circumstances group variable universal life could be viewed as being part of such a plan, giving rise to adverse tax consequences. Finally, employer involvement and other factors determine whether group variable universal life is subject to the Employee Retirement Income Security Act ("ERISA"). To the extent permitted under the federal tax law, we may claim the benefit of certain foreign tax credits attributable to taxes paid by certain Funds to foreign jurisdictions. Rights We Reserve We reserve the right to make certain changes if we believe the changes are in the best interest of our Certificate owners or would help carry out the purposes of the Certificate. We will make these changes in the manner permitted by applicable law and only after obtaining any necessary owner and 28 regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: .. Operating the Separate Account in any other form that is permitted by applicable law. .. Changes to obtain or continue exemptions from the 1940 Act. .. Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. .. Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. .. Changing the way we assess charges without exceeding the aggregate amount of the Certificate's guaranteed maximum charges. .. Making any necessary technical changes to the Certificate to conform it to the changes we have made. Some such changes might require us to obtain regulatory or Policy owner approval. Whether regulatory or Policy owner approval is required would depend on the nature of the change and, in many cases, the manner in which the change is implemented. You should not assume, therefore, that you necessarily will have an opportunity to approve or disapprove any such changes. Circumstances that could influence our determination to make any change might include changes in law or interpretations thereof; changes in financial or investment market conditions; changes in accepted methods of conducting operations in the relevant market; or a desire to achieve material operating economies or efficiencies. Other Certificate Provisions [SIDEBAR: Carefully review the Certificate, which contains a full discussion of all its provisions.] Free Look Period You can return the Certificate or terminate an increase in the specified face amount during this period. The period ends on the later of: .. 10 days after you receive the Certificate or, in the case of an increase, the revised Certificate (unless state law requires a longer specified period); and .. 45 days after we receive the completed enrollment form or specified face amount increase request. If you return the Certificate, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. If you terminate an increase in the specified face amount, we will restore all Certificate values to what they would have been had there been no increase. We will also refund any premiums paid so that the Certificate will continue to qualify as life insurance under the federal income tax laws. Suicide Subject to applicable state law, if the covered person commits suicide within the first two Certificate years (or another period required by state law), your beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the covered person commits suicide within two years of such increase. 29 Retrospective Experience Rating and Dividends Depending on the provisions in the Group Policy and the claim experience under the Group Policy, the Group Policy may be eligible to receive premium refunds or dividends. We have set the cost of insurance rates in such a way that we will not generally pay a premium refund or a dividend. But, if either is due, it will be paid to the Group Policyholder who will distribute it to Certificate owners. Also, in some situations involving transfer of coverage to a Group Policy or to a successor insurer, certain amounts of surplus or reserves may also be transferred to us or the successor insurer rather than being declared as dividends or premium refunds. The Group Policy describes how we calculate whether any premium refund or dividend will be paid in more detail. Effect of Termination of Employer Participation in the Group Policy Your employer can terminate its participation in the Group Policy. In addition, we may also terminate your employer's participation in the Group Policy if either: 1. during any twelve month period, the total specified face amount for all Certificate Owners under the Group Policy or the number of Certificates falls by certain amounts or below the minimum levels we establish (these levels are set forth in the Certificate), or 2. your employer makes available to its employees another life insurance product. Both your employer and MetLife must provide ninety days written notice to the other as well as to you before terminating participation in the Group Policy. Termination means that your employer will no longer send premiums to us through payroll deduction and that no new Certificates will be issued to employees in your employer's group. You will remain an Owner of your Certificate if: .. you are an Owner of a Certificate that has become portable (as discussed below) not later than the Certificate monthly anniversary prior to termination of your employer's participation; or .. you are an Owner who exercised the paid-up Certificate provision not later than the last Certificate monthly anniversary prior to notice being sent to you of the termination. For all other Owners, .. If your employer replaces your group coverage with another life insurance product that is designed to have cash value, .. we will terminate the Certificate and .. we will transfer your cash surrender value to the other life insurance product (or pay your cash surrender value to you if you are not covered by the new product). Any outstanding loan may be taxable. .. If the other life insurance product is not designed to have cash value, .. we will terminate your certificate and .. we will pay your cash surrender value to you. In such case, the Federal income tax consequences to you would be the same as if you surrendered your Certificate. 30 If your employer does not replace your group coverage with another life insurance product, then, depending on the terms of the Certificate, .. you may have the option of choosing to become an Owner of a portable Certificate or a paid-up Certificate, and .. you may have the option of purchasing insurance based on the "conversion" rights set forth in the Certificate and of receiving the cash surrender value of the Certificate. If you choose the conversion rights, the insurance provided will be substantially less (and in some cases nominal) than the insurance provided under the Certificate. Instead of any of the above options, you may choose to apply the Certificate's cash surrender value to the purchase of an annuity product from MetLife upon termination of the Certificate. Portable Certificate: A Certificate becomes "portable" when an event specified in the Certificate occurs. These events may include: .. termination of the payroll deduction plan with no successor carrier .. other termination of the covered person's employment .. the sale by your employer of the business unit with which the covered person is employed If you become the Owner of a portable Certificate, the current cost of insurance may change, but it will never be higher than the guaranteed cost of insurance. Also, we may no longer consider you a member of your employer's group for purposes of determining cost of insurance rates and charges. Assignment and Change in Ownership You can assign the Certificate if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Administrative Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax advisor before making any change of ownership or other assignment. Reports Generally, you will promptly receive statements confirming your significant transactions such as: .. Change in specified face amount; .. Transfers among investment divisions (including those through Systematic Investment Strategies, which may be confirmed quarterly); .. Partial withdrawals; .. Loan amounts you request; and .. Loan repayments and premium payments. If your premium payments are made through a payroll deduction plan, we will not send you any confirmation in addition to the one you receive from your bank or employer. We will also send you an annual statement generally within 30 days after a Certificate year. This statement will summarize the year's transactions and include information on: .. Deductions and charges; .. Status of the death benefit; 31 .. Cash and cash surrender values; .. Amounts in the investment divisions and Fixed Account; .. Status of Certificate loans; .. Automatic loans to pay interest; and .. Information on your modified endowment contract status (if applicable) We will also send you a Fund's annual and semi-annual reports to shareholders. When Your Requests Become Effective Generally, requests, premium payments and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of the Valuation Period during which we receive them at our Administrative Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. A Valuation Date is: .. Each day on which the New York Stock Exchange is open for trading, except on the day after Thanksgiving when our GVUL Administrative Office is closed. .. Other days, if we think that there has been a sufficient degree of trading in the Fund's portfolio securities that the current net asset value of its shares might be materially affected. If your employer's participation in the Group Policy is still in its first year, the effective time of premium allocation instructions and transfer requests you make in the Certificate enrollment form, or within 20 days of your Investment Start Date, is the end of the first Valuation Date after that 20 day period. During the 20 day period, all of your cash value is automatically allocated to our Fixed Account. Your Investment Start Date is the Date of Receipt of your first premium payment with respect to the Certificate, or, if later, the Date of Receipt of your enrollment form. If your employer's participation in the Group Policy is not still in its first year, the Investment Start Date is the effective time of the allocation instructions you made in the Certificate enrollment form. If your employer has determined to exchange your current insurance coverage for a MetLife Group Policy, there may be a delay between the effective date of the Certificate and the receipt of any cash value from the prior certificate for the 1035 exchange. At the sole discretion of MetLife, the premium attributable to the 1035 exchange may be credited interest from the Certificate effective date. In no case will transfers among the investment options for the premium attributable to the 1035 exchange be applied prior to the date of receipt. The effective date of your Systematic Investment Strategies will be that set forth in the strategy chosen. 32 Third Party Requests Generally, we accept requests for transactions or information only from you. Therefore, we reserve the right not to process transactions requested on your behalf by your agent with a power of attorney or any other authorization. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Certificate owners, and who simultaneously makes the same request or series of requests on behalf of other Certificate owners. Exchange Privilege If you decide that you no longer want to take advantage of the investment divisions in the Separate Account, you may transfer all of your money into the Fixed Account. No transaction charge will be imposed on a transfer of your entire cash value (or the cash value attributable to a specified face amount increase) to the Fixed Account within the first 24 Certificate months (or within 24 Certificate months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Certificate cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy that we make available. Sales of Certificates We serve as the "principal underwriter," as defined in the 1940 Act, for the Group Policies and Certificates. This offering is continuous. We are registered under the Securities Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We sell the Group Policies and Certificates through licensed life insurance sales representatives: .. Registered through us. .. Registered through other broker-dealers, including a wholly owned subsidiary. We do not pay commissions to MetLife representatives for the sale of the Group Policies and Certificates, although MetLife representatives may earn certain incentive award credits. We may pay commissions to other registered broker-dealers who have entered into selling agreements with us. Commissions or fees which are payable to a broker-dealer or third party administrator, including maximum commissions, are set forth in our schedules of group insurance commission rates. These commissions consist of: .. Up to 15% of the cost of insurance, and may be based on the services provided by the broker-dealer or a third party administrator, and .. A per-Certificate payment, based on the total number of Certificates issued under a Group Policy. Our licensed representatives are eligible for various cash benefits, such as bonuses, insurance benefits and financing arrangements, and non-cash compensation programs that we offer, such as attendance at conferences, trips, prizes, and awards. In addition, our licensed representatives who meet certain productivity, persistency, and length of service standards and/or their managers may be eligible for additional compensation. Other payments may 33 be made for other services that do not directly involve the sale of the Certificates. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. We may require all or part of the commission to be returned to us by the MetLife representative or other broker-dealer if you do not continue the Certificate for at least two years. The commissions do not result in a charge against the Group Policies or Certificates in addition to the charges already described elsewhere in this Prospectus. Experts The financial statements included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Deloitte & Touche LLP's principal business address is 201 E. Kennedy Boulevard, Tampa, Florida 33602. Financial Statements The financial statements of the Separate Account are attached to this Prospectus. You can find the financial statements of MetLife in the Statement of Additional Information referred to on the back cover of this Prospectus. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Certificate. Additional information about the Group Policy, the Certificate and the Separate Account can be found in the Statement of Additional Information. You may obtain a copy of the Statement of Additional Information, without charge, by calling 1-800-664-4885, by e-mailing us at our website, or by logging on to our website at www.metlifegvul.com. You may also obtain, without charge, a personalized illustration of death benefits, cash surrender values and cash values by calling 1-800-664-4885. In order to help you understand how the Certificate's values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the person insured under the Certificate and such factors as the specified face amount, premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. This Prospectus incorporates by reference all of the information contained in the Statement of Additional Information, which is legally part of this Prospectus. 34 Information about the Group Policy, Certificates and the Separate Account, including the Statement of Additional Information, is available for viewing and copying at the SEC's Public Reference Room in Washington, D.C. Information about the operation of the public reference room may be obtained by calling the SEC at 202-942-8090. The Statement of Additional Information, reports and other information about the Separate Account are available on the SEC Internet site as www.sec.gov. Copies of this information may be obtained upon payment of a duplicating fee, by writing to the SEC's Public Reference Section at 450 Fifth Street, NW, Washington, DC 20549-0102. 811- 06025 35 INDEPENDENT AUDITORS' REPORT To the Policyholders of Metropolitan Life Separate Account UL and the Board of Directors Metropolitan Life Insurance Company: We have audited the accompanying statement of assets and liabilities of each of the investment divisions (as disclosed in Note 1 to the financial statements) comprising Metropolitan Life Separate Account UL (the "Separate Account") of Metropolitan Life Insurance Company ("Metropolitan Life") as of December 31, 2003, and the related statements of operations and statements of changes in net assets for each of the periods in the three years 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 auditing standards generally accepted in the United States of America. 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, 2003, by correspondence with the custodians and the depositors 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, the financial statements referred to above present fairly, in all material respects, the financial position of each of the investment divisions comprising the Separate Account of Metropolitan Life as of December 31, 2003, the results of their operations and the changes in their net assets for each of the periods in the three years then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Tampa, Florida April 16, 2004 F-1 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
State Street State Street State Street Research Research Research Investment Trust Diversified Aggressive Growth Investment Division Investment Division Investment Division ------------------- ------------------- ------------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ 366,694,241 $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- 289,072,197 -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- 187,148,479 MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- ----------------- ----------------- ----------------- Total Investments...................................... 366,694,241 289,072,197 187,148,479 Cash and Accounts Receivable........................... 393,060 -- 119,894 ----------------- ----------------- ----------------- Total Assets........................................... 367,087,301 289,072,197 187,268,373 LIABILITIES............................................ Due to/From Metropolitan Life Insurance Company........ -- 38,810 -- ----------------- ----------------- ----------------- NET ASSETS............................................. $367,087,301 $289,033,387 $187,268,373 ================= ================= ================= Outstanding Units (In Thousands)....................... 16,151 12,881 11,833 Unit Values............................................ $10.57 to $33.12 $11.79 to $30.64 $11.71 to $16.87
MetLife Stock Index Investment Division ------------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ 456,268,669 FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- ---------------- Total Investments...................................... 456,268,669 Cash and Accounts Receivable........................... 845,678 ---------------- Total Assets........................................... 457,114,347 LIABILITIES............................................ Due to/From Metropolitan Life Insurance Company........ -- ---------------- NET ASSETS............................................. $457,114,347 ================ Outstanding Units (In Thousands)....................... 25,747 Unit Values............................................ $9.58 to $29.26
See Notes to Financial Statements. F-2
FI International Janus T. Rowe Price Scudder Harris Oakmark Neuberger Berman T. Rowe Price Stock Mid Cap Small Cap Growth Global Equity Large Cap Value Partners Mid Cap Large Cap Growth Investment Investment Investment Investment Investment Value Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 43,910,364 -- -- -- -- -- -- -- 182,829,152 -- -- -- -- -- -- -- 61,703,229 -- -- -- -- -- -- -- 28,617,758 -- -- -- -- -- -- -- 37,440,522 -- -- -- -- -- -- -- 30,910,402 -- -- -- -- -- -- -- 33,385,077 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- 43,910,364 182,829,152 61,703,229 28,617,758 37,440,522 30,910,402 33,385,077 73,925 1,248,936 139,936 77,960 63,107 35,149 135,257 - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- 43,984,289 184,078,088 61,843,165 28,695,718 37,503,629 30,945,551 33,520,334 -- -- -- -- -- -- -- - ---------------- ---------------- ----------------- ----------------- ----------------- ----------------- ---------------- $ 43,984,289 $ 184,078,088 $ 61,843,165 $ 28,695,718 $ 37,503,629 $ 30,945,551 $ 33,520,334 ================ ================ ================= ================= ================= ================= ================ 3,484 13,348 4,703 2,140 3,060 1,946 3,290 $9.92 to $13.85 $5.69 to $16.17 $12.64 to $14.08 $12.92 to $14.39 $11.53 to $14.56 $13.86 to $19.29 $8.23 to $12.13 Lehman Brothers Aggregate Bond Index Investment Division - ----------------- $ -- -- -- -- -- -- -- -- -- -- -- 54,942,071 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ----------------- 54,942,071 52,236 - ----------------- 54,994,307 -- - ----------------- $ 54,994,307 ================= 4,064 $12.77 to $13.67
See Notes to Financial Statements. F-3 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
Morgan Stanley Russell 2000 Met/Putnam State Street EAFE Index Index Voyager Research Aurora Investment Investment Investment Investment Division Division Division Division ---------------- ----------------- --------------- ----------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- $ -- $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- -- -- -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- -- -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. 24,103,487 -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- 27,690,757 -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- 8,588,274 -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- 56,539,160 MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... -- -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- -- -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- -- -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- -- Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- -- ---------------- ----------------- --------------- ----------------- Total Investments...................................... 24,103,487 27,690,757 8,588,274 56,539,160 Cash and Accounts Receivable........................... 186,690 35,522 62,483 502 ---------------- ----------------- --------------- ----------------- Total Assets........................................... 24,290,177 27,726,279 8,650,757 56,539,662 LIABILITIES Due to/From Metropolitan Life Insurance Company........ -- -- -- -- ---------------- ----------------- --------------- ----------------- NET ASSETS $ 24,290,177 $ 27,726,279 $ 8,650,757 $ 56,539,662 ================ ================= =============== ================= Outstanding Units (In Thousands)....................... 2,676 2,085 1,913 3,372 Unit Values............................................ $7.85 to $10.37 $10.75 to $14.59 $4.38 to $4.78 $15.46 to $16.89
See Notes to Financial Statements. F-4
MetLife Franklin State Street MFS Mid Cap Stock Templeton Small Research Large Davis Venture Loomis Sayles Alger Equity Investors Index Cap Growth Cap Value Value Small Cap Growth Trust Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ----------------- --------------- ----------------- ---------------- ----------------- ------------ --------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 27,896,567 -- -- -- -- -- -- -- 3,041,132 -- -- -- -- -- -- -- 1,110,523 -- -- -- -- -- -- -- 24,393,963 -- -- -- -- -- -- -- 4,415,478 -- -- -- -- -- -- -- 4,933,432 -- -- -- -- -- -- -- 1,538,430 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- 27,896,567 3,041,132 1,110,523 24,393,963 4,415,478 4,933,432 1,538,430 28,320 -- -- 35,532 7,461 -- 5,616 - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- 27,924,887 3,041,132 1,110,523 24,429,495 4,422,939 4,933,432 1,544,046 -- 2,885 395 -- -- -- -- - ----------------- --------------- ----------------- ---------------- ----------------- ---------- --------------- $ 27,924,887 $ 3,038,247 $ 1,110,128 $ 24,429,495 $ 4,422,939 $4,933,432 $ 1,544,046 ================= =============== ================= ================ ================= ========== =============== 2,338 329 103 1,322 30 721 186 $11.04 to $12.13 $9.07 to $9.29 $10.70 to $10.86 $9.79 to $28.40 $9.27 to $205.39 $6.84 $7.96 to $8.33 MFS Research Mangers Investment Division - --------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 666,466 -- -- -- -- -- -- -- - --------------- 666,466 2,075 - --------------- 668,541 -- - --------------- $ 668,541 =============== 81 $6.57 to $8.51
See Notes to Financial Statements. F-5 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
State Street Salomon Brothers Research Bond FI Structured Harris Oakmark Strategic Bond Income Equity Focused Value Opportunities Investment Investment Investment Investment Division Division Division Division ---------------- --------------- ------------------ ---------------- ASSETS: Investments at Value: Metropolitan Series Fund, Inc. ("Metropolitan Fund") State Street Research Investment Trust Portfolio (14,863,974 Shares; cost $441,842,964)................ $ -- $ -- $ -- $ -- State Street Research Diversified Portfolio (19,105,895 Shares; cost $308,822,843)................ -- -- -- -- State Street Research Aggressive Growth Portfolio (10,426,099 Shares; cost $247,124,703)................ -- -- -- -- MetLife Stock Index Portfolio (15,492,994 Shares; cost $471,480,310)................ -- -- -- -- FI International Stock Portfolio (4,453,384 Shares; cost $49,092,645).................. -- -- -- -- Janus Mid Cap Portfolio (13,049,904 Shares; cost $245,811,880)................ -- -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,028,788 Shares; cost $60,709,864).................. -- -- -- -- Scudder Global Equity Portfolio (2,503,741 Shares; cost $28,862,268).................. -- -- -- -- Harris Oakmark Large Cap Value Portfolio (3,104,521 Shares; cost $33,265,016).................. -- -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (1,781,579 Shares; cost $24,876,339).................. -- -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,868,134 Shares; cost $31,282,336).................. -- -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (5,026,722 Shares; cost $53,380,037).................. -- -- -- -- Morgan Stanley EAFE Index Portfolio (2,459,540 Shares; cost $19,855,278).................. -- -- -- -- Russell 2000 Index Portfolio (2,317,218 Shares; cost $22,079,290).................. -- -- -- -- Met/Putnam Voyager Portfolio (1,900,061 Shares; cost $8,302,977)................... -- -- -- -- State Street Research Aurora Portfolio (3,401,875 Shares; cost $44,584,567).................. -- -- -- -- MetLife Mid Cap Stock Index Portfolio (2,344,249 Shares; cost $23,095,881).................. -- -- -- -- Franklin Templeton Small Cap Growth Portfolio (327,356 Shares; cost $2,499,796)..................... -- -- -- -- State Street Research Large Cap Value Portfolio (104,079 Shares; cost $957,558)....................... -- -- -- -- Davis Venture Value Portfolio (965,333 Shares; cost $21,277,385).................... -- -- -- -- Loomis Sayles Small Cap Portfolio (23,295 Shares; cost $3,717,206)...................... -- -- -- -- Alger Equity Growth Portfolio (263,538 Shares; cost $4,582,005)..................... -- -- -- -- MFS Investors Trust Portfolio (186,025 Shares; cost $1,391,215)..................... -- -- -- -- MFS Research Managers Portfolio (79,153 Shares; cost $613,213)........................ -- -- -- -- State Street Research Bond Income Portfolio (837,355 Shares; cost $89,830,207).................... 96,806,570 -- -- -- FI Structured Equity Portfolio (3,215 Shares; cost $454,116)......................... -- 505,504 -- -- Harris Oakmark Focused Value Portfolio (115,466 Shares; cost $21,015,539).................... -- -- 25,894,491 -- Salomon Brothers Strategic Bond Opportunities Portfolio (409,695 Shares; cost $4,866,132)..................... -- -- -- 5,166,251 Salomon Brothers U.S. Government Portfolio (592,211 Shares; cost $7,267,172)..................... -- -- -- -- State Street Research Money Market Portfolio (273,528 Shares; cost $27,352,817).................... -- -- -- -- FI Mid Cap Opportunities Portfolio (96,616 Shares; cost $916,740)........................ -- -- -- -- ---------------- --------------- ------------------ ---------------- Total Investments...................................... 96,806,570 505,504 25,894,491 5,166,251 Cash and Accounts Receivable........................... -- -- -- -- ---------------- --------------- ------------------ ---------------- Total Assets........................................... 96,806,570 505,504 25,894,491 5,166,251 LIABILITIES Due to/From Metropolitan Life Insurance Company........ 86,980 221 28,853 3,182 ---------------- --------------- ------------------ ---------------- NET ASSETS............................................. $96,719,590 $505,283 $25,865,638 $5,163,069 ================ =============== ================== ================ Outstanding Units (In Thousands)....................... 5,517 49 115 375 Unit Values............................................ $12.89 to $27.12 $8.37 to $10.56 $219.73 to $225.05 $13.52 to $13.85
See Notes to Financial Statements. F-6
State Street Salomon Brothers Research FI Mid Cap U.S. Government Money Market Opportunities Investment Investment Investment Division Division Division ----------------- ----------------- ----------------- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 7,307,884 -- -- -- 27,352,819 -- -- -- 1,112,044 ----------------- ----------------- ----------------- 7,307,884 27,352,819 1,112,044 -- 15,270 -- ----------------- ----------------- ----------------- 7,307,884 27,368,089 1,112,044 2,982 21,662 273 ----------------- ----------------- ----------------- $ 7,304,902 $ 27,346,427 $ 1,111,771 ================= ================= ================= 559 1,760 96 $12.82 to $13.13 $15.21 to $15.92 $11.50 to $11.67
See Notes to Financial Statements. F-7 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
Invesco VIF Invesco VIF Janus Aspen Invesco VIF Equity Real Estate Growth High Yield Income Opportunity Investment Investment Investment Investment Division Division Division Division ----------- ----------- ----------- ----------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $3,499,893 $ -- $ -- $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- 804,108 -- -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- -- 184,406 -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- -- -- 178,608 Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- -- -- -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- -- -- -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- -- -- -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- -- -- -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- -- -- -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- -- -- -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- -- -- -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- -- -- -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... -- -- -- -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- -- -- -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- -- -- -- Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... -- -- -- -- MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- -- -- -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- -- -- -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- -- -- -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- -- -- -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- -- -- -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- -- -- -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- -- -- -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- -- -- -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -- -- -- ---------- -------- -------- -------- Total Investments........................................................... 3,499,893 804,108 184,406 178,608 Cash and Accounts Receivable................................................ -- -- -- -- ---------- -------- -------- -------- Total Assets................................................................ 3,499,893 804,108 184,406 178,608 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -- -- -- ---------- -------- -------- -------- NET ASSETS.................................................................. $3,499,893 $804,108 $184,406 $178,608 ========== ======== ======== ======== Outstanding Units (In Thousands)............................................ 435 87 19 10 Unit Values................................................................. $8.03 $9.21 $9.73 $17.79
See Notes to Financial Statements. F-8
Alliance Alliance Fidelity Franklin Templeton Franklin Templeton Growth & Premier Alliance Fidelity Asset Manager Fidelity International Stock Valuemark Small Income Growth Technology Contrafund Growth Growth Investment Cap Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------------- ------------------ ---------- ---------- ---------- ---------- ------------- ---------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4,053,532 -- -- -- -- -- -- -- -- 1,345,642 -- -- -- -- -- -- -- -- 2,063,085 -- -- -- -- -- -- -- -- 84,057 -- -- -- -- -- -- -- -- 45,595 -- -- -- -- -- -- -- -- 893,677 -- -- -- -- -- -- -- -- 432,629 -- -- -- -- -- -- -- -- 296,358 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- 4,053,532 1,345,642 2,063,085 84,057 45,595 893,677 432,629 296,358 -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- 4,053,532 1,345,642 2,063,085 84,057 45,595 893,677 432,629 296,358 -- -- -- -- -- -- -- -- ----------- ---------- ---------- ------- ------- -------- -------- -------- $4,053,532 $1,345,642 $2,063,085 $84,057 $45,595 $893,677 $432,629 $296,358 =========== ========== ========== ======= ======= ======== ======== ======== 403 199 197 14 10 97 54 47 $10.03 $6.76 $10.47 $6.10 $4.54 $9.18 $8.00 $6.27
See Notes to Financial Statements. F-9 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2003
American Funds American Funds American Funds Global Growth Growth-Income Small Cap Investment Investment Investment Division Division Division ---------------- ---------------- ---------------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $ -- $ -- $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- -- -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- -- -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- -- -- Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- -- -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- -- -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- -- -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- -- -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- -- -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- -- -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- -- -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- -- -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... 25,279,776 -- -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- 20,182,964 -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- -- 5,784,566 Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... -- -- -- MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- -- -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- -- -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- -- -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- -- -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- -- -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- -- -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- -- -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- -- -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -- -- ---------------- ---------------- ---------------- Total Investments........................................................... 25,279,776 20,182,964 5,784,566 Cash and Accounts Receivable................................................ 480,164 185,947 16,294 ---------------- ---------------- ---------------- Total Assets................................................................ 25,759,940 20,368,911 5,800,860 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -- -- ---------------- ---------------- ---------------- NET ASSETS.................................................................. $25,759,940 $20,368,911 $5,800,860 ================ ================ ================ Outstanding Units (In Thousands)............................................ 417 525 378 Unit Values................................................................. $60.53 to $62.00 $38.04 to $38.96 $15.06 to $15.42
T. Rowe Price Mid Cap Growth Investment Division -------------- ASSETS: Investments at Value: Janus Aspen Series Fund ("Janus Fund") Janus Aspen Growth Portfolio (182,002 Shares; cost $3,317,989).......................................... $ -- Invesco Variable Investment Funds, Inc ("Invesco Funds") Invesco VIF High Yield Portfolio (101,401 Shares; cost $755,920)............................................ -- Invesco VIF Equity Income Portfolio (10,296 Shares; cost $180,622)............................................. -- Invesco VIF Real Estate Opportunity Portfolio (12,455 Shares; cost $132,719)............................................. -- Franklin Templeton Variable Insurance Product Series Funds ("Franklin Fund") Franklin Templeton International Stock Portfolio (327,691 Shares; cost $3,587,146).......................................... -- Franklin Templeton Valuemark Small Cap Portfolio (77,203 Shares; cost $1,159,415)........................................... -- Alliance Variable Product Series Funds ("Alliance Fund") Alliance Growth & Income Portfolio (95,425 Shares; cost $1,731,867)........................................... -- Alliance Premier Growth Portfolio (3,941 Shares; cost $83,621)............................................... -- Alliance Technology Portfolio (3,177 Shares; cost $43,696)............................................... -- Fidelity Variable Insurance Products Funds ("Fidelity Funds") Fidelity VIP Contrafund Portfolio (38,974 Shares; cost $783,501)............................................. -- Fidelity VIP Asset Manager Growth Portfolio (35,491 Shares; cost $395,048)............................................. -- Fidelity VIP Growth Portfolio (9,647 Shares; cost $277,258).............................................. -- American Series Funds ("American Fund") American Funds Growth Portfolio (555,600 Shares; cost $21,669,606)......................................... -- American Funds Growth-Income Portfolio (602,836 Shares; cost $17,398,081)......................................... -- American Funds Global Small Cap Portfolio (410,836 Shares; cost $4,620,777).......................................... -- Met Investors Series Trust ("Met Investors Fund") T. Rowe Price Mid Cap Growth Portfolio (527,122 Shares; cost $2,959,767).......................................... 3,368,307 MFS Research International Portfolio (152,598 Shares; cost $1,307,159).......................................... -- PIMCO Total Return Portfolio (1,093,890 Shares; cost $12,468,910)....................................... -- PIMCO Innovation Portfolio (924,904 Shares; cost $3,855,266).......................................... -- Lord Abbett Bond Debenture Portfolio (991,531 Shares; cost $10,678,786)......................................... -- Met/AIM Mid Cap Core Equity Portfolio (80,233 Shares; cost $854,896)............................................. -- Met/AIM Small Cap Growth Portfolio (53,490 Shares; cost $596,561)............................................. -- Harris Oakmark International Portfolio (68,416 Shares; cost $766,989)............................................. -- Janus Aggressive Growth Portfolio (567,168 Shares; cost $3,302,437).......................................... -- Lord Abbett Growth and Income Portfolio (845 Shares; cost $16,883)................................................. -- -------------- Total Investments........................................................... 3,368,307 Cash and Accounts Receivable................................................ 6,963 -------------- Total Assets................................................................ 3,375,270 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- -------------- NET ASSETS.................................................................. $3,375,270 ============== Outstanding Units (In Thousands)............................................ 527 Unit Values................................................................. $6.28 to $6.43
See Notes to Financial Statements. F-10
MFS Lord Abbett Met/AIM Mid Research PIMCO PIMCO Bond Cap Met/AIM Small Harris Oakmark International Total Return Innovation Debenture Core Equity Cap Growth International Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 1,496,988 -- -- -- -- -- -- -- 12,700,057 -- -- -- -- -- -- -- 4,467,285 -- -- -- -- -- -- -- 11,938,027 -- -- -- -- -- -- -- 989,278 -- -- -- -- -- -- -- 643,481 -- -- -- -- -- -- -- 813,470 -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- 1,496,988 12,700,057 4,467,285 11,938,027 989,278 643,481 813,470 232 -- 13,528 104,275 -- -- -- - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- 1,497,220 12,700,057 4,480,813 12,042,302 989,278 643,481 813,470 -- 2,991 -- -- 346 30 454 - -------------- ---------------- -------------- ---------------- ---------------- ---------------- ----------------- $1,497,220 $12,697,066 $4,480,813 $12,042,302 $988,932 $643,451 $ 813,016 ============== ================ ============== ================ ================ ================ ================= 151 1,042 932 876 92 60 72 $9.70 to $9.94 $11.96 to $12.25 $4.72 to $4.83 $12.87 to $14.95 $10.69 to $10.85 $10.46 to $10.62 $11.23 to $11.40
Janus Lord Abbett Aggressive Growth & Growth Income Investment Investment Division Division - --------------- ----------- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 3,987,193 -- -- 20,634 - --------------- ------- 3,987,193 20,634 15,526 -- - --------------- ------- 4,002,719 20,634 -- 105 - --------------- ------- $ 4,002,719 $20,529 =============== ======= 569 3 $6.89 to $7.06 $8.10
See Notes to Financial Statements. F-11 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
State Street Research Investment Trust Investment Division ---------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 2,669,960 $ 1,708,899 $ 51,437,166 Expenses: Mortality and expense charges................................ 2,738,164 2,678,347 3,136,115 ----------- ------------ ------------- Net investment (loss) income................................... (68,204) (969,448) 48,301,051 ----------- ------------ ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (6,958,914) (6,132,437) 731,187 Change in unrealized appreciation (depreciation) of investments 88,855,777 (90,883,953) (122,469,738) ----------- ------------ ------------- Net realized and unrealized gains (losses) on investments...... 81,896,863 (97,016,390) (121,738,551) ----------- ------------ ------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $81,828,659 $(97,985,838) $ (73,437,500) =========== ============ =============
See Notes to Financial Statements. F-12
State Street Research Diversified State Street Research Aggressive Growth MetLife Stock Index Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- ---------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 9,831,564 $ 5,726,999 $ 25,415,648 $ -- $ -- $ 46,776,659 $ 6,468,236 $ 5,409,402 $ 3,858,667 2,320,042 2,168,000 2,231,404 1,367,678 1,263,240 1,493,070 3,080,678 2,704,257 2,645,594 - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ 7,511,522 3,558,999 23,184,244 (1,367,678) (1,263,240) 45,283,589 3,387,558 2,705,145 1,213,073 - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ (2,593,687) (1,810,936) (111,095) (8,202,841) (5,953,657) (1,536,972) (10,060,006) (5,045,284) 4,130,927 42,182,763 (41,694,719) (42,080,714) 62,199,697 (44,703,891) (94,895,107) 101,361,307 (82,559,071) (48,985,481) - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ 39,589,076 (43,505,655) (42,191,809) 53,996,856 (50,657,548) (96,432,079) 91,301,301 (87,604,355) (44,854,554) - ----------- ------------ ------------ ----------- ------------ ------------ ------------ ------------ ------------ $47,100,598 $(39,946,656) $(19,007,565) $52,629,178 $(51,920,788) $(51,148,490) $ 94,688,859 $(84,899,210) $(43,641,481) =========== ============ ============ =========== ============ ============ ============ ============ ============
F-13 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
FI International Stock Investment Division -------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 249,748 $ 317,077 $ 1,500,375 Expenses: Mortality and expense charges................................ 304,442 298,333 327,499 ----------- ----------- ------------ Net investment (loss) income................................... (54,694) 18,744 1,172,876 ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (1,630,864) (2,655,399) (1,661,736) Change in unrealized appreciation (depreciation) of investments 10,924,390 (4,418,288) (9,202,287) ----------- ----------- ------------ Net realized and unrealized gains (losses) on investments...... 9,293,526 (7,073,687) (10,864,023) ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 9,238,832 $(7,054,943) $ (9,691,147) =========== =========== ============
See Notes to Financial Statements. F-14
Janus Mid Cap T. Rowe Price Small Cap Growth Scudder Global Equity Investment Division Investment Division Investment Division - --------------------------------------- -------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ -- $ -- $ -- $ -- $ 3,542,193 $ 501,419 $ 350,009 $ 2,319,964 1,297,757 1,013,088 1,037,631 402,320 332,098 332,644 189,917 168,321 164,713 - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- (1,297,757) (1,013,088) (1,037,631) (402,320) (332,098) 3,209,549 311,502 181,688 2,155,251 - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- (1,145,184) (5,163,698) (2,451,549) (309,653) (297,872) (796,014) (1,005,776) (466,029) (71,082) 46,019,342 (34,449,605) (53,291,667) 17,635,578 (12,423,975) (6,595,361) 7,242,152 (3,445,540) (5,825,339) - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 44,874,158 (39,613,303) (55,743,216) 17,325,925 (12,721,847) (7,391,375) 6,236,376 (3,911,569) (5,896,421) - ----------- ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- $43,576,401 $(40,626,391) $(56,780,847) $16,923,605 $(13,053,945) $(4,181,826) $ 6,547,878 $(3,729,881) $(3,741,170) =========== ============ ============ =========== ============ =========== =========== =========== ===========
F-15 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Harris Oakmark Large Cap Value Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 618,214 $ 12,105 Expenses: Mortality and expense charges................................ 252,368 179,930 68,617 ---------- ----------- -------- Net investment (loss) income................................... (252,368) 438,284 (56,512) ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 38,696 173,172 94,596 Change in unrealized appreciation (depreciation) of investments 6,986,213 (3,824,797) 810,284 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 7,024,909 (3,651,625) 904,880 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,772,541 $(3,213,341) $848,368 ========== =========== ========
See Notes to Financial Statements. F-16
Neuberger Berman Partners Mid Cap Value T. Rowe Price Large Cap Growth Lehman Brothers Aggregate Bond Index Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- -------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 78,805 $ 49,885 $ 196,293 $ 30,610 $ 57,106 $ 8,447 $ 2,863,939 $1,283,105 $ 366,468 197,793 139,354 89,772 210,672 163,196 103,226 357,739 300,244 154,225 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- (118,988) (89,469) 106,521 (180,062) (106,090) (94,779) 2,506,200 982,861 212,243 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- 28,084 105,666 (68,863) (489,389) (317,124) (100,488) 1,152,171 515,268 210,509 7,656,793 (1,888,036) (195,526) 7,871,800 (5,333,848) (92,461) (2,185,014) 2,760,523 1,053,501 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- 7,684,877 (1,782,370) (264,389) 7,382,411 (5,650,972) (192,949) (1,032,843) 3,275,791 1,264,010 ---------- ----------- --------- ---------- ----------- --------- ----------- ---------- ---------- $7,565,889 $(1,871,839) $(157,868) $7,202,349 $(5,757,062) $(287,728) $ 1,473,357 $4,258,652 $1,476,253 ========== =========== ========= ========== =========== ========= =========== ========== ==========
F-17 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Morgan Stanley EAFE Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 280,223 $ 59,278 $ 25,460 Expenses: Mortality and expense charges................................ 158,241 123,406 63,300 ---------- ----------- ----------- Net investment (loss) income................................... 121,982 (64,128) (37,840) ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (497,564) (800,822) (961,834) Change in unrealized appreciation (depreciation) of investments 6,516,826 (1,274,363) (729,479) ---------- ----------- ----------- Net realized and unrealized gains (losses) on investments...... 6,019,262 (2,075,185) (1,691,313) ---------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,141,244 $(2,139,313) $(1,729,153) ========== =========== ===========
See Notes to Financial Statements. F-18
Russell 2000 Index Met/Putnam Voyager State Street Research Aurora Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 134,309 $ 74,869 $ 21,244 $ -- $ -- $ -- $ -- $ 127,494 $ 44,265 163,522 104,600 68,898 58,697 39,278 22,732 336,756 225,368 95,291 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- (29,213) (29,731) (47,654) (58,697) (39,278) (22,732) (336,756) (97,874) (51,026) ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- (125,595) (343,069) (1,016,179) (624,452) (304,226) (113,353) 196,537 81,843 155,882 7,938,110 (2,545,881) 1,215,383 2,271,140 (1,227,374) (585,114) 17,391,943 (6,958,922) 1,218,805 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- 7,812,515 (2,888,950) 199,204 1,646,688 (1,531,600) (698,467) 17,588,480 (6,877,079) 1,374,687 ---------- ----------- ----------- ---------- ----------- --------- ----------- ----------- ---------- $7,783,302 $(2,918,681) $ 151,550 $1,587,991 $(1,570,878) $(721,199) $17,251,724 $(6,974,953) $1,323,661 ========== =========== =========== ========== =========== ========= =========== =========== ==========
F-19 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
MetLife Mid Cap Stock Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 100,611 $ 42,658 $ 24,102 Expenses: Mortality and expense charges................................ 164,774 98,019 42,826 ---------- ----------- -------- Net investment (loss) income................................... (64,163) (55,361) (18,724) ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 12,063 (23,095) (19,531) Change in unrealized appreciation (depreciation) of investments 6,538,587 (2,089,536) 294,328 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 6,550,650 (2,112,631) 274,797 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,486,487 $(2,167,992) $256,073 ========== =========== ========
See Notes to Financial Statements. F-20
State Street Research Franklin Templeton Small Cap Growth Large Cap Value Davis Venture Value Investment Division Investment Division Investment Division - --------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ -------------- ------------ -------------- ------------ ------------ ------------ $ -- $ -- $ -- $ 8,880 $ 869 $ 69,175 $ 91,596 $ 192,850 16,641 8,397 1,124 4,290 436 144,858 90,846 39,662 -------- --------- ------- -------- ------- ---------- ----------- --------- (16,641) (8,397) (1,124) 4,590 433 (75,683) 750 153,188 -------- --------- ------- -------- ------- ---------- ----------- --------- (19,016) (42,766) (3,651) 41,938 (3,284) (213,900) (188,804) (46,987) 796,643 (271,373) 16,066 156,144 (3,178) 5,610,390 (2,083,879) (437,523) -------- --------- ------- -------- ------- ---------- ----------- --------- 777,627 (314,139) 12,415 198,082 (6,462) 5,396,490 (2,272,683) (484,510) -------- --------- ------- -------- ------- ---------- ----------- --------- $760,986 $(322,536) $11,291 $202,672 $(6,029) $5,320,807 $(2,271,933) $(331,322) ======== ========= ======= ======== ======= ========== =========== =========
F-21 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Loomis Sayles Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 2,322 $ 86,281 Expenses: Mortality and expense charges................................ 28,298 18,464 11,207 ---------- --------- -------- Net investment (loss) income................................... (28,298) (16,142) 75,074 ---------- --------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (88,636) (106,829) (35,645) Change in unrealized appreciation (depreciation) of investments 1,169,772 (414,868) (62,611) ---------- --------- -------- Net realized and unrealized gains (losses) on investments...... 1,081,136 (521,697) (98,256) ---------- --------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,052,838 $(537,839) $(23,182) ========== ========= ========
See Notes to Financial Statements. F-22
Alger Equity Growth MFS Investors Trust MFS Research Managers Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 2,523 $ -- $ -- $ 2,817 $ 3,660 $ -- $ 3,840 $ 705 $ 386 26,251 13,698 121 10,528 6,375 1,179 4,713 3,132 749 ---------- ----------- ------- -------- --------- ------- -------- -------- ------ (23,728) (13,698) (121) (7,711) (2,715) (1,179) (873) (2,427) (363) ---------- ----------- ------- -------- --------- ------- -------- -------- ------ (63,998) (57,097) (175) 13,432 (71,866) (5,896) (4,462) (30,794) 1,304 1,339,908 (983,355) (5,126) 221,187 (78,498) 4,527 112,414 (58,814) (346) ---------- ----------- ------- -------- --------- ------- -------- -------- ------ 1,275,910 (1,040,452) (5,301) 234,619 (150,364) (1,369) 107,952 (89,608) 958 ---------- ----------- ------- -------- --------- ------- -------- -------- ------ $1,252,182 $(1,054,150) $(5,422) $226,908 $(153,079) $(2,548) $107,079 $(92,035) $ 595 ========== =========== ======= ======== ========= ======= ======== ======== ======
F-23 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
State Street Research Bond Income Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $2,907,624 $4,937,322 $5,667,650 Expenses: Mortality and expense charges................................ 724,135 658,727 572,051 ---------- ---------- ---------- Net investment (loss) income................................... 2,183,489 4,278,595 5,095,599 ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 880,712 (378,655) 400,025 Change in unrealized appreciation (depreciation) of investments 1,572,001 2,444,438 (137,736) ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... 2,452,713 2,065,783 262,289 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,636,202 $6,344,378 $5,357,888 ========== ========== ==========
See Notes to Financial Statements. F-24
FI Structured Equity Harris Oakmark Focused Value Salomon Brothers Strategic Bond Investment Division Investment Division Opportunities Investment Division - ------------------------------------- --------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Period Ended Ended Ended Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------ -------------- $ 1,560 $ 527 $ -- $ 24,204 $ 15,621 $ -- $ 62,248 $ 83,495 $ -- 2,368 457 69 151,516 79,292 9,775 29,146 10,768 894 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ (808) 70 (69) (127,312) (63,671) (9,775) 33,102 72,727 (894) ------- -------- ------- ---------- ----------- -------- -------- -------- ------ 24,426 (9,596) (77) 31,214 (9,588) (43) 97,650 241 117 58,141 (4,285) (2,467) 5,537,632 (938,481) 279,801 233,146 62,351 4,621 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ 82,567 (13,881) (2,544) 5,568,846 (948,069) 279,758 330,796 62,592 4,738 ------- -------- ------- ---------- ----------- -------- -------- -------- ------ $81,759 $(13,811) $(2,613) $5,441,534 $(1,011,740) $269,983 $363,898 $135,319 $3,844 ======= ======== ======= ========== =========== ======== ======== ======== ======
F-25 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Salomon Brothers U.S. Government Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 91,740 $ 90,377 $ -- Expenses: Mortality and expense charges................................ 49,123 18,808 1,841 -------- -------- ------- Net investment (loss) income................................... 42,617 71,569 (1,841) -------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 48,098 10,225 5,065 Change in unrealized appreciation (depreciation) of investments (40,677) 83,661 (2,273) -------- -------- ------- Net realized and unrealized gains (losses) on investments...... 7,421 93,886 2,792 -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 50,038 $165,455 $ 951 ======== ======== =======
See Notes to Financial Statements. F-26
State Street Research Money Market FI Mid Cap Opportunities Janus Aspen Growth Investment Division Investment Division Investment Division - ------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended Ended Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ $226,302 $ 527,338 $1,134,017 $ 14,470 $ -- $ 2,873 $ 708 $ 210,720 179,158 268,010 215,488 4,632 333 13,156 10,078 25,354 -------- --------- ---------- -------- ------- ---------- --------- ----------- 47,144 259,328 918,529 9,838 (333) (10,283) (9,370) 185,366 -------- --------- ---------- -------- ------- ---------- --------- ----------- (1) (628,588) (499,341) 19,777 (1,950) (263,013) (179,152) (1,848,663) 1 611,711 796,577 191,546 3,758 1,041,007 (329,490) 498,521 -------- --------- ---------- -------- ------- ---------- --------- ----------- -- (16,877) 297,236 211,323 1,808 777,994 (508,642) (1,350,142) -------- --------- ---------- -------- ------- ---------- --------- ----------- $ 47,144 $ 242,451 $1,215,765 $221,161 $ 1,475 $ 767,711 $(518,012) $(1,164,776) ======== ========= ========== ======== ======= ========== ========= ===========
F-27 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Invesco VIF High Yield Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 46,066 $ 49,754 $ 29,774 Expenses: Mortality and expense charges................................ 2,831 1,346 602 -------- -------- -------- Net investment (loss) income................................... 43,235 48,408 29,172 -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (5,183) (31,480) (3,798) Change in unrealized appreciation (depreciation) of investments 90,384 (7,350) (33,395) -------- -------- -------- Net realized and unrealized gains (losses) on investments...... 85,201 (38,830) (37,193) -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $128,436 $ 9,578 $ (8,021) ======== ======== ========
See Notes to Financial Statements. F-28
Invesco VIF Equity Income Invesco VIF Real Estate Opportunity Franklin Templeton International Stock Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,951 $ 2,157 $ 1,779 $ 2,672 $ 1,881 $ 1,183 $ 50,493 $ 44,446 $ 203,320 662 638 304 946 2,129 531 16,047 13,035 5,484 ------- -------- ------- ------- ------- ------- -------- --------- --------- 1,289 1,519 1,475 1,726 (248) 652 34,446 31,411 197,836 ------- -------- ------- ------- ------- ------- -------- --------- --------- (4,599) (7,425) (1,414) 7,645 12,032 1,271 (71,786) (325,690) (18,952) 30,971 (21,641) (4,995) 41,591 3,016 (3,692) 947,139 (187,267) (287,060) ------- -------- ------- ------- ------- ------- -------- --------- --------- 26,372 (29,066) (6,409) 49,236 15,048 (2,421) 875,353 (512,957) (306,012) ------- -------- ------- ------- ------- ------- -------- --------- --------- $27,661 $(27,547) $(4,934) $50,962 $14,800 $(1,769) $909,799 $(481,546) $(108,176) ======= ======== ======= ======= ======= ======= ======== ========= =========
F-29 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Franklin Templeton Valuemark Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ -- $ 2,327 $ 56 Expenses: Mortality and expense charges................................ 6,613 3,601 177 -------- --------- ------ Net investment (loss) income................................... (6,613) (1,274) (121) -------- --------- ------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... (16,606) (49,638) (480) Change in unrealized appreciation (depreciation) of investments 366,174 (184,311) 4,364 -------- --------- ------ Net realized and unrealized gains (losses) on investments...... 349,568 (233,949) 3,884 -------- --------- ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $342,955 $(235,223) $3,763 ======== ========= ======
See Notes to Financial Statements. F-30
Alliance Growth & Income Alliance Premier Growth Alliance Technology Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 11,419 $ 27,692 $ 3,229 $ -- $ -- $ -- $ -- $ -- $ 782 7,030 4,105 1,034 257 274 104 181 96 121 -------- --------- ------- ------- -------- ------ ------- ------- -------- 4,389 23,587 2,195 (257) (274) (104) (181) (96) 661 -------- --------- ------- ------- -------- ------ ------- ------- -------- (27,592) (18,278) (318) (661) (9,853) (138) (931) (519) (19,763) 441,306 (137,057) 24,267 11,616 (12,480) 1,299 13,613 (9,033) (2,681) -------- --------- ------- ------- -------- ------ ------- ------- -------- 413,714 (155,335) 23,949 10,955 (22,333) 1,161 12,682 (9,552) (22,444) -------- --------- ------- ------- -------- ------ ------- ------- -------- $418,103 $(131,748) $26,144 $10,698 $(22,607) $1,057 $12,501 $(9,648) $(21,783) ======== ========= ======= ======= ======== ====== ======= ======= ========
F-31 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Fidelity Contrafund Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 830 $ 187 $ -- Expenses: Mortality and expense charges................................ 3,285 1,113 57 -------- -------- ----- Net investment (loss) income................................... (2,455) (926) (57) -------- -------- ----- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 6,303 (348) (27) Change in unrealized appreciation (depreciation) of investments 139,867 (29,437) (253) -------- -------- ----- Net realized and unrealized gains (losses) on investments...... 146,170 (29,785) (280) -------- -------- ----- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $143,715 $(30,711) $(337) ======== ======== =====
See Notes to Financial Statements. F-32
Fidelity Asset Manager Growth Fidelity Growth American Funds Growth Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended Ended Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $ 8,346 $ 3,640 $ -- $ 174 $ 132 $ -- $ 22,917 $ 3,067 $ 134,864 1,598 623 233 1,005 649 243 141,220 59,610 6,807 ------- -------- ------- ------- -------- ------- ---------- ----------- --------- 6,748 3,017 (233) (831) (517) (243) (118,303) (56,543) 128,057 ------- -------- ------- ------- -------- ------- ---------- ----------- --------- (4,335) (5,591) 113 (2,588) (8,400) (3,407) (100,817) (49,022) (95,342) 59,143 (19,964) (1,597) 63,146 (40,968) (3,078) 5,264,250 (1,636,890) (17,189) ------- -------- ------- ------- -------- ------- ---------- ----------- --------- 54,808 (25,555) (1,484) 60,558 (49,368) (6,485) 5,163,433 (1,685,912) (112,531) ------- -------- ------- ------- -------- ------- ---------- ----------- --------- $61,556 $(22,538) $(1,717) $59,727 $(49,885) $(6,728) $5,045,130 $(1,742,455) $ 15,526 ======= ======== ======= ======= ======== ======= ========== =========== =========
F-33 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
American Funds Growth-Income Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 170,202 $ 83,225 $ 20,236 Expenses: Mortality and expense charges................................ 112,608 48,157 5,104 ---------- ----------- -------- Net investment (loss) income................................... 57,594 35,068 15,132 ---------- ----------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... (26,406) (51,319) (13,398) Change in unrealized appreciation (depreciation) of investments 3,852,340 (1,122,854) 55,397 ---------- ----------- -------- Net realized and unrealized gains (losses) on investments...... 3,825,934 (1,174,173) 41,999 ---------- ----------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,883,528 $(1,139,105) $ 57,131 ========== =========== ========
See Notes to Financial Statements. F-34
American Funds Global Small Cap JPM Enhanced Index T. Rowe Price Mid Cap Growth Investment Division Investment Division Investment Division - --------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended May 1, 2001 to Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ ------------ ------------ ------------ -------------- $ 19,214 $ 10,794 $ 7,147 $ 163 $ 117 $ -- $ -- $ 7,906 $ -- 27,847 12,245 1,216 16 39 13 17,818 6,944 940 ---------- --------- -------- ------- ------- ----- -------- --------- ------- (8,633) (1,451) 5,931 147 78 (13) (17,818) 962 (940) ---------- --------- -------- ------- ------- ----- -------- --------- ------- (33,362) 35,746 (18,714) (1,554) (1,186) (25) (46,026) (55,314) (1,372) 1,513,502 (396,292) 46,579 1,806 (1,483) (320) 776,010 (378,709) 11,239 ---------- --------- -------- ------- ------- ----- -------- --------- ------- 1,480,140 (360,546) 27,865 252 (2,669) (345) 729,984 (434,023) 9,867 ---------- --------- -------- ------- ------- ----- -------- --------- ------- $1,471,507 $(361,997) $ 33,796 $ 399 $(2,591) $(358) $712,166 $(433,061) $ 8,927 ========== ========= ======== ======= ======= ===== ======== ========= =======
F-35 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
MFS Research International Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 10,739 $ 1,203 $ 174 Expenses: Mortality and expense charges................................ 7,953 3,324 525 -------- -------- ------- Net investment (loss) income................................... 2,786 (2,121) (351) -------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 148,987 (66,559) (4,107) Change in unrealized appreciation (depreciation) of investments 191,049 (2,664) 1,444 -------- -------- ------- Net realized and unrealized gains (losses) on investments...... 340,036 (69,223) (2,663) -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $342,822 $(71,344) $(3,014) ======== ======== =======
See Notes to Financial Statements. F-36
PIMCO Total Return PIMCO Innovation Lord Abbett Bond Debenture Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $255,223 $ -- $ 26,164 $ -- $ -- $ -- $ 190,964 $ 996,547 $ 923,897 79,517 28,120 2,322 21,608 9,521 1,528 81,381 71,674 64,809 -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 175,706 (28,120) 23,842 (21,608) (9,521) (1,528) 109,583 924,873 859,088 -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 175,963 60,373 1,564 (195,867) (111,879) (9,873) 198,834 (1,886,218) (134,223) (25,434) 270,736 (14,155) 1,260,206 (652,366) 4,179 1,391,673 949,375 (902,997) -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- 150,529 331,109 (12,591) 1,064,339 (764,245) (5,694) 1,590,507 (936,843) (1,037,220) -------- -------- -------- ---------- --------- ------- ---------- ----------- ----------- $326,235 $302,989 $ 11,251 $1,042,731 $(773,766) $(7,222) $1,700,090 $ (11,970) $ (178,132) ======== ======== ======== ========== ========= ======= ========== =========== ===========
F-37 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF OPERATIONS
Met/AIM Mid Cap Core Equity Met/AIM Small Cap Growth Investment Division Investment Division -------------------------- -------------------------- For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended May 1, 2002 to December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ -------------- ------------ -------------- INVESTMENT (LOSS) INCOME: Income: Dividends.................................................... $ 8,411 $ 291 $ -- $ -- Expenses: Mortality and expense charges................................ 4,773 638 2,947 281 -------- ------- -------- ------- Net investment (loss) income................................... 3,638 (347) (2,947) (281) -------- ------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 6,414 (1,242) 66,977 (593) Change in unrealized appreciation (depreciation) of investments 140,733 (6,351) 51,242 (4,322) -------- ------- -------- ------- Net realized and unrealized gains (losses) on investments...... 147,147 (7,593) 118,219 (4,915) -------- ------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................... $150,785 $(7,940) $115,272 $(5,196) ======== ======= ======== =======
See Notes to Financial Statements. F-38
Harris Oakmark International Janus Aggressive Growth Lord Abbett Growth & Income Investment Division Investment Division Investment Division - -------------------------- --------------------------------------- -------------------------------- For the Year For the Period For the Year For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended Ended May 1, 2001 to Ended October 31, 2002 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2003 2002 2001 2003 2002 - ------------ -------------- ------------ ------------ -------------- ------------ ------------------- $ 8,848 $ 210 $ -- $ -- $ -- $ -- $-- 2,473 298 25,657 13,374 2,780 47 -- -------- ------- ---------- --------- -------- ------ --- 6,375 (88) (25,657) (13,374) (2,780) (47) -- -------- ------- ---------- --------- -------- ------ --- 72,432 (843) (313,967) (78,401) (43,356) 20 -- 49,401 (2,920) 1,123,504 (426,893) (11,854) 3,750 -- -------- ------- ---------- --------- -------- ------ --- 121,833 (3,763) 809,537 (505,294) (55,210) 3,770 -- -------- ------- ---------- --------- -------- ------ --- $128,208 $(3,851) $ 783,880 $(518,668) $(57,990) $3,723 $-- ======== ======= ========== ========= ======== ====== ===
F-39 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
State Street Research Investment Trust Investment Division ----------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (68,204) $ (969,448) $ 48,301,051 Net realized (losses) gains from security transactions..................... (6,958,914) (6,132,437) 731,187 Change in unrealized appreciation (depreciation) of investments............ 88,855,777 (90,883,953) (122,469,738) ------------ ------------ ------------- Net increase (decrease) in net assets resulting from operations............ 81,828,659 (97,985,838) (73,437,500) ------------ ------------ ------------- From capital transactions: Net premiums............................................................... 67,707,999 78,160,135 80,046,712 Redemptions................................................................ (15,137,546) (10,399,853) (15,513,042) Net Investment Division transfers.......................................... (7,863,696) (11,186,400) 2,751,095 Other net transfers........................................................ (36,428,084) (38,309,389) (40,534,492) ------------ ------------ ------------- Net increase (decrease) in net assets resulting from capital transactions.. 8,278,673 18,264,493 26,750,273 ------------ ------------ ------------- NET CHANGE IN NET ASSETS...................................................... 90,107,332 (79,721,345) (46,687,227) NET ASSETS--BEGINNING OF PERIOD............................................... 276,979,969 356,701,314 403,388,541 ------------ ------------ ------------- NET ASSETS--END OF PERIOD..................................................... $367,087,301 $276,979,969 $ 356,701,314 ============ ============ =============
See Notes to Financial Statements. F-40
State Street Research Diversified State Street Research Aggressive Growth MetLife Stock Index Investment Division Investment Division Investment Division - ---------------------------------------- ---------------------------------------- ---------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 7,511,522 $ 3,558,999 $ 23,184,244 $ (1,367,678) $ (1,263,240) $ 45,283,589 $ 3,387,558 $ 2,705,145 $ 1,213,073 (2,593,687) (1,810,936) (111,095) (8,202,841) (5,953,657) (1,536,972) (10,060,006) (5,045,284) 4,130,927 42,182,763 (41,694,719) (42,080,714) 62,199,697 (44,703,891) (94,895,107) 101,361,307 (82,559,071) (48,985,481) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 47,100,598 (39,946,656) (19,007,565) 52,629,178 (51,920,788) (51,148,490) 94,688,859 (84,899,210) (43,641,481) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 52,190,961 54,194,120 55,767,097 34,182,901 40,003,786 42,942,155 108,236,751 114,022,950 113,949,042 (14,264,879) (9,523,000) (8,333,720) (7,318,523) (4,831,140) (6,486,474) (14,265,812) (13,779,170) (11,030,629) (2,178,352) (383,162) 8,413,016 (5,104,646) (6,485,783) 1,097,789 (11,228,029) 11,797,286 19,393,554 (31,835,294) (32,044,615) (31,250,185) (17,936,155) (17,642,321) (19,697,556) (46,545,385) (47,844,806) (45,631,351) - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 3,912,436 12,243,343 24,596,208 3,823,577 11,044,542 17,855,914 36,197,525 64,196,260 76,680,616 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 51,013,034 (27,703,313) 5,588,643 56,452,755 (40,876,246) (33,292,576) 130,886,384 (20,702,950) 33,039,135 238,020,353 265,723,666 260,135,023 130,815,618 171,691,864 204,984,440 326,227,963 346,930,913 313,891,778 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $289,033,387 $238,020,353 $265,723,666 $187,268,373 $130,815,618 $171,691,864 $457,114,347 $326,227,963 $346,930,913 ============ ============ ============ ============ ============ ============ ============ ============ ============
F-41 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
FI International Stock Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (54,694) $ 18,744 $ 1,172,876 Net realized (losses) gains from security transactions..................... (1,630,864) (2,655,399) (1,661,736) Change in unrealized appreciation (depreciation) of investments............ 10,924,390 (4,418,288) (9,202,287) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 9,238,832 (7,054,943) (9,691,147) ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 7,903,805 9,783,594 9,615,907 Redemptions................................................................ (1,780,012) (1,287,021) (1,289,983) Net Investment Division transfers.......................................... (552,252) (2,781,604) 323,092 Other net transfers........................................................ (3,792,182) (3,974,969) (4,148,436) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 1,779,359 1,740,000 4,500,580 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 11,018,191 (5,314,943) (5,190,567) NET ASSETS--BEGINNING OF PERIOD............................................... 32,966,098 38,281,041 43,471,608 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $43,984,289 $32,966,098 $38,281,041 =========== =========== ===========
See Notes to Financial Statements. F-42
Janus Mid Cap T. Rowe Price Small Cap Growth Scudder Global Equity Investment Division Investment Division Investment Division - ---------------------------------------- -------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (1,297,757) $ (1,013,088) $ (1,037,631) $ (402,320) $ (332,098) $ 3,209,549 $ 311,502 $ 181,688 $ 2,155,251 (1,145,184) (5,163,698) (2,451,549) (309,653) (297,872) (796,014) (1,005,776) (466,029) (71,082) 46,019,342 (34,449,605) (53,291,667) 17,635,578 (12,423,975) (6,595,361) 7,242,152 (3,445,540) (5,825,339) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 43,576,401 (40,626,391) (56,780,847) 16,923,605 (13,053,945) (4,181,826) 6,547,878 (3,729,881) (3,741,170) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 53,673,455 64,528,237 74,363,749 12,384,395 14,332,234 15,023,523 6,014,790 7,029,500 7,562,752 (5,340,392) (2,804,544) (3,144,623) (1,578,439) (1,348,311) (2,577,320) (1,735,572) (936,418) (630,613) (5,185,372) (5,298,371) 3,860,189 (197,295) 753,895 (372,409) (125,590) (322,915) 603,395 (21,665,579) (21,964,497) (23,970,747) (5,569,189) (5,463,573) (5,350,422) (2,481,721) (2,670,700) (2,572,779) - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 21,482,112 34,460,825 51,108,568 5,039,472 8,274,245 6,723,372 1,671,907 3,099,467 4,962,755 - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- 65,058,513 (6,165,566) (5,672,279) 21,963,077 (4,779,700) 2,541,546 8,219,785 (630,414) 1,221,585 119,019,575 125,185,141 130,857,420 39,880,088 44,659,788 42,118,242 20,475,933 21,106,347 19,884,762 - ------------ ------------ ------------ ----------- ------------ ----------- ----------- ----------- ----------- $184,078,088 $119,019,575 $125,185,141 $61,843,165 $ 39,880,088 $44,659,788 $28,695,718 $20,475,933 $21,106,347 ============ ============ ============ =========== ============ =========== =========== =========== ===========
F-43 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Harris Oakmark Large Cap Value Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (252,368) $ 438,284 $ (56,512) Net realized (losses) gains from security transactions..................... 38,696 173,172 94,596 Change in unrealized appreciation (depreciation) of investments............ 6,986,213 (3,824,797) 810,284 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,772,541 (3,213,341) 848,368 ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 11,430,624 10,115,432 4,073,390 Redemptions................................................................ (991,704) (287,586) (268,807) Net Investment Division transfers.......................................... 1,835,698 6,291,525 9,043,603 Other net transfers........................................................ (4,616,084) (4,169,815) (1,466,228) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 7,658,534 11,949,556 11,381,958 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 14,431,075 8,736,215 12,230,326 NET ASSETS--BEGINNING OF PERIOD............................................... 23,072,554 14,336,339 2,106,013 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $37,503,629 $23,072,554 $14,336,339 =========== =========== ===========
See Notes to Financial Statements. F-44
Neuberger Berman Partners Mid Cap Value T. Rowe Price Large Cap Growth Lehman Brothers Aggregate Bond Index Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (118,988) $ (89,469) $ 106,521 $ (180,062) $ (106,090) $ (94,779) $ 2,506,200 $ 982,861 $ 212,243 28,084 105,666 (68,863) (489,389) (317,124) (100,488) 1,152,171 515,268 210,509 7,656,793 (1,888,036) (195,526) 7,871,800 (5,333,848) (92,461) (2,185,014) 2,760,523 1,053,501 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 7,565,889 (1,871,839) (157,868) 7,202,349 (5,757,062) (287,728) 1,473,357 4,258,652 1,476,253 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 8,682,614 8,172,686 5,746,048 8,620,553 9,447,412 8,996,035 13,565,785 10,479,062 8,533,067 (629,059) (1,215,338) (57,006) (982,056) (125,856) (60,227) (1,812,183) (1,839,866) (1,024,276) 650,401 2,321,678 4,766,372 (78,277) 873,833 8,736,398 (6,698,353) 8,318,943 11,244,179 (3,610,116) (3,236,171) (2,321,908) (3,337,120) (3,453,967) (3,536,498) (5,580,587) (4,492,832) (2,262,688) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,093,840 6,042,855 8,133,506 4,223,100 6,741,422 14,135,708 (525,338) 12,465,307 16,490,282 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 12,659,729 4,171,016 7,975,638 11,425,449 984,360 13,847,980 948,019 16,723,959 17,966,535 18,285,822 14,114,806 6,139,168 22,094,885 21,110,525 7,262,545 54,046,288 37,322,329 19,355,794 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $30,945,551 $18,285,822 $14,114,806 $33,520,334 $22,094,885 $21,110,525 $54,994,307 $54,046,288 $37,322,329 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-45 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Morgan Stanley EAFE Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 121,982 $ (64,128) $ (37,840) Net realized (losses) gains from security transactions..................... (497,564) (800,822) (961,834) Change in unrealized appreciation (depreciation) of investments............ 6,516,826 (1,274,363) (729,479) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,141,244 (2,139,313) (1,729,153) ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 7,425,875 6,625,665 4,890,376 Redemptions................................................................ (362,211) (1,101,621) (722,285) Net Investment Division transfers.......................................... 438,708 1,672,217 4,395,203 Other net transfers........................................................ (2,849,511) (2,360,586) (1,819,787) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 4,652,861 4,835,675 6,743,507 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 10,794,105 2,696,362 5,014,354 NET ASSETS--BEGINNING OF PERIOD............................................... 13,496,072 10,799,710 5,785,356 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $24,290,177 $13,496,072 $10,799,710 =========== =========== ===========
See Notes to Financial Statements. F-46
Russell 2000 Index Met/Putnam Voyager State Street Research Aurora Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (29,213) $ (29,731) $ (47,654) $ (58,697) $ (39,278) $ (22,732) $ (336,756) $ (97,874) $ (51,026) (125,595) (343,069) (1,016,179) (624,452) (304,226) (113,353) 196,537 81,843 155,882 7,938,110 (2,545,881) 1,215,383 2,271,140 (1,227,374) (585,114) 17,391,943 (6,958,922) 1,218,805 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 7,783,302 (2,918,681) 151,550 1,587,991 (1,570,878) (721,199) 17,251,724 (6,974,953) 1,323,661 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 7,659,016 7,082,371 5,343,692 3,213,111 3,461,165 2,425,615 16,618,731 15,376,489 7,040,736 (486,878) (266,570) (375,673) (93,468) (27,865) (23,841) (920,139) (302,359) (81,569) 991,151 2,834,125 1,811,235 (151,453) 548,678 2,239,800 1,566,557 6,843,668 11,247,758 (3,048,846) (2,527,437) (2,007,235) (1,158,137) (1,159,060) (878,209) (7,037,769) (5,887,521) (2,656,308) - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 5,114,443 7,122,489 4,772,019 1,810,053 2,822,918 3,763,365 10,227,380 16,030,277 15,550,617 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- 12,897,745 4,203,808 4,923,569 3,398,044 1,252,040 3,042,166 27,479,104 9,055,324 16,874,278 14,828,534 10,624,726 5,701,157 5,252,713 4,000,673 958,507 29,060,558 20,005,234 3,130,956 - ----------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- $27,726,279 $14,828,534 $10,624,726 $ 8,650,757 $ 5,252,713 $4,000,673 $56,539,662 $29,060,558 $20,005,234 =========== =========== =========== =========== =========== ========== =========== =========== ===========
F-47 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
MetLife Mid Cap Stock Index Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (64,163) $ (55,361) $ (18,724) Net realized (losses) gains from security transactions..................... 12,063 (23,095) (19,531) Change in unrealized appreciation (depreciation) of investments............ 6,538,587 (2,089,536) 294,328 ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 6,486,487 (2,167,992) 256,073 ----------- ----------- ----------- From capital transactions: Net premiums............................................................... 8,658,518 7,438,484 4,147,919 Redemptions................................................................ (315,294) (109,971) (16,900) Net Investment Division transfers.......................................... 960,729 4,006,261 4,052,437 Other net transfers........................................................ (3,433,510) (2,617,681) (1,566,864) ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 5,870,443 8,717,093 6,616,592 ----------- ----------- ----------- NET CHANGE IN NET ASSETS...................................................... 12,356,930 6,549,101 6,872,665 NET ASSETS--BEGINNING OF PERIOD............................................... 15,567,957 9,018,856 2,146,191 ----------- ----------- ----------- NET ASSETS--END OF PERIOD..................................................... $27,924,887 $15,567,957 $ 9,018,856 =========== =========== ===========
See Notes to Financial Statements. F-48
State Street Research Franklin Templeton Small Cap Growth Large Cap Value Davis Venture Value Investment Division Investment Division Investment Division - --------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Period For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ -------------- ------------ -------------- ------------ ------------ ------------ $ (16,641) $ (8,397) $ (1,124) $ 4,590 $ 433 $ (75,683) $ 750 $ 153,188 (19,016) (42,766) (3,651) 41,938 (3,284) (213,900) (188,804) (46,987) 796,643 (271,373) 16,066 156,144 (3,178) 5,610,390 (2,083,879) (437,523) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 760,986 (322,536) 11,291 202,672 (6,029) 5,320,807 (2,271,933) (331,322) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 844,482 626,488 107,629 405,361 64,977 6,492,659 5,157,409 3,338,434 (27,310) (5,592) (802) (5,862) (313) (286,620) (86,825) (44,938) 610,392 745,849 369,945 469,287 153,138 2,147,532 5,300,022 4,710,785 (416,036) (235,608) (30,931) (149,915) (23,188) (2,675,075) (2,166,021) (1,312,198) ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 1,011,528 1,131,137 445,841 718,871 194,614 5,678,496 8,204,585 6,692,083 ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- 1,772,514 808,601 457,132 921,543 188,585 10,999,303 5,932,652 6,360,761 1,265,733 457,132 -- 188,585 -- 13,430,192 7,497,540 1,136,779 ---------- ---------- -------- ---------- -------- ----------- ----------- ----------- $3,038,247 $1,265,733 $457,132 $1,110,128 $188,585 $24,429,495 $13,430,192 $ 7,497,540 ========== ========== ======== ========== ======== =========== =========== ===========
F-49 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Loomis Sayles Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (28,298) $ (16,142) $ 75,074 Net realized (losses) gains from security transactions..................... (88,636) (106,829) (35,645) Change in unrealized appreciation (depreciation) of investments............ 1,169,772 (414,868) (62,611) ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 1,052,838 (537,839) (23,182) ---------- ---------- ---------- From capital transactions: Net premiums............................................................... 1,387,309 1,200,038 909,510 Redemptions................................................................ (49,105) (11,815) (7,864) Net Investment Division transfers.......................................... 159,941 268,407 960,425 Other net transfers........................................................ (536,437) (436,811) (356,458) ---------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions.. 961,708 1,019,819 1,505,613 ---------- ---------- ---------- NET CHANGE IN NET ASSETS...................................................... 2,014,546 481,980 1,482,431 NET ASSETS--BEGINNING OF PERIOD............................................... 2,408,393 1,926,413 443,982 ---------- ---------- ---------- NET ASSETS--END OF PERIOD..................................................... $4,422,939 $2,408,393 $1,926,413 ========== ========== ==========
See Notes to Financial Statements. F-50
Alger Equity Growth MFS Investors Trust MFS Research Managers Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (23,728) $ (13,698) $ (121) $ (7,711) $ (2,715) $ (1,179) $ (873) $ (2,427) $ (363) (63,998) (57,097) (175) 13,432 (71,866) (5,896) (4,462) (30,794) 1,304 1,339,908 (983,355) (5,126) 221,187 (78,498) 4,527 112,414 (58,814) (346) ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,252,182 (1,054,150) (5,422) 226,908 (153,079) (2,548) 107,079 (92,035) 595 ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,035,783 40,283 -- 701,861 657,381 122,835 278,607 256,687 72,571 -- -- -- (14,052) (4,428) (1,444) (4,854) (250) (3,984) 359 4,290,312 52,468 164,766 480,329 486,210 57,895 151,712 231,621 (337,622) (338,952) (1,809) (229,330) (608,417) (282,946) (84,526) (153,237) (149,340) ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 698,520 3,991,643 50,659 623,245 524,865 324,655 247,122 254,912 150,868 ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- 1,950,702 2,937,493 45,237 850,153 371,786 322,107 354,201 162,877 151,463 2,982,730 45,237 -- 693,893 322,107 -- 314,340 151,463 -- ---------- ----------- ------- ---------- --------- --------- -------- --------- --------- $4,933,432 $ 2,982,730 $45,237 $1,544,046 $ 693,893 $ 322,107 $668,541 $ 314,340 $ 151,463 ========== =========== ======= ========== ========= ========= ======== ========= =========
F-51 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
State Street Research Bond Income Investment Division -------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 2,183,489 $ 4,278,595 $ 5,095,599 Net realized (losses) gains from security transactions..................... 880,712 (378,655) 400,025 Change in unrealized appreciation (depreciation) of investments............ 1,572,001 2,444,438 (137,736) ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations............ 4,636,202 6,344,378 5,357,888 ----------- ----------- ------------ From capital transactions: Net premiums............................................................... 16,159,717 18,007,464 14,237,318 Redemptions................................................................ (4,549,369) (3,078,401) (3,623,665) Net Investment Division transfers.......................................... (3,340,166) 1,121,089 3,289,281 Other net transfers........................................................ (9,344,726) (8,719,726) (15,760,945) ----------- ----------- ------------ Net increase (decrease) in net assets resulting from capital transactions.. (1,074,544) 7,330,426 (1,858,011) ----------- ----------- ------------ NET CHANGE IN NET ASSETS...................................................... 3,561,658 13,674,804 3,499,877 NET ASSETS--BEGINNING OF PERIOD............................................... 93,157,932 79,483,128 75,983,251 ----------- ----------- ------------ NET ASSETS--END OF PERIOD..................................................... $96,719,590 $93,157,932 $ 79,483,128 =========== =========== ============
See Notes to Financial Statements. F-52
Salomon Brothers FI Structured Equity Harris Oakmark Focused Value Strategic Bond Opportunities Investment Division Investment Division Investment Division - ------------------------------------- --------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Period Ended Ended Ended Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------ -------------- $ (808) $ 70 $ (69) $ (127,312) $ (63,671) $ (9,775) $ 33,102 $ 72,727 $ (894) 24,426 (9,596) (77) 31,214 (9,588) (43) 97,650 241 117 58,141 (4,285) (2,467) 5,537,632 (938,481) 279,801 233,146 62,351 4,621 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 81,759 (13,811) (2,613) 5,441,534 (1,011,740) 269,983 363,898 135,319 3,844 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 167,405 51,077 -- 8,198,287 6,333,512 999,657 1,996,763 890,271 97,914 (10,046) -- -- (450,269) (161,171) (7,188) (108,331) (17,732) (566) 229,644 41,277 28,886 3,144,705 5,880,885 3,223,723 1,486,748 1,049,918 396,753 (56,377) (10,863) (1,055) (3,347,152) (2,377,498) (271,630) (749,672) (348,947) (33,111) -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 330,626 81,491 27,831 7,545,571 9,675,728 3,944,562 2,625,508 1,573,510 460,990 -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- 412,385 67,680 25,218 12,987,105 8,663,988 4,214,545 2,989,406 1,708,829 464,834 92,898 25,218 -- 12,878,533 4,214,545 -- 2,173,663 464,834 -- -------- -------- ------- ----------- ----------- ---------- ---------- ---------- -------- $505,283 $ 92,898 $25,218 $25,865,638 $12,878,533 $4,214,545 $5,163,069 $2,173,663 $464,834 ======== ======== ======= =========== =========== ========== ========== ========== ========
F-53 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Salomon Brothers U.S. Government Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 42,617 $ 71,569 $ (1,841) Net realized (losses) gains from security transactions..................... 48,098 10,225 5,065 Change in unrealized appreciation (depreciation) of investments............ (40,677) 83,661 (2,273) ----------- ---------- -------- Net increase (decrease) in net assets resulting from operations............ 50,038 165,455 951 ----------- ---------- -------- From capital transactions: Net premiums............................................................... 3,454,837 1,641,232 162,934 Redemptions................................................................ (137,457) (35,283) (10,909) Net Investment Division transfers.......................................... 916,767 2,382,469 755,686 Other net transfers........................................................ (1,344,693) (637,762) (59,363) ----------- ---------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 2,889,454 3,350,656 848,348 ----------- ---------- -------- NET CHANGE IN NET ASSETS...................................................... 2,939,492 3,516,111 849,299 NET ASSETS--BEGINNING OF PERIOD............................................... 4,365,410 849,299 -- ----------- ---------- -------- NET ASSETS--END OF PERIOD..................................................... $ 7,304,902 $4,365,410 $849,299 =========== ========== ========
See Notes to Financial Statements. F-54
State Street Research Money Market FI Mid Cap Opportunities Janus Aspen Growth Investment Division Investment Division Investment Division - -------------------------------------- -------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended Ended Ended May 1, 2002 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2003 2002 2001 - ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ $ 47,144 $ 259,328 $ 918,529 $ 9,838 $ (333) $ (10,283) $ (9,370) $ 185,366 (1) (628,588) (499,341) 19,777 (1,950) (263,013) (179,152) (1,848,663) 1 611,711 796,577 191,546 3,758 1,041,007 (329,490) 498,521 - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- 47,144 242,451 1,215,765 221,161 1,475 767,711 (518,012) (1,164,776) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- 4,560,820 25,769,284 17,936,134 324,317 49,033 839,829 913,602 779,753 (1,186,158) (4,958,930) (1,689,474) (43,946) (19) (88,894) (13,590) (2,741,484) (4,975,125) (33,048,287) (4,603,225) 537,734 149,230 (5,665) 34,319 254,486 (1,910,867) 10,079,748 (1,666,768) (95,364) (31,850) (176,510) (211,649) (189,372) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- (3,511,330) (2,158,185) 9,976,667 722,741 166,394 568,760 722,682 (1,896,617) - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- (3,464,186) (1,915,734) 11,192,432 943,902 167,869 1,336,471 204,670 (3,061,393) 30,810,613 32,726,347 21,533,915 167,869 -- 2,163,422 1,958,752 5,020,145 - ----------- ------------ ----------- ---------- -------- ---------- ---------- ----------- $27,346,427 $ 30,810,613 $32,726,347 $1,111,771 $167,869 $3,499,893 $2,163,422 $ 1,958,752 =========== ============ =========== ========== ======== ========== ========== ===========
F-55 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Invesco VIF High Yield Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 43,235 $ 48,408 $ 29,172 Net realized (losses) gains from security transactions..................... (5,183) (31,480) (3,798) Change in unrealized appreciation (depreciation) of investments............ 90,384 (7,350) (33,395) -------- -------- -------- Net increase (decrease) in net assets resulting from operations............ 128,436 9,578 (8,021) -------- -------- -------- From capital transactions: Net premiums............................................................... 232,669 216,788 213,527 Redemptions................................................................ (6,154) -- -- Net Investment Division transfers.......................................... 11,139 2,473 71,476 Other net transfers........................................................ (37,616) (27,503) (13,506) -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 200,038 191,758 271,497 -------- -------- -------- NET CHANGE IN NET ASSETS...................................................... 328,474 201,336 263,476 NET ASSETS--BEGINNING OF PERIOD............................................... 475,634 274,298 10,822 -------- -------- -------- NET ASSETS--END OF PERIOD..................................................... $804,108 $475,634 $274,298 ======== ======== ========
See Notes to Financial Statements. F-56
Invesco VIF Equity Income Invesco VIF Real Estate Opportunity Franklin Templeton International Stock Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,289 $ 1,519 $ 1,475 $ 1,726 $ (248) $ 652 $ 34,446 $ 31,411 $ 197,836 (4,599) (7,425) (1,414) 7,645 12,032 1,271 (71,786) (325,690) (18,952) 30,971 (21,641) (4,995) 41,591 3,016 (3,692) 947,139 (187,267) (287,060) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 27,661 (27,547) (4,934) 50,962 14,800 (1,769) 909,799 (481,546) (108,176) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 44,937 30,604 5,886 20,763 9,629 3,478 571,285 937,164 461,547 (13,395) -- (780) (74,780) -- -- (219,304) (90,063) (236,261) 6,492 7,548 112,018 8,373 64,182 (24,700) 342,850 643,475 589,847 (6,352) (8,020) (3,589) (5,943) 1,520 (2,641) (163,132) (163,651) (39,531) -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 31,682 30,132 113,535 (51,587) 75,331 (23,863) 531,699 1,326,925 775,602 -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- 59,343 2,585 108,601 (625) 90,131 (25,632) 1,441,498 845,379 667,426 125,063 122,478 13,877 179,233 89,102 114,734 2,612,034 1,766,655 1,099,229 -------- -------- -------- -------- -------- -------- ---------- ---------- ---------- $184,406 $125,063 $122,478 $178,608 $179,233 $ 89,102 $4,053,532 $2,612,034 $1,766,655 ======== ======== ======== ======== ======== ======== ========== ========== ==========
F-57 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Franklin Templeton Valuemark Small Cap Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (6,613) $ (1,274) $ (121) Net realized (losses) gains from security transactions..................... (16,606) (49,638) (480) Change in unrealized appreciation (depreciation) of investments............ 366,174 (184,311) 4,364 ---------- --------- -------- Net increase (decrease) in net assets resulting from operations............ 342,955 (235,223) 3,763 ---------- --------- -------- From capital transactions: Net premiums............................................................... 258,012 40,174 32,699 Redemptions................................................................ -- -- -- Net Investment Division transfers.......................................... 30,689 995,374 69,587 Other net transfers........................................................ (86,982) (102,364) (3,042) ---------- --------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 201,719 933,184 99,244 ---------- --------- -------- NET CHANGE IN NET ASSETS...................................................... 544,674 697,961 103,007 NET ASSETS--BEGINNING OF PERIOD............................................... 800,968 103,007 -- ---------- --------- -------- NET ASSETS--END OF PERIOD..................................................... $1,345,642 $ 800,968 $103,007 ========== ========= ========
See Notes to Financial Statements. F-58
Alliance Growth & Income Alliance Premier Growth Alliance Technology Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- ------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year Ended Ended Ended Ended Ended Ended Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 4,389 $ 23,587 $ 2,195 $ (257) $ (274) $ (104) $ (181) $ (96) $ 661 (27,592) (18,278) (318) (661) (9,853) (138) (931) (519) (19,763) 441,306 (137,057) 24,267 11,616 (12,480) 1,299 13,613 (9,033) (2,681) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 418,103 (131,748) 26,144 10,698 (22,607) 1,057 12,501 (9,648) (21,783) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 581,532 560,351 422,139 29,785 29,958 -- 15,245 17,162 463 (87,076) (14,526) -- -- -- -- (316) -- -- 41,687 192,482 160,474 3,688 (60,622) 97,128 727 -- 36,082 (82,296) (71,035) (11,019) (2,341) (2,820) 133 (792) (1,833) (2,213) ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 453,847 667,272 571,594 31,132 (33,484) 97,261 14,864 15,329 34,332 ---------- ---------- -------- ------- -------- ------- ------- ------- -------- 871,950 535,524 597,738 41,830 (56,091) 98,318 27,365 5,681 12,549 1,191,135 655,611 57,873 42,227 98,318 -- 18,230 12,549 -- ---------- ---------- -------- ------- -------- ------- ------- ------- -------- $2,063,085 $1,191,135 $655,611 $84,057 $ 42,227 $98,318 $45,595 $18,230 $ 12,549 ========== ========== ======== ======= ======== ======= ======= ======= ========
F-59 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Fidelity Contrafund Investment Division ------------------------------------- For the Year For the Year For the Year Ended Ended Ended December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ ------------ (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ (2,455) $ (926) $ (57) Net realized (losses) gains from security transactions..................... 6,303 (348) (27) Change in unrealized appreciation (depreciation) of investments............ 139,867 (29,437) (253) --------- -------- ------- Net increase (decrease) in net assets resulting from operations............ 143,715 (30,711) (337) --------- -------- ------- From capital transactions: Net premiums............................................................... 53,210 22,932 3,356 Redemptions................................................................ (213,750) -- -- Net Investment Division transfers.......................................... 657,697 237,002 21,462 Other net transfers........................................................ 3,584 (3,862) (621) --------- -------- ------- Net increase (decrease) in net assets resulting from capital transactions.. 500,741 256,072 24,197 --------- -------- ------- NET CHANGE IN NET ASSETS...................................................... 644,456 225,361 23,860 NET ASSETS--BEGINNING OF PERIOD............................................... 249,221 23,860 -- --------- -------- ------- NET ASSETS--END OF PERIOD..................................................... $ 893,677 $249,221 $23,860 ========= ======== =======
See Notes to Financial Statements. F-60
Fidelity Asset Manager Growth Fidelity Growth American Funds Growth Investment Division Investment Division Investment Division - ------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended Ended Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $ 6,748 $ 3,017 $ (233) $ (831) $ (517) $ (243) $ (118,303) $ (56,543) $ 128,057 (4,335) (5,591) 113 (2,588) (8,400) (3,407) (100,817) (49,022) (95,342) 59,143 (19,964) (1,597) 63,146 (40,968) (3,078) 5,264,250 (1,636,890) (17,189) -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 61,556 (22,538) (1,717) 59,727 (49,885) (6,728) 5,045,130 (1,742,455) 15,526 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 194,197 105,094 16,990 101,957 102,972 22,338 8,746,040 5,515,691 700,197 (1,698) (2,162) -- (738) -- -- (274,455) (51,220) (1,570) 74,992 (31,085) 84,590 6,224 (1,143) 74,755 5,353,241 5,147,713 2,173,706 (27,293) (12,942) (5,355) (4,423) (5,581) (3,117) (3,102,038) (2,053,980) 288,414 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 240,198 58,905 96,225 103,020 96,248 93,976 10,722,788 8,558,204 3,160,747 -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- 301,754 36,367 94,508 162,747 46,363 87,248 15,767,918 6,815,749 3,176,273 130,875 94,508 -- 133,611 87,248 -- 9,992,022 3,176,273 -- -------- -------- ------- -------- -------- ------- ----------- ----------- ---------- $432,629 $130,875 $94,508 $296,358 $133,611 $87,248 $25,759,940 $ 9,992,022 $3,176,273 ======== ======== ======= ======== ======== ======= =========== =========== ==========
F-61 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
American Funds Growth-Income Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 57,594 $ 35,068 $ 15,132 Net realized (losses) gains from security transactions..................... (26,406) (51,319) (13,398) Change in unrealized appreciation (depreciation) of investments............ 3,852,340 (1,122,854) 55,397 ----------- ----------- ---------- Net increase (decrease) in net assets resulting from operations............ 3,883,528 (1,139,105) 57,131 ----------- ----------- ---------- From capital transactions: Net premiums............................................................... 7,049,440 4,324,156 553,810 Redemptions................................................................ (184,181) (62,519) (6,270) Net investment division transfers.......................................... 3,708,586 4,404,613 1,876,550 Other net transfers........................................................ (2,495,963) (1,573,001) (27,864) ----------- ----------- ---------- Net increase (decrease) in net assets resulting from capital transactions.. 8,077,882 7,093,249 2,396,226 ----------- ----------- ---------- NET CHANGE IN NET ASSETS...................................................... 11,961,410 5,954,144 2,453,357 NET ASSETS--BEGINNING OF PERIOD............................................... 8,407,501 2,453,357 -- ----------- ----------- ---------- NET ASSETS--END OF PERIOD..................................................... $20,368,911 $ 8,407,501 $2,453,357 =========== =========== ==========
See Notes to Financial Statements. F-62
American Funds Global Small Cap JPM Enhanced Index T. Rowe Price Mid Cap Growth Investment Division Investment Division Investment Division - --------------------------------------- ------------------------------------- --------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Year For the Year For the Year For the Period Ended Ended May 1, 2001 to Ended Ended Ended Ended Ended May 1, 2001 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ ------------ ------------ ------------ -------------- $ (8,633) $ (1,451) $ 5,931 $ 147 $ 78 $ (13) $ (17,818) $ 962 $ (940) (33,362) 35,746 (18,714) (1,554) (1,186) (25) (46,026) (55,314) (1,372) 1,513,502 (396,292) 46,579 1,806 (1,483) (320) 776,010 (378,709) 11,239 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 1,471,507 (361,997) 33,796 399 (2,591) (358) 712,166 (433,061) 8,927 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 1,663,445 1,071,636 138,839 3,043 6,165 -- 1,283,521 820,210 82,192 (60,720) (8,869) -- -- -- -- (26,453) (1,344) (543) 1,303,948 1,067,611 476,691 (11,034) 1,869 5,908 481,182 375,032 264,649 (610,233) (354,525) (30,269) (173) (3,041) (187) (448,143) 47,743 209,192 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 2,296,440 1,775,853 585,261 (8,164) 4,993 5,721 1,290,107 1,241,641 555,490 ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- 3,767,947 1,413,856 619,057 (7,765) 2,402 5,363 2,002,273 808,580 564,417 2,032,913 619,057 -- 7,765 5,363 -- 1,372,997 564,417 -- ---------- ---------- -------- -------- ------- ------ ---------- ---------- -------- $5,800,860 $2,032,913 $619,057 $ -- $ 7,765 $5,363 $3,375,270 $1,372,997 $564,417 ========== ========== ======== ======== ======= ====== ========== ========== ========
F-63 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
MFS Research International Investment Division --------------------------------------- For the Year For the Year For the Period Ended Ended May 1, 2001 to December 31, December 31, December 31, 2003 2002 2001 ------------ ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income............................................... $ 2,786 $ (2,121) $ (351) Net realized (losses) gains from security transactions..................... 148,987 (66,559) (4,107) Change in unrealized appreciation (depreciation) of investments............ 191,049 (2,664) 1,444 ---------- -------- -------- Net increase (decrease) in net assets resulting from operations............ 342,822 (71,344) (3,014) ---------- -------- -------- From capital transactions: Net premiums............................................................... 514,658 323,700 38,580 Redemptions................................................................ (15,626) (1,956) -- Net investment division transfers.......................................... 140,125 254,704 77,076 Other net transfers........................................................ (198,441) (28,935) 124,871 ---------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions.. 440,716 547,513 240,527 ---------- -------- -------- NET CHANGE IN NET ASSETS...................................................... 783,538 476,169 237,513 NET ASSETS--BEGINNING OF PERIOD............................................... 713,682 237,513 -- ---------- -------- -------- NET ASSETS--END OF PERIOD..................................................... $1,497,220 $713,682 $237,513 ========== ======== ========
See Notes to Financial Statements. F-64
PIMCO Total Return PIMCO Innovation Lord Abbett Bond Debenture Investment Division Investment Division Investment Division - --------------------------------------- --------------------------------------- -------------------------------------- For the Year For the Year For the Period For the Year For the Year For the Period For the Year For the Year For the Year Ended Ended May 1, 2001 to Ended Ended May 1, 2001 to Ended Ended Ended December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2001 2003 2002 2001 2003 2002 2001 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $ 175,706 $ (28,120) $ 23,842 $ (21,608) $ (9,521) $ (1,528) $ 109,583 $ 924,873 $ 859,088 175,963 60,373 1,564 (195,867) (111,879) (9,873) 198,834 (1,886,218) (134,223) (25,434) 270,736 (14,155) 1,260,206 (652,366) 4,179 1,391,673 949,375 (902,997) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 326,235 302,989 11,251 1,042,731 (773,766) (7,222) 1,700,090 (11,970) (178,132) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 5,176,301 1,998,260 266,987 1,268,741 931,879 138,136 2,358,538 2,500,797 2,653,126 (300,049) (31,798) (9,397) (47,295) (7,020) -- (558,076) (441,582) (478,731) 3,254,351 3,693,012 902,199 1,385,317 627,449 661,537 1,087,733 11,019,013 807,014 (1,973,454) (851,347) (68,474) (437,762) (258,151) (43,761) (1,142,589) (13,314,199) (872,472) - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 6,157,149 4,808,127 1,091,315 2,169,001 1,294,157 755,912 1,745,606 (235,971) 2,108,937 - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- 6,483,384 5,111,116 1,102,566 3,211,732 520,391 748,690 3,445,696 (247,941) 1,930,805 6,213,682 1,102,566 -- 1,269,081 748,690 -- 8,596,606 8,844,547 6,913,742 - ----------- ---------- ---------- ---------- ---------- -------- ----------- ------------ ---------- $12,697,066 $6,213,682 $1,102,566 $4,480,813 $1,269,081 $748,690 $12,042,302 $ 8,596,606 $8,844,547 =========== ========== ========== ========== ========== ======== =========== ============ ==========
F-65 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company STATEMENTS OF CHANGES IN NET ASSETS
Met/AIM Met/AIM Mid Cap Core Equity Small Cap Growth Investment Division Investment Division -------------------------- -------------------------- For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended May 1, 2002 to December 31, December 31, December 31, December 31, 2003 2002 2003 2002 ------------ -------------- ------------ -------------- (DECREASE) INCREASE IN NET ASSETS From operations: Net investment (loss) income..................................... $ 3,638 $ (347) $ (2,947) $ (281) Net realized (losses) gains from security transactions........... 6,414 (1,242) 66,977 (593) Change in unrealized appreciation (depreciation) of investments.. 140,733 (6,351) 51,242 (4,322) --------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.. 150,785 (7,940) 115,272 (5,196) --------- -------- -------- -------- From capital transactions: Net premiums..................................................... 376,221 70,763 201,753 30,362 Redemptions...................................................... (9,516) (929) (5,605) (129) Net investment division transfers................................ 345,361 212,616 286,464 84,320 Other net transfers.............................................. (126,899) (21,530) (70,229) 6,439 --------- -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions............................................ 585,167 260,920 412,383 120,992 --------- -------- -------- -------- NET CHANGE IN NET ASSETS............................................ 735,952 252,980 527,655 115,796 NET ASSETS--BEGINNING OF PERIOD..................................... 252,980 -- 115,796 -- --------- -------- -------- -------- NET ASSETS--END OF PERIOD........................................... $ 988,932 $252,980 $643,451 $115,796 ========= ======== ======== ========
See Notes to Financial Statements. F-66
Harris Oakmark International Janus Aggressive Growth Lord Abbett Growth & Income Investment Division Investment Division Investment Division - -------------------------- --------------------------------------- -------------------------------- For the Year For the Period For the Year For the Year For the Period For the Year For the Period Ended May 1, 2002 to Ended Ended May 1, 2001 to Ended October 31, 2002 to December 31, December 31, December 31, December 31, December 31, December 31, December 31, 2003 2002 2003 2002 2001 2003 2002 - ------------ -------------- ------------ ------------ -------------- ------------ ------------------- $ 6,375 $ (88) $ (25,657) $ (13,374) $ (2,780) $ (47) $-- 72,432 (843) (313,967) (78,401) (43,356) 20 -- 49,401 (2,920) 1,123,504 (426,893) (11,854) 3,750 -- -------- -------- ---------- ---------- ---------- ------- --- 128,208 (3,851) 783,880 (518,668) (57,990) 3,723 -- -------- -------- ---------- ---------- ---------- ------- --- 111,653 59,332 1,705,553 1,567,918 311,526 4,885 -- (357) (178) (28,560) (23,600) -- -- -- 446,278 122,434 109,161 607,036 817,361 12,124 -- (22,736) (27,767) (612,599) (540,084) (118,215) (203) -- -------- -------- ---------- ---------- ---------- ------- --- 534,838 153,821 1,173,555 1,611,270 1,010,672 16,806 -- -------- -------- ---------- ---------- ---------- ------- --- 663,046 149,970 1,957,435 1,092,602 952,682 20,529 -- 149,970 -- 2,045,284 952,682 -- -- -- -------- -------- ---------- ---------- ---------- ------- --- $813,016 $149,970 $4,002,719 $2,045,284 $ 952,682 $20,529 $-- ======== ======== ========== ========== ========== ======= ===
F-67 Metropolitan Life Separate Account UL Of Metropolitan Life Insurance Company NOTES TO FINANCIAL STATEMENTS December 31, 2003 1. BUSINESS Metropolitan Life Separate Account UL (the "Separate Account"), a separate account of Metropolitan Life Insurance Company ("Metropolitan Life"), was established on December 13, 1988 to support Metropolitan Life's operations with respect to certain variable universal life policies ("Policies"). Metropolitan Life is a wholly owned subsidiary of MetLife Inc. ("MetLife"). The Separate Account was registered as a unit investment trust on January 5, 1990 under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the New York Insurance Department. The Separate Account presently consists of fifty-seven investment divisions that support six variable universal life insurance policies: Flexible Premium Multifunded Life ("UL II"), MetLife Flexible Premium Variable Life ("MetFlex"), Group Variable Universal Life ("GVUL"), Flexible Premium Multifunded Life ("UL 2001"), Variable Additional Insurance ("VAI") and Variable Additional Benefits Rider ("VABR"). The Separate Account is divided into investment divisions. Each investment division invests its assets exclusively in shares of corresponding portfolios, series or funds (with the same name) within the Metropolitan Fund, Janus Fund, Invesco Funds, Franklin Fund, Alliance Fund, Fidelity Funds, American Fund or Met Investors Fund, collectively, (the "Funds"). For convenience, the portfolios, series, and funds are referred to as "portfolios." The assets of the Separate Account are registered in the name of Metropolitan Life. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from Metropolitan Life's other assets and liabilities. The portion of the Separate Account's assets applicable to the variable life policies is not chargeable with liabilities arising out of any other business Metropolitan Life may conduct. The table below represents the investment divisions within the Separate Account: State Street Research Investment Trust Investment Division State Street Research Diversified Investment Division State Street Research Aggressive Growth Investment Division MetLife Stock Index Investment Division FI International Stock Investment Division Janus Mid Cap Investment Division T. Rowe Price Small Cap Growth Investment Division Scudder Global Equity Investment Division Harris Oakmark Large Cap Value Investment Division Neuberger Berman Partners Mid Cap Value Investment Division T. Rowe Price Large Cap Growth Investment Division Lehman Brothers Aggregate Bond Index Investment Division Morgan Stanley EAFE Index Investment Division Russell 2000 Index Investment Division Met/Putnam Voyager Investment Division State Street Research Aurora Investment Division MetLife Mid Cap Stock Index Investment Division Franklin Templeton Small Cap Growth Investment Division (b) State Street Research Large Cap Value Investment Division (c) Davis Venture Value Investment Division Loomis Sayles Small Cap Investment Division Alger Equity Growth Investment Division (a) MFS Investors Trust Investment Division (a) MFS Research Managers Investment Division (a) State Street Research Bond Income Investment Division (a) FI Structured Equity Investment Division (a) Harris Oakmark Focused Value Investment Division (b) Salomon Brothers Stategic Bond Opportunities Investment Division (b) Salomon Brothers U.S. Government Investment Division (b) State Street Research Money Market Investment Division FI Mid Cap Opportunities Investment Division (c) Janus Aspen Growth Investment Division Invesco VIF High Yield Investment Division Invesco VIF Equity Income Investment Division Invesco VIF Real Estate Opportunity Investment Division Franklin Templeton International Stock Investment Division Franklin Templeton Valuemark Small Cap Investment Division (a) Alliance Growth & Income Investment Division Alliance Premier Growth Investment Division (a) Alliance Technology Investment Division (a) Fidelity Contrafund Investment Division (a) Fidelity Asset Manager Growth Investment Division (a) Fidelity Growth Investment Division (a) American Funds Growth Investment Division (b) American Funds Growth-Income Investment Division (b) American Funds Global Small Cap Investment Division (b) JPM Enhanced Index Investment Division (a) T. Rowe Price Mid Cap Growth Investment Division (b) MFS Research International Investment Division (b) PIMCO Total Return Investment Division (b) PIMCO Innovation Investment Division (b) Lord Abbett Bond Debenture Investment Division Met/AIM Mid Cap Core Equity Investment Division (c) Met/AIM Small Cap Growth Investment Division (c) Harris Oakmark International Investment Division (c) Janus Aggressive Growth Investment Division Lord Abbett Growth & Income Investment Division (d) F-68 NOTES TO FINANCIAL STATEMENTS -- (Continued) 1. BUSINESS -- (Continued) (a) On January 1, 2001, operations commenced for eleven new investment divisions added to the Separate Account on that date: Franklin Templeton Valuemark Small Cap Investment Division, Alger Equity Growth Investment Division, MFS Investors Trust Investment Division, MFS Research Managers Investment Division, FI Structured Equity Investment Division, Alliance Premier Growth Investment Division, Alliance Technology Investment Division, Fidelity Contrafund Investment Division, Fidelity Asset Manager Growth Investment Division, Fidelity Growth Investment Division, and JPM Enhanced Index Investment Division. (b) On May 1, 2001, operations commenced for twelve new investment divisions added to the Separate Account on that date: Janus Aggressive Growth Investment Division, Franklin Templeton Small Cap Growth Investment Division, Harris Oakmark Focused Value Investment Division, Salomon Brothers Strategic Bond Opportunities Investment Division, Salomon Brothers U.S. Government Investment Division, American Funds Growth Investment Division, American Funds Growth-Income Investment Division, American Funds Global Small Cap Investment Division, T. Rowe Price Mid Cap Growth Investment Division, MFS Research International Investment Division, PIMCO Total Return Investment Division, and PIMCO Innovation Investment Division. (c) On May 1, 2002, operations commenced for five new investment divisions added to the Separate Account on that date: State Street Research Large Cap Value Investment Division, FI Mid Cap Opportunities Investment Division, Met/AIM Mid Cap Core Equity Investment Division, Met/AIM Small Cap Growth Investment Division, and Harris Oakmark International Investment Division. (d) On October 31, 2002 operations commenced for one new investment division added to the Separate Account on that date: Lord Abbett Growth & Income Investment Division. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements included herein have been provided in accordance with accounting principles generally accepted in the United States of America for variable universal life separate accounts registered as unit investment trusts. A. Valuation of Investments Investments are made in the portfolios of the Funds and are valued at the reported net asset values of these portfolios. The investments of the Funds are valued at fair value. Money market fund investments are valued utilizing the amortized cost method of valuation. B. Security Transactions Purchases and sales are recorded on the trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the identified cost of the investment sold. Income from dividends, and gains from realized gain distributions, are recorded on the ex-distribution date. C. Federal Income Taxes The operations of the Separate Account are included in the Federal income tax return of Metropolitan Life, which is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, Metropolitan Life does not expect to incur Federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the policies. Accordingly, no charge is being made currently to the Separate Account for Federal income taxes. Metropolitan Life will review periodically the status of this policy in the event of changes in the tax law. A charge may be made in future years for any Federal income taxes that would be attributed to the policies. 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 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 policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. F-69 NOTES TO FINANCIAL STATEMENTS -- (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES -- (Continued) E. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. F. Purchase Payments Purchase payments received by Metropolitan Life are credited as Accumulation Units as of the end of the valuation period in which received, as provided in the prospectus. 3. EXPENSES With respect to assets in the Separate Account that support certain policies, Metropolitan Life deducts a charge from the assets of the Separate Account for the assumption of general administrative expenses and mortality and expense risks. This charge is equivalent to an effective annual rate of 0.45% of the average daily values of the assets in the Separate Account for GVUL policies, 0.90% for UL II & UL 2001 policies, 0.75% for VAI and VABR policies less than $250,000, and 0.50% for VAI and VABR policies $250,000 and greater. For Met Flex policies, a charge of 0.48% is assessed against the cash value of the assets in the separate account. F-70 NOTES TO FINANCIAL STATEMENTS -- (Continued) 4. PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of investments for the year ended December 31, 2003 were as follows:
Purchases Sales --------- -------- (In Thousands) State Street Research Investment Trust Investment Division....... $ 23,613 $ 15,572 State Street Research Diversified Investment Division............ 25,688 14,354 State Street Research Aggressive Growth Investment Division...... 11,163 8,764 MetLife Stock Index Investment Division.......................... 63,324 24,023 FI International Stock Investment Division....................... 5,514 3,811 Janus Mid Cap Investment Division................................ 22,923 3,117 T. Rowe Price Small Cap Growth Investment Division............... 6,430 1,862 Scudder Global Equity Investment Division........................ 4,833 2,872 Harris Oakmark Large Cap Value Investment Division............... 9,213 1,835 Neuberger Berman Partners Mid Cap Value Investment Division...... 5,510 557 T. Rowe Price Large Cap Growth Investment Division............... 6,544 2,531 Lehman Brothers Aggregate Bond Index Investment Division......... 20,915 19,015 Morgan Stanley EAFE Index Investment Division.................... 9,570 4,867 Russell 2000 Index Investment Division........................... 6,960 1,888 Met/Putnam Voyager Investment Division........................... 2,701 964 State Street Research Aurora Investment Division................. 11,291 1,416 MetLife Mid Cap Stock Index Investment Division.................. 7,181 1,384 Franklin Templeton Small Cap Growth Investment Division.......... 1,497 116 State Street Research Large Cap Value Investment Division........ 1,062 338 Davis Venture Value Investment Division.......................... 6,627 1,045 Loomis Sayles Small Cap Investment Division...................... 1,611 682 Alger Equity Growth Investment Division.......................... 1,071 396 MFS Investors Trust Investment Division.......................... 1,675 1,062 MFS Research Managers Investment Division........................ 279 34 State Street Research Bond Income Investment Division............ 13,891 12,765 FI Structured Equity Investment Division......................... 587 257 Harris Oakmark Focused Value Investment Division................. 7,908 488 Salomon Brothers Stategic Bond Opportunities Investment Division. 4,033 1,375 Salomon Brothers U.S. Government Investment Division............. 5,404 2,472 State Street Research Money Market Investment Division........... 6,223 9,648 FI Mid Cap Opportunities Investment Division..................... 823 90 Janus Aspen Growth Investment Division........................... 833 274 Invesco VIF High Yield Investment Division....................... 298 55 Invesco VIF Equity Income Investment Division.................... 57 24 Invesco VIF Real Estate Opportunity Investment Division.......... 32 82 Franklin Templeton International Stock Investment Division....... 1,048 482 Franklin Templeton Valuemark Small Cap Investment Division....... 311 502 Alliance Growth & Income Investment Division..................... 635 176 Alliance Premier Growth Investment Division...................... 33 3 Alliance Technology Investment Division.......................... 16 1 Fidelity Contrafund Investment Division.......................... 728 230 Fidelity Asset Manager Growth Investment Division................ 279 32 Fidelity Growth Investment Division.............................. 109 6 American Funds Growth Investment Division........................ 10,843 369 American Funds Growth-Income Investment Division................. 8,552 463 American Funds Global Small Cap Investment Division.............. 3,456 1,175 JPM Enhanced Index Investment Division........................... 3 11 T. Rowe Price Mid Cap Growth Investment Division................. 1,455 183 MFS Research International Investment Division................... 2,812 2,368 PIMCO Total Return Investment Division........................... 8,452 2,120 PIMCO Innovation Investment Division............................. 2,694 553 Lord Abbett Bond Debenture Investment Division................... 4,152 2,314 Met/AIM Mid Cap Core Equity Investment Division.................. 704 115 Met/AIM Small Cap Growth Investment Division..................... 786 377 Harris Oakmark International Investment Division................. 1,577 1,035 Janus Aggressive Growth Investment Division...................... 4,304 3,158 Lord Abbett Growth & Income Investment Division.................. 17 0 -------- -------- Total............................................................ $350,250 $155,708 ======== ========
F-71 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS The changes in units outstanding for the years ended December 31, 2003, 2002 and 2001 were as follows:
State Street State Street State Street Research MetLife Research Research Aggressive Stock Investment Trust Diversified Growth Index Investment Investment Investment Investment Division Division Division Division ---------------- ------------ ------------ ---------- (In Thousands) Outstanding at December 31, 2002 15,060 12,268 11,447 22,140 Activity during 2003: Issued........................ 5,136 3,873 3,343 10,343 Redeemed...................... (4,045) (3,260) (2,957) (6,736) ------ ------ ------ ------ Outstanding at December 31, 2003 16,151 12,881 11,833 25,747 ====== ====== ====== ====== Outstanding at December 31, 2001 13,264 11,138 10,503 17,015 Activity during 2002: Issued........................ 5,072 3,678 3,343 9,909 Redeemed...................... (3,276) (2,548) (2,399) (4,784) ------ ------ ------ ------ Outstanding at December 31, 2002 15,060 12,268 11,447 22,140 ====== ====== ====== ====== Outstanding at December 31, 2000 11,054 9,234 9,254 11,689 Activity during 2001: Issued........................ 2,828 2,200 1,392 6,525 Redeemed...................... (618) (296) (143) (1,199) ------ ------ ------ ------ Outstanding at December 31, 2001 13,264 11,138 10,503 17,015 ====== ====== ====== ======
F-72 NOTES TO FINANCIAL STATEMENTS -- (Continued)
FI T. Rowe Price Harris Neuberger T. Rowe Price Lehman Brothers International Janus Small Cap Scudder Oakmark Berman Partners Large Cap Aggregate Stock Mid Cap Growth Global Equity Large Cap Value Mid Cap Value Growth Bond Index Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------- ---------- ------------- ------------- --------------- --------------- ------------- --------------- 3,296 11,521 4,261 1,978 2,346 1,567 2,853 4,147 1,224 5,469 1,463 768 1,639 892 1,408 2,097 (1,036) (3,642) (1,021) (606) (925) (513) (971) (2,180) ------ ------ ------ ----- ----- ----- ----- ------ 3,484 13,348 4,703 2,140 3,060 1,946 3,290 4,064 ====== ====== ====== ===== ===== ===== ===== ====== 3,106 8,481 3,509 2,000 1,242 1,076 2,124 3,153 1,176 5,867 1,561 687 1,697 906 1,289 1,774 (986) (2,827) (809) (709) (593) (415) (560) (780) ------ ------ ------ ----- ----- ----- ----- ------ 3,296 11,521 4,261 1,978 2,346 1,567 2,853 4,147 ====== ====== ====== ===== ===== ===== ===== ====== 2,709 5,367 2,995 1,848 220 456 632 1,730 1,578 3,701 864 209 1,076 790 2,004 2,267 (1,181) (587) (350) (57) (54) (170) (512) (844) ------ ------ ------ ----- ----- ----- ----- ------ 3,106 8,481 3,509 2,000 1,242 1,076 2,124 3,153 ====== ====== ====== ===== ===== ===== ===== ======
F-73 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
Morgan Stanley State Street EAFE Russell Met/Putnam Research Index 2000 Index Voyager Aurora Investment Investment Investment Investment Division Division Division Division -------------- ---------- ---------- ------------ (In Thousands) Outstanding at December 31, 2002 2,044 1,614 1,463 2,599 Activity during 2003: Issued........................ 2,174 1,138 1,235 1,832 Redeemed...................... (1,542) (667) (785) (1,059) ------ ----- ----- ------ Outstanding at December 31, 2003 2,676 2,085 1,913 3,372 ====== ===== ===== ====== Outstanding at December 31, 2001 1,352 920 792 1,317 Activity during 2002: Issued........................ 1,485 1,015 1,075 1,944 Redeemed...................... (793) (321) (404) (662) ------ ----- ----- ------ Outstanding at December 31, 2002 2,044 1,614 1,463 2,599 ====== ===== ===== ====== Outstanding at December 31, 2000 544 512 131 164 Activity during 2001: Issued........................ 1,865 1,181 704 1,201 Redeemed...................... (1,057) (773) (43) (48) ------ ----- ----- ------ Outstanding at December 31, 2001 1,352 920 792 1,317 ====== ===== ===== ======
F-74 NOTES TO FINANCIAL STATEMENTS -- (Continued)
MetLife Mid Franklin State Street MFS Cap Stock Templeton Research Davis Loomis Sayles Alger MFS Research Index Small Cap Growth Large Cap Value Venture Value Small Cap Equity Growth Investors Trust Managers Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ----------- ---------------- --------------- ------------- ------------- ------------- --------------- ---------- 1,762 198 23 901 18 589 104 47 1,301 266 147 650 21 200 272 54 (725) (135) (67) (229) (9) (68) (190) (20) ----- ---- --- ----- -- --- ---- --- 2,338 329 103 1,322 30 721 186 81 ===== ==== === ===== == === ==== === 867 52 -- 297 11 6 43 13 1,231 215 27 754 12 624 110 73 (336) (69) (4) (150) (5) (41) (49) (39) ----- ---- --- ----- -- --- ---- --- 1,762 198 23 901 18 589 104 47 ===== ==== === ===== == === ==== === 210 -- -- 39 2 -- -- -- 693 54 -- 267 10 6 47 83 (36) (2) -- (9) (1) -- (4) (70) ----- ---- --- ----- -- --- ---- --- 867 52 -- 297 11 6 43 13 ===== ==== === ===== == === ==== ===
F-75 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
State Street Saloman Brothers Research FI Harris Oakmark Strategic Bond Bond Income Structured Equity Focused Value Opportunities Investment Investment Investment Investment Division Division Division Division ------------ ----------------- -------------- ---------------- (In Thousands) Outstanding at December 31, 2002 5,564 12 76 177 Activity during 2003: Issued........................ 1,494 75 72 430 Redeemed...................... (1,541) (38) (33) (232) ------ --- --- ---- Outstanding at December 31, 2003 5,517 49 115 375 ====== === === ==== Outstanding at December 31, 2001 4,202 3 23 41 Activity during 2002: Issued........................ 2,094 15 72 195 Redeemed...................... (732) (6) (19) (59) ------ --- --- ---- Outstanding at December 31, 2002 5,564 12 76 177 ====== === === ==== Outstanding at December 31, 2000 3,980 -- -- -- Activity during 2001: Issued........................ 1,197 3 24 42 Redeemed...................... (975) -- (1) (1) ------ --- --- ---- Outstanding at December 31, 2001 4,202 3 23 41 ====== === === ====
F-76 NOTES TO FINANCIAL STATEMENTS -- (Continued)
State Street FI Janus Invesco VIF Invesco Franklin Templeton Saloman Brothers Research Mid Cap Aspen Invesco VIF Equity VIF Real Estate International U.S. Government Money Market Opportunities Growth High Yield Income Opportunity Stock Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ---------------- ------------ ------------- ---------- ----------- ----------- --------------- ------------------ 340 1,981 21 354 65 15 14 344 626 526 107 123 29 6 2 118 (407) (747) (32) (42) (7) (2) (6) (59) ---- ------ --- ---- --- -- --- --- 559 1,760 96 435 87 19 10 403 ==== ====== === ==== === == === === 71 2,156 -- 236 37 12 7 189 393 1,770 22 149 38 5 61 183 (124) (1,945) (1) (31) (10) (2) (54) (28) ---- ------ --- ---- --- -- --- --- 340 1,981 21 354 65 15 14 344 ==== ====== === ==== === == === === -- 1,479 -- 473 1 2 10 99 99 2,983 -- 84 45 12 1 118 (28) (2,306) -- (321) (9) (2) (4) (28) ---- ------ --- ---- --- -- --- --- 71 2,156 -- 236 37 12 7 189 ==== ====== === ==== === == === ===
F-77 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
Franklin Templeton Alliance Valuemark Growth & Alliance Alliance Small Cap Income Premier Growth Technology Investment Investment Investment Investment Division Division Division Division ------------------ ---------- -------------- ---------- (In Thousands) Outstanding at December 31, 2002 163 150 9 6 Activity during 2003: Issued........................ 57 67 6 5 Redeemed...................... (21) (20) (1) (1) --- --- --- --- Outstanding at December 31, 2003 199 197 14 10 === === === === Outstanding at December 31, 2001 16 65 14 2 Activity during 2002: Issued........................ 183 95 5 4 Redeemed...................... (36) (10) (10) -- --- --- --- --- Outstanding at December 31, 2002 163 150 9 6 === === === === Outstanding at December 31, 2000 -- 6 -- -- Activity during 2001: Issued........................ 17 60 14 26 Redeemed...................... (1) (1) -- (24) --- --- --- --- Outstanding at December 31, 2001 16 65 14 2 === === === ===
F-78 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Fidelity American JPM T. Rowe Price Fidelity Asset Manager Fidelity American American Funds Funds Global Enhanced Mid Cap Contrafund Growth Growth Funds Growth Growth-Income Small Cap Index Growth Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ---------- ------------- ---------- ------------ -------------- ------------ ---------- ------------- 35 20 28 221 287 203 1 294 90 39 20 313 387 375 1 387 (28) (5) (1) (117) (149) (200) (2) (154) --- -- -- ---- ---- ---- -- ---- 97 54 47 417 525 378 -- 527 === == == ==== ==== ==== == ==== 3 13 13 53 68 49 1 68 33 15 18 217 287 226 1 328 (1) (8) (3) (49) (68) (72) (1) (102) --- -- -- ---- ---- ---- -- ---- 35 20 28 221 287 203 1 294 === == == ==== ==== ==== == ==== -- -- -- -- -- -- -- -- 3 14 17 67 76 55 1 71 -- (1) (4) (14) (8) (6) -- (3) --- -- -- ---- ---- ---- -- ---- 3 13 13 53 68 49 1 68 === == == ==== ==== ==== == ====
F-79 NOTES TO FINANCIAL STATEMENTS -- (Continued) 5. CHANGES IN OUTSTANDING UNITS -- (Continued)
MFS Lord Abbett Research PIMCO PIMCO Bond International Total Return Innovation Debenture Investment Investment Investment Investment Division Division Division Division ------------- ------------ ---------- ----------- (In Thousands) Outstanding at December 31, 2002 95 534 416 748 Activity during 2003: Issued........................ 397 1,055 896 449 Redeemed...................... (341) (547) (380) (321) ---- ----- ---- ---- Outstanding at December 31, 2003 151 1,042 932 876 ==== ===== ==== ==== Outstanding at December 31, 2001 28 103 121 774 Activity during 2002: Issued........................ 239 623 437 178 Redeemed...................... (172) (192) (142) (204) ---- ----- ---- ---- Outstanding at December 31, 2002 95 534 416 748 ==== ===== ==== ==== Outstanding at December 31, 2000 -- -- -- 601 Activity during 2001: Issued........................ 113 123 128 246 Redeemed...................... (85) (20) (7) (73) ---- ----- ---- ---- Outstanding at December 31, 2001 28 103 121 774 ==== ===== ==== ====
F-80 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Met/Aim Met/Aim Harris Janus Lord Abbett Mid Cap Small Cap Oakmark Aggressive Growth & Core Equity Growth International Growth Income Investment Investment Investment Investment Investment Division Division Division Division Division ----------- ---------- ------------- ---------- ----------- 30 15 18 381 -- 96 99 180 1,088 3 (34) (54) (126) (900) -- --- --- ---- ----- -- 92 60 72 569 3 === === ==== ===== == -- -- -- 122 -- 33 17 22 409 -- (3) (2) (4) (150) -- --- --- ---- ----- -- 30 15 18 381 -- === === ==== ===== == -- -- -- -- -- -- -- -- 148 -- -- -- -- (26) -- --- --- ---- ----- -- -- -- -- 122 -- === === ==== ===== ==
F-81 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES A summary of unit values and units outstanding for the Contracts and the expense as a percentage of average net assets, excluding expenses for the underlying funds, for each of the periods ended December 31, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
State Street State Street State Street Research Research Research Aggressive MetLife Investment Trust Diversified Growth Stock Index Investment Investment Investment Investment Division Division Division Division ---------------- ---------------- ---------------- ---------------- 2003 Units (In Thousands).................................. 16,151 12,881 11,833 25,747 Unit Fair Value, Lowest to Highest (1)................ $10.57 to $33.12 $11.79 to $30.64 $11.71 to $16.87 $9.58 to $29.26 Net Assets (In Thousands)............................. $367,087 $289,033 $187,268 $457,114 Investment Income Ratio to Net Assets (2)............. 0.83% 3.73% 0.00% 1.65% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ 29.08% to 30.24% 19.48% to 20.56% 39.53% to 40.79% 27.06% to 28.20% 2002 Units (In Thousands).................................. 15,060 12,268 11,447 22,140 Unit Fair Value, Lowest to Highest (1)................ $8.11 to $25.66 $9.78 to $25.64 $8.32 to $12.09 $7.48 to $23.03 Net Assets (In Thousands)............................. $276,980 $238,020 $130,816 $326,228 Investment Income Ratio to Net Assets (2)............. 0.54% 2.27% 0.00% 1.61% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ -27% to -26% -15% to -14% -29% -23% to -22% 2001 Units (In Thousands).................................. 13,264 11,138 10,503 17,015 Unit Fair Value, Lowest to Highest (1)................ $10.98 to $35.04 $11.35 to $30.04 $11.67 to $17.12 $9.62 to $29.91 Net Assets (In Thousands)............................. $356,701 $265,724 $171,692 $346,931 Investment Income Ratio to Net Assets (2)............. 13.53% 9.67% 24.84% 1.17% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (1)(4)................ -18% to -17% -7% to -6% -24% -13% to -12%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of units values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-82 NOTES TO FINANCIAL STATEMENTS -- (Continued)
FI T. Rowe Price Harris Neuberger T. Rowe Price International Janus Small Cap Scudder Oakmark Large Berman Partners Large Cap Stock Mid Cap Growth Global Equity Cap Value Mid Cap Value Growth Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 3,484 13,348 4,703 2,140 3,060 1,946 3,290 $9.92 to $13.85 $5.69 to $16.17 $12.64 to $14.08 $12.92 to $14.39 $11.53 to $14.56 $13.86 to $19.29 $8.23 to $12.13 $43,984 $184,078 $61,843 $28,696 $37,504 $30,946 $33,520 0.65% 0.00% 0.00% 2.04% 0.00% 0.32% 0.11% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% 0.60% to 0.90% 26.90% to 28.04% 33.38% to 35.10% 39.62% to 40.87% 29.29% to 30.45% 24.38% to 25.49% 35.30% to 36.52% 29.64% to 30.81% 3,296 11,521 4,261 1,978 2,346 1,567 2,853 $7.78 to $10.91 $4.22 to $12.07 $9.05 to $10.04 $9.90 to $11.03 $9.23 to $11.71 $10.24 to $14.13 $6.35 to $9.27 $32,966 $119,020 $39,880 $20,476 $23,073 $18,286 $22,095 0.89% 0.00% 0.00% 1.68% 3.31% 0.31% 0.26% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% -18% to -17% -30% to -29% -27% -17% to -16% -15% to -14% -10% -24% to 23% 3,106 8,481 3,509 2,000 1,242 1,076 2,124 $9.47 to $13.35 $5.95 to $17.08 $12.46 to $13.76 $11.79 to $12.88 $10.80 to $13.76 $11.44 to $15.63 $8.35 to $12.08 $38,281 $125,185 $44,660 $21,106 $14,336 $14,115 $21,111 3.67% 0.00% 8.16% 11.32% 0.15% 1.94% 0.06% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% 0.60% to 0.90% -21% to -20% -37% to -33% -10% to 2% -16% to -15% 17% to 20% -3% to 0% -11% to -6%
F-83 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
Lehman Brothers Aggregate Bond Morgan Stanley Russell 2000 Met/Putnam Index EAFE Index Index Voyager Investment Investment Investment Investment Division Division Division Division ---------------- ---------------- ---------------- ---------------- 2003 Units (In Thousands).................................. 4,064 2,676 2,085 1,913 Unit Fair Value, Lowest to Highest (1)................ $12.77 to $13.67 $7.85 to $10.37 $10.75 to $14.59 $4.38 to $4.78 Net Assets (In Thousands)............................. $54,994 $24,290 $27,726 $8,651 Investment Income Ratio to Net Assets (2)............. 5.25% 1.48% 0.63% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)................ 2.71% to 3.63% 36.41% to 37.70% 44.77% to 46.07% 24.78% to 25.91% 2002 Units (In Thousands).................................. 4,147 2,044 1,614 1,463 Unit Fair Value, Lowest to Highest (1)................ $12.43 to $13.19 $5.76 to $7.53 $7.43 to $9.99 $3.51 to $3.79 Net Assets (In Thousands)............................. $54,046 $13,496 $14,829 $5,253 Investment Income Ratio to Net Assets (2)............. 2.81% 0.49% 0.59% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.50% to 0.90% Total Return, Lowest to Highest (1)(4)................ 9% to 10% -17% -21% to -20% -30% to -29% 2001 Units (In Thousands).................................. 3,153 1,352 920 792 Unit Fair Value, Lowest to Highest (1)................ $11.38 to $11.97 $6.97 to $9.04 $9.42 to $12.56 $4.98 to $5.04 Net Assets (In Thousands)............................. $37,322 $10,800 $10,625 $4,001 Investment Income Ratio to Net Assets (2)............. 1.29% 0.31% 0.26% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3)....................................... 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)................ 7% -22% to -21% 0% to 6% -46% to -31%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-84 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Franklin State Street MetLife Mid Templeton State Street Loomis Research Cap Stock Small Cap Research Davis Sayles Alger Aurora Index Growth Large Cap Value Venture Value Small Cap Equity Growth Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ------------- 3,372 2,338 329 103 1,322 30 721 $15.46 to $16.89 $11.04 to $12.13 $9.07 to $9.29 $10.70 to $10.86 $9.79 to $28.40 $9.27 to $205.39 $6.84 $56,540 $27,925 $3,038 $1,110 $24,429 $4,423 $4,933 0.00% 0.46% 0.00% 1.37% 0.37% 0.00% 0.06% 0.60% to 0.90% 0.60% to 0.90% 0.90% 0.90% 0.60% to 0.90% 0.60% to 0.90% 0.60% 48.80% to 50.14% 33.76% to 34.96% 43.64% to 44.93% 34.47% to 35.68% 29.70% to 30.87% 35.25% to 36.47% 35.15% 2,599 1,762 198 23 901 18 589 $10.30 to $11.25 $8.18 to $8.98 $6.31 to $6.41 $7.96 to $8.00 $7.48 to $21.70 $6.80 to $150.51 $5.06 $29,061 $15,568 $1,266 $189 $13,430 $2,408 $2,983 0.52% 0.35% 0.00% 0.92% 0.88% 0.11% 0.00% 0.50% to 0.90% 0.50% to 0.90% 0.90% 0.90% 0.50% to 0.90% 0.50% to 0.90% 0.60% -22% to -21% -16% to -15% -28% -20% -17% to -16% -22% -33% 1,317 867 52 -- 297 11 6 $13.09 to $14.29 $9.62 to $10.56 $8.83 to $8.88 $-- $8.94 to $25.95 $8.66 to $191.87 $7.57 $20,005 $9,019 $457 $-- $7,498 $1,926 $45 0.38% 0.43% 0.00% -- 4.47% 7.28% 0.00% 0.60% to 0.90% 0.60% to 0.90% 0.60% -- 0.60% to 0.90% 0.60% to 0.90% 0.60% 16% to 19% -1% to 3% -12% to -11% -- -11% to -9% -9% to -4% -16%
F-85 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
MFS State Street MFS Research Research Investors Trust Managers Bond Income Investment Investment Investment Division Division Division ---------------- ---------------- ---------------- 2003 Units (In Thousands)................................................. 186 81 5,517 Unit Fair Value, Lowest to Highest (1)............................... $7.96 to $8.33 $6.57 to $8.51 $12.89 to $27.12 Net Assets (In Thousands)............................................ $1,544 $669 $96,720 Investment Income Ratio to Net Assets (2)............................ 0.25% 0.78% 3.06% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)............................... 20.76% to 21.85% 23.00% to 24.10% 4.91% to 5.85% 2002 Units (In Thousands)................................................. 104 47 5,564 Unit Fair Value, Lowest to Highest (1)............................... $6.54 to $6.84 $5.29 to $6.86 $12.18 to $25.85 Net Assets (In Thousands)............................................ $694 $314 $93,158 Investment Income Ratio to Net Assets (2)............................ 0.72% 0.30% 5.72% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (1)(4)............................... -21% to -20% -25% to -24% 7% to 8% 2001 Units (In Thousands)................................................. 43 13 4,202 Unit Fair Value, Lowest to Highest (1)............................... $8.19 to $8.57 $6.97 to $9.04 $11.23 to $24.08 Net Assets (In Thousands)............................................ $322 $151 $79,483 Investment Income Ratio to Net Assets (2)............................ 0.00% 0.25% 5.64% to 7.28% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to 0.90% 0.60% to 0.90% .45% to 0.90% Total Return, Lowest to Highest (1)(4)............................... -14% to -3% -17% to -14% 7% to 8%
FI Structured Equity Investment Division ---------------- 2003 Units (In Thousands)................................................. 49 Unit Fair Value, Lowest to Highest (1)............................... $8.37 to $10.56 Net Assets (In Thousands)............................................ $505 Investment Income Ratio to Net Assets (2)............................ 0.52% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to .90% Total Return, Lowest to Highest (1)(4)............................... 25.79% to 26.92% 2002 Units (In Thousands)................................................. 12 Unit Fair Value, Lowest to Highest (1)............................... $6.59 to $8.32 Net Assets (In Thousands)............................................ $93 Investment Income Ratio to Net Assets (2)............................ 0.89% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% to .90% Total Return, Lowest to Highest (1)(4)............................... -19% to -17% 2001 Units (In Thousands)................................................. 3 Unit Fair Value, Lowest to Highest (1)............................... $8.19 Net Assets (In Thousands)............................................ $25 Investment Income Ratio to Net Assets (2)............................ 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% Total Return, Lowest to Highest (1)(4)............................... -11%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-86 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Saloman Brothers Saloman State Street FI Janus Invesco Invesco Harris Oakmark Strategic Bond Brothers Research Mid Cap Aspen VIF High VIF Equity Focused Value Opporunities U.S. Government Money Market Opportunities Growth Yield Income Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - ------------------ ---------------- ---------------- ---------------- ---------------- ---------- ---------- ---------- 115 375 559 1,760 96 435 87 19 $219.73 to $225.05 $13.52 to $13.85 $12.82 to $13.13 $15.21 to $15.92 $11.50 to $11.67 $8.03 $9.21 $9.73 $25,866 $5,163 $7,305 $27,346 $1,112 $3,500 $804 $184 0.12% 1.70% 1.57% 0.78% 2.26% 0.10% 7.20% 1.26% 0.90% 0.90% 0.90% 0.60% to 0.90% 0.90% 0.60% 0.60% 0.60% 31.47% to 32.66% 11.62% to 12.62% 0.77% to 1.68% -0.09% to 0.81% 41.26% to 42.53% 31.73% 25.04% 22.60% 76 177 340 1,981 21 354 65 15 $167.13 to $169.65 $12.12 to $12.30 $12.72 to $12.91 $13.09 to $15.93 $8.14 to $8.19 $6.10 $7.37 $7.94 $12,879 $2,174 $4,365 $30,811 $168 $2,163 $476 $125 0.18% 6.33% 3.47% 1.57% 0.00% 0.03% 13.27% 1.74% 0.90% 0.90% 0.90% 0.45% to 0.90% 0.90% 0.60% 0.60% 0.60% -10% to -9% 9% to 10% 7% to 8% 0% to 1% -19% to -18% -27% -1% -19% 23 41 71 2,156 -- 236 37 12 $184.98 to $186.09 $11.15 to $11.22 $11.89 to $11.96 $14.88 to $15.85 $-- $8.30 $7.46 $9.81 $4,215 $465 $849 $32,726 $-- $1,959 $274 $122 0.00% 0.00% 0.00% 4.18% -- 6.04% 20.89% 2.61% 0.90% 0.90% 0.90% 0.60% to 0.90% -- 0.60% 0.60% 0.60% 12% to 13% 3% to 4% 4% 3% to 4% -- -19% -15% -7%
F-87 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
Franklin Franklin Invesco VIF Templeton Templeton Alliance Real Estate International Valuemark Growth & Opportunity Stock Small Cap Income Investment Investment Investment Investment Division Division Division Division ----------- ------------- ---------- ---------- 2003 Units (In Thousands)................................................. 10 403 199 197 Unit Fair Value, Lowest to Highest (1)............................... $17.79 $10.03 $6.76 $10.47 Net Assets (In Thousands)............................................ $179 $4,054 $1,346 $2,063 Investment Income Ratio to Net Assets (2)............................ 1.49% 1.52% 0.00% 0.70% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... 38.82% 32.55% 37.24% 32.18% 2002 Units (In Thousands)................................................. 14 344 163 150 Unit Fair Value, Lowest to Highest (1)............................... $12.82 $7.57 $4.93 $7.92 Net Assets (In Thousands)............................................ $179 $2,612 $801 $1,191 Investment Income Ratio to Net Assets (2)............................ 1.40% 2.03% 0.51% 3.31% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... -6% -18% -29% -22% 2001 Units (In Thousands)................................................. 7 189 16 65 Unit Fair Value, Lowest to Highest (1)............................... $12.05 $9.27 $6.91 $10.19 Net Assets (In Thousands)............................................ $89 $1,767 $103 $656 Investment Income Ratio to Net Assets (2)............................ 1.16% 14.19% 0.05% 0.91% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.60% 0.60% 0.60% Total Return, Lowest to Highest (1)(4)............................... 1% -16% -9% 2%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-88 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Fidelity American Asset American American Funds Alliance Alliance Fidelity Manager Fidelity Funds Funds Global Premier Growth Technology Contrafund Growth Growth Growth Growth-Income Small Cap Investment Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division Division - -------------- ---------- ---------- ---------- ---------- ---------------- ---------------- ---------------- 14 10 97 54 47 417 525 378 $6.10 $4.54 $9.18 $8.00 $6.27 $60.53 to $62.00 $38.04 to $38.96 $15.06 to $15.42 $84 $46 $894 $433 $296 $25,760 $20,369 $5,801 0.00% 0.00% 0.15% 2.96% 0.08% 0.13% 1.18% 0.49% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% 23.37% 43.79% 28.35% 23.15% 32.78% 35.59% to 36.81% 31.25% to 32.43% 52.16% to 53.53% 9 6 35 20 28 221 287 203 $4.94 $3.16 $7.16 $6.50 $4.72 $44.64 to $45.32 $28.98 to $29.42 $9.90 to $10.05 $42 $18 $249 $131 $134 $9,992 $8,408 $2,033 0.00% 5.08% 0.14% 3.23% 0.12% 0.05% 1.74% 0.81% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% -31% -42% -10% -18% -30% -25% to -24% -19% to -18% -20% to -19% 14 2 3 13 13 53 68 49 $7.15 $5.43 $7.96 $7.89 $6.77 $59.63 to $59.99 $35.81 to $36.03 $12.34 to $12.41 $98 $13 $24 $95 $87 $3,176 $2,453 $619 0.00% 6.23% 0.00% 0.00% 0.00% 4.25% 0.82% 1.15% 0.60% 0.60% 0.60% 0.60% 0.60% 0.90% 0.90% 0.90% -14% -35% -12% -10% -20% -15% to -14% -3% -9% to -8%
F-89 NOTES TO FINANCIAL STATEMENTS -- (Continued) 6. UNIT VALUES -- (Continued)
JPM MFS Enhanced T. Rowe Price Research Index Mid Cap Growth International Investment Investment Investment Division Division Division ---------- ---------------- ---------------- 2003 Units (In Thousands)................................................. -- 527 151 Unit Fair Value, Lowest to Highest (1)............................... $-- $6.28 to $6.43 $9.70 to $9.94 Net Assets (In Thousands)............................................ $-- $3,375 $1,497 Investment Income Ratio to Net Assets (2)............................ -- 0.00% 0.97% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) -- 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -- 35.90% to 37.12% 31.01% to 32.19% 2002 Units (In Thousands)................................................. 1 294 95 Unit Fair Value, Lowest to Highest (1)............................... $6.09 $4.62 to $4.69 $7.41 to $7.52 Net Assets (In Thousands)............................................ $8 $1,373 $714 Investment Income Ratio to Net Assets (2)............................ 1.78% 0.82% 0.25% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -25% -44% -12% 2001 Units (In Thousands)................................................. 1 68 28 Unit Fair Value, Lowest to Highest (1)............................... $8.12 $8.32 to $8.37 $8.44 to $8.50 Net Assets (In Thousands)............................................ $5 $564 $238 Investment Income Ratio to Net Assets (2)............................ 0.00% 0.00% 0.07% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.60% 0.90% 0.90% Total Return, Lowest to Highest (1)(4)............................... -9% -16% to -15% -13% to -12%
PIMCO Total Return Investment Division ---------------- 2003 Units (In Thousands)................................................. 1,042 Unit Fair Value, Lowest to Highest (1)............................... $11.96 to $12.25 Net Assets (In Thousands)............................................ $12,697 Investment Income Ratio to Net Assets (2)............................ 2.70% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 3.59% to 4.52% 2002 Units (In Thousands)................................................. 534 Unit Fair Value, Lowest to Highest (1)............................... $11.55 to $11.72 Net Assets (In Thousands)............................................ $6,214 Investment Income Ratio to Net Assets (2)............................ 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 9% to 10% 2001 Units (In Thousands)................................................. 103 Unit Fair Value, Lowest to Highest (1)............................... $10.64 to $10.70 Net Assets (In Thousands)............................................ $1,103 Investment Income Ratio to Net Assets (2)............................ 2.37% Expenses as a percent of Average Net Assets, Lowest to Highest (1)(3) 0.90% Total Return, Lowest to Highest (1)(4)............................... 6%
- -------- (1) Metropolitan Life sells a number of variable life products which have unique combinations of features and fees that are charged against the contract owners' account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the investment division from the underlying portfolio, net of management fees assessed by the fund manager, divided by the average net assets. These ratios excluded those expenses, such as mortality and expense charges, that are assessed against contract owners' accounts either through reductions in unit values or the redemption of units. The recognition of investment income by the investment division is affected by the timing of the declaration of dividends by the underlying portfolio in which the investment divisions invest. (3) These amounts represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk charges for each period indicated. The ratios include only those expenses that result in a direct reduction to unit value. Charges made directly to contract owner accounts through the redemption of units, and expenses of the underlying portfolio, are excluded. (4) These amounts represent the total return for the period indicated including changes in the value of the underlying portfolio, and expenses assessed through the reduction of unit values. The total return does not include any expenses assessed through the redemption of units. Investment options with a date notation indicate the effective date of that investment option in the Separate Account. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. F-90 NOTES TO FINANCIAL STATEMENTS -- (Continued)
Lord Abbett Met/Aim Met/Aim Janus Lord Abbett PIMCO Bond Mid Cap Small Cap Harris Oakmark Aggressive Growth & Innovation Debenture Core Equity Growth International Growth Income Investment Investment Investment Investment Investment Investment Investment Division Division Division Division Division Division Division - ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ----------- 932 876 92 60 72 569 3 $4.72 to $4.83 $12.87 to $14.95 $10.69 to $10.85 $10.46 to $10.62 $11.23 to $11.40 $6.89 to $7.06 $8.10 $4,481 $12,042 $989 $643 $814 $4,003 $20,529 0.00% 1.85% 1.35% 0.00% 1.84% 0.00% 0.00% 0.90% 0.45% to 0.90% 0.90% 0.90% 0.90% 0.90% 0.60% 56.44% to 57.84% 17.17% to 19.52% 25.29% to 26.42% 37.84% to 39.08% 34.16% to 35.37% 28.77% to 29.93% 29.15% 416 748 30 15 18 381 -- $3.01 to $3.06 $10.87 to $12.51 $8.53 to $8.58 $7.59 to $7.63 $8.37 to $8.42 $5.35 to $5.43 $-- $1,269 $8,597 $253 $116 $150 $2,045 $-- 0.00% 11.43% 0.00% 0.00% 0.00% 0.00% -- 0.90% 0.45% to 0.90% 0.90% 0.90% 0.90% 0.90% -- -51% 0% to 1% -15% to -14% -24% -16% -31% -- 121 774 -- -- -- 122 -- $6.15 to $6.19 $10.83 to $12.35 $-- $-- $-- $7.73 to $7.82 $-- $749 $8,845 $-- $-- $-- $953 $-- 0.00% 11.73% -- -- -- 0.00% -- 0.90% 0.45% to 0.90% -- -- -- 0.90% -- -25% -2% to -1% -- -- -- -23% to -22% --
F-91 NOTES TO FINANCIAL STATEMENTS -- (Concluded) 7. CHANGE OF PORTFOLIO NAME AND PORTFOLIO MERGERS Effective January 1, 2003, MFS Mid Cap Growth Portfolio changed sub-advisers from Massachusetts Financial Services to T. Rowe Price Associates Inc. and changed its name to T. Rowe Price Mid Cap Growth Portfolio; and State Street Research Concentrated International Portfolio changed sub-advisers from State Street Research & Management Company to Harris Associates L.P. and changed its name to Harris Oakmark International Portfolio. Effective April 28, 2003, Janus Growth Portfolio of the Metropolitan Fund merged into the Janus Aggressive Growth Portfolio of the Met Investors Fund. Effective May 1, 2003, Putnam Large Cap Growth Portfolio changed its name to Met/Putnam Voyager Portfolio. Effective May, 1, 2003, all series of the New England Zenith Fund became newly organized portfolios of the Metropolitan Fund. The reorganization had no effect on the investment objectives, policies or advisory fees of any series, nor was there any change in investment adviser or sub-adviser. Effective December 16, 2003, Putnam International Stock Portfolio of the Metropolitan Fund changed its name to FI International Stock Portfolio. Effective April 29, 2002, Loomis Sayles High Yield Bond Portfolio of the Metropolitan Fund was merged into the Lord Abbett Bond Debenture Portfolio of the Met Investors Fund. Effective April 29, 2002, State Street Research Income Portfolio and State Street Research Money Market Portfolio of the Metropolitan Fund were merged respectively into the State Street Research Bond Income Portfolio and the State Street Research Money Market Portfolio of the Zenith Fund. Effective May 1, 2002, State Street Research Aurora Small Cap Value Portfolio and the Harris Oakmark Mid Cap Value Portfolio changed their names to State Street Research Aurora Portfolio and Harris Oakmark Focused Value Portfolio, respectively. Effective July 1, 2001, State Street Research became the sub-investment manager of the State Street Research Bond Income Portfolio (formerly Back Bay Advisers Bond Income Portfolio) of the New England Zenith Series Fund. Effective May 1, 2001, State Street Research Growth Portfolio changed its name to State Street Research Investment Trust Portfolio. F-92 GROUP VARIABLE UNIVERSAL LIFE POLICIES Metropolitan Life Separate Account UL Issued by Metropolitan Life Insurance Company STATEMENT OF ADDITIONAL INFORMATION May 1, 2004 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the prospectus dated May 1, 2004 for Group Variable Universal Life and should be read in conjunction therewith. A copy of that prospectus may be obtained by writing to MetLife GVUL Administration, 190 Carondelet Plaza, St. Louis, Missouri 63105. B-1 TABLE OF CONTENTS The Company and the Separate Account............................. B-3 Additional Information about the Operations of the Certificates.. B-3 Limits to MetLife's Right to Challenge the Certificate......... B-3 Misstatement of Age............................................ B-3 Payment and Deferment............................................ B-3 Additional Information About Voting.............................. B-4 Restrictions on Financial Transactions........................... B-4 Additional Information About Commissions......................... B-4 Legal and Actuarial Matters...................................... B-4 Experts.......................................................... B-4 Financial Statements............................................. B-5 B-2 THE COMPANY AND THE SEPARATE ACCOUNT Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at One Madison Avenue, New York, New York 10010. MetLife was formed under the laws of New York State in 1868. MetLife Inc., through its subsidiaries and affiliates, is a leading provider of insurance and other financial services to individual and group customers. The MetLife companies serve approximately 12 million individuals in the United States and provide benefits to 37 million employees and family members through their plan sponsers. Outside the U.S., the MetLife companies have insurance operations in 8 countries serving approximately 8 million customers. We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Policies described in the Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"). For more information about MetLife, please visit our website at www.metlife.com ADDITIONAL INFORMATION ABOUT THE OPERATIONS OF THE CERTIFICATES Limits To Metlife's Right To Challenge The Certificate We will not contest: .. The Certificate after two Certificate years from issue or reinstatement (excluding riders added later). .. An increase in a death benefit after it has been in effect for two years. Misstatement Of Age We will adjust benefits to reflect the correct age of the covered person, if this information is not correct in the Certificate enrollment form. Payment and Deferment [SIDEBAR: Under certain situations, we may defer payments.] We can delay transfers, withdrawals, surrender and payment of Certificate loans from the Fixed Account for up to 6 months. Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: .. The New York Stock Exchange has an unscheduled closing. .. There is an emergency so that we could not reasonably determine the investment experience of the Certificate. .. The Securities and Exchange Commission by order permits us to do so for the protection of Certificate owners (provided that the delay is permitted under New York State insurance law and regulations). .. With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. .. We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. B-3 We currently pay interest on the amount of insurance proceeds at 3% per year (or higher if state law requires) from the date of death until the date we pay the benefit. ADDITIONAL INFORMATION ON VOTING If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Certificate owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: .. The Certificate's cash value in the corresponding investment division; by .. The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Certificate owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. RESTRICTIONS ON FINANCIAL TRANSACTIONS If mandated under money laundering or anti-terrorist laws, or other applicable law, we may be required to reject a premium payment or refuse to honor any request for transfers, withdrawals, surrenders, loans, or death benefits, until we receive instructions from the appropriate regulator. ADDITIONAL INFORMATION ABOUT COMMISSIONS We paid commissions of $157,675, $156,081 and $163,317 in 2001, 2002 and 2003 respectively. The amount of revenues we received from sales charges was less than the amount of commissions we paid in each of these three years. LEGAL AND ACTUARIAL MATTERS Christopher P. Nicholas, Associate General Counsel at MetLife, has passed upon the legality of the Group Policies and Certificates. The firm of Foley & Lardner LLP, Washington, D.C., has advised us on certain matters relating to the federal securities laws. Michael F. Rogalski, FSA, MAAA, Vice-President and Actuary of MetLife, has examined actuarial matters included in the registration statement, as stated in his opinion filed as an exhibit to the registration statement. MetLife, like other life insurance companies, is involved in lawsuits, including class action lawsuits. In some class action and other lawsuits involving insurers, substantial damages have been sought and/or material settlement payments have been made. Although the outcome of any litigation cannot be predicted with certainty, MetLife believes that, as of the date of this prospectus, there are no pending or threatened lawsuits that will have a materially adverse impact on it or the Separate Account. EXPERTS The financial statements included in this Statement of Additional Information have been audited by Deloitte and Touche LLP, independent auditors, as stated in their report appearing herein (which report expresses B-4 an unqualified opinion and includes an explanatory paragraph referring to the change in the method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Deloitte and Touche LLP's principal business address is 201 E. Kennedy Boulevard, Tampa, Florida 33602. FINANCIAL STATEMENTS The financial statements of MetLife are attached to this Statement of Additional Information. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Certificate. B-5 Independent Auditors' Report To the Board of Directors and Stockholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2003 and 2002, and the related consolidated statements of income, stockholder's equity, and cash flows for each of the three years in the period ended December 31, 2003. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries as of December 31, 2003 and 2002, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1, the Company changed its method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle. DELOITTE & TOUCHE LLP New York, New York April 9, 2004 F-1 Metropolitan Life Insurance Company and Subsidiaries Consolidated Balance Sheets December 31, 2003 and 2002 (Dollars in millions, except share and per share data)
2003 2002 -------- -------- Assets Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $134,844 and $117,528, respectively)................................................................ $143,148 $124,260 Equity securities, at fair value (cost: $893 and $1,495, respectively)...................... 1,246 1,551 Mortgage loans on real estate............................................................... 26,637 25,353 Policy loans................................................................................ 8,180 8,047 Real estate and real estate joint ventures held-for-investment.............................. 3,163 3,050 Real estate held-for-sale................................................................... 89 799 Other limited partnership interests......................................................... 2,461 2,380 Short-term investments...................................................................... 1,320 1,199 Other invested assets....................................................................... 4,803 3,419 -------- -------- Total investments........................................................................ 191,047 170,058 Cash and cash equivalents....................................................................... 2,393 1,106 Accrued investment income....................................................................... 1,922 1,889 Premiums and other receivables.................................................................. 6,193 6,721 Deferred policy acquisition costs............................................................... 10,232 9,666 Other assets.................................................................................... 5,817 6,084 Separate account assets......................................................................... 63,661 53,912 -------- -------- Total assets............................................................................. $281,265 $249,436 ======== ======== Liabilities and Stockholder's Equity Liabilities: Future policy benefits...................................................................... $ 86,802 $ 86,039 Policyholder account balances............................................................... 61,725 54,464 Other policyholder funds.................................................................... 6,948 6,206 Policyholder dividends payable.............................................................. 1,046 1,025 Policyholder dividend obligation............................................................ 2,130 1,882 Short-term debt............................................................................. 3,536 912 Long-term debt.............................................................................. 2,055 2,624 Shares subject to mandatory redemption...................................................... 277 -- Current income taxes payable................................................................ 792 873 Deferred income taxes payable............................................................... 2,698 1,947 Payables under securities loaned transactions............................................... 24,065 16,321 Other liabilities........................................................................... 8,057 6,889 Separate account liabilities................................................................ 63,661 53,912 -------- -------- Total liabilities........................................................................ 263,792 233,094 -------- -------- Company-obligated mandatorily redeemable securities of subsidiary trusts........................ -- 277 -------- -------- Stockholder's Equity: Preferred stock, par value $1,000 per share; 110,000 shares authorized; 93,402 shares issued and outstanding at December 31, 2003............................................................... 93 -- Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2003 and 2002........................................... 5 5 Additional paid-in capital...................................................................... 13,730 13,474 Retained earnings............................................................................... 1,261 708 Accumulated other comprehensive income.......................................................... 2,384 1,878 -------- -------- Total stockholder's equity............................................................... 17,473 16,065 -------- -------- Total liabilities and stockholder's equity............................................... $281,265 $249,436 ======== ========
See accompanying notes to consolidated financial statements. F-2 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Income For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 ------- ------- ------- Revenues Premiums...................................................................... $18,151 $18,461 $17,023 Universal life and investment-type product policy fees........................ 1,921 1,927 1,874 Net investment income......................................................... 10,357 10,631 11,054 Other revenues................................................................ 1,062 1,354 1,532 Net investment gains (losses) (net of amounts allocable from other accounts of ($259), ($139) and ($33), respectively)..................................... (287) (697) 951 ------- ------- ------- Total revenues............................................................. 31,204 31,676 32,434 ------- ------- ------- Expenses Policyholder benefits and claims (excludes amounts directly related to net investment gains (losses) of ($233), ($150) and ($54), respectively)........ 18,677 18,860 18,265 Interest credited to policyholder account balances............................ 2,379 2,711 3,035 Policyholder dividends........................................................ 1,897 1,911 2,060 Other expenses (excludes amounts directly related to net investment gains (losses) of ($26), $11 and $21, respectively)............................... 5,836 6,543 6,920 ------- ------- ------- Total expenses............................................................. 28,789 30,025 30,280 ------- ------- ------- Income from continuing operations before provision for income taxes........... 2,415 1,651 2,154 Provision for income taxes.................................................... 688 510 774 ------- ------- ------- Income from continuing operations............................................. 1,727 1,141 1,380 Income from discontinued operations, net of income taxes...................... 300 471 107 ------- ------- ------- Income before cumulative effect of change in accounting....................... 2,027 1,612 1,487 Cumulative effect of change in accounting, net of income taxes................ (26) -- -- ------- ------- ------- Net income.................................................................... $ 2,001 $ 1,612 $ 1,487 ======= ======= =======
See accompanying notes to consolidated financial statements. F-3 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Stockholder's Equity For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
Additional Preferred Common Paid-in Retained Stock Stock Capital Earnings --------- ------ ---------- -------- Balance at December 31, 2000........................... $-- $ 5 $14,549 $ 407 Sale of subsidiary to the Holding Company.............. 96 Issuance of warrants--by subsidiary.................... 40 Dividends on common stock.............................. (1,860) (1,894) Comprehensive income: Net income.......................................... 1,487 Other comprehensive income: Cumulative effect of change in accounting for derivatives, net of income taxes and reclassification adjustment..................... Unrealized gains on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Minimum pension liability adjustment............. Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2001........................... -- 5 12,825 -- Sale of subsidiary to the Holding Company.............. 149 Capital contribution from the Holding Company.......... 500 Dividends on common stock.............................. (904) Comprehensive income: Net income.......................................... 1,612 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2002........................... -- 5 13,474 708 Issuance of preferred stock--by subsidiary............. 93 Issuance of shares--by subsidiary...................... 24 Issuance of stock options.............................. 2 Sale of subsidiaries to the Holding Company or affiliate............................................. 261 Capital contribution from the Holding Company.......... 2 Return of capital to the Holding Company............... (33) Dividends on common stock.............................. (1,448) Comprehensive income: Net income.......................................... 2,001 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... Foreign currency translation adjustment.......... Minimum pension liability adjustment............. Other comprehensive income....................... Comprehensive income................................ --- --- ------- ------- Balance at December 31, 2003........................... $93 $ 5 $13,730 $ 1,261 === === ======= =======
Accumulated Other Comprehensive Income (Loss) -------------------------------------------- Net Foreign Minimum Unrealized Currency Pension Investment Translation Liability (Losses) Gains Adjustment Adjustment Total -------------- ----------- ---------- ------- Balance at December 31, 2000........................... $1,183 $(100) $ (28) $16,016 Sale of subsidiary to the Holding Company.............. 96 Issuance of warrants--by subsidiary.................... 40 Dividends on common stock.............................. (3,754) Comprehensive income: Net income.......................................... 1,487 Other comprehensive income: Cumulative effect of change in accounting for derivatives, net of income taxes and reclassification adjustment..................... 22 22 Unrealized gains on derivative instruments, net of income taxes............................. 24 24 Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 570 570 Foreign currency translation adjustment.......... (39) (39) Minimum pension liability adjustment............. (18) (18) ------- Other comprehensive income....................... 559 ------- Comprehensive income................................ 2,046 ------ ----- ----- ------- Balance at December 31, 2001........................... 1,799 (139) (46) 14,444 Sale of subsidiary to the Holding Company.............. 149 Capital contribution from the Holding Company.......... 500 Dividends on common stock.............................. (904) Comprehensive income: Net income.......................................... 1,612 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. (58) (58) Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 250 250 Foreign currency translation adjustment.......... 72 72 ------- Other comprehensive income....................... 264 ------- Comprehensive income................................ 1,876 ------ ----- ----- ------- Balance at December 31, 2002........................... 1,991 (67) (46) 16,065 Issuance of preferred stock--by subsidiary............. 93 Issuance of shares--by subsidiary...................... 24 Issuance of stock options.............................. 2 Sale of subsidiaries to the Holding Company or affiliate............................................. 261 Capital contribution from the Holding Company.......... 2 Return of capital to the Holding Company............... (33) Dividends on common stock.............................. (1,448) Comprehensive income: Net income.......................................... 2,001 Other comprehensive income: Unrealized losses on derivative instruments, net of income taxes............................. (228) (228) Unrealized investment gains, net of related offsets, reclassification adjustments and income taxes.................................... 642 642 Foreign currency translation adjustment.......... 174 174 Minimum pension liability adjustment............. (82) (82) ------- Other comprehensive income....................... 506 ------- Comprehensive income................................ 2,507 ------ ----- ----- ------- Balance at December 31, 2003........................... $2,405 $ 107 $(128) $17,473 ====== ===== ===== =======
See accompanying notes to consolidated financial statements. F-4 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 -------- -------- -------- Cash flows from operating activities Net income............................................................. $ 2,001 $ 1,612 $ 1,487 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.............................. 386 432 521 Amortization of premiums and accretion of discounts associated with investments, net.................................................. (162) (456) (560) (Gains) losses from sales of investments and businesses, net........ 125 256 (918) Interest credited to other policyholder account balances............ 2,379 2,711 3,035 Universal life and investment-type product policy fees.............. (1,921) (1,927) (1,874) Change in premiums and other receivables............................ (81) (1,878) (612) Change in deferred policy acquisition costs, net.................... (902) (766) (553) Change in insurance-related liabilities............................. 4,210 4,550 3,463 Change in income taxes payable...................................... 250 684 871 Change in other liabilities......................................... 725 106 (226) Other, net.......................................................... (485) (937) (946) -------- -------- -------- Net cash provided by operating activities.............................. 6,525 4,387 3,688 -------- -------- -------- Cash flows from investing activities Sales, maturities and repayments of: Fixed maturities.................................................... 69,292 61,473 51,479 Equity securities................................................... 576 2,676 2,116 Mortgage loans on real estate....................................... 3,221 2,555 1,834 Real estate and real estate joint ventures.......................... 888 714 1,131 Other limited partnership interests................................. 307 209 396 Purchases of: Fixed maturities.................................................... (90,122) (79,509) (51,122) Equity securities................................................... (104) (1,235) (3,323) Mortgage loans on real estate....................................... (4,354) (3,111) (3,310) Real estate and real estate joint ventures.......................... (310) (28) (665) Other limited partnership interests................................. (588) (447) (424) Net change in short-term investments................................... (183) (308) (303) Proceeds from sales of businesses...................................... 1,995 749 831 Net change in payable under securities loaned transactions............. 7,744 3,659 361 Other, net............................................................. (1,141) (815) (510) -------- -------- -------- Net cash used in investing activities.................................. $(12,779) $(13,418) $ (1,509) ======== ======== ========
See accompanying notes to consolidated financial statements. F-5 Metropolitan Life Insurance Company and Subsidiaries Consolidated Statements of Cash Flows--(Continued) For the years ended December 31, 2003, 2002 and 2001 (Dollars in millions)
2003 2002 2001 -------- -------- -------- Cash flows from financing activities Policyholder account balances: Deposits........................................................... $ 29,054 $ 30,457 $ 31,407 Withdrawals........................................................ (22,268) (24,880) (27,846) Net change in short-term debt......................................... 2,624 567 (740) Long-term debt issued................................................. 145 537 353 Long-term debt repaid................................................. (714) (221) (1,379) Capital contribution from the Holding Company......................... 148 649 96 Net proceeds from issuance of company-obligated mandatorily redeemable securities of subsidiary trust...................................... -- -- 197 Dividends on common stock............................................. (1,448) (904) (3,754) -------- -------- -------- Net cash provided by (used in) financing activities................... 7,541 6,205 (1,666) -------- -------- -------- Change in cash and cash equivalents................................... 1,287 (2,826) 513 Cash and cash equivalents, beginning of year.......................... 1,106 3,932 3,419 -------- -------- -------- Cash and cash equivalents, end of year................................ $ 2,393 $ 1,106 $ 3,932 ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid (refunded) during the year: Interest....................................................... $ 344 $ 267 $ 346 ======== ======== ======== Income taxes................................................... $ 789 $ 96 $ (335) ======== ======== ======== Non-cash transactions during the year: Business dispositions--assets.................................. $ 5,506 $ 17,276 $ 6,162 ======== ======== ======== Business dispositions--liabilities............................. $ 3,511 $ 16,547 $ 5,263 ======== ======== ======== Mortgage note on sale of real estate........................... $ -- $ -- $ 1,530 ======== ======== ======== Purchase money mortgage on real estate sale.................... $ 196 $ 954 $ -- ======== ======== ======== Real estate acquired in satisfaction of debt................... $ 14 $ 30 $ 30 ======== ======== ========
See accompanying notes to consolidated financial statements. F-6 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Accounting Policies Business Metropolitan Life Insurance Company ("Metropolitan Life") and its subsidiaries (the "Company") is a leading provider of insurance and other financial services to a broad spectrum of individual and institutional customers. The Company offers life insurance, annuities, and mutual funds to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. Metropolitan Life is a wholly-owned subsidiary of MetLife, Inc. ("MetLife" or the "Holding Company"). The Company offered automobile and homeowners insurance through Metropolitan Property and Casualty Insurance Company, which was sold to the Holding Company in 2003. Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The New York 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 conformity with GAAP in making such determination. The accompanying consolidated financial statements include the accounts of (i) Metropolitan Life and its subsidiaries; (ii) partnerships and joint ventures in which the Company has a majority voting interest; and (iii) variable interest entities ("VIEs") created or acquired on or after February 1, 2003 of which the Company is deemed to be the primary beneficiary. Closed block assets, liabilities, revenues and expenses are combined on a line by line basis with the assets, liabilities, revenues and expenses outside the closed block based on the nature of the particular item. See Note 6. Intercompany accounts and transactions have been eliminated. Metropolitan Insurance and Annuity Company ("MIAC" ), which was sold to MetLife in 2001; Cova Corporation, MetLife Investors Group, Inc., MetLife International Holdings, Inc., Walnut Street Securities, Inc., Seguros Genesis S.A., MetLife Pensiones S.A. and Metropolitan Life Seguros de Vida S.A., which were sold to MetLife in 2002; and Metropolitan Property and Casualty Insurance Company and its subsidiaries, Metropolitan Tower Life Insurance Company, MetLife General Insurance Agency, Inc. and its subsidiaries, MetLife Securities, Inc. and N.L. Holding Corporation and its subsidiaries, which were sold to MetLife in 2003, are included in the accompanying financial statements until the date of sale. See Note 17. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests in which it has more than a minor equity interest or more than minor influence over the partnership's operations, but does not have a controlling interest. The Company uses the cost method of accounting for interests in which it has a minor equity investment and virtually no influence over the partnership's operations. Minority interest related to consolidated entities included in other liabilities was $1,233 million and $481 million at December 31, 2003 and 2002, respectively. This increase was the direct result of the change in Metropolitan Life's ownership of Reinsurance Group of America Incorporated ("RGA") to approximately 52% in 2003 as compared to 58% in 2002. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2003 presentation. F-7 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Summary of Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in the consolidated financial statements. The critical accounting policies, estimates and related judgments underlying the Company's consolidated financial statements are summarized below. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to the Company's businesses and operations. Investments The Company's principal investments are in fixed maturities, mortgage loans and real estate, all of which are exposed to three primary sources of investment risk: credit, interest rate and market valuation. The financial statement risks are those associated with the recognition of impairments and income, as well as the determination of fair values. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in fair value. Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management's evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used by the Company in the impairment evaluation process include, but are not limited to: (i) the length of time and the extent to which the market value has been below cost; (ii) the potential for impairments of securities when the issuer is experiencing significant financial difficulties; (iii) the potential for impairments in an entire industry sector or sub-sector; (iv) the potential for impairments in certain economically depressed geographic locations; (v) the potential for impairments of securities where the issuer, series of issuers or industry has suffered a catastrophic type of loss or has exhausted natural resources; (vi) unfavorable changes in forecasted cash flows on asset-backed securities; and (vii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. In addition, the earnings on certain investments are dependent upon market conditions, which could result in prepayments and changes in amounts to be earned due to changing interest rates or equity markets. The determination of fair values in the absence of quoted market values is based on: (i) valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The use of different methodologies and assumptions may have a material effect on the estimated fair value amounts. In addition, the Company enters into certain structured investment transactions, real estate joint ventures and limited partnerships for which the Company may be deemed to be the primary beneficiary and, therefore, may be required to consolidate such investments. The accounting rules for the determination of the primary beneficiary are complex and require evaluation of the contractual rights and obligations associated with each party involved in the entity, an estimate of the entity's expected losses and expected residual returns and the allocation of such estimates to each party. Derivatives The Company enters into freestanding derivative transactions primarily to manage the risk associated with variability in cash flows or changes in fair values related to the Company's financial assets and liabilities or to changing fair values. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. The Company also purchases investment securities, issues certain insurance policies and engages in certain reinsurance contracts that embed derivatives. The associated financial statement risk is the volatility in net income which can result from (i) changes in fair value of derivatives not qualifying as accounting hedges; (ii) ineffectiveness of designated hedges; and (iii) counterparty default. In addition, there is a risk that embedded derivatives requiring bifurcation are not identified and reported F-8 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) at fair value in the consolidated financial statements. Accounting for derivatives is complex, as evidenced by significant authoritative interpretations of the primary accounting standards which continue to evolve, as well as the significant judgments and estimates involved in determining fair value in the absence of quoted market values. These estimates are based on valuation methodologies and assumptions deemed appropriate in the circumstances. Such assumptions include estimated volatility and interest rates used in the determination of fair value where quoted market values are not available. The use of different assumptions may have a material effect on the estimated fair value amounts. Deferred Policy Acquisition Costs The Company incurs significant costs in connection with acquiring new and renewal insurance business. These costs, which vary with and are primarily related to the production of that business, are deferred. The recovery of such costs is dependent upon the future profitability of the related business. The amount of future profit is dependent principally on investment returns in excess of the amounts credited to policyholders, mortality, morbidity, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns are most likely to impact the rate of amortization of such costs. The aforementioned factors enter into management's estimates of gross margins and profits, which generally are used to amortize such costs. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future gross margins and profits are less than amounts deferred. In addition, the Company utilizes the reversion to the mean assumption, a standard industry practice, in its determination of the amortization of deferred policy acquisition cost ("DAC"), including value of business acquired ("VOBA"). This practice assumes that the expectation for long-term appreciation in equity markets is not changed by minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Future Policy Benefits The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, annuities and disability insurance. Generally, amounts are payable over an extended period of time and liabilities are established based on methods and underlying assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, expenses, persistency, investment returns and inflation. The Company also establishes liabilities for unpaid claims and claims expenses for property and casualty insurance. Liabilities for property and casualty insurance are dependent on estimates of amounts payable for claims reported but not settled and claims incurred but not reported. These estimates are influenced by historical experience and actuarial assumptions with respect to current developments, anticipated trends and risk management strategies. Differences between the actual experience and assumptions used in pricing these policies and in the establishment of liabilities result in variances in profit and could result in losses. Reinsurance The Company enters into reinsurance transactions as both a provider and a purchaser of reinsurance. Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to F-9 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed previously. Additionally, for each of its reinsurance contracts, the Company must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. The Company must review all contractual features, particularly those that may limit the amount of insurance risk to which the reinsurer is subject or features that delay the timely reimbursement of claims. If the Company determines that a reinsurance contract does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the contract using the deposit method of accounting. Litigation The Company is a party to a number of legal actions. Given the inherent unpredictability of litigation, it is difficult to estimate the impact of litigation on the Company's consolidated financial position. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Liabilities related to certain lawsuits, including the Company's asbestos-related liability, are especially difficult to estimate due to the limitation of available data and uncertainty regarding numerous variables used to determine amounts recorded. The data and variables that impact the assumption used to estimate the Company's asbestos-related liability include the number of future claims, the cost to resolve claims, the disease mix and severity of disease, the jurisdiction of claims filed, tort reform efforts and the impact of any possible future adverse verdicts and their amounts. It is possible that an adverse outcome in certain of the Company's litigation, including asbestos-related cases, or the use of different assumptions in the determination of amounts recorded could have a material effect upon the Company's consolidated net income or cash flows in particular quarterly or annual periods. Employee Benefit Plans The Company sponsors pension and other retirement plans in various forms covering employees who meet specified eligibility requirements. The reported expense and liability associated with these plans requires an extensive use of assumptions which include the discount rate, expected return on plan assets and rate of future compensation increases as determined by the Company. Management determines these assumptions based upon currently available market and industry data, historical performance of the plan and its assets, and consultation with an independent consulting actuarial firm to aid it in selecting appropriate assumptions and valuing its related liabilities. The actuarial assumptions used in the calculation of the Company's aggregate projected benefit obligation may vary and include an expectation of long-term market appreciation in equity markets which is not changed by minor short-term market fluctuations, but does change when large interim deviations occur. These assumptions used by the Company may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of the participants. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. Significant Accounting Policies Investments The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other- than-temporary. These adjustments are recorded as investment losses. Investment gains and losses on sales of F-10 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are established for the excess carrying value of the mortgage loan over its estimated fair value when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Such valuation allowances are based upon the present value of expected future cash flows discounted at the loan's original effective interest rate or the collateral value if the loan is collateral dependent. The Company also establishes allowances for loan loss when a loss contingency exists for pools of loans with similar characteristics based on property types and loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. Changes in valuation allowances are included in net investment gains and losses. Interest income earned on impaired loans is accrued on the principal amount of the loan based on the loan's contractual interest rate. However, interest ceases to be accrued for loans on which interest is generally more than 60 days past due and/or where the collection of interest is not considered probable. Cash receipts on impaired loans are recorded as a reduction of the recorded investment. Real estate held-for-investment, including related improvements, is stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful life of the asset (typically 20 to 40 years). Once the Company identifies a property that is expected to be sold within one year and commences a firm plan for marketing the property, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"), the Company, if applicable, classifies the property as held-for-sale and reports the related net investment income and any resulting investment gains and losses as discontinued operations. Real estate held-for-sale is stated at the lower of depreciated cost or fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. Cost of real estate held-for-investment is adjusted for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Impaired real estate is written down to estimated fair value with the impairment loss being included in net investment gains and losses. Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. Other invested assets consist principally of leveraged leases and funds withheld at interest. The leveraged leases are recorded net of non-recourse debt. The Company participates in lease transactions which are diversified by industry, asset type and geographic area. The Company regularly reviews residual values and impairs residuals to expected values as needed. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets supporting the reinsured policies and equal to the net statutory reserves are withheld and continue to be legally owned by the ceding companies. Other invested assets also includes the fair value of embedded derivatives related to funds withheld and modified coinsurance contracts. The Company recognizes interest on funds withheld in accordance with the treaty terms as investment income is earned on the assets supporting the reinsured policies. F-11 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Structured Investment Transactions The Company participates in structured investment transactions, primarily asset securitizations and structured notes. These transactions enhance the Company's total return of the investment portfolio principally by generating management fee income on asset securitizations and by providing equity-based returns on debt securities through structured notes and similar instruments. The Company sponsors financial asset securitizations of high yield debt securities, investment grade bonds and structured finance securities and also is the collateral manager and a beneficial interest holder in such transactions. As the collateral manager, the Company earns management fees on the outstanding securitized asset balance, which are recorded in income as earned. When the Company transfers assets to a bankruptcy-remote special purpose entity ("SPE") and surrenders control over the transferred assets, the transaction is accounted for as a sale. Gains or losses on securitizations are determined with reference to the carrying amount of the financial assets transferred, which is allocated to the assets sold and the beneficial interests retained based on relative fair values at the date of transfer. Beneficial interests in securitizations are carried at fair value in fixed maturities. Income on these beneficial interests is recognized using the prospective method in accordance with Emerging Issues Task Force ("EITF") Issue No. 99-20, Recognition of Interest Income and Impairment on Certain Investments ("EITF 99-20"). The SPEs used to securitize assets are not consolidated by the Company because the Company has determined that it is not the primary beneficiary of these entities based on the framework provided in Financial Accounting Standards Board ("FASB") Interpretation No. 46 (revised December 31, 2003), Consolidation of Variable Interest Entities, An Interpretation of ARB No. 51 ("FIN 46(r)"). Prior to the adoption of FIN 46(r), such SPEs were not consolidated because they did not meet the criteria for consolidation under previous accounting guidance. The Company purchases or receives beneficial interests in SPEs, which generally acquire financial assets, including corporate equities, debt securities and purchased options. The Company has not guaranteed the performance, liquidity or obligations of the SPEs and the Company's exposure to loss is limited to its carrying value of the beneficial interests in the SPEs. The Company uses the beneficial interests as part of its risk management strategy, including asset-liability management. These SPEs are not consolidated by the Company because the Company has determined that it is not the primary beneficiary of these entities based on the framework provided in FIN 46(r). Prior to the adoption of FIN 46(r), such SPEs were not consolidated because they did not meet the criteria for consolidation under previous accounting guidance. These beneficial interests are generally structured notes, as defined by EITF Issue No. 96-12, Recognition of Interest Income and Balance Sheet Classification of Structured Notes, which are included in fixed maturities, and their income is recognized using the retrospective interest method or the level yield method, as appropriate. Impairments of these beneficial interests are included in net investment gains and losses. Derivative Financial Instruments The Company uses derivative instruments to manage risk through one of five principal risk management strategies, the hedging of: (i) liabilities; (ii) invested assets; (iii) portfolios of assets or liabilities; (iv) net investments in certain foreign operations; and (v) firm commitments and forecasted transactions. Additionally, the Company enters into income generation and replication derivative transactions as permitted by its insurance subsidiaries' Derivatives Use Plans approved by the applicable state insurance departments. The Company's derivative hedging strategy employs a variety of instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, and options, including caps and floors. On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure (fair value, cash flow or foreign currency). If a derivative does not qualify for hedge F-12 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) accounting, according to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended ("SFAS 133"), the changes in its fair value and all scheduled periodic settlement receipts and payments are reported in net investment gains or losses. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. In this documentation, the Company specifically identifies the asset, liability, firm commitment, foreign operation, or forecasted transaction that has been designated as a hedged item, states how the hedging instrument is expected to hedge the risks related to the hedged item, and sets forth the method that will be used to retrospectively and prospectively assess the hedging instruments effectiveness and the method that will be used to measure hedge ineffectiveness. The Company generally determines hedge effectiveness based on total changes in fair value of a derivative instrument. The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item; (ii) the derivative expires or is sold, terminated, or exercised; (iii) the derivative is de-designated as a hedge instrument; (iv) it is probable that the forecasted transaction will not occur; (v) a hedged firm commitment no longer meets the definition of a firm commitment; or (vi) management determines that designation of the derivative as a hedge instrument is no longer appropriate. The Company designates and accounts for the following as cash flow hedges, when they have met the effectiveness requirements of SFAS 133: (i) various types of interest rate swaps to convert floating rate investments to fixed rate investments; (ii) various types of interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) receive U.S. dollar fixed on foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments; (iv) foreign currency forwards to hedge the exposure of future payments or receipts in foreign currencies; and (v) other instruments to hedge the cash flows of various other forecasted transactions. For all qualifying and highly effective cash flow hedges, the effective portion of changes in fair value of the derivative instrument is reported in other comprehensive income or loss. The ineffective portion of changes in fair value of the derivative instrument is reported in net investment gains or losses. Hedged forecasted transactions, other than the receipt or payment of variable interest payments, are not expected to occur more than 12 months after hedge inception. The Company designates and accounts for the following as fair value hedges when they have met the effectiveness requirements of SFAS 133: (i) various types of interest rate swaps to convert fixed rate investments to floating rate investments; (ii) receive U.S. dollar floating on foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments; (iii) pay U.S. dollar floating on foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated liabilities, and (iv) other instruments to hedge various other fair value exposures of investments. For all qualifying and highly effective fair value hedges, the changes in fair value of the derivative instrument are reported as net investment gains or losses. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the derivative continues to be carried on the consolidated balance sheet at its fair value, but the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative continues to be carried on the consolidated balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment is removed from the consolidated balance sheet and recognized as a net investment gain or loss in the current period. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative continues to be carried on the consolidated balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive F-13 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) income or loss are recognized immediately in net investment gains or losses. When the hedged forecasted transaction is no longer probable, but is reasonably possible, the accumulated gain or loss remains in other comprehensive income or loss and is recognized when the transaction affects net income or loss; however, prospective hedge accounting for the transaction is terminated. In all other situations in which hedge accounting is discontinued, the derivative is carried at its fair value on the consolidated balance sheet, with changes in its fair value recognized in the current period as net investment gains or losses. The Company uses forward exchange contracts that provide an economic hedge on portions of its net investments in foreign operations against adverse movements in foreign currency exchange rates. Unrealized losses on instruments so designated are recorded as components of accumulated other comprehensive income. The Company may enter into contracts that are not themselves derivative instruments but contain embedded derivatives. For each contract, the Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to those of the host contract and determines whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. If it is determined that the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and accounted for as a stand-alone derivative. Such embedded derivatives are recorded on the consolidated balance sheet at fair value and changes in their fair value are recognized in the current period in net investment gains or losses. If the Company is unable to properly identify and measure an embedded derivative for separation from its host contract, the entire contract is carried on the consolidated balance sheet at fair value, with changes in fair value recognized in the current period as net investment gains or losses. The Company also uses derivatives to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These securities, called replication synthetic asset transactions ("RSATs"), are a combination of a credit default swap and a U.S. Treasury or Agency security, to synthetically create a third replicated security. These derivatives are not designated as hedges. As of December 31, 2003 and 2002, 23 and 18, respectively, of such RSATs, with notional amounts totaling $479 million and $275 million, respectively, were outstanding. The Company records both the premiums received on the credit default swaps over the life of the contracts and changes in their fair value in net investment gains and losses. The Company enters into written covered calls to generate additional investment income on the underlying assets it holds. These derivatives are not designated as hedges. The Company records the premiums received over the life of the contract and changes in fair value of such options as net investment gains and losses. Cash and Cash Equivalents The Company considers all investments purchased with an original maturity of three months or less to be cash equivalents. Property, Equipment, Leasehold Improvements and Computer Software Property, equipment and leasehold improvements, which are included in other assets, are stated at cost, less accumulated depreciation and amortization. Depreciation is determined using either the straight-line or sum-of-the-years-digits method over the estimated useful lives of the assets. The estimated life for company occupied real estate property is generally 40 years. Estimated lives range from five to ten years for leasehold improvements and three to five years for all other property and equipment. Accumulated depreciation and F-14 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) amortization of property, equipment and leasehold improvements was $394 million and $368 million at December 31, 2003 and 2002, respectively. Related depreciation and amortization expense was $101 million, $81 million and $96 million for the years ended December 31, 2003, 2002 and 2001, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a three-year period using the straight-line method. Accumulated amortization of capitalized software was $376 million and $297 million at December 31, 2003 and 2002, respectively. Related amortization expense was $139 million, $153 million and $106 million for the years ended December 31, 2003, 2002 and 2001, respectively. Deferred Policy Acquisition Costs The costs of acquiring new and renewal insurance business that vary with, and are primarily related to, the production of that business are deferred. Such costs, which consist principally of commissions, agency and policy issue expenses, are amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, DAC is amortized in proportion to the present value of estimated gross margins or profits from investment, mortality, expense margins and surrender charges. Interest rates are based on rates in effect at the inception or acquisition of the contracts. Actual gross margins or profits can vary from management's estimates resulting in increases or decreases in the rate of amortization. Management utilizes the reversion to the mean assumption, a standard industry practice, in its determination of the amortization of DAC. This practice assumes that the expectation for long-term equity investment appreciation is not changed by minor short-term market fluctuations, but that it does change when large interim deviations have occurred. Management periodically updates these estimates and evaluates the recoverability of DAC. When appropriate, management revises its assumptions of the estimated gross margins or profits of these contracts, and the cumulative amortization is reestimated and adjusted by a cumulative charge or credit to current operations. DAC for non-participating traditional life, non-medical health and annuity policies with life contingencies is amortized in proportion to anticipated premiums. Assumptions as to anticipated premiums are made at the date of policy issuance or acquisition and are consistently applied during the lives of the contracts. Deviations from estimated experience are included in operations when they occur. For these contracts, the amortization period is typically the estimated life of the policy. Policy acquisition costs related to internally replaced contracts are expensed at the date of replacement. DAC for property and casualty insurance contracts, which is primarily comprised of commissions and certain underwriting expenses, are deferred and amortized on a pro rata basis over the applicable contract term or reinsurance treaty. VOBA, included as part of DAC, represents the present value of future profits generated from existing insurance contracts in-force at the date of acquisition and is amortized over the expected policy or contract duration in relation to the estimated gross profits or premiums from such policies and contracts. Goodwill The excess of cost over the fair value of net assets acquired ("goodwill") is included in other assets. On January 1, 2002, the Company adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets, F-15 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) ("SFAS 142"). In accordance with SFAS 142, goodwill is not amortized but is tested for impairment at least annually to determine whether a write down of the cost of the asset is required. Impairments are recognized in operating results when the carrying amount of goodwill exceeds its implied fair value. Prior to the adoption of SFAS 142, goodwill was amortized on a straight-line basis over a period ranging from ten to 30 years and impairments were recognized in operating results when permanent diminution in value was deemed to have occurred. Changes in goodwill were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ----- ----- ---- (Dollars in millions) Net balance at January 1.. $ 405 $ 575 $703 Acquisitions.............. 3 7 20 Amortization.............. -- -- (47) Impairment losses......... -- (2) (61) Disposition and other..... (190) (175) (40) ----- ----- ---- Net balance at December 31 $ 218 $ 405 $575 ===== ===== ====
Accumulated amortization from goodwill was as follows at:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Accumulated amortization $32 $71 === ===
Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due. Benefits and expenses are provided against such revenues to recognize profits over the estimated lives of the policies. When premiums are due over a significantly shorter period than the period over which benefits are provided, any excess profit is deferred and recognized into operations in a constant relationship to insurance in-force or, for annuities, the amount of expected future policy benefit payments. Premiums related to non-medical health contracts are recognized on a pro rata basis over the applicable contract term. Deposits related to universal life and investment-type products are credited to policyholder account balances. Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration and surrender charges and are recognized in the period in which services are provided. Amounts that are charged to operations include interest credited and benefit claims incurred in excess of related policyholder account balances. Premiums related to property and casualty contracts are recognized as revenue on a pro rata basis over the applicable contract term. Unearned premiums are included in other liabilities. Other Revenues Other revenues include asset management and advisory fees, broker/dealer commissions and fees, and administrative service fees. Such fees and commissions are recognized in the period in which services are F-16 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) performed. Other revenues also include changes in account value relating to corporate-owned life insurance ("COLI"). Under certain COLI contracts, if the Company reports certain unlikely adverse results in its consolidated financial statements, withdrawals would not be immediately available and would be subject to market value adjustment, which could result in a reduction of the account value. Policyholder Dividends Policyholder dividends are approved annually by the insurance subsidiaries' boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by the insurance subsidiaries. Participating Business Participating business represented approximately 13% and 16% of the Company's life insurance in-force, and 88% and 89% of the number of life insurance policies in-force, at December 31, 2003 and 2002, respectively. Participating policies represented approximately 40% and 41%, 40% and 41%, and 44% and 46% of gross and net life insurance premiums for the years ended December 31, 2003, 2002 and 2001, respectively. The percentages indicated are calculated excluding the business of the Reinsurance segment. Income Taxes The Holding Company and its includable life insurance and non-life insurance subsidiaries file a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Non-includable subsidiaries file either separate tax returns or separate consolidated tax returns. The future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. Reinsurance The Company has reinsured certain of its life insurance and property and casualty insurance contracts with other insurance companies under various agreements. Amounts due from reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. Policy and contract liabilities are reported gross of reinsurance credits. DAC is reduced by amounts recovered under reinsurance contracts. Amounts received from reinsurers for policy administration are reported in other revenues. The Company assumes and retrocedes financial reinsurance contracts, which represent low mortality risk reinsurance treaties. These contracts are reported as deposits and are included in other assets. The amount of revenue reported on these contracts represents fees and the cost of insurance under the terms of the reinsurance agreement and is reported in other revenue. Separate Accounts Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Investments (stated at estimated fair value) and liabilities of the separate accounts are reported separately as assets and F-17 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) liabilities. Deposits to separate accounts, investment income and recognized and unrealized gains and losses on the investments of the separate accounts accrue directly to contractholders and, accordingly, are not reflected in the revenues of the Company. Fees charged to contractholders, principally mortality, policy administration and surrender charges are included in universal life and investment-type product fees. See "--Application of Recent Accounting Pronouncements." Stock-Based Compensation Effective January 1, 2003, MetLife and the Company account for stock-based compensation plans using the prospective fair value method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), as amended by SFAS 148, Accounting for Stock-Based Compensation--Transition and Disclosure ("SFAS 148"). MetLife allocates 100% of stock option expense to the Company. Stock-based compensation grants prior to January 1, 2003 are accounted for using the accounting method prescribed by Accounting Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued to Employees ("APB 25") and Note 14 includes the pro forma disclosures required by SFAS No. 123, as amended. Foreign Currency Balance sheet accounts of foreign operations are translated at the exchange rates in effect at each year-end and income and expense accounts are translated at the average rates of exchange prevailing during the year. The local currencies of foreign operations are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income or loss. Gains and losses from foreign currency transactions are reported in earnings. Discontinued Operations The results of operations of a component of the Company that either has been disposed of or is classified as held-for-sale on or after January 1, 2002 are reported in discontinued operations if the operations and cash flows of the component have been or will be eliminated from the ongoing operations of the Company as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction. Application of Recent Accounting Pronouncements Effective December 31, 2003, the Company adopted EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides guidance on the disclosure requirements for other-than-temporary impairments of debt and marketable equity investments that are accounted for under SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115"). The adoption of EITF 03-1 requires the Company to include certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under SFAS 115 that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. (See Note 2). The initial adoption of EITF 03-1, which only required additional disclosures, did not have a material impact on the Company's consolidated financial statements. In December, 2003, the FASB revised SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits--an Amendment of FASB Statements No. 87, 88 and 106 ("SFAS 132(r)"). SFAS 132(r) retains most of the disclosure requirements of SFAS 132 and requires additional disclosure about assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other defined F-18 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) postretirement plans. SFAS 132(r) is primarily effective for fiscal years ending after December 15, 2003; however, certain disclosures about foreign plans and estimated future benefit payments are effective for fiscal years ending after June 15, 2004. The Company's adoption of SFAS 132(r) on December 31, 2003 did not have a significant impact on its consolidated financial statements since it only revises disclosure requirements. In January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-1") which permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the new legislation. The Company has elected to defer the accounting until further guidance is issued by the FASB. The measurements of the Company's postretirement accumulated benefit plan obligation and net periodic benefit cost disclosed in Note 13 do not reflect the effects of the new legislation. The guidance, when issued, could require the Company to change previously reported information. In July 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). SOP 03-1 provides guidance on (i) the classification and valuation of long-duration contract liabilities, (ii) the accounting for sales inducements and (iii) separate account presentation and valuation. SOP 03-1 is effective for fiscal years beginning after December 15, 2003. As of January 1, 2004, the Company increased future policyholder benefits for various guaranteed minimum death and income benefits net of DAC and unearned revenue liability offsets under certain variable annuity and universal life contracts of approximately $61 million, net of income tax, which will be reported as a cumulative effect of a change in accounting. Industry standards and practices continue to evolve relating to the valuation of liabilities relating to these types of benefits, which may result in further adjustments to the Company's measurement of liabilities associated with such benefits in subsequent accounting periods. Effective with the adoption of SOP 03-1, costs associated with enhanced or bonus crediting rates to contractholders must be deferred and amortized over the life of the related contract using assumptions consistent with the amortization of DAC, which has been the Company's accounting treatment. Effective January 1, 2004, the Company reclassified $116 million of ownership in its own separate accounts from other assets to fixed maturities available-for-sale and equity securities. This reclassification will have no effect on net income or other comprehensive income. In accordance with SOP 03-1's revised definition of a separate account, effective January 1, 2004, the Company also reclassified $1,678 million of separate account assets to general account investments and $1,678 million of separate account liabilities to future policy benefits and policyholder account balances. The net cumulative effect of this reclassification was insignificant. In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS 150"). SFAS 150 clarifies the accounting for certain financial instruments with characteristics of both liabilities and equity and requires that those instruments be classified as a liability or, in certain circumstances, an asset. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS 150, as of July 1, 2003, required the Company to reclassify $277 million of company-obligated mandatorily redeemable securities of subsidiary trusts from mezzanine equity to liabilities. In April 2003, the FASB cleared Statement 133 Implementation Issue No. B36, Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments ("Issue B36"). Issue B36 concluded that (i) a company's funds withheld payable and/or receivable under certain F-19 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) reinsurance arrangements, and (ii) a debt instrument that incorporates credit risk exposures that are unrelated or only partially related to the creditworthiness of the obligor include an embedded derivative feature that is not clearly and closely related to the host contract. Therefore, the embedded derivative feature must be measured at fair value on the balance sheet and changes in fair value reported in income. Issue B36 became effective on October 1, 2003 and required the Company to increase policyholder account balances by $40 million, to decrease other invested assets by $1 million and increase DAC by $2 million. These amounts, net of income taxes of $13 million, were recorded as a cumulative effect of a change in accounting. As a result of the adoption of Issue B36, the Company recognized investment gains of $9 million, net of income tax, for the three month period ended December 31, 2003. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS 149"). SFAS 149 amends and clarifies the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Except for certain implementation guidance that is incorporated in SFAS 149 and already effective, SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The Company's adoption of SFAS 149 on July 1, 2003 did not have a significant impact on the consolidated financial statements. During 2003, the Company adopted FASB Interpretation No. 46 Consolidation of Variable Interest Entities--An Interpretation of ARB No. 51 ("FIN 46") and its December 2003 revision ("FIN 46(r)"). Certain of the Company's asset-backed securitizations, collateralized debt obligations, structured investment transactions, and investments in real estate joint ventures and other limited partnership interests meet the definition of a variable interest entity ("VIE") and must be consolidated, in accordance with the transition rules and effective dates, if the Company is deemed to be the primary beneficiary. A VIE is defined as (i) any entity in which the equity investments at risk in such entity do not have the characteristics of a controlling financial interest or (ii) any entity that does not have sufficient equity at risk to finance its activities without additional subordinated support from other parties. Effective February 1, 2003, the Company adopted FIN 46 for VIEs created or acquired on or after February 1, 2003 and, effective December 31, 2003, the Company adopted FIN 46(r) with respect to interests in entities formerly considered special purpose entities ("SPEs") including interests in asset-backed securities and collateralized debt obligations. In accordance with the provisions in FIN 46(r), the Company has elected to defer until March 31, 2004 the consolidation of interests in VIEs for non SPEs acquired prior to February 1, 2003 for which it is the primary beneficiary. The adoption of FIN 46 as of February 1, 2003 did not have a significant impact on the Company's consolidated financial statements. The adoption of the provisions of FIN 46(r) at December 31, 2003 did not require the Company to consolidate any additional VIEs that were not previously consolidated. Effective January 1, 2003, the Company adopted FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45"). FIN 45 requires entities to establish liabilities for certain types of guarantees and expands financial statement disclosures for others. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have a significant impact on the Company's consolidated financial statements. See Note 12. Effective January 1, 2003, MetLife and the Company adopted SFAS No. 148, Accounting for Stock-Based Compensation--Transition and Disclosure ("SFAS 148"), which provides guidance on how to apply the fair value method of accounting and use the prospective transition method for stock options granted by the Holding Company and the Company subsequent to December 31, 2002. As permitted under SFAS 148, options granted prior to January 1, 2003 will continue to be accounted for under Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and the pro forma impact of accounting for these options at fair value will continue to be disclosed in the consolidated financial statements until the last of those options vest in 2005. See Note 14. F-20 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Effective January 1, 2003, the Company adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146"). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recorded and measured initially at fair value only when the liability is incurred rather than at the date of an entity's commitment to an exit plan as required by EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity Including Certain Costs Incurred in a Restructuring ("EITF 94-3"). The Company's activities subject to this guidance in 2003 were not significant. Effective January 1, 2003, the Company adopted SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). In addition to amending or rescinding other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions, SFAS 145 generally precludes companies from recording gains and losses from the extinguishment of debt as an extraordinary item. SFAS 145 also requires sale-leaseback treatment for certain modifications of a capital lease that result in the lease being classified as an operating lease. The adoption of SFAS 145 did not have a significant impact on the Company's consolidated financial statements. Effective January 1, 2002, the Company adopted SFAS 144. SFAS 144 provides a single model for accounting for long-lived assets to be disposed of by superseding SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("SFAS 121"), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB 30"). Under SFAS 144, discontinued operations are measured at the lower of carrying value or fair value less costs to sell, rather than on a net realizable value basis. Future operating losses relating to discontinued operations also are no longer recognized before they occur. SFAS 144 (i) broadens the definition of a discontinued operation to include a component of an entity (rather than a segment of a business); (ii) requires long-lived assets to be disposed of other than by sale to be considered held and used until disposed; and (iii) retains the basic provisions of (a) APB 30 regarding the presentation of discontinued operations in the statements of income, (b) SFAS 121 relating to recognition and measurement of impaired long-lived assets (other than goodwill), and (c) SFAS 121 relating to the measurement of long-lived assets classified as held-for-sale. Adoption of SFAS 144 did not have a material impact on the Company's consolidated financial statements other than the presentation as discontinued operations of net investment income and net investment gains related to operations of real estate on which the Company initiated disposition activities subsequent to January 1, 2002 and the classification of such real estate as held-for-sale on the consolidated balance sheets. See Note 18. Effective January 1, 2002, the Company adopted SFAS No. 142. SFAS 142 eliminates the systematic amortization and establishes criteria for measuring the impairment of goodwill and certain other intangible assets by reporting unit. Amortization of goodwill, prior to the adoption of SFAS 142 was $47 million for the year ended December 31, 2001. Amortization of other intangible assets was not material for the years ended December 31, 2003, 2002 and 2001. The Company completed the required impairment tests of goodwill and indefinite-lived intangible assets in the third quarter of 2002 and recorded a $5 million charge to earnings relating to the impairment of certain goodwill assets as a cumulative effect of a change in accounting. There was no impairment of identified intangible assets or significant reclassifications between goodwill and other intangible assets at January 1, 2002. Effective July 1, 2001, the Company adopted SFAS No. 141, Business Combinations ("SFAS 141"). SFAS 141 requires the purchase method of accounting for all business combinations and separate recognition of intangible assets apart from goodwill if such intangible assets meet certain criteria. In accordance with SFAS 141, the elimination of $5 million of negative goodwill was reported in net income in the first quarter of 2002 as a cumulative effect of a change in accounting. F-21 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) In July 2001, the U.S. Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No. 102, Selected Loan Loss Allowance and Documentation Issues ("SAB 102"). SAB 102 summarizes certain of the SEC's views on the development, documentation and application of a systematic methodology for determining allowances for loan and lease losses. The application of SAB 102 by the Company did not have a material impact on the Company's consolidated financial statements. Effective April 1, 2001, the Company adopted certain additional accounting and reporting requirements of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities-- a Replacement of FASB Statement No. 125, relating to the derecognition of transferred assets and extinguished liabilities and the reporting of servicing assets and liabilities. The initial adoption of these requirements did not have a material impact on the Company's consolidated financial statements. Effective April 1, 2001, the Company adopted EITF 99-20, Recognition of Interest Income and Impairment on Certain Investments. This pronouncement requires investors in certain asset-backed securities to record changes in their estimated yield on a prospective basis and to apply specific evaluation methods to these securities for an other-than-temporary decline in value. The initial adoption of EITF 99-20 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2001, the Company adopted SFAS 133 which established new accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The cumulative effect of the adoption of SFAS 133, as of January 1, 2001, resulted in a $33 million increase in other comprehensive income, net of income taxes of $18 million, and had no material impact on net income. The increase to other comprehensive income is attributable to net gains on cash flow-type hedges at transition. Also at transition, the amortized cost of fixed maturities decreased and other invested assets increased by $22 million, representing the fair value of certain interest rate swaps that were accounted for prior to SFAS 133 using fair value-type settlement accounting. During the year ended December 31, 2001, $18 million of the pre-tax gain reported in accumulated other comprehensive income at transition was reclassified into net investment income. The FASB continues to issue additional guidance relating to the accounting for derivatives under SFAS 133, which may result in further adjustments to the Company's treatment of derivatives in subsequent accounting periods. F-22 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 2. Investments Fixed Maturities and Equity Securities Fixed maturities and equity securities at December 31, 2003 were as follows:
Gross Cost or Unrealized Amortized ----------- Estimated Cost Gain Loss Fair Value --------- ------ ---- ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. corporate securities................. $ 49,466 $3,486 $228 $ 52,724 Mortgage-backed securities................ 28,049 687 81 28,655 Foreign corporate securities.............. 18,680 2,005 70 20,615 U.S. treasuries/agencies.................. 13,249 1,208 23 14,434 Asset-backed securities................... 10,414 169 54 10,529 Commercial mortgage-backed securities..... 9,080 480 15 9,545 Foreign government securities............. 4,847 752 20 5,579 States and political subdivisions......... 282 11 8 285 Other fixed income assets................. 232 138 62 308 -------- ------ ---- -------- Total bonds............................ 134,299 8,936 561 142,674 Redeemable preferred stocks................... 545 2 73 474 -------- ------ ---- -------- Total fixed maturities................. $134,844 $8,938 $634 $143,148 ======== ====== ==== ======== Equity Securities: Common stocks................................. $ 514 $ 329 $ 1 $ 842 Nonredeemable preferred stocks................ 379 25 -- 404 -------- ------ ---- -------- Total equity securities................ $ 893 $ 354 $ 1 $ 1,246 ======== ====== ==== ========
F-23 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Fixed maturities and equity securities at December 31, 2002 were as follows:
Cost or Gross Unrealized Amortized ---------------- Estimated Cost Gain Loss Fair Value --------- ------ ------ ---------- (Dollars in millions) Fixed Maturities: Bonds: U.S. corporate securities................. $ 42,265 $2,914 $ 896 $ 44,283 Mortgage-backed securities................ 24,999 1,018 15 26,002 Foreign corporate securities.............. 15,405 1,295 185 16,515 U.S. treasuries/agencies.................. 13,256 1,514 3 14,767 Asset-backed securities................... 8,070 204 181 8,093 Commercial mortgage-backed securities..... 5,445 516 5 5,956 Foreign government securities............. 4,649 516 50 5,115 States and political subdivisions......... 2,575 181 20 2,736 Other fixed income assets................. 312 126 82 356 -------- ------ ------ -------- Total bonds............................ 116,976 8,284 1,437 123,823 Redeemable preferred stocks................... 552 1 116 437 -------- ------ ------ -------- Total fixed maturities................. $117,528 $8,285 $1,553 $124,260 ======== ====== ====== ======== Equity Securities: Common stocks............................. $ 827 $ 114 $ 80 $ 861 Nonredeemable preferred stocks............ 668 25 3 690 -------- ------ ------ -------- Total equity securities................ $ 1,495 $ 139 $ 83 $ 1,551 ======== ====== ====== ========
The Company held foreign currency derivatives with notional amounts of $4,242 million and $2,371 million to hedge the exchange rate risk associated with foreign bonds and loans at December 31, 2003 and 2002, respectively. The Company held fixed maturities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $11,814 million and $11,041 million at December 31, 2003 and 2002, respectively. These securities had a net unrealized gain of $839 million at December 31, 2003 and a net unrealized loss of $378 million at December 31, 2002. Non-income producing fixed maturities were $357 million and $456 million at December 31, 2003 and 2002, respectively. F-24 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The cost or amortized cost and estimated fair value of bonds at December 31, 2003, by contractual maturity date (excluding scheduled sinking funds), are shown below:
Cost or Amortized Estimated Cost Fair Value --------- ---------- (Dollars in millions) Due in one year or less.................... $ 4,084 $ 4,233 Due after one year through five years...... 25,388 26,737 Due after five years through ten years..... 24,539 26,662 Due after ten years........................ 32,745 36,313 -------- -------- Subtotal................................ 86,756 93,945 Mortgage-backed and asset-backed securities 47,543 48,729 -------- -------- Subtotal................................ 134,299 142,674 Redeemable preferred stock................. 545 474 -------- -------- Total fixed maturities.................. $134,844 $143,148 ======== ========
Bonds not due at a single maturity date have been included in the above table in the year of final maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales of fixed maturities and equity securities classified as available-for-sale were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Proceeds............... $48,390 $34,918 $27,576 Gross investment gains. $ 446 $ 1,683 $ 634 Gross investment losses $ (452) $ (973) $ (934)
Gross investment losses above exclude writedowns recorded during 2003, 2002 and 2001 for other-than-temporarily impaired available-for-sale fixed maturities and equity securities of $328 million, $1,342 million and $278 million, respectively. Excluding investments in U.S. Treasury securities and obligations of U.S. government corporations and agencies, the Company is not exposed to any significant concentration of credit risk in its fixed maturities portfolio. F-25 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table shows the estimated fair values and gross unrealized losses of the Company's fixed maturities, aggregated by sector and length of time that the securities have been in a continuous unrealized loss position at December 31, 2003:
Equal to or Greater Less than 12 months than 12 months Total -------------------- -------------------- -------------------- Estimated Gross Estimated Gross Estimated Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Loss Value Loss Value Loss --------- ---------- --------- ---------- --------- ---------- (Dollars in millions) U.S. corporate securities............ $ 6,338 $136 $ 962 $ 92 $ 7,300 $228 Mortgage-backed securities........... 7,133 78 18 3 7,151 81 Foreign corporate securities......... 2,446 57 331 13 2,777 70 U.S. treasuries/agencies............. 3,526 23 -- -- 3,526 23 Asset-backed securities.............. 2,295 29 780 25 3,075 54 Commercial mortgage-backed securities 1,998 13 227 2 2,225 15 Foreign government securities........ 225 20 2 -- 227 20 States and political subdivisions.... 131 8 -- -- 131 8 Other fixed income assets............ 12 52 40 10 52 62 ------- ---- ------ ---- ------- ---- Total bonds....................... 24,104 416 2,360 145 26,464 561 Redeemable preferred stocks.......... 192 60 279 13 471 73 ------- ---- ------ ---- ------- ---- Total fixed maturities............ $24,296 $476 $2,639 $158 $26,935 $634 ======= ==== ====== ==== ======= ====
At December 31, 2003, the Company had gross unrealized losses of $1 million from equity securities that had been in an unrealized loss position for less than twelve months. The amount of unrealized losses from equity securities that had been in an unrealized loss position for twelve months or greater is less than $1 million at December 31, 2003. The fair value of those equity securities that had been in an unrealized loss position for less than twelve months and for twelve months or greater at December 31, 2003, is $18 million and $21 million, respectively. Securities Lending Program The Company participates in securities lending programs whereby blocks of securities, which are included in investments, are loaned to third parties, primarily major brokerage firms. The Company requires a minimum of 102% of the fair value of the loaned securities to be separately maintained as collateral for the loans. Securities with a cost or amortized cost of $22,290 million and $13,477 million and an estimated fair value of $23,461 million and $16,120 million were on loan under the program at December 31, 2003 and 2002, respectively. The Company was liable for cash collateral under its control of $24,065 million and $16,321 million at December 31, 2003 and 2002, respectively. Security collateral on deposit from customers may not be sold or repledged and is not reflected in the consolidated financial statements. Assets on Deposit and Held in Trust The Company had investment assets on deposit with regulatory agencies with a fair market value of $1,286 million and $939 million at December 31, 2003 and 2002, respectively. Company securities held in trust to satisfy collateral requirements had an amortized cost of $1,711 million and $1,430 million at December 31, 2003 and 2002, respectively. F-26 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Mortgage Loans on Real Estate Mortgage loans on real estate were categorized as follows:
December 31, ------------------------------ 2003 2002 -------------- -------------- Amount Percent Amount Percent ------- ------- ------- ------- (Dollars in millions) Commercial mortgage loans.. $21,597 81% $20,433 80% Agricultural mortgage loans 5,166 19% 5,042 20% ------- --- ------- --- Total................... 26,763 100% 25,475 100% === === Less: Valuation allowances. 126 122 ------- ------- Mortgage loans.......... $26,637 $25,353 ======= =======
Mortgage loans on real estate are collateralized by properties primarily located throughout the United States. At December 31, 2003, approximately 20%, 12% and 7% of the properties were located in California, New York and Florida, respectively. Generally, the Company (as the lender) requires that a minimum of one-fourth of the purchase price of the underlying real estate be paid by the borrower. Mortgage loans at December 31, 2003 and 2002 include $1,998 million and $1,515 million, respectively to MIAC, a related party, in connection with MIAC's purchase of real estate from the Company in 2001 and 2003. In addition, certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $639 million and $620 million at December 31, 2003 and 2002, respectively. Changes in mortgage loan valuation allowances were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Balance at January 1...... $122 $144 $ 83 Additions................. 50 39 106 Deductions................ (46) (56) (45) Dispositions of affiliates -- (5) -- ---- ---- ---- Balance at December 31.... $126 $122 $144 ==== ==== ====
A portion of the Company's mortgage loans on real estate was impaired and consisted of the following:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Impaired mortgage loans with valuation allowances... $286 $604 Impaired mortgage loans without valuation allowances 146 257 ---- ---- Total............................................ 432 861 Less: Valuation allowances on impaired mortgages.... 61 121 ---- ---- Impaired mortgage loans.......................... $371 $740 ==== ====
F-27 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The average investment in impaired mortgage loans on real estate was $615 million, $1,068 million and $938 million for the years ended December 31, 2003, 2002 and 2001, respectively. Interest income on impaired mortgage loans was $55 million, $88 million and $103 million for the years ended December 31, 2003, 2002 and 2001, respectively. The investment in restructured mortgage loans on real estate was $188 million and $410 million at December 31, 2003 and 2002, respectively. Interest income of $19 million, $44 million and $76 million was recognized on restructured loans for the years ended December 31, 2003, 2002 and 2001, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $24 million, $41 million and $60 million for the years ended December 31, 2003, 2002 and 2001, respectively. Mortgage loans on real estate with scheduled payments of 60 days (90 days for agriculture mortgages) or more past due or in foreclosure had an amortized cost of $35 million and $28 million at December 31, 2003 and 2002, respectively. Real Estate and Real Estate Joint Ventures Real estate and real estate joint ventures consisted of the following:
December 31, -------------------- 2003 2002 ------ ------ (Dollars in millions) Real estate and real estate joint ventures held-for-investment $3,446 $3,321 Impairments................................................... (283) (271) ------ ------ Total...................................................... 3,163 3,050 ------ ------ Real estate held-for-sale..................................... 101 815 Impairments................................................... -- (5) Valuation allowance........................................... (12) (11) ------ ------ Total...................................................... 89 799 ------ ------ Real estate and real estate joint ventures............. $3,252 $3,849 ====== ======
Accumulated depreciation on real estate was $1,226 million and $1,319 million at December 31, 2003 and 2002, respectively. The related depreciation expense was $124 million, $180 million and $217 million for the years ended December 31, 2003, 2002 and 2001, respectively. These amounts include $15 million, $66 million and $93 million of depreciation expense related to discontinued operations for the years ended December 31, 2003, 2002 and 2001, respectively. F-28 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Real estate and real estate joint ventures were categorized as follows:
December 31, ---------------------------- 2003 2002 ------------- ------------- Amount Percent Amount Percent ------ ------- ------ ------- (Dollars in millions) Office..... $1,597 49 % $2,244 58 % Retail..... 660 20 697 18 Apartments. 499 15 454 12 Land....... 77 2 87 2 Agriculture 1 -- 7 -- Other...... 418 14 360 10 ------ --- ------ ---- Total... $3,252 100% $3,849 100 % ====== === ====== ====
The Company's real estate holdings are primarily located throughout the United States. At December 31, 2003, approximately 25%, 21% and 17% of the Company's real estate holdings were located in California, Texas and New York, respectively. Changes in real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Balance at January 1...................... $ 11 $ 35 $ 39 Additions charged to investment income.... 17 21 16 Deductions for writedowns and dispositions (16) (45) (20) ---- ---- ---- Balance at December 31.................... $ 12 $ 11 $ 35 ==== ==== ====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $35 million, $48 million and $34 million for the years ended December 31, 2003, 2002 and 2001, respectively. There was no investment income related to impaired real estate and real estate joint ventures held-for-sale for the year ended December 31, 2003. Investment income related to impaired real estate and real estate joint ventures held-for-sale was $3 million and $19 million for the years ended December 31, 2002 and 2001, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $67 million and $62 million at December 31, 2003 and 2002, respectively. The Company owned real estate acquired in satisfaction of debt of $1 million and $8 million at December 31, 2003 and 2002, respectively. F-29 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Leveraged Leases Leveraged leases, included in other invested assets, consisted of the following:
December 31, -------------------- 2003 2002 ------ ------ (Dollars in millions) Investment............... $ 974 $ 985 Estimated residual values 386 428 ------ ------ Total................. 1,360 1,413 Unearned income.......... (380) (368) ------ ------ Leveraged leases...... $ 980 $1,045 ====== ======
The investment amounts set forth above are generally due in monthly installments. The payment periods generally range from one to 15 years, but in certain circumstances are as long as 30 years. These receivables are generally collateralized by the related property. The Company's deferred tax liability related to leveraged leases was $870 million and $981 million at December 31, 2003 and 2002, respectively. Net Investment Income The components of net investment income were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Fixed maturities................................. $ 7,757 $ 7,844 $ 8,449 Equity securities................................ 26 42 61 Mortgage loans on real estate.................... 1,811 1,840 1,838 Real estate and real estate joint ventures (1)... 612 673 824 Policy loans..................................... 510 512 527 Other limited partnership interests.............. 75 57 48 Cash, cash equivalents and short-term investments 83 228 264 Other............................................ 315 286 244 ------- ------- ------- Total......................................... 11,189 11,482 12,255 Less: Investment expenses (1).................... 832 851 1,201 ------- ------- ------- Net investment income......................... $10,357 $10,631 $11,054 ======= ======= =======
- -------- (1)Excludes amounts related to real estate held-for-sale presented as discontinued operations in accordance with SFAS 144. F-30 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Net Investment Gains (Losses) Net investment gains (losses), including changes in valuation allowances, and related policyholder amounts were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ----- ----- ------ (Dollars in millions) Fixed maturities............................... $(373) $(862) $ (644) Equity securities.............................. 39 230 66 Mortgage loans on real estate.................. (51) (21) (91) Real estate and real estate joint ventures (1). 19 (6) 1,626 Other limited partnership interests............ (84) (2) (161) Sales of businesses............................ 5 (7) 25 Derivatives (2)................................ (122) (140) 124 Other.......................................... 21 (28) (27) ----- ----- ------ Total................................... (546) (836) 918 Amounts allocated from: Deferred policy acquisition costs........... 26 (11) (21) Participating contracts..................... 89 (7) (105) Policyholder dividend obligation............ 144 157 159 ----- ----- ------ Total net investment gains (losses)..... $(287) $(697) $ 951 ===== ===== ======
- -------- (1)The amounts presented exclude amounts related to sales of real estate held-for-sale presented as discontinued operations in accordance with SFAS 144. (2)The amounts presented include scheduled periodic settlement payments on derivative instruments that do not qualify for hedge accounting under SFAS 133. Investment gains and losses are net of related policyholder amounts. The amounts netted against investment gains and losses are (i) amortization of DAC to the extent that such amortization results from investment gains and losses; (ii) adjustments to participating contractholder accounts when amounts equal to such investment gains and losses are applied to the contractholder's accounts; and (iii) adjustments to the policyholder dividend obligation resulting from investment gains and losses. This presentation may not be comparable to presentations made by other insurers. Real estate and real estate joint ventures net investment gains for 2001 include $1,630 million related to the sale of real estate to MIAC. F-31 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Net Unrealized Investment Gains The components of net unrealized investment gains, included in accumulated other comprehensive income, were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Fixed maturities........................... $ 8,094 $ 6,701 $ 2,958 Equity securities.......................... 353 56 619 Derivatives................................ (395) (24) 71 Other invested assets...................... (55) 1 59 ------- ------- ------- Total................................... 7,997 6,734 3,707 ------- ------- ------- Amounts allocated from: Future policy benefit loss recognition.. (1,453) (1,242) (30) Deferred policy acquisition costs....... (495) (366) (6) Participating contracts................. (117) (129) (127) Policyholder dividend obligation........ (2,130) (1,882) (708) Deferred income taxes...................... (1,397) (1,124) (1,037) ------- ------- ------- Total................................... (5,592) (4,743) (1,908) ------- ------- ------- Net unrealized investment gains..... $ 2,405 $ 1,991 $ 1,799 ======= ======= =======
The changes in net unrealized investment gains were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------ ------- ------ (Dollars in millions) Balance at January 1................................................. $1,991 $ 1,799 $1,183 Unrealized investment gains during the year.......................... 994 2,803 1,391 Unrealized investment gains (losses) relating to: Future policy benefit (loss) gain recognition..................... (211) (1,212) 254 Deferred policy acquisition costs................................. (129) (204) (128) Participating contracts........................................... 12 (2) 6 Policyholder dividend obligation.................................. (248) (1,174) (323) Deferred income taxes................................................ (179) (72) (475) Unrealized investment gains (losses) of subsidiaries at date of sale, net of deferred income taxes....................................... 175 53 (109) ------ ------- ------ Balance at December 31............................................... $2,405 $ 1,991 $1,799 ====== ======= ====== Net change in unrealized investment gains............................ $ 414 $ 192 $ 616 ====== ======= ======
Structured Investment Transactions The Company securitizes high yield debt securities, investment grade bonds and structured finance securities. The Company has sponsored four securitizations with a total of approximately $1,431 million in financial assets as of December 31, 2003. The Company's beneficial interests in these SPEs as of December 31, 2003 and 2002 and the related investment income for the years ended December 31, 2003, 2002 and 2001 were insignificant. F-32 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company also invests in structured notes and similar type instruments, which generally provide equity-based returns on debt securities. The carrying value of such investments was approximately $880 million and $870 million at December 31, 2003 and 2002, respectively. The related income recognized was $78 million, $1 million and $44 million for the years ended December 31, 2003, 2002 and 2001, respectively. Variable Interest Entities As discussed in Note 1, the Company has adopted the provisions of FIN 46 and FIN46(r). At December 31, 2003, FIN 46(r) did not require the Company to consolidate any additional VIEs that were not previously consolidated. The following table presents the total assets of and maximum exposure to loss relating to VIEs for which the Company has concluded that (i) it is the primary beneficiary and which will be consolidated in the Company's financial statements beginning March 31, 2004 and (ii) it holds significant valuable interests but it is not the primary beneficiary and which will not be consolidated:
December 31, 2003 ------------------------------------------------------- Primary Beneficiary (1) Not Primary Beneficiary --------------------------- --------------------------- Total Maximum Exposure Total Maximum Exposure Assets (2) to Loss (3) Assets (2) to Loss (3) ---------- ---------------- ---------- ---------------- (Dollars in millions) SPEs: Asset-backed securitizations and collateralized debt obligations $ -- $ -- $2,400 $20 Non-SPEs: Real estate joint ventures (4)... 617 238 42 59 Other limited partnerships (5)... 29 27 445 10 ---- ---- ------ --- Total......................... $646 $265 $2,887 $89 ==== ==== ====== ===
- -------- (1)Had the Company consolidated these VIEs at December 31, 2003, the transition adjustments would have been $10 million, net of income tax. (2)The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value as of December 31, 2003. The assets of the real estate joint ventures and other limited partnerships are reflected at the carrying amounts at which such assets would have been reflected on the Company's balance sheet had the Company consolidated the VIE from the date of its initial investment in the entity. (3)The maximum exposure to loss of the asset-backed securitizations and collateralized debt obligations is equal to the carrying amounts of retained interests. In addition, the Company provides collateral management services for certain of these structures for which it collects a management fee. The maximum exposure to loss relating to real estate joint ventures and other limited partnerships is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (4)Real estate joint ventures include partnerships and other ventures, which engage in the acquisition, development, management and disposal of real estate investments. (5)Other limited partnerships include partnerships established for the purpose of investing in public and private debt and equity securities, as well as limited partnerships established for the purpose of investing in low-income housing that qualifies for federal tax credits. F-33 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 3. Derivative Financial Instruments The table below provides a summary of notional amount and fair value of derivative financial instruments held at December 31, 2003 and 2002:
2003 2002 --------------------------- --------------------------- Current Market Current Market or Fair Value or Fair Value Notional ------------------ Notional ------------------ Amount Assets Liabilities Amount Assets Liabilities -------- ------ ----------- -------- ------ ----------- (Dollars in millions) Financial futures................ $ 1,015 $ 8 $ 24 $ 4 $ -- $ -- Interest rate swaps.............. 9,921 189 36 3,866 196 126 Floors........................... 325 5 -- 325 9 -- Caps............................. 9,483 29 -- 7,770 -- -- Financial forwards............... 1,310 2 3 1,870 -- 12 Foreign currency swaps........... 4,679 9 791 2,371 92 181 Options.......................... 6,065 7 -- 6,472 9 -- Foreign currency forwards........ 528 -- 10 1 -- -- Credit default swaps............. 605 2 1 376 2 -- ------- ---- ---- ------- ---- ---- Total contractual commitments. $33,931 $251 $865 $23,055 $308 $319 ======= ==== ==== ======= ==== ====
The following is a reconciliation of the notional amounts by derivative type and strategy at December 31, 2003 and 2002:
December 31, 2002 Terminations/ December 31, 2003 Notional Amount Additions Maturities Notional Amount ----------------- --------- ------------- ----------------- (Dollars in millions) BY DERIVATIVE TYPE Financial futures............................ $ 4 $ 1,543 $ 532 $ 1,015 Interest rate swaps.......................... 3,866 8,040 1,985 9,921 Floors....................................... 325 -- -- 325 Caps......................................... 7,770 3,000 1,287 9,483 Financial forwards........................... 1,870 1,310 1,870 1,310 Foreign currency swaps....................... 2,371 2,516 208 4,679 Options...................................... 6,472 -- 407 6,065 Foreign currency forwards.................... 1 527 -- 528 Written covered calls........................ -- 1,178 1,178 -- Credit default swaps......................... 376 284 55 605 ------- ------- ------ ------- Total contractual commitments............. $23,055 $18,398 $7,522 $33,931 ======= ======= ====== ======= BY DERIVATIVE STRATEGY Liability hedging............................ $ 8,683 $ 5,030 $1,187 $12,526 Invested asset hedging....................... 5,284 6,671 1,459 10,496 Portfolio hedging............................ 9,028 2,323 4,429 6,922 Firm commitments and forecasted transactions. 60 3,847 447 3,460 Hedging net investments in foreign operations -- 527 -- 527 ------- ------- ------ ------- Total contractual commitments............. $23,055 $18,398 $7,522 $33,931 ======= ======= ====== =======
F-34 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table presents the notional amounts of derivative financial instruments by maturity at December 31, 2003:
Remaining Life --------------------------------------------------------------------- One Year After One Year After Five Years or Less Through Five Years Through Ten Years After Ten Years Total -------- ------------------ ----------------- --------------- ------- (Dollars in millions) Financial futures................ $ 1,015 $ -- $ -- $ -- $ 1,015 Interest rate swaps.............. 242 6,297 1,716 1,666 9,921 Floors........................... -- -- 325 -- 325 Caps............................. 3,000 6,483 -- -- 9,483 Financial forwards............... 1,310 -- -- -- 1,310 Foreign currency swaps........... 326 1,663 2,255 435 4,679 Options.......................... 4,163 1,901 -- 1 6,065 Foreign currency forwards........ 528 -- -- -- 528 Credit default swaps............. 209 396 -- -- 605 ------- ------- ------ ------ ------- Total contractual commitments. $10,793 $16,740 $4,296 $2,102 $33,931 ======= ======= ====== ====== =======
The following table presents the notional amounts and fair values of derivatives by type of hedge designation at December 31, 2003 and 2002:
2003 2002 -------------------------- --------------------------- Fair Value Fair Value ----------------- ------------------ Notional Notional Amount Asset Liabilities Amount Assets Liabilities -------- ----- ----------- -------- ------ ----------- (Dollars in millions) BY TYPE OF HEDGE Fair value........ $ 3,678 $ 27 $291 $ 418 $ -- $ 64 Cash flow......... 12,968 54 422 3,445 69 72 Foreign Operations 527 -- 10 -- -- -- Non qualifying.... 16,758 170 142 19,192 239 183 ------- ---- ---- ------- ---- ---- Total.......... $33,931 $251 $865 $23,055 $308 $319 ======= ==== ==== ======= ==== ====
The company recognizes net investment expense of $61 million and $4 million and net investment income of $8 million, from the periodic settlement of interest rate caps and interest rate, foreign currency and credit default swaps that qualify as accounting hedges under SFAS No. 133, as amended, for the years ended December 31, 2003, 2002 and 2001, respectively. During the years ended December 31, 2003 and 2002, the Company recognized $184 million and $30 million, respectively, in net investment losses related to qualifying fair value hedges. Accordingly, $158 million and $34 million of net unrealized gains on fair value hedged investments were recognized in net investment losses during the years ended December 31, 2003 and 2002, respectively. There were no discontinued fair value hedges during the years ended December 31, 2003 or 2002. There were no derivatives designated as fair value hedges during the year ended December 31, 2001. For the years ended December 31, 2003 and 2002, the net amounts accumulated in other comprehensive income relating to cash flow hedges were losses of $379 million and $24 million, respectively. For the years ended December 31, 2003 and 2002, the market value of cash flow hedges decreased by $418 million and $145 million, respectively. During the years ended December 31, 2003 and 2002, the Company recognized other F-35 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) comprehensive net losses of $349 million and $142 million, respectively, relating to the effective portion of cash flow hedges. During the year ended December 31, 2003, other comprehensive expense of $2 million was reclassified to net investment income. During the year ended December 31, 2002, other comprehensive losses of $57 million were reclassified to net investment losses. During the year ended December 31, 2003, insignificant amounts were recognized in net investment losses related to discontinued cash flow hedges. During the year ended December 31, 2002 and 2001 no cash flow hedges were discontinued. For the years ended December 31, 2003, 2002 and 2001, $8 million, $10 million and $19 million of other comprehensive income was reclassified to net investment income, respectively, related to the SFAS 133 transition adjustment. Approximately $2 million of net investment expense and $17 million of net losses reported in accumulated other comprehensive income at December 31, 2003 are expected to be reclassified during the year ending December 31, 2004 into net investment income and net investment loss, respectively, as the derivatives and underlying investments mature or expire according to their original terms. For the years ended December 31, 2003, 2002 and 2001, the Company recognized as net investment gains, the settlement payments on derivative instruments of $84 million, $32 million and $24 million, respectively, and net investment losses from changes in fair value of $206 million and $172 million and net investment gains of $100 million, respectively, related to derivatives not qualifying as accounting hedges. The Company uses forward exchange contracts that provide an economic hedge on portions of its net investments in foreign operations against adverse movements in foreign currency exchange rates. For the year ended December 31, 2003, the Company experienced net unrealized foreign currency losses of $10 million related to hedges of its net investments in foreign operations. These unrealized losses were recorded as components of accumulated other comprehensive income. F-36 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 4. Insurance Deferred Policy Acquisition Costs Information regarding VOBA and DAC for the years ended December 31, 2003, 2002 and 2001 is as follows:
Deferred Value of Policy Business Acquisition Acquired Costs Total -------- ----------- ------- (Dollars in millions) Balance at December 31, 2000............ $1,674 $ 8,823 $10,497 Capitalizations......................... -- 2,018 2,018 ------ ------- ------- Total............................ 1,674 10,841 12,515 Amortization allocated to: Net investment gains (losses)........ (15) 36 21 Unrealized investment gains (losses). 16 112 128 Other expenses....................... 178 1,256 1,434 ------ ------- ------- Total amortization............... 179 1,404 1,583 Dispositions and other.................. 7 (468) (461) ------ ------- ------- Balance at December 31, 2001............ 1,502 8,969 10,471 Capitalizations......................... -- 2,227 2,227 ------ ------- ------- Total............................ 1,502 11,196 12,698 Amortization allocated to: Net investment gains (losses)........ 16 (5) 11 Unrealized investment gains (losses). 31 173 204 Other expenses....................... 121 1,380 1,501 ------ ------- ------- Total amortization............... 168 1,548 1,716 Dispositions and other.................. (463) (853) (1,316) ------ ------- ------- Balance at December 31, 2002............ 871 8,795 9,666 Capitalizations......................... -- 1,982 1,982 Acquisitions............................ -- 218 218 ------ ------- ------- Total............................ 871 10,995 11,866 Amortization allocated to: -- Net investment gains (losses)........ (5) (21) (26) Unrealized investment gains (losses). (9) 138 129 Other expenses....................... 49 1,332 1,381 ------ ------- ------- Total amortization............... 35 1,449 1,484 Dispositions and other.................. -- (150) (150) ------ ------- ------- Balance at December 31, 2003............ $ 836 $ 9,396 $10,232 ====== ======= =======
The estimated future amortization expense allocated to other expenses for VOBA is $71 million in 2004, $69 million in 2005, $63 million in 2006, $59 million in 2007 and $56 million in 2008. Amortization of VOBA and DAC is allocated to (i) investment gains and losses to provide consolidated statement of income information regarding the impact of such gains and losses on the amount of the amortization, (ii) unrealized investment gains and losses to provide information regarding the amount that would F-37 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) have been amortized if such gains and losses had been recognized, and (iii) other expenses to provide amounts related to the gross margins or profits originating from transactions other than investment gains and losses. Investment gains and losses related to certain products have a direct impact on the amortization of VOBA and DAC. Presenting investment gains and losses net of related amortization of VOBA and DAC provides information useful in evaluating the operating performance of the Company. This presentation may not be comparable to presentations made by other insurers. Future Policy Benefits and Policyholder Account Balances Future policy benefit liabilities for participating traditional life insurance policies are equal to the aggregate of (i) net level premium reserves for death and endowment policy benefits (calculated based upon the nonforfeiture interest rate, ranging from 3% to 9%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts), (ii) the liability for terminal dividends, and (iii) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the present value of expected future gross premiums are insufficient to provide for expected future policy benefits and expenses after DAC is written off. Future policy benefit liabilities for traditional annuities are equal to accumulated contractholder fund balances during the accumulation period and the present value of expected future payments after annuitization. Interest rates used in establishing such liabilities range from 3% to 9%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 7%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 8%. Policyholder account balances for universal life and investment-type contracts are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 1% to 13%, less expenses, mortality charges, and withdrawals. The liability for unpaid claims and claim expenses for property and casualty insurance represents the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, reduced for anticipated salvage and subrogation. Revisions of these estimates are included in operations in the year such refinements are made. Separate Accounts Separate accounts include two categories of account types: non-guaranteed separate accounts totaling $47,198 million and $38,702 million at December 31, 2003 and 2002, respectively, for which the policyholder assumes the investment risk, and guaranteed separate accounts totaling $16,463 million and $15,210 million at December 31, 2003 and 2002, respectively, for which the Company contractually guarantees either a minimum return or account value to the policyholder. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company's revenues as universal life and investment-type product policy fees and totaled $451 million, $461 million and $559 million for the years ended December 31, F-38 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 2003, 2002 and 2001, respectively. Guaranteed separate accounts consisted primarily of Met Managed Guaranteed Interest Contracts and participating close-out contracts. The average interest rates credited on these contracts were 4.5% and 4.8% at December 31, 2003 and 2002, respectively. The assets that support these liabilities were comprised of $13,504 million and $12,979 million in fixed maturities at December 31, 2003 and 2002, respectively. 5. Reinsurance The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and to provide additional capacity for future growth. The Company currently reinsures up to 90% of the mortality risk for all new individual life insurance policies that it writes through its various franchises. This practice was initiated by different franchises for different products starting at various points in time between 1992 and 2000. Risks in excess of $25 million on single life policies and $30 million on survivorship policies are 100% coinsured. In addition, in 1998, the Company reinsured substantially all of the mortality risk on its universal life policies issued since 1983. RGA retains a maximum of $6 million of coverage per individual life with respect to its assumed reinsurance business. The Company reinsures its business through a diversified group of reinsurers. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks of specific characteristics. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. In addition to reinsuring mortality risk, the Company reinsures other risks and specific coverages. The Company routinely reinsures certain classes of risks in order to limit its exposure to particular travel, avocation and lifestyle hazards. The Company has exposure to catastrophes, which are an inherent risk of the property and casualty business and could contribute to significant fluctuations in the Company's results of operations. The Company uses excess of loss and quota share reinsurance arrangements to limit its maximum loss, provide greater diversification of risk and minimize exposure to larger risks. The Company has also protected itself through the purchase of combination risk coverage. This reinsurance coverage pools risks from several lines of business and includes individual and group life claims in excess of $2 million per policy, as well as excess property and casualty losses, among others. See Note 12 for information regarding certain excess of loss reinsurance agreements providing coverage for risks associated primarily with sales practices claims. The amounts in the consolidated statements of income are presented net of reinsurance ceded. The effects of reinsurance were as follows:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Direct premiums............................................ $16,843 $17,859 $16,257 Reinsurance assumed........................................ 3,568 2,948 2,786 Reinsurance ceded.......................................... (2,260) (2,346) (2,020) ------- ------- ------- Net premiums............................................... $18,151 $18,461 $17,023 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits $ 2,175 $ 2,478 $ 2,069 ======= ======= =======
Reinsurance recoverables, included in premiums and other receivables, were $3,692 million and $3,833 million at December 31, 2003 and 2002, respectively, including $1,341 million and $1,348 million, respectively, F-39 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) relating to reinsurance of long-term guaranteed interest contracts and structured settlement lump sum contracts accounted for as a financing transaction. Reinsurance and ceded commissions payables, included in other liabilities, were $102 million and $74 million at December 31, 2003 and 2002, respectively. Included in premiums and other receivables are reinsurance recoverables due from Exeter Reassurance Company, Limited, a related party, of $507 million and $502 million at December 31, 2003 and 2002, respectively. Included in future policy benefits, other policyholder funds, and policyholder account balances are reinsurance liabilities assumed from MIAC, Cova Corporation, MetLife Investor's Group, Inc. and MetLife International Holdings, Inc., related parties, of $790 million, $1,807 million, and $190 million and $772 million, $1,694 million, and $136 million, respectively, at December 31, 2003 and 2002. The following table provides an analysis of the activity in the liability for benefits relating to property and casualty group accident and non-medical health policies and contracts (See Note 17):
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Balance at January 1............. $ 4,821 $ 4,597 $ 4,226 Reinsurance recoverables...... (496) (457) (410) ------- ------- ------- Net balance at January 1......... 4,325 4,140 3,816 ------- ------- ------- Incurred related to: Current year.................. 3,816 4,219 4,182 Prior years................... 28 (81) (84) ------- ------- ------- 3,844 4,138 4,098 ------- ------- ------- Paid related to: Current year.................. (2,153) (2,559) (2,538) Prior years................... (1,290) (1,332) (1,236) ------- ------- ------- (3,443) (3,891) (3,774) ------- ------- ------- Dispositions..................... (1,450) (62) -- Net Balance at December 31....... 3,276 4,325 4,140 Add: Reinsurance recoverables. 284 496 457 ------- ------- ------- Balance at December 31........... $ 3,560 $ 4,821 $ 4,597 ======= ======= =======
6. Closed Block On April 7, 2000 ("the date of demutualization"), Metropolitan Life established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life. Assets have been allocated to the closed block in an amount that has been determined to produce cash flows which, together with anticipated revenues from the policies included in the closed block, are reasonably expected to be sufficient to support obligations and liabilities relating to these policies, including, but not limited to, provisions for the payment of claims and certain expenses and taxes, and to provide for the continuation of policyholder dividend scales in effect for 1999, if the experience underlying such dividend scales continues, and for appropriate adjustments in such scales if the experience changes. At least annually, the Company compares actual and projected experience against the experience assumed in the then-current dividend scales. Dividend scales are adjusted periodically to give effect to changes in experience. F-40 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The closed block assets, the cash flows generated by the closed block assets and the anticipated revenues from the policies in the closed block will benefit only the holders of the policies in the closed block. To the extent that, over time, cash flows from the assets allocated to the closed block and claims and other experience related to the closed block are, in the aggregate, more or less favorable than what was assumed when the closed block was established, total dividends paid to closed block policyholders in the future may be greater than or less than the total dividends that would have been paid to these policyholders if the policyholder dividend scales in effect for 1999 had been continued. Any cash flows in excess of amounts assumed will be available for distribution over time to closed block policyholders and will not be available to stockholders. If the closed block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside of the closed block. The closed block will continue in effect as long as any policy in the closed block remains in-force. The expected life of the closed block is over 100 years. The Company uses the same accounting principles to account for the participating policies included in the closed block as it used prior to the date of demutualization. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. F-41 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Closed block liabilities and assets designated to the closed block are as follows:
December 31, -------------------- 2003 2002 ------- ------- (Dollars in millions) CLOSED BLOCK LIABILITIES Future policy benefits.................................................... $41,928 $41,207 Other policyholder funds.................................................. 260 279 Policyholder dividends payable............................................ 682 719 Policyholder dividend obligation.......................................... 2,130 1,882 Payables under securities loaned transactions............................. 6,418 4,851 Other liabilities......................................................... 180 433 ------- ------- Total closed block liabilities..................................... 51,598 49,371 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $30,381 and $28,339, respectively).................. 32,348 29,981 Equity securities, at fair value (cost: $217 and $236, respectively)... 250 218 Mortgage loans on real estate.......................................... 7,431 7,032 Policy loans........................................................... 4,036 3,988 Short-term investments................................................. 123 24 Other invested assets.................................................. 108 604 ------- ------- Total investments.................................................. 44,296 41,847 Cash and cash equivalents................................................. 531 435 Accrued investment income................................................. 527 540 Deferred income taxes..................................................... 1,043 1,151 Premiums and other receivables............................................ 164 130 ------- ------- Total assets designated to the closed block........................ 46,561 44,103 ------- ------- Excess of closed block liabilities over assets designated to to the closed block................................................................... 5,037 5,268 ------- ------- Amounts included in accumulated other comprehensive loss: Net unrealized investment gains, net of deferred income tax of $730 and $577, respectively............................ 1,270 1,047 Unrealized derivative gains (losses), net of deferred income tax (benefit) expense of $(28) and $7, respectively.................. (48) 13 Allocated to policyholder dividend obligation, net of deferred income tax benefit of ($778) and ($668), respectively....... (1,352) (1,214) ------- ------- (130) (154) ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities............................................ $ 4,907 $ 5,114 ======= =======
F-42 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Information regarding the policyholder dividend obligation is as follows:
Years Ended December 31, --------------------- 2003 2002 2001 ------ ------ ----- (Dollars in millions) Balance at beginning of year................................... $1,882 $ 708 $ 385 Impact on net income before amounts allocated from policyholder dividend obligation.......................................... 144 157 159 Net investment gains (losses).................................. (144) (157) (159) Change in unrealized investment and derivative gains........... 248 1,174 323 ------ ------ ----- Balance at end of year......................................... $2,130 $1,882 $ 708 ====== ====== =====
Closed block revenues and expenses were as follows:
Years Ended December 31, ----------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) REVENUES Premiums................................................................ $3,365 $3,551 $3,658 Net investment income and other revenues................................ 2,554 2,568 2,547 Net investment gains (losses) (net of amounts allocated from the policyholder dividend obligation of ($144), ($157) and ($159), respectively)......................................................... 16 168 (12) ------ ------ ------ Total revenues....................................................... 5,935 6,287 6,193 ------ ------ ------ EXPENSES Policyholder benefits and claims........................................ 3,660 3,770 3,862 Policyholder dividends.................................................. 1,509 1,573 1,544 Change in policyholder dividend obligation (excludes amounts directly related to net investment gains (losses) of ($144), ($157) and ($159), respectively)......................................................... 144 157 159 Other expenses.......................................................... 297 310 352 ------ ------ ------ Total expenses....................................................... 5,610 5,810 5,917 ------ ------ ------ Revenues net of expenses before income taxes............................ 325 477 276 Income taxes............................................................ 118 173 97 ------ ------ ------ Revenues net of expenses and income taxes............................... $ 207 $ 304 $ 179 ====== ====== ======
The change in maximum future earnings of the closed block is as follows:
Years Ended December 31, ---------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) Balance at end of year.......... $4,907 $5,114 $5,333 Less: Reallocation of assets....... -- 85 -- Balance at beginning of year. 5,114 5,333 5,512 ------ ------ ------ Change during year.............. $ (207) $ (304) $ (179) ====== ====== ======
F-43 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) During the year ended December 31, 2002, the allocation of assets to the closed block was revised to appropriately classify assets in accordance with the plan of demutualization. The reallocation of assets had no impact on consolidated assets or liabilities. Metropolitan Life charges the closed block with federal income taxes, state and local premium taxes, and other additive state or local taxes, as well as investment management expenses relating to the closed block as provided in the plan of demutualization. Metropolitan Life also charges the closed block for expenses of maintaining the policies included in the closed block. Many of the derivative instrument strategies used by the Company are also used for the closed block. The table below provides a summary of the notional amount and fair value of derivatives by hedge accounting classification at:
December 31, 2003 December 31, 2002 --------------------------- --------------------------- Fair Value Fair Value Notional ------------------ Notional ------------------ Amount Assets Liabilities Amount Assets Liabilities -------- ------ ----------- -------- ------ ----------- (Dollars in millions) By Type of Hedge Fair value...... $ 6 $-- $ 1 $ -- $-- $-- Cash flow....... 473 -- 80 128 2 11 Non qualifying.. 90 -- 12 258 32 2 ---- --- --- ---- --- --- Total........ $569 $-- $93 $386 $34 $13 ==== === === ==== === ===
During the years ended December 31, 2003, 2002 and 2001, the closed block recognized net investment expenses of $2 million and net investment income of $1 million and $1 million, respectively, from the periodic settlement of interest rate caps and interest rate, foreign currency and credit default swaps that qualify as accounting hedges under SFAS 133, as amended. During the year ended December 31, 2003, the closed block recognized $1 million in net investment losses related to qualifying fair value hedges. Accordingly, $1 million of unrealized gains on fair value hedged investments was recognized in net investment losses during the year ended December 31, 2003. There were no fair value hedges during the years ended December 31, 2002 and 2001. There were no discontinued fair value hedges during the years ended December 31, 2003, 2002 and 2001. For the years ended December 31, 2003 and 2002, the net amounts accumulated in other comprehensive income relating to cash flow hedges were losses of $76 million and gains of $20 million, respectively. For the years ended December 31, 2003 and 2002, the market value of cash flow hedges decreased by $106 million and increased $4 million, respectively. During the years ended December 31, 2003 and 2002, the closed block recognized other comprehensive net losses of $93 million and other comprehensive net gains of $4 million, respectively, relating to the effective portion of cash flow hedges. During the years ended December 31, 2003, 2002 and 2001, no cash flow hedges were discontinued. For the years ended December 31, 2003 and 2002, $3 million and $4 million of other comprehensive income was reclassified to net investment income, respectively, related to the SFAS 133 transition adjustment. Amounts reclassified for transition adjustment for the year ended December 31, 2001 were insignificant. Approximately $5 million of net losses reported in accumulated other comprehensive income at December 31, 2003 are expected to be reclassified during the year ending December 31, 2004 into net investment losses as the derivatives and underlying investments mature or expire according to their original terms. F-44 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) For the years ended December 31, 2003, 2002 and 2001, scheduled periodic settlement payments on derivative instruments recognized as net investment gains and losses were immaterial. Net investment losses from changes in fair value of $18 million and $11 million and gains of $5 million related to derivatives not qualifying as accounting hedges were recognized for the years ended December 31, 2003, 2002 and 2001, respectively. 7. Debt Debt consisted of the following:
December 31, --------------------- 2003 2002 ------ ------ (Dollars in millions) Surplus notes, interest rates ranging from 7.00% to 7.88%, maturity dates ranging from 2005 to 2025.............................................................. $ 940 $1,632 Capital notes payable to the Holding Company, interest rate of 7.13%, maturity dates ranging from 2032 to 2033................................................ 500 500 Senior notes, interest rates ranging from 6.75% to 7.25%, maturity dates ranging from 2006 to 2011.............................................................. 299 298 Fixed rate notes, interest rates ranging from 1.69% to 12.00%, maturity dates ranging from 2005 to 2009...................................................... 103 33 Capital lease obligations........................................................ 74 21 Other notes with varying interest rates.......................................... 139 140 ------ ------ Total long-term debt............................................................. 2,055 2,624 Total short-term debt............................................................ 3,536 912 ------ ------ Total......................................................................... $5,591 $3,536 ====== ======
The Company maintains committed and unsecured credit facilities aggregating $2,478 million ($1,000 million expiring in 2004, $1,303 million expiring in 2005 and $175 million expiring in 2006). If these facilities were drawn upon, they would bear interest at rates stated in the agreements. The facilities are primarily used for general corporate purposes and as back-up lines of credit for the borrowers' commercial paper program. At December 31, 2003, the Company had drawn approximately $49 million under the facilities expiring in 2005 at interest rates ranging from 4.08% to 5.48% and approximately another $50 million under the facility expiring in 2006 at an interest rate of 1.69%. In April 2003, the Company replaced an expiring $1 billion five-year credit facility with a $1 billion 364-day credit facility and the Holding Company was added as a borrower. In May 2003, the Company replaced an expiring $140 million three-year credit facility, with a $175 million three-year credit facility which expires in 2006. At December 31, 2003, the Company had approximately $616 million in letters of credit from various banks. Payments of interest and principal on the surplus notes, subordinated to all other indebtedness, may be made only with the prior approval of the insurance department of the state of domicile. On November 1, 2003, the Company redeemed the $300 million of 7.45% surplus notes outstanding scheduled to mature on November 1, 2023 at a redemption price of $311 million. The aggregate maturities of long-term debt for the Company are $131 million in 2004, $309 million in 2005, $160 million in 2006, $14 million in 2007, $24 million in 2008 and $1,417 million thereafter. F-45 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 1.1% and a weighted average maturity of 33 days at December 31, 2003. Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 1.4% and a weighted average maturity of 63 days at December 31, 2002. The Company also has other collateralized borrowings with a weighted average coupon rate of 5.07% and a weighted average maturity of 30 days at December 31, 2003. Such securities had a weighted average coupon rate of 5.83% and a weighted average maturity of 34 days at December 31, 2002. Interest expense related to the Company's indebtedness included in other expenses was $265 million, $208 million and $313 million for the years ended December 31, 2003, 2002 and 2001, respectively. 8. Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts GenAmerica Capital I. In June 1997, GenAmerica Corporation ("GenAmerica") issued $125 million of 8.525% capital securities through a wholly-owned subsidiary trust, GenAmerica Capital I. GenAmerica has fully and unconditionally guaranteed, on a subordinated basis, the obligation of the trust under the capital securities and is obligated to mandatorily redeem the securities on June 30, 2027. GenAmerica may prepay the securities any time after June 30, 2007. Capital securities outstanding were $119 million, net of unamortized discounts of $6 million, at both December 31, 2003 and 2002. Interest expense on these instruments is included in other expenses and was $11 million for each of the years ended December 31, 2003, 2002 and 2001. RGA Capital Trust I. In December 2001, a majority-owned subsidiary of the Company, RGA, through its wholly-owned trust, RGA Capital Trust I (the "Trust"), issued 4,500,000 Preferred Income Equity Redeemable Securities ("PIERS") Units. Each PIERS unit consists of (i) a preferred security issued by the trust, having a stated liquidation amount of $50 per unit, representing an undivided beneficial ownership interest in the assets of the Trust, which consist solely of junior subordinated debentures issued by RGA which have a principal amount at maturity of $50 and a stated maturity of March 18, 2051, and (ii) a warrant to purchase, at any time prior to December 15, 2050, 1.2508 shares of RGA stock at an exercise price of $50. The fair market value of the warrant on the issuance date was $14.87 and is detachable from the preferred security. RGA fully and unconditionally guarantees, on a subordinated basis, the obligations of the Trust under the preferred securities. The preferred securities and subordinated debentures were issued at a discount (original issue discount) to the face or liquidation value of $14.87 per security. The securities will accrete to their $50 face/liquidation value over the life of the security on a level yield basis. The weighted average effective interest rate on the preferred securities and the subordinated debentures is 8.25% per annum. Capital securities outstanding were $158 million, net of unamortized discount of $67 million, at both December 31, 2003 and 2002. 9. September 11, 2001 Tragedies On September 11, 2001, terrorist attacks occurred in New York, Washington, D.C. and Pennsylvania (the "tragedies") triggering a significant loss of life and property, which had an adverse impact on certain of the Company's businesses. The Company's original estimate of the total insurance losses related to the tragedies, which was recorded in the third quarter of 2001, was $208 million, net of income taxes of $117 million. As of December 31, 2003 and 2002, the Company's remaining liability for unpaid and future claims associated with the tragedies was $9 million and $47 million, respectively, principally related to disability coverages. This estimate has been and will continue to be subject to revision in subsequent periods, as claims are received from insureds and processed. Any revision to the estimate of losses in subsequent periods will affect net income in such periods. F-46 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 10. Business Realignment Initiatives During the fourth quarter of 2001, the Company implemented several business realignment initiatives, which resulted from a strategic review of operations and an ongoing commitment to reduce expenses. The impact of these actions on a segment basis were charges of $399 million in Institutional, $97 million in Individual and $3 million in Auto & Home. The liability at December 31, 2003 and 2002 was $27 million and $40 million, in the Institutional segment and $9 million and $14 million, in the Individual segment, respectively. The remaining liability is due to certain contractual obligations. The remaining liability in the Individual segment as of December 31, 2002 does not include $4 million, related to MetLife Investors Group, Inc., a subsidiary sold to the Holding Company in December 2002. There was no liability remaining for Metlife Investors Group, Inc., as of December 31, 2003. 11. Income Taxes The provision for income taxes for continuing operations was as follows:
Years Ended December 31, -------------------- 2003 2002 2001 ---- ----- ---- (Dollars in millions) Current: Federal................ $357 $ 826 $(83) State and local........ 19 (18) (4) Foreign................ 2 (5) 15 ---- ----- ---- 378 803 (72) ---- ----- ---- Deferred: Federal................ 283 (322) 813 State and local........ 27 17 32 Foreign................ -- 12 1 ---- ----- ---- 310 (293) 846 ---- ----- ---- Provision for income taxes $688 $ 510 $774 ==== ===== ====
Reconciliations of the income tax provision at the U.S. statutory rate to the provision for income taxes as reported for continuing operations were as follows:
Years Ended December 31, -------------------- 2003 2002 2001 ----- ---- ---- (Dollars in millions) Tax provision at U.S. statutory rate.............. $ 845 $578 $754 Tax effect of: Tax exempt investment income................... (101) (86) (82) State and local income taxes................... 42 18 29 Foreign operations net of foreign income taxes. (17) 4 4 Prior year taxes............................... (25) (8) 36 Sales of businesses............................ -- -- 5 Other, net..................................... (56) 4 28 ----- ---- ---- Provision for income taxes........................ $ 688 $510 $774 ===== ==== ====
F-47 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
December 31, -------------------- 2003 2002 ------- ------- (Dollars in millions) Deferred income tax assets: Policyholder liabilities and receivables. $ 2,597 $ 3,020 Net operating losses..................... 245 187 Litigation related....................... 72 95 Other.................................... 179 286 ------- ------- 3,093 3,588 Less: Valuation allowance................ 16 14 ------- ------- 3,077 3,574 ------- ------- Deferred income tax liabilities: Investments.............................. 1,352 1,597 Deferred policy acquisition costs........ 2,815 2,699 Employee benefits........................ 151 65 Net unrealized investment gains.......... 1,397 1,124 Other.................................... 60 36 ------- ------- 5,775 5,521 ------- ------- Net deferred income tax liability........... $(2,698) $(1,947) ======= =======
Domestic net operating loss carryforwards amount to $650 million at December 31, 2003 and will expire beginning in 2013. Foreign net operating loss carryforwards amount to $55 million at December 31, 2003 and were generated in various foreign countries with expiration periods of five years to infinity. The Company has recorded a valuation allowance related to tax benefits of certain foreign net operating loss carryforwards. The valuation allowance reflects management's assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain foreign net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable. The 2003 tax provision also includes an adjustment revising the estimate of income taxes for 2002. The Internal Revenue Service has audited the Company for the years through and including 1996. The Company is being audited for the years 1997, 1998 and 1999. The Company believes that any adjustments that might be required for open years will not have a material effect on its consolidated financial statements. 12. Commitments, Contingencies and Guarantees Litigation Sales Practices Claims Over the past several years, Metropolitan Life, New England Mutual Life Insurance Company ("New England Mutual") and General American Life Insurance Company ("General American") have faced numerous claims, including class action lawsuits, alleging improper marketing and sales of individual life insurance policies or annuities. These lawsuits are generally referred to as "sales practices claims." F-48 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) In December 1999, a federal court approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies and annuity contracts or certificates issued pursuant to individual sales in the United States by Metropolitan Life, MIAC or Metropolitan Tower Life Insurance Company between January 1, 1982 and December 31, 1997. The class includes owners of approximately six million in-force or terminated insurance policies and approximately one million in-force or terminated annuity contracts or certificates. Similar sales practices class actions against New England Mutual, with which Metropolitan Life merged in 1996, and General American, which was acquired in 2000, have been settled. In October 2000, a federal court approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies issued by New England Mutual between January 1, 1983 through August 31, 1996. The class includes owners of approximately 600,000 in-force or terminated policies. A federal court has approved a settlement resolving sales practices claims on behalf of a class of owners of permanent life insurance policies issued by General American between January 1, 1982 through December 31, 1996. An appellate court has affirmed the order approving the settlement. The class includes owners of approximately 250,000 in-force or terminated policies. Certain class members have opted out of the class action settlements noted above and have brought or continued non-class action sales practices lawsuits. In addition, other sales practices lawsuits have been brought. As of December 31, 2003, there are approximately 366 sales practices lawsuits pending against Metropolitan Life, approximately 40 sales practices lawsuits pending against New England Mutual and approximately 25 sales practices lawsuits pending against General American. Metropolitan Life, New England Mutual and General American continue to defend themselves vigorously against these lawsuits. Some individual sales practices claims have been resolved through settlement, won by dispositive motions, or, in a few instances, have gone to trial. Most of the current cases seek substantial damages, including in some cases punitive and treble damages and attorneys' fees. Additional litigation relating to the Company's marketing and sales of individual life insurance may be commenced in the future. The Metropolitan Life class action settlement did not resolve two putative class actions involving sales practices claims filed against Metropolitan Life in Canada, and these actions remain pending. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for sales practices claims against Metropolitan Life, New England Mutual and General American. Regulatory authorities in a small number of states have had investigations or inquiries relating to Metropolitan Life's, New England Mutual's or General American's sales of individual life insurance policies or annuities. Over the past several years, these and a number of investigations by other regulatory authorities were resolved for monetary payments and certain other relief. The Company may continue to resolve investigations in a similar manner. Asbestos-Related Claims Metropolitan Life is also a defendant in thousands of lawsuits seeking compensatory and punitive damages for personal injuries allegedly caused by exposure to asbestos or asbestos-containing products. Metropolitan Life has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products nor has Metropolitan Life issued liability or workers' compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos-containing products. Rather, these lawsuits have principally been based upon allegations relating to certain research, publication and F-49 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) other activities of one or more of Metropolitan Life's employees during the period from the 1920's through approximately the 1950's and have alleged that Metropolitan Life learned or should have learned of certain health risks posed by asbestos and, among other things, improperly publicized or failed to disclose those health risks. Metropolitan Life believes that it should not have legal liability in such cases. Legal theories asserted against Metropolitan Life have included negligence, intentional tort claims and conspiracy claims concerning the health risks associated with asbestos. Although Metropolitan Life believes it has meritorious defenses to these claims, and has not suffered any adverse monetary judgments in respect of these claims, due to the risks and expenses of litigation, almost all past cases have been resolved by settlements. Metropolitan Life's defenses (beyond denial of certain factual allegations) to plaintiffs' claims include that: (i) Metropolitan Life owed no duty to the plaintiffs--it had no special relationship with the plaintiffs and did not manufacture, produce, distribute or sell the asbestos products that allegedly injured plaintiffs; (ii) plaintiffs cannot demonstrate justifiable detrimental reliance; and (iii) plaintiffs cannot demonstrate proximate causation. In defending asbestos cases, Metropolitan Life selects various strategies depending upon the jurisdictions in which such cases are brought and other factors which, in Metropolitan Life's judgment, best protect Metropolitan Life's interests. Strategies include seeking to settle or compromise claims, motions challenging the legal or factual basis for such claims or defending on the merits at trial. In 2002 and 2003, trial courts in California, Utah and Georgia granted motions dismissing claims against Metropolitan Life on some or all of the above grounds. Other courts have denied motions brought by Metropolitan Life to dismiss cases without the necessity of trial. There can be no assurance that Metropolitan Life will receive favorable decisions on motions in the future. Metropolitan Life intends to continue to exercise its best judgment regarding settlement or defense of such cases, including when trials of these cases are appropriate. The following table sets forth the total number of asbestos personal injury claims pending against Metropolitan Life as of the dates indicated, the number of new claims during the years ended on those dates and the total settlement payments made to resolve asbestos personal injury claims during those years:
At or for the Years Ended December 31, ------------------------- 2003 2002 2001 -------- -------- ------- (Dollars in millions) Asbestos personal injury claims at year end (approximate) 111,700 106,500 89,000 Number of new claims during the year (approximate)....... 60,300 66,000 59,500 Settlement payments during the year (1).................. $ 84.2 $ 95.1 $ 90.7
- -------- (1)Settlement payments represent payments made by Metropolitan Life during the year in connection with settlements made in that year and in prior years. Amounts do not include Metropolitan Life's attorneys' fees and expenses and do not reflect amounts received from insurance carriers. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. The ability of Metropolitan Life to estimate its ultimate asbestos exposure is subject to considerable uncertainty due to numerous factors. The availability of data is limited and it is difficult to predict with any certainty numerous variables that can affect liability estimates, including the number of future claims, the cost to resolve claims, the disease mix and severity of disease, the jurisdiction of claims filed, tort reform efforts and the impact of any possible future adverse verdicts and their amounts. Recent bankruptcies of other companies involved in asbestos litigation, as well as advertising by plaintiffs' asbestos lawyers, may result in an increase in the number of claims and the cost of resolving claims, as well as the number of trials and possible adverse verdicts Metropolitan Life may experience. Plaintiffs are seeking F-50 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) additional funds from defendants, including Metropolitan Life, in light of such recent bankruptcies by certain other defendants. In addition, publicity regarding legislative reform efforts may result in an increase in the number of claims. Metropolitan Life will continue to study its claims experience, review external literature regarding asbestos claims experience in the United States and consider numerous variables that can affect its asbestos liability exposure, including bankruptcies of other companies involved in asbestos litigation and legislative and judicial developments, to identify trends and to assess their impact on the recorded asbestos liability. The number of asbestos cases that may be brought or the aggregate amount of any liability that Metropolitan Life may ultimately incur is uncertain. Accordingly, it is reasonably possible that the Company's total exposure to asbestos claims may be greater than the liability recorded by the Company in its consolidated financial statements and that future charges to income may be necessary. While the potential future charges could be material in particular quarterly or annual periods in which they are recorded, based on information currently known by management, it does not believe any such charges are likely to have a material adverse effect on the Company's consolidated financial position. During the fourth quarter of 2002, Metropolitan Life analyzed its claims experience and reviewed external publications and numerous variables to identify trends and assessed their impact on its recorded asbestos liability. Certain publications suggested a trend towards more asbestos-related claims and a greater awareness of asbestos litigation generally by potential plaintiffs and plaintiffs' lawyers. Plaintiffs' lawyers continue to advertise heavily with respect to asbestos litigation. Bankruptcies and reorganizations of other defendants in asbestos litigation may increase the pressures on remaining defendants, including Metropolitan Life. Through the first nine months of 2002, the number of new claims received by Metropolitan Life was lower than those received during the comparable 2001 period. However, the number of new claims received by Metropolitan Life during the fourth quarter of 2002 was significantly higher than those received in the prior year quarter, resulting in more new claims being received by Metropolitan Life in 2002 than in 2001. Factors considered also included expected trends in filing cases, the dates of initial exposure of plaintiffs to asbestos, the likely percentage of total asbestos claims which included Metropolitan Life as a defendant and experience in claims settlement negotiations. Metropolitan Life also considered views derived from actuarial calculations it made in the fourth quarter of 2002. These calculations were made using, among other things, then current information regarding Metropolitan Life's claims and settlement experience, information available in public reports, as well as a study regarding the possible future incidence of mesothelioma. Based on all of the above information, including greater than expected claims experience in 2000, 2001 and 2002, Metropolitan Life expected to receive more claims in the future than it had previously expected. Previously, Metropolitan Life's liability reflected that the increase in asbestos-related claims was a result of an acceleration in the reporting of such claims; the liability now reflects that such an increase is also the result of an increase in the total number of asbestos-related claims expected to be received by Metropolitan Life. Accordingly, Metropolitan Life increased its recorded liability for asbestos-related claims by $402 million from approximately $820 million to $1,225 million at December 31, 2002. This total recorded asbestos-related liability (after the self-insured retention) is within the coverage of the excess insurance policies discussed below. The aforementioned analysis was updated through December 31, 2003. During 1998, Metropolitan Life paid $878 million in premiums for excess insurance policies for asbestos-related claims. The excess insurance policies for asbestos-related claims provide for recovery of losses up to $1,500 million, which is in excess of a $400 million self-insured retention. The asbestos-related policies are also subject to annual and per-claim sublimits. Amounts are recoverable under the policies annually with respect to claims paid during the prior calendar year. Although amounts paid by Metropolitan Life in any given year that may be recoverable in the next calendar year under the policies will be reflected as a reduction in the Company's F-51 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) operating cash flows for the year in which they are paid, management believes that the payments will not have a material adverse effect on the Company's liquidity. Each asbestos-related policy contains an experience fund and a reference fund that provides for payments to Metropolitan Life at the commutation date if the reference fund is greater than zero at commutation or pro rata reductions from time to time in the loss reimbursements to Metropolitan Life if the cumulative return on the reference fund is less than the return specified in the experience fund. The return in the reference fund is tied to performance of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. A claim was made under the excess insurance policies in 2003 for the amounts paid with respect to asbestos litigation in excess of the retention. Based on performance of the reference fund, at December 31, 2002, the loss reimbursements to Metropolitan Life in 2003 and the recoverable with respect to later periods was $42 million less than the amount of the recorded losses. Such foregone loss reimbursements may be recovered upon commutation depending upon future performance of the reference fund. The foregone loss reimbursements were estimated to be $9 million with respect to 2002 claims and estimated to be $42 million in the aggregate. The $402 million increase in the recorded liability for asbestos claims less the foregone loss reimbursement adjustment of $42 million ($27 million, net of income tax) resulted in an increase in the recoverable of $360 million. At December 31, 2002, a portion ($136 million) of the $360 million recoverable was recognized in income while the remainder ($224 million) was recorded as a deferred gain which is expected to be recognized in income in the future over the estimated settlement period of the excess insurance policies. The $402 million increase in the recorded liability, less the portion of the recoverable recognized in income, resulted in a net expense of $266 million ($169 million, net of income tax). The $360 million recoverable may change depending on the future performance of the Standard & Poor's 500 Index and the Lehman Brothers Aggregate Bond Index. As a result of the excess insurance policies, $1,237 million is recorded as a recoverable at December 31, 2002 ($224 million of which is recorded as a deferred gain as mentioned above); the amount includes recoveries for amounts paid in 2002. If at some point in the future, the Company believes the liability for probable and estimable losses for asbestos-related claims should be increased, an expense would be recorded and the insurance recoverable would be adjusted subject to the terms, conditions and limits of the excess insurance policies. Portions of the change in the insurance recoverable would be recorded as a deferred gain and amortized into income over the estimated remaining settlement period of the insurance policies. In 2003, Metropolitan Life also has been named as a defendant in a small number of silicosis, welding and mixed dust cases. The cases are pending in Mississippi, Texas, Ohio, Pennsylvania, West Virginia, Louisiana, Kentucky, Georgia, Alabama, Illinois and Arkansas. The Company intends to defend itself vigorously against these cases. Demutualization Actions Several lawsuits were brought in 2000 challenging the fairness of Metropolitan Life's plan of reorganization, as amended (the "plan") and the adequacy and accuracy of Metropolitan Life's disclosure to policyholders regarding the plan. These actions name as defendants some or all of Metropolitan Life, the Holding Company, the individual directors, the New York Superintendent of Insurance (the "Superintendent") and the underwriters for MetLife, Inc.'s initial public offering, Goldman Sachs & Company and Credit Suisse First Boston. Five purported class actions pending in the New York state court in New York County were consolidated within the commercial part. In addition, there remained a separate purported class action in New York state court in New York County. On February 21, 2003, the defendants' motions to dismiss both the consolidated action and separate action were granted; leave to replead as a proceeding under Article 78 of New York's Civil Practice Law and Rules has been granted in the separate action. Plaintiffs in the consolidated action and separate action F-52 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) have filed notices of appeal. Another purported class action in New York state court in Kings County has been voluntarily held in abeyance by plaintiffs. The plaintiffs in the state court class actions seek injunctive, declaratory and compensatory relief, as well as an accounting and, in some instances, punitive damages. Some of the plaintiffs in the above described actions also have brought a proceeding under Article 78 of New York's Civil Practice Law and Rules challenging the Opinion and Decision of the Superintendent who approved the plan. In this proceeding, petitioners seek to vacate the Superintendent's Opinion and Decision and enjoin him from granting final approval of the plan. This case also is being held in abeyance by plaintiffs. Three purported class actions were filed in the United States District Court for the Eastern District of New York claiming violation of the Securities Act of 1933. The plaintiffs in these actions, which have been consolidated, claim that the Policyholder Information Booklets relating to the plan failed to disclose certain material facts and seek rescission and compensatory damages. Metropolitan Life's motion to dismiss these three cases was denied in 2001. On February 4, 2003, plaintiffs filed a consolidated amended complaint adding a fraud claim under the Securities Exchange Act of 1934. Metropolitan Life has served a motion to dismiss the consolidated amended complaint and a motion for summary judgment in this action. Metropolitan Life, the Holding Company and the individual defendants believe they have meritorious defenses to the plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims in these actions. In 2001, a lawsuit was filed in the Superior Court of Justice, Ontario, Canada on behalf of a proposed class of certain former Canadian policyholders against the Holding Company, Metropolitan Life, and Metropolitan Life Insurance Company of Canada. Plaintiffs' allegations concern the way that their policies were treated in connection with the demutualization of Metropolitan Life; they seek damages, declarations, and other non-pecuniary relief. The defendants believe they have meritorious defenses to the plaintiffs' claims and will contest vigorously all of plaintiffs' claims in this matter. In July 2002, a lawsuit was filed in the United States District Court for the Eastern District of Texas on behalf of a proposed class comprised of the settlement class in the Metropolitan Life sales practices class action settlement approved in December 1999 by the United States District Court for the Western District of Pennsylvania. After the defendants' motion to transfer the lawsuit to the Western District of Pennsylvania was granted, plaintiffs filed an amended complaint alleging that the treatment of the cost of the sales practices settlement in connection with the demutualization of Metropolitan Life breached the terms of the settlement. Plaintiffs sought compensatory and punitive damages, as well as attorneys' fees and costs. In October 2003, the court granted defendants' motion to dismiss the action. Plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit. In January 2004, the appeal was dismissed. Race-Conscious Underwriting Claims Insurance departments in a number of states initiated inquiries in 2000 about possible race-conscious underwriting of life insurance. These inquiries generally have been directed to all life insurers licensed in their respective states, including Metropolitan Life and certain of its affiliates. The New York Insurance Department has concluded its examination of Metropolitan Life concerning possible past race-conscious underwriting practices. Four purported class action lawsuits filed against Metropolitan Life in 2000 and 2001 alleging racial discrimination in the marketing, sale, and administration of life insurance policies have been consolidated in the United States District Court for the Southern District of New York. On April 28, 2003, the United States District Court approved a class-action settlement of the consolidated actions. Several persons filed notices of appeal from the order approving the settlement, but subsequently the appeals were dismissed. Metropolitan Life also has entered into settlement agreements to resolve the regulatory examination. Metropolitan Life recorded a charge in the fourth quarter of 2001 in connection with the anticipated resolution of these matters. The Company believes the remaining portion of the previously recorded charge is adequate to cover the costs associated with the resolution of these matters. F-53 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Sixteen lawsuits involving approximately 130 plaintiffs have been filed in federal and state court in Alabama, Mississippi and Tennessee alleging federal and/or state law claims of racial discrimination in connection with the sale, formation, administration or servicing of life insurance policies. Metropolitan Life is contesting vigorously plaintiffs' claims in these actions. Other In 2001, a putative class action was filed against Metropolitan Life in the United States District Court for the Southern District of New York alleging gender discrimination and retaliation in the MetLife Financial Services unit of the Individual segment. The plaintiffs were seeking unspecified compensatory damages, punitive damages, a declaration that the alleged practices were discriminatory and illegal, injunctive relief requiring Metropolitan Life to discontinue the alleged discriminatory practices, an order restoring class members to their rightful positions (or appropriate compensation in lieu thereof), and other relief. Plaintiffs filed a motion for class certification. Opposition papers were filed by Metropolitan Life. In August 2003, the court granted preliminary approval to a settlement of the lawsuit. At the fairness hearing held on November 6, 2003, the court approved the settlement of the lawsuit. Implementation of the settlement has commenced in 2004. A putative class action lawsuit is pending in the United States District Court for the District of Columbia, in which plaintiffs allege that they were denied certain ad hoc pension increases awarded to retirees under the Metropolitan Life retirement plan. The ad hoc pension increases were awarded only to retirees (i.e., individuals who were entitled to an immediate retirement benefit upon their termination of employment) and not available to individuals like these plaintiffs whose employment, or whose spouses' employment, had terminated before they became eligible for an immediate retirement benefit. The plaintiffs seek to represent a class consisting of former Metropolitan Life employees, or their surviving spouses, who are receiving deferred vested annuity payments under the retirement plan and who were allegedly eligible to receive the ad hoc pension increases awarded in 1977, 1980, 1989, 1992, 1996 and 2001, as well as increases awarded in earlier years. Metropolitan Life is vigorously defending itself against these allegations. A lawsuit was filed against Metropolitan Life in Ontario, Canada by Clarica Life Insurance Company ("Clarica") regarding the sale of the majority of Metropolitan Life's Canadian operation to Clarica in 1998. Clarica alleged that Metropolitan Life breached certain representations and warranties contained in the sale agreement, that Metropolitan Life made misrepresentations upon which Clarica relied during the negotiations and that Metropolitan Life was negligent in the performance of certain of its obligations and duties under the sale agreement. The parties settled the matter in January 2004. The settlement will have no material impact on the Company's consolidated financial results in 2004. A reinsurer of universal life policy liabilities of Metropolitan Life and certain of its affiliates commenced an arbitration proceeding and sought rescission, claiming that, during underwriting, material misrepresentations or omissions were made to the reinsurer. The reinsurer also sent a notice purporting to increase reinsurance premium rates. In December 2003, the arbitration panel denied the reinsurer's attempt to rescind the contract and granted the reinsurer's request to raise rates. As a result of the panel's rulings, liabilities ceded to the reinsurer were recaptured effective May 5, 2003. The recapture had no material impact on the Company's consolidated financial results in 2003. As previously reported, the SEC is conducting a formal investigation of New England Securities Corporation ("NES"), an indirect subsidiary of New England Life Insurance Company, in response to NES informing the SEC that certain systems and controls relating to one NES advisory program were not operating effectively. NES is cooperating fully with the SEC. F-54 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Prior to filing MetLife's June 30, 2003 Form 10-Q, MetLife announced a $31 million after-tax charge resulting from certain improperly deferred expenses at an affiliate, New England Financial. MetLife notified the SEC about the nature of this charge prior to its announcement. The SEC is pursuing a formal investigation of the matter and MetLife is fully cooperating with the investigation. The American Dental Association and two individual providers have sued MetLife, Mutual of Omaha and Cigna in a purported class action lawsuit brought in a Florida federal district court. The plaintiffs purport to represent a nationwide class of in-network providers who allege that their claims are being wrongfully reduced by downcoding, bundling, and the improper use and programming of software. The complaint alleges federal racketeering and various state law theories of liability. MetLife is vigorously defending the case and a motion to dismiss has been filed. A purported class action in which a policyholder seeks to represent a class of owners of participating life insurance policies is pending in state court in New York. Plaintiff asserts that Metropolitan Life breached her policy in the manner in which it allocated investment income across lines of business during a period ending with the 2000 demutualization. In August 2003, an appellate court affirmed the dismissal of fraud claims in this action. MetLife is vigorously defending the case. Regulatory bodies have contacted the Company and have requested information relating to market timing and late trading of mutual funds and variable insurance products. The Company believes that these inquiries are similar to those made to many financial services companies as part of an industry-wide investigation by various regulatory agencies into the practices, policies and procedures relating to trading in mutual fund shares. State Street Research Investment Services, one of the Company's indirect broker/dealer subsidiaries, has entered into a settlement with the National Association of Securities Dealers ("NASD") resolving all outstanding issues relating to its investigation. The SEC has commenced an investigation with respect to market timing and late trading in a limited number of privately-placed variable insurance contracts that were sold through General American. The Company is in the process of responding and is fully cooperating with regard to these information requests and investigations. The Company at the present time is not aware of any systemic problems with respect to such matters that may have a material adverse effect on the Company's consolidated financial position. Various litigation, claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. Summary It is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, except as noted above in connection with specific matters. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's consolidated financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-55 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Leases In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements were as follows:
Gross Rental Sublease Rental Income Income Payments ------ -------- -------- (Dollars in millions) 2004.............................................. $ 399 $16 $194 2005.............................................. $ 366 $15 $178 2006.............................................. $ 336 $14 $158 2007.............................................. $ 293 $12 $137 2008.............................................. $ 232 $10 $108 Thereafter........................................ $1,402 $13 $698
Commitments to Fund Partnership Investments The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1,378 million and $1,667 million at December 31, 2003 and 2002, respectively. The Company anticipates that these amounts will be invested in the partnerships over the next three to five years. Guarantees In the course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from $1 million to $800 million, while in other cases such limitations are not specified or applicable. Since certain of these obligations are not subject to limitations, the Company does not believe that it is possible to determine the maximum potential amount due under these guarantees in the future. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies other of its agents for liabilities incurred as a result of their representation of the Company's interests. Since these indemnities are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under these indemnities in the future. The fair value of such indemnities, guarantees and commitments entered into was insignificant. The Company's recorded liability at December 31, 2003 and 2002 for indemnities, guarantees and commitments provided to third parties prior to January 1, 2003 was insignificant. F-56 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company writes credit default swap obligations requiring payment of principal due in exchange for the reference credit obligation, depending on the nature or occurrence of specified credit events for the referenced entities. In the event of a specified credit event, the Company's maximum amount at risk, assuming the value of the referenced credits become worthless, is $479 million at December 31, 2003. The credit default swaps expire at various times during the next four years. 13. Employee Benefit Plans Pension Benefit and Other Benefit Plans The Company is both the sponsor and administrator of defined benefit pension plans covering eligible employees and sales representatives of the Company. Retirement benefits are based upon years of credited service and final average or career average earnings history. The Company also provides certain postemployment benefits and certain postretirement health care and life insurance benefits for retired employees through insurance contracts. Substantially all of the Company's employees may, in accordance with the plans applicable to the postretirement benefits, become eligible for these benefits if they attain retirement age, with sufficient service, while working for the Company. F-57 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The Company uses a December 31 measurement date for all of its pension and postretirement benefit plans. Obligations, Funded Status and Net Periodic Benefit Costs
December 31, ------------------------------- Pension Benefits Other Benefits -------------- --------------- 2003 2002 2003 2002 ------ ------ ------- ------ (Dollars in millions) Change in projected benefit obligation: Projected benefit obligation at beginning of year...... $4,747 $4,426 $ 1,878 $1,669 Service cost........................................ 122 104 38 36 Interest cost....................................... 311 307 122 123 Acquisitions and divestitures....................... (1) (110) -- -- Actuarial losses.................................... 352 307 167 342 Curtailments and terminations....................... (7) (3) (4) (2) Change in benefits.................................. (1) -- (1) (168) Transfers in (out) of controlled group.............. (181) -- (77) -- Benefits paid....................................... (287) (284) (122) (122) ------ ------ ------- ------ Projected benefit obligation at end of year............ 5,055 4,747 2,001 1,878 ------ ------ ------- ------ Change in plan assets: Contract value of plan assets at beginning of year..... 4,008 4,161 965 1,169 Actual return on plan assets........................ 632 (185) 112 (92) Acquisitions and divestitures....................... (1) (110) -- -- Employer and participant contributions.............. 340 426 46 10 Transfers in (out) of controlled group.............. (186) -- (2) -- Benefits paid....................................... (287) (284) (122) (122) ------ ------ ------- ------ Contract value of plan assets at end of year........... 4,506 4,008 999 965 ------ ------ ------- ------ Under funded........................................... (549) (739) (1,002) (913) Unrecognized net asset at transition................... 1 -- -- -- Unrecognized net actuarial losses...................... 1,438 1,507 352 262 Unrecognized prior service cost........................ 82 101 (175) (208) ------ ------ ------- ------ Prepaid (accrued) benefit cost......................... $ 972 $ 869 $ (825) $ (859) ====== ====== ======= ====== Qualified plan prepaid pension cost.................... $1,296 $1,164 Non-qualified plan accrued pension cost................ (468) (351) Unamortized prior service cost......................... 14 -- Accumulated other comprehensive loss................... 130 56 ------ ------ Prepaid benefit cost................................... $ 972 $ 869 ====== ======
The aggregate projected benefit obligation and aggregate contract value of plan assets for the pension plans were as follows:
Qualified Plan Non-Qualified Plan Total ---------------- ----------------- ---------------- 2003 2002 2003 2002 2003 2002 ------- ------- ----- ----- ------- ------- (Dollars in millions) Aggregate projected benefit obligation....................... $(4,526) $(4,273) $(529) $(474) $(5,055) $(4,747) Aggregate contract value of plan assets (principally Company contracts)....................... 4,506 4,008 -- -- 4,506 4,008 ------- ------- ----- ----- ------- ------- Under funded....................... $ (20) $ (265) $(529) $(474) $ (549) $ (739) ======= ======= ===== ===== ======= =======
F-58 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The accumulated benefit obligation for all defined benefit pension plans was $4,869 million and $4,224 million at December 31, 2003 and 2002, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets:
December 31, ------------------ 2003 2002 ---- ---- (Dollars in millions) Projected benefit obligation.. $546 $489 Accumulated benefit obligation $468 $357 Fair value of plan assets..... $ 12 $ 9
Information for pension and postretirement plans with a projected benefit obligation in excess of plan assets:
December 31, ------------------------------------ Pension Benefits Other Benefits ------------------- ---------------- 2003 2002 2003 2002 ------ ------ ------ ------ (Dollars in millions) Projected benefit obligation $5,046 $4,739 $2,001 $1,878 Fair value of plan assets... $4,486 $3,991 $1,003 $ 965
The components of net periodic benefit cost were as follows:
Pension Benefits Other Benefits ------------------- ----------------- 2003 2002 2001 2003 2002 2001 ----- ----- ----- ---- ---- ----- (Dollars in millions) Service cost.................................. $ 122 $ 104 $ 104 $ 38 $ 36 $ 34 Interest cost................................. 311 307 308 122 123 115 Expected return on plan assets................ (331) (354) (402) (71) (93) (108) Amortization of prior actuarial losses (gains) 102 33 (2) (12) (9) (27) Curtailment cost.............................. 10 11 21 3 4 6 ----- ----- ----- ---- ---- ----- Net periodic benefit cost..................... $ 214 $ 101 $ 29 $ 80 $ 61 $ 20 ===== ===== ===== ==== ==== =====
Assumptions Assumptions used in determining benefit obligations were as follows:
December 31, ------------------------------------ Pension Benefits Other Benefits --------------- -------------------- 2003 2002 2003 2002 --------- ----- --------- ---------- Discount rate................ 6.1%-6.5% 6.75% 6.1%-6.5% 6.5%-6.75% Rate of compensation increase 4%-8% 4%-8% N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
December 31, ---------------------------------------- Pension Benefits Other Benefits ------------------ --------------------- 2003 2002 2003 2002 ---------- ------- ---------- ---------- Discount rate.................. 6.5%-6.75% 6%-7.4% 6.5%-6.75% 6.5%-7.40% Expected rate of return on plan assets....................... 8%-8.75% 8%-9% 3.79%-8.5% 5.2%-9 % Rate of compensation increase.. 4%-8 % 4%-8% N/A N/A
F-59 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The discount rate is based on the yield of a hypothetical portfolio of high-quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long-term historical returns of the plan assets by sector, adjusted for the Company's long-term expectations on the performance of the markets. While the precise expected return derived using this approach will fluctuate from year to year, the Company's policy is to hold this long-term assumption constant as long as it remains within a reasonable tolerance from the derived rate. The assumed health care cost trend rates used in measuring the accumulated nonpension postretirement benefit obligation were as follows:
December 31, ----------------------------------------------- 2003 2002 ------------------------ ---------------------- Pre-Medicare eligible claims 8.5% down to 5% in 2010 9% down to 5% in 2010 Medicare eligible claims.... 10.5% down to 5% in 2014 11% down to 5% in 2014
Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One Percent One Percent Increase Decrease ----------- ----------- (Dollars in millions) Effect on total of service and interest cost components $ 10 $ (9) Effect of accumulated postretirement benefit obligation $108 $(105)
Plan Assets The weighted average allocation of pension plan and other benefit plan assets is as follows:
December 31, ------------------------------ Pension Benefits Other Benefits --------------- ------------- 2003 2002 2003 2002 Asset Category ---- ---- ---- ---- Equity securities 52% 39% 38% 36% Fixed maturities. 39% 51% 61% 63% Real estate...... 9% 10% -- -- Other............ -- -- 1% 1% --- --- --- --- Total......... 100% 100% 100% 100% === === === ===
The weighted average target allocation of pension plan and other benefit plan assets for 2004 is as follows:
Pension Benefits Other Benefits ---------------- -------------- Asset Category Equity securities 35%-60% 25%-40% Fixed maturities. 35%-70% 50%-80% Real estate...... 0%-15% N/A Other............ 0%-20% 0%-10%
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification and partial liability immunization. Adjustments are made to target allocations based on the Company's assessment of the impact of economic factors and market conditions. F-60 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Cash Flows The Company expects to contribute $488 million to its pension plans and $87 million to its other benefit plans during 2004. The following benefit payments, which reflect expected future service as appropriate, are expected to be paid:
Pension Benefits Other Benefits ---------------- -------------- (Dollars in millions) 2004..... $ 326 $115 2005..... $ 297 $119 2006..... $ 309 $123 2007..... $ 313 $128 2008..... $ 321 $131 2009-2013 $1,771 $711
Savings and Investment Plans The Company sponsors savings and investment plans for substantially all employees under which the Company matches a portion of employee contributions. The Company contributed $59 million, $58 million and $60 million for the years ended December 31, 2003, 2002 and 2001, respectively. 14. Equity Preferred Stock On December 16, 2003, the Holding Company contributed 2,532,600 shares of common stock to the Company in exchange for 93,402 shares of Series A Cumulative Preferred Stock ("the Preferred Shares"). Holders of the Preferred Shares are entitled to receive cumulative cash dividends at the annual applicable rate of 7% times the Liquidation Preference of $1,000 per share payable quarterly, when and if declared by the Board of Directors. Holders of the Preferred Shares have no voting rights, except as required by applicable law. The Preferred Shares rank senior to the common stock. The Preferred Shares are redeemable at the option of the Company at any time, to the extent that any such redemption shall not violate applicable provisions of the laws of the State of Missouri. The Preferred Shares are redeemable at a price equal to the par value per share plus any amount equal to accumulated and unpaid dividends. Dividend Restrictions Under the New York Insurance Law, Metropolitan Life is permitted without prior insurance regulatory clearance to pay a stockholder dividend to the Holding Company as long as the aggregate amount of all such dividends in any calendar year does not exceed the lesser of (i) 10% of its surplus to policyholders as of the immediately preceding calendar year, and (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). Metropolitan Life will be permitted to pay a cash dividend to the Holding Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution. Under the New York Insurance Law, the Superintendent has broad discretion in determining whether the financial condition of a stock life insurance company would support the payment of such dividends to its stockholders. The Department has established informal guidelines for such determinations. F-61 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. For the year ended December 31, 2003, Metropolitan Life paid to MetLife, Inc. $698 million in dividends for which prior insurance regulatory clearance was not required and $750 million in special dividends, as approved by the Superintendent. For the year ended December 31, 2002, Metropolitan Life paid to MetLife, Inc. $535 million in dividends for which prior insurance regulatory clearance was not required and $369 million in special dividends, as approved by the Superintendent. For the year ended December 31, 2001, Metropolitan Life paid to MetLife, Inc. $721 million in dividends for which prior insurance regulatory clearance was not required and $3,033 million in special dividends, as approved by the Superintendent. At December 31, 2003, the maximum amount of the dividend, which may be paid to the Holding Company from Metropolitan Life in 2004, without prior regulatory approval, is $798 million. Stock Compensation Plans Under the MetLife, Inc. 2000 Stock Incentive Plan (the "Stock Incentive Plan"), awards granted may be in the form of non-qualified or incentive stock options qualifying under Section 422A of the Internal Revenue Code. Under the MetLife, Inc. 2000 Directors Stock Plan, as amended, (the "Directors Stock Plan") awards granted may be in the form of stock awards or non-qualified stock options or a combination of the foregoing to outside Directors of MetLife. The aggregate number of shares of stock that may be awarded under the Stock Incentive Plan is subject to a maximum limit of 37,823,333 shares for the duration of the plan. The Directors Stock Plan has a maximum limit of 500,000 share awards. All options granted have an exercise price equal to the fair market value price of MetLife common stock on the date of grant, and an option's maximum term is ten years. Certain options under the Stock Incentive Plan become exercisable over a three-year period commencing with date of grant, while other options become exercisable three years after the date of grant. Options issued under the Directors Stock Plan are exercisable immediately. Effective January 1, 2003, MetLife and the Company elected to apply the fair value method of accounting and use the prospective transition method for stock options granted by MetLife subsequent to December 31, 2002. As permitted under SFAS 148, options granted prior to January 1, 2003 will continue to be accounted for under APB 25. MetLife allocated 100% of stock option expense to the Company in each of the years ended December 31, 2003, 2002 and 2001. Had compensation cost for MetLife Stock Incentive Plan and Directors Stock Plan been determined based on fair value at the grant date for awards under those plans consistent with the method of SFAS 123, the Company's net income would have been reduced to the following pro-forma amounts:
Years Ended December 31, ---------------------- 2003 2002 2001 ------ ------ ------ (Dollars in millions) Net Income.......................................................... $2,001 $1,612 $1,487 Add: Stock-based employee compensation expense included in reported net income, net of related tax effects................... 13 1 1 Deduct: Total Stock-based employee compensation determined under fair value based method for all awards, net of related tax effects (42) (33) (20) ------ ------ ------ Pro forma net income (1) (2)........................................ $1,972 $1,580 $1,468 ====== ====== ======
- -------- (1)The pro forma earnings disclosures are not necessarily representative of the effects on net income. (2)Includes MetLife's ownership share of stock compensation costs related to the RGA incentive stock plan and the stock compensation costs related to the incentive stock plans at SSRM Holdings, Inc. determined in accordance with SFAS 123. F-62 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The fair value of each option grant is estimated on the date of the grant using the Black-Scholes options-pricing model with the following weighted average assumptions used for grants for the:
Years Ended December 31, --------------------------------- 2003 2002 2001 ----------- ----------- --------- Dividend yield.......... 0.68%-0.79% 0.68% 0.68% Risk-free rate of return 2.71%-4.03% 4.74%-5.52% 5.72% Volatility.............. 37.0%-38.7% 25.3%-30.3% 31.60% Expected duration....... 6 years 6 years 4-6 years
Statutory Equity and Income Applicable insurance department regulations require that the insurance subsidiaries prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile. Statutory accounting practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, reporting surplus notes as surplus instead of debt and valuing securities on a different basis. As of December 31, 2001, New York Statutory Accounting Practices did not provide for deferred income taxes. The Department has adopted a modification to its regulations, effective December 31, 2002, with respect to the admissibility of deferred taxes by New York insurers, subject to certain limitations. Statutory net income of Metropolitan Life, as filed with the Department, was $2,169 million, $1,455 million and $2,782 million for the years ended December 31, 2003, 2002 and 2001, respectively; statutory capital and surplus, as filed, was $7,978 million and $6,986 million at December 31, 2003 and 2002, respectively. The National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles (the "Codification"), which is intended to standardize regulatory accounting and reporting to state insurance departments, and became effective January 1, 2001. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The Department required adoption of the Codification, with certain modifications, for the preparation of statutory financial statements effective January 1, 2001. Further modifications by state insurance departments may impact the effect of the Codification on the statutory capital and surplus of Metropolitan Life and the Holding Company's other insurance subsidiaries. F-63 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Other Comprehensive Income The following table sets forth the reclassification adjustments required for the years ended December 31, 2003, 2002 and 2001 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
Years Ended December 31, ---------------------- 2003 2002 2001 ----- ------- ------ (Dollars in millions) Holding gains on investments arising during the year............................... $ 835 $ 2,936 $1,311 Income tax effect of holding gains................................................. (344) (971) (518) Reclassification adjustments: Recognized holding losses included in current year income....................... 311 307 555 Amortization of premiums and accretion of discounts associated with investments................................................................... (152) (440) (475) Recognized holding gains allocated to other policyholder amounts................ (259) (139) (33) Income tax effect............................................................... 40 85 (18) Allocation of holding losses on investments relating to other policyholder amounts. (317) (2,453) (158) Income tax effect of allocation of holding losses to other policyholder amounts.... 125 814 61 Unrealized investment gains (losses) of subsidiary at date of sale................. 269 68 (173) Deferred income taxes on unrealized investment gains (losses) of subsidiary at date of sale.......................................................................... (94) (15) 64 ----- ------- ------ Net unrealized investment gains.................................................... 414 192 616 ----- ------- ------ Foreign currency translation adjustments arising during the year................... 174 137 (58) Foreign currency translation adjustments of subsidiary at date of sale............. -- (65) 19 ----- ------- ------ Foreign currency translation adjustment............................................ 174 72 (39) ----- ------- ------ Minimum pension liability adjustments arising during the year...................... (81) -- (18) Minimum pension liability adjustments of subsidiary at date of sale................ (1) -- -- ----- ------- ------ Minimum pension liability adjustment............................................... (82) -- (18) ----- ------- ------ Other comprehensive income......................................................... $ 506 $ 264 $ 559 ===== ======= ======
15. Other Expenses Other expenses were comprised of the following:
Years Ended December 31, ------------------------- 2003 2002 2001 ------- ------- ------- (Dollars in millions) Compensation....................................................... $ 2,038 $ 2,423 $ 2,447 Commissions........................................................ 1,710 1,938 1,649 Interest and debt issue costs...................................... 313 242 312 Amortization of policy acquisition costs (excludes amounts directly related to net investment gains (losses) of $(26), $11 and $21, respectively).................................................... 1,381 1,501 1,434 Capitalization of policy acquisition costs......................... (1,982) (2,227) (2,018) Rent, net of sublease income....................................... 226 289 280 Minority interest.................................................. 116 74 57 Other.............................................................. 2,034 2,303 2,759 ------- ------- ------- Total other expenses............................................ $ 5,836 $ 6,543 $ 6,920 ======= ======= =======
F-64 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 16. Business Segment Information The Company provides insurance and financial services to customers in the United States, Canada, Central America, South America, Europe, South Africa, Asia and Australia. The Company's business is divided into six major segments: Institutional, Individual, Auto & Home, International, Reinsurance and Asset Management. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Institutional offers a broad range of group insurance and retirement and savings products and services, including group life insurance, non-medical health insurance, such as short and long-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of individual insurance and investment products, including life insurance, annuities and mutual funds. Auto & Home provides insurance coverages, including private passenger automobile, homeowners and personal excess liability insurance. International provides life insurance, accident and health insurance, annuities and retirement and savings products to both individuals and groups, and auto and homeowners coverage to individuals. Reinsurance provides primarily reinsurance of life and annuity policies in North America and various international markets. Additionally, reinsurance of critical illness policies is provided in select international markets. Asset Management provides a broad variety of asset management products and services to individuals and institutions. F-65 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) Set forth in the tables below is certain financial information with respect to the Company's operating segments as of and for the years ended December 31, 2003, 2002 and 2001. The accounting policies of the segments are the same as those of the Company, except for the method of capital allocation and the accounting for gains and losses from intercompany sales, which are eliminated in consolidation. The Company allocates capital to each segment based upon an internal capital allocation system that allows the Company to more effectively manage its capital. The Company evaluates the performance of each operating segment based upon net income excluding certain net investment gains and losses, net of income taxes, and the impact from the cumulative effect of changes in accounting, net of income taxes. Scheduled periodic settlement payments on derivative instruments not qualifying for hedge accounting are included in net investment gains (losses). The Company allocates certain non-recurring items (e.g., expenses associated with the resolution of proceedings alleging race-conscious underwriting practices, sales practices claims and claims for personal injuries caused by exposure to asbestos or asbestos-containing products) to Corporate & Other.
At or for the Year Ended Auto & Asset Corporate December 31, 2003 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 9,093 $ 4,242 $2,168 $ 6 $ 2,648 $ -- $ (6) $ 18,151 Universal life and investment-type product policy fees.............. 633 1,287 -- 1 -- -- -- 1,921 Net investment income............. 4,037 5,592 119 50 431 66 62 10,357 Other revenues.................... 592 204 23 14 48 143 38 1,062 Net investment gains (losses)..... (204) (127) (4) (7) 31 9 15 (287) Policyholder benefits and claims.. 9,931 5,020 1,604 16 2,102 -- 4 18,677 Interest credited to policyholder account balances................. 914 1,280 -- 1 184 -- -- 2,379 Policyholder dividends............ 198 1,697 -- 3 -- -- (1) 1,897 Other expenses.................... 1,782 2,464 572 24 741 182 71 5,836 Income from continuing operations before provision for income taxes............................ 1,326 737 130 20 131 36 35 2,415 Income from discontinued operations, net of income taxes............................ 30 30 -- -- -- -- 240 300 Cumulative effect of change in accounting, net of income taxes............................ (26) -- -- -- -- -- -- (26) Net income........................ 849 519 111 13 86 22 401 2,001 Total assets...................... 109,492 133,335 -- 1,069 12,879 175 24,315 281,265 Deferred policy acquisition costs............................ 739 7,363 -- 6 2,122 -- 2 10,232 Goodwill, net..................... 59 42 -- -- 99 18 -- 218 Separate account assets........... 35,632 28,028 -- -- 13 -- (12) 63,661 Policyholder liabilities.......... 61,565 88,096 -- 297 9,272 -- (579) 158,651 Separate account liabilities...... 35,632 28,028 -- -- 13 -- (12) 63,661
F-66 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued)
At or for the Year Ended Auto & Asset Corporate December 31, 2002 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 8,245 $ 4,419 $2,828 $992 $1,984 $ -- $ (7) $ 18,461 Universal life and investment-type product policy fees.............. 623 1,267 -- 37 -- -- -- 1,927 Net investment income............. 3,915 6,019 177 241 378 59 (158) 10,631 Other revenues.................... 607 454 26 10 42 166 49 1,354 Net investment gains (losses)..... (497) (110) (46) (9) 7 (4) (38) (697) Policyholder benefits and claims.. 9,337 5,162 2,020 821 1,517 -- 3 18,860 Interest credited to policyholder account balances................. 930 1,608 -- 28 146 -- (1) 2,711 Policyholder dividends............ 115 1,769 (1) 28 -- -- -- 1,911 Other expenses.................... 1,529 2,543 794 373 616 211 477 6,543 Income (loss) from continuing operations before provision (benefit) for income taxes....... 982 967 172 21 132 10 (633) 1,651 Income from discontinued operations, net of income taxes............................ 121 199 -- -- -- -- 151 471 Net income (loss)................. 759 811 131 21 86 6 (202) 1,612 Total assets...................... 94,911 120,284 4,957 795 9,458 191 18,840 249,436 Deferred policy acquisition costs............................ 608 7,448 175 5 1,429 -- 1 9,666 Goodwill, net..................... 62 73 156 -- 96 18 -- 405 Separate account assets........... 31,935 21,982 -- -- 11 -- (16) 53,912 Policyholder liabilities.......... 55,460 84,844 2,673 248 6,734 -- (343) 149,616 Separate account liabilities...... 31,935 21,982 -- -- 11 -- (16) 53,912 At or for the Year Ended Auto & Asset Corporate December 31, 2001 Institutional Individual Home International Reinsurance Management & Other Total - ------------------------ ------------- ---------- ------ ------------- ----------- ---------- --------- -------- (Dollars in millions) Premiums.......................... $ 7,288 $ 4,531 $2,755 $788 $1,664 $ -- $ (3) $ 17,023 Universal life and investment-type product policy fees.............. 592 1,245 -- 38 -- -- (1) 1,874 Net investment income............. 3,966 6,107 200 256 349 71 105 11,054 Other revenues.................... 649 527 22 16 35 198 85 1,532 Net investment gains (losses)..... (16) 864 (17) (16) (10) 25 121 951 Policyholder benefits and claims.. 8,924 5,213 2,121 632 1,373 -- 2 18,265 Interest credited to policyholder account balances................. 1,012 1,850 -- 51 122 -- -- 3,035 Policyholder dividends............ 259 1,767 -- 34 -- -- -- 2,060 Other expenses.................... 1,746 2,763 800 315 478 252 566 6,920 Income (loss) from continuing operations before provision (benefit) for income taxes....... 538 1,681 39 50 65 42 (261) 2,154 Income from discontinued operations, net of income taxes............................ 21 36 -- -- -- -- 50 107 Net income (loss)................. 383 1,092 41 16 39 27 (111) 1,487
F-67 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table indicates amounts in the current and prior years that have been classified as discontinued operations in accordance with SFAS 144:
Year ended December 31, ----------------------- 2003 2002 2001 ---- ---- ---- (Dollars in millions) Net investment income Institutional............................... $ 2 $ 33 $ 34 Individual.................................. 5 50 56 Corporate & Other........................... 45 77 79 ---- ---- ---- Total net investment income............. $ 52 $160 $169 ==== ==== ==== Net investment gains (losses) Institutional............................... $ 45 $156 $ -- Individual.................................. 43 262 -- Corporate & Other........................... 333 164 -- ---- ---- ---- Total net investment gains (losses)..... $421 $582 $ -- ==== ==== ==== Interest Expense Individual.................................. $ 1 $ 1 $ -- ---- ---- ---- Total interest expense.................. $ 1 $ 1 $ -- ==== ==== ====
Economic Capital. Beginning in 2003, the Company changed its methodology of allocating capital to its business segments from Risk-Based Capital ("RBC") to Economic Capital. Prior to 2003, the Company's business segments' allocated equity was primarily based on RBC, an internally developed formula based on applying a multiple to the National Association of Insurance Commissioners Statutory Risk-Based Capital and included certain adjustments in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Economic Capital is an internally developed risk capital model, the purpose of which is to measure the risk in the business and to provide a basis upon which capital is deployed. The Economic Capital model accounts for the unique and specific nature of the risks inherent in the Company's businesses. This is in contrast to the standardized regulatory RBC formula, which is not as refined in its risk calculations with respect to the nuances of the Company's businesses. The change in methodology is being applied prospectively. This change has and will continue to impact the level of net investment income and net income of each of the Company's business segments. A portion of net investment income is credited to the segments based on the level of allocated equity. This change in methodology of allocating equity does not impact the Company's consolidated net investment income or net income. F-68 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The following table presents actual and pro forma net investment income with respect to the Company's segments for the years ended December 31, 2002 and 2001. The amounts shown as pro forma reflect net investment income that would have been reported in these years had the Company allocated capital based on Economic Capital rather than on the basis of RBC. Net Investment Income
For the Years Ended December 31, ------------------------------------ 2002 2001 ----------------- ----------------- Actual Pro forma Actual Pro forma ------- --------- ------- --------- (Dollars in millions) Institutional.... $ 3,915 $ 3,977 $ 3,966 $ 4,040 Individual....... 6,019 5,929 6,107 6,020 Auto & Home...... 177 160 200 184 International.... 241 204 256 240 Reinsurance...... 378 341 349 313 Asset Management. 59 71 71 89 Corporate & Other (158) (51) 105 168 ------- ------- ------- ------- Total......... $10,631 $10,631 $11,054 $11,054 ======= ======= ======= =======
The Auto & Home segment's results of operations for the year ended December 31, 2003 consists of Metropolitan Property and Casualty Insurance Company and its subsidiaries until October 2003 when it was sold to MetLife. See Note 17. The Reinsurance segment's results of operations for the year ended December 31, 2003 include RGA's coinsurance agreement under which it assumed the traditional U.S. life reinsurance business of Allianz Life Insurance Company of North America. The transaction added approximately $246 million of premiums and $11 million of pre-tax income, excluding minority interest expense. The Individual segment's results of operations for the year ended December 31, 2003 includes a second quarter after-tax charge of $31 million resulting from certain improperly deferred expenses at an affiliate, New England Financial. The Institutional, Individual, Reinsurance and Auto & Home segments for the year ended December 31, 2001 include $287 million, $24 million, $9 million and $5 million, respectively, of pre-tax losses associated with the September 11, 2001 tragedies. See Note 9. The Institutional, Individual and Auto & Home segments include $399 million, $97 million and $3 million, respectively, in pre-tax charges associated with business realignment initiatives for the year ended December 31, 2001. See Note 10. The Individual segment for the year ended December 31, 2001, includes $118 million of pre-tax expenses associated with the establishment of a policyholder liability for certain group annuity policies. For the year ended December 31, 2001, pre-tax gross investment gains (losses) of $1,027 million, $142 million and $357 million resulting from the sale of certain real estate properties to MIAC are included in the Individual segment, Institutional segment and Corporate & Other, respectively. F-69 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) As part of the GenAmerica acquisition in 2000, the Company acquired Conning Corporation ("Conning"), the results of which are included in the Asset Management segment due to the types of products and strategies employed by the entity from its acquisition date to July 2001, the date of its disposition. The Company sold Conning, receiving $108 million in the transaction and reported a gain of approximately $25 million, in the third quarter of 2001. Corporate & Other includes various start-up and run-off entities, as well as the elimination of all intersegment amounts. The elimination of intersegment amounts relates to intersegment loans, which bear interest rates commensurate with related borrowings, as well as intersegment reinsurance transactions. Net investment income and net investment gains (losses) are based upon the actual results of each segment's specifically identifiable asset portfolio adjusted for allocated capital. Other costs and operating costs were allocated to each of the segments based upon: (i) a review of the nature of such costs; (ii) time studies analyzing the amount of employee compensation costs incurred by each segment; and (iii) cost estimates included in the Company's product pricing. Revenues derived from any customer did not exceed 10% of consolidated revenues for the years ended December 31, 2003, 2002 and 2001. Revenues from U.S. operations were $30,199 million, $29,723 million and $30,812 million for the years ended December 31, 2003, 2002 and 2001, respectively, which represented 97%, 94% and 95%, respectively, of consolidated revenues. 17. Acquisitions and Dispositions In September 2003, a subsidiary of the Company, RGA, announced a coinsurance agreement under which it assumed the traditional U.S. life reinsurance business of Allianz Life Insurance Company of North America. This transaction closed during the fourth quarter of 2003 with an effective date retroactive to July 1, 2003. The transaction added approximately $278 billion of life reinsurance in-force, $246 million of premiums and $11 million of income before income tax expense, excluding minority interest expense, to the fourth quarter of 2003. In October 2003, the Company completed its sales of Met Tower Life Insurance Company, MetLife General Insurance Agency, Inc., MetLife Securities, Inc., and N.L. Holding Corporation to the Holding Company. The amount received in excess of book value of $28 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of the entities sold at the date of sale were $293 million and $195 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $156 million, $218 million and $219 million for the years ended December 31, 2003, 2002 and 2001, respectively. In October 2003, the Company sold Metropolitan Property and Casualty Insurance Company's common stock to the Holding Company for $1,990 million. The amount received in excess of book value of $120 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of the entities sold at the date of sale were $5,806 million and $3,400 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $2,343 million, $3,013 million and $2,973 million for the years ended December 31, 2003, 2002 and 2001, respectively. In December 2002, the Company completed its sales of Cova Corporation, MetLife Investors Group, Inc., MetLife International Holdings, Inc., Walnut Street Securities, Inc., Seguros Genesis S.A., MetLife Pensiones S.A. and Metropolitan Life Seguros de Vida S.A. to the Holding Company. The amount received in excess of book value of $149 million was recorded as a capital contribution from the Holding Company. Total assets and F-70 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) total liabilities of the entities sold at the date of sale were $17,853 million and $16,545 million, respectively. Total revenues of the entities sold included in the consolidated statements of income were $1,648 million and $1,463 million for the years ended December 31, 2002 and 2001, respectively. In December 2001, the Company completed its sale of MIAC to the Holding Company. The amount received in excess of book value of $96 million was recorded as a capital contribution from the Holding Company. Total assets and total liabilities of MIAC at the date of sale were $6,240 million and $5,219 million, respectively. Total revenues of MIAC included in the consolidated statements of income were $391 million for the year ended December 31, 2001. In July 2001, the Company completed its sale of Conning, an affiliate acquired in the acquisition of GenAmerica Financial Corporation in 2000. Conning specialized in asset management for insurance company investment portfolios and investment research. 18. Discontinued Operations The Company actively manages its real estate portfolio with the objective to maximize earnings through selective acquisitions and dispositions. In accordance with SFAS 144, income related to real estate classified as held-for-sale on or after January 1, 2002 is presented as discontinued operations. These assets are carried at lower of cost or market. The following table presents the components of income from discontinued operations:
Years Ended December 31, ----------------------- 2003 2002 2001 ---- ----- ----- (Dollars in millions) Investment income...................... $120 $ 458 $ 508 Investment expense..................... (68) (298) (339) Net investment gains (losses).......... 421 582 -- ---- ----- ----- Total revenues...................... 473 742 169 Interest Expense....................... 1 1 -- Provision for income taxes............. 172 270 62 ---- ----- ----- Income from discontinued operations. $300 $ 471 $ 107 ==== ===== =====
The carrying value of real estate related to discontinued operations was $89 million and $799 million at December 31, 2003 and 2002, respectively. See Note 16 for discontinued operations by business segment. F-71 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) 19. Fair Value Information The estimated fair values of financial instruments have been determined by using available market information and the valuation methodologies described below. Considerable judgment is often required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein may not necessarily be indicative of amounts that could be realized in a current market exchange. The use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. Amounts related to the Company's financial instruments were as follows:
Notional Carrying Estimated Amount Value Fair Value December 31, 2003 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities............................. $143,148 $143,148 Equity securities............................ $ 1,246 $ 1,246 Mortgage loans on real estate................ $ 26,637 $ 28,572 Policy loans................................. $ 8,180 $ 8,180 Short-term investments....................... $ 1,320 $ 1,320 Cash and cash equivalents.................... $ 2,393 $ 2,393 Mortgage loan commitments.................... $ 555 $ -- $ (4) Commitments to fund partnership investments.. $1,378 $ -- $ -- Liabilities: Policyholder account balances................ $ 53,503 $ 55,218 Short-term debt.............................. $ 3,536 $ 3,536 Long-term debt............................... $ 2,055 $ 2,236 Shares subject to mandatory redemption....... $ 277 $ 336 Payable under securities loaned transactions. $ 24,065 $ 24,065
Notional Carrying Estimated Amount Value Fair Value December 31, 2002 -------- -------- ---------- (Dollars in millions) Assets: Fixed maturities.................................................. $124,260 $124,260 Equity securities................................................. $ 1,551 $ 1,551 Mortgage loans on real estate..................................... $ 25,353 $ 27,935 Policy loans...................................................... $ 8,047 $ 8,047 Short-term investments............................................ $ 1,199 $ 1,199 Cash and cash equivalents......................................... $ 1,106 $ 1,106 Mortgage loan commitments......................................... $ 859 $ -- $ 12 Commitments to fund partnership investments....................... $1,667 $ -- $ -- Liabilities: Policyholder account balances..................................... $ 34,706 $ 35,063 Short-term debt................................................... $ 912 $ 912 Long-term debt.................................................... $ 2,624 $ 2,794 Payable under securities loaned transactions...................... $ 16,321 $ 16,321 Other: Company-obligated mandatorily redeemable securities of subsidiary trusts.......................................................... $ 277 $ 310
F-72 Metropolitan Life Insurance Company and Subsidiaries Notes to Consolidated Financial Statements--(Continued) The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: Fixed Maturities and Equity Securities The fair value of fixed maturities and equity securities are based upon quotations published by applicable stock exchanges or received from other reliable sources. For securities for which the market values were not readily available, fair values were estimated using quoted market prices of comparable investments. Mortgage Loans on Real Estate, Mortgage Loan Commitments and Commitments to Fund Partnership Investments Fair values for mortgage loans on real estate are estimated by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. For mortgage loan commitments, the estimated fair value is the net premium or discount of the commitments. Commitments to fund partnership investments have no stated interest rate and are assumed to have a fair value of zero. Policy Loans The carrying values for policy loans approximate fair value. Cash and Cash Equivalents and Short-term Investments The carrying values for cash and cash equivalents and short-term investments approximated fair values due to the short-term maturities of these instruments. Policyholder Account Balances The fair value of policyholder account balances is estimated by discounting expected future cash flows based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the agreements being valued. Short-term and Long-term Debt, Payables Under Securities Loaned Transactions, Shares Subject to Mandatory Redemption and Company-Obligated Mandatorily Redeemable Securities of Subsidiary Trusts The fair values of short-term and long-term debt, payables under securities loaned transactions, shares subject to mandatory redemption and Company-obligated mandatorily redeemable securities of subsidiary trusts are determined by discounting expected future cash flows using risk rates currently available for debt with similar terms and remaining maturities. Derivative Financial Instruments The fair value of derivative instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, caps, floors, options and written covered calls are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 20. Related Parties Effective January 1, 2003, MetLife Group, Incorporated, a New York corporation and wholly owned subsidiary of the Holding Company, was formed as a personnel services company to provide personnel, as needed, to support the activities of the Company. Charges for these services were approximately $1,680 million in 2003. F-73 Metropolitan Life Separate Account UL PART C. OTHER INFORMATION Item 27. Exhibits (a) Resolution of Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL* (b) Not Applicable (c) (1) Not Applicable (2) Form of Selected Broker Agreement+++ (3) Schedule of Sales Commissions** (d) (1) Specimen Group Variable Universal Life Insurance Policy (including any alternate pages as required by State Law) with form of riders, if any++ (2) Specimen Group Variable Universal Life Insurance Certificate issued under the Group Variable Universal Life Policy (including any alternate pages as required by state law) with form of riders, if any++ (e) Restated Charter and By-Laws of Metropolitan Life*** (f) Reinsurance Contracts (h) Not Applicable (i) Not Applicable (j) Not Applicable (k) Opinion and consent of Counsel as to the legality of the securities being registered++ (l) Opinion and consent of Michael F. Rogalski, relating to the Policies+ (m) Not Applicable (n) Powers of Attorney++++ (o) Not Applicable (p) Not Applicable (q) Memoranda describing certain procedures filed pursuant to Rule 6e- (T)(b)(12)(iii) ++ (r) Form of personalized illustration**** No Code of Ethics has been included in the above exhibits, because the registrant invests only in shares of open-end management investment companies registered under the Investment Company Act of 1940. + Filed herewith. * Incorporated herein 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 from the sections entitled "Distribution of the Group Policies and Certificates" in the prospectuses that are included in this amended Registration Statement. *** Incorporated herein by reference from the filing to the Post-Effective Amendment No. 11 to the Registration Statement of Separate Account UL (File No. 33-47927) on April 6, 2000. **** Included in Post-Effective Amendment No. 5 to this Registration Statement filed on April 28, 1999. ++ Included in the initial filing of this Registration Statement of Separate Account UL (File No. 33-91226) on April 14, 1995. C-1 +++ Included in the filing of Pre-Effective Amendment No. 1 of this Registration Statement of Separate Account UL (File No. 33-91226) on September 8, 1995. ++++ Incorporated by reference to the filing of Post-Effective Amendment No. 30 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed October 22, 2003 except for the respective powers of attorney of John M. Keane, William J. Wheeler and Joseph J. Prochaska, Jr., each of which is incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement of Metropolitan Life Separate Account E (File No. 033-69320) filed on February 6, 2004, and the power of attorney of Sylvia M. Mathews which is incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed on April 20, 2004. Item 28. Directors and Officers of Depositor
Name and Principal Business Address Positions and Offices with Depositor - ----------------------------------- ------------------------------------ Robert H. Benmosche Chairman of the Board, President and Chief Metropolitan Life Insurance Company Executive Officer One Madison Avenue, New York, NY 10010 Curtis H. Barnette Director Chairman Emeritus Bethlehem Steel Corporation 1170 Eighth Avenue, Martin Tower 2118 Bethlehem, PA 18016-7699 John C. Danforth Director Partner Bryan Cave LLP One Metropolitan Square 211 North Broadway, Suite 3600 St. Louis, MO 63102 Burton A. Dole, Jr.
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Retired Chairman Director Nellcor Puritan Bennett, Inc. P.O. Box 208 Carlsbad, CA 92018 Cheryl W. Grise Director President Utility Group, Northeast Utilities Service Company P.O. Box 270 Hartford CT 06141 James R. Houghton Director Chairman of the Board Emeritus Corning Incorporated One Riverfront Plaza MP HQE2-6 Corning, NY 14831 Harry P. Kamen Director Retired Chairman and Chief Executive Officer Metropolitan Life Insurance Company 200 Park Avenue, Suite 5700 New York, NY 10166 Helene L. Kaplan Director Of Counsel, Skadden, Arps, Slate, Meagher and Flom Four Times Square New York, NY 10036 John M. Keane Director General (Retired), United States Army 2200 Wilson Blvd. Suite 102-542 Arlington, VA 22201-3324 Charles H. Leighton Director Retired Chairman and Chief Executive Officer CML Group, Inc. 51 Vaughn Hill Road Bolton, MA 01740 Sylvia M. Mathews Director Chief Operating Officer and Executive Director The Bill & Melinda Gates Foundation 1551 Eastlake Avenue East Seattle, WA 98102 Stewart G. Nagler Vice Chairman and Director Vice Chairman of the Board Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 John J. Phelan, Jr. Director Former Chairman and Chief Executive Officer New York Stock Exchange, Inc. 108 Forest Avenue
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Locust Valley, NY 11560 Hugh B. Price Director Of Counsel Piper Rudnick LLP 1251 Avenue of the Americas New York, NY 10005 Kenton J. Sicchitano Director Retired Global Managing Partner PricewaterhouseCoopers 101 Jericho Road Weston, MA 02493 William C. Steere, Jr. Director Retired Chairman of the Board Pfizer, Inc. 235 East 42nd Street New York, NY 10016
Set forth below is a list of certain principal officers of Metropolitan Life. The principal business address of each officer of Metropolitan Life is One Madison Avenue, New York, New York 10010.
Name Position with Metropolitan Life Robert H. Benmosche Chairman of the Board, President and Chief Executive Officer Stewart C. Nagler Vice Chairman of the Board and Director Gwenn L. Carr Vice President and Secretary Daniel J. Cavanagh Executive Vice President C. Robert Henrikson President- U.S. Insurance and Financial Services Leland C. Launer, Jr. Executive Vice President and Chief Investment Officer James L. Lipscomb Executive Vice President and General Counsel Catherine A. Rein Senior Executive Vice President; President and Chief Executive Officer of MetLife Auto & Home Stanley J. Talbi Senior Vice President and Chief Actuary William J. Toppeta President, International Lisa Weber Senior Executive Vice President, Chief Administration Officer Judy E. Weiss Executive Vice President Joseph J. Prochaska Senior Vice President, Financial Operations and Chief Accounting Officer Joseph A. Reali Senior Vice President and Tax Director John E. Welch Senior Vice President and General Auditor William J. Wheeler Executive Vice President and Chief Financial Officer Anthony J. Williamson Senior Vice President and Treasurer Timothy Journy Vice President and Controller
The business address of each officer is One Madison Avenue, New York, New York 10010. Item 29. Persons Controlled by or Under Common Control with the Depositor or the Registrant The registrant is a separate account of Metropolitan Life Insurance Company under the New York Insurance law. Under said law the assets allocated to the separate account are the property of Metropolitan Life Insurance Company. Metropolitan Life Insurance Company is a C-4 wholly-owned subsidiary of MetLife, Inc. a publicly traded company. The following outline indicates those persons who are controlled by or under common control with Metropolitan Life Insurance Company: [Module of the List of Companies under Common Control appears here] C-5 Item 30. Indemnification MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000 subject to a $5,000,000 deductible. MetLife maintains a directors' and officers' liability policy with a maximum coverage of $300 million under which Metropolitan Life Insurance Company ("Metropolitan"), which is the Depositor and the Registrant's underwriter (the "Underwriter"), as well as certain other subsidiaries of MetLife are covered. A provision in Metropolitan's by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of Metropolitan. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan Life Insurance Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification may be against public policy as expressed in the Act and may be, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Metropolitan of expenses incurred or paid by a director, officer or controlling person or Metropolitan Life Insurance Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Metropolitan will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 31. Principal Underwriters (a) Other Activity. The principal underwriter for the registrant is Metropolitan Life Insurance Company. Metropolitan Life Insurance Company acts in the following capacities with respect to the following investment companies: Metropolitan Tower Life Separate Account One (principal underwriter) Metropolitan Tower Life Separate Account Two (principal underwriter) Metropolitan Life Separate Account E (principal underwriter and depositor) Metropolitan Series Fund, Inc. (principal underwriter and sub-investment manager) New England Variable Annuity Fund I (depositor) New England Life Retirement Investment Account (depositor) The New England Variable Account (depositor) (b) Management. See response to Item 28 above. (c) Compensation from the Registrant. C-6
(1) (2) (3) (4) (5) Compensation on Events Net Underwriting Occasioning the Name of Principal Discounts and Deduction of a Deferred Brokerage Other Underwriter Commissions Sales Load Commissions Compensation ----------- ----------- ---------- ----------- ------------ Metropolitan Life Insurance Company $163,317 0 0 0
Commissions are paid by the Company directly to agents who are registered representatives of the Principal Underwriter or to broker-dealers that have entered into a selling agreement with the principal underwriter with respect to sales of the Contracts. Item 32. Location of Accounts and Records The following companies will maintain possession of the documents required by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder: (a) Registrant (b) Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Item 33. Management Services Not applicable Item 34. Fee Representation Metropolitan Life represents that the fees and charges deducted under the Policies offered and sold pursuant to this amended Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life under the Policies. Metropolitan Life bases its representation on its assessment of numerous facts and circumstances that it deems relevant. These may include such factors as: the nature and extent of such services, expenses and risks, the need for Metropolitan Life to earn an adequate profit, the degree to which the Policies include innovative features, and regulatory standards for exemptive relief under the Investment Company Act of 1940 used prior to October 1996, including the range of industry practice. This representation applies to all policies issued pursuant to this Registration Statement, including those sold on the terms specifically described in the prospectuses contained herein, or any variations therein based on supplements, amendments, endorsements or other riders to such policies or prospectuses, or otherwise. C-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Metropolitan Life Separate Account UL certifies that it meets the requirements of Securities Rule 485(b) for effectiveness of this Registration Statement and has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 29th day of April, 2004. Metropolitan Life Separate Account UL By: Metropolitan Life Insurance Company By: /s/ James L. Lipscomb --------------------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Attest: /s/ James D. Gaughan -------------------- James D. Gaughan Assistant Secretary C-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Metropolitan Life Insurance Company has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 29th day of April, 2004. Metropolitan Life Insurance Company BY: /s/ James L. Lipscomb James L. Lipscomb, Esq. Executive Vice President and General Counsel Attest: /s/ James D. Gaughan -------------------- James D. Gaughan Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons, in the capacities indicated, on April 29, 2004.
SIGNATURE Title * Chairman of the Board, President and Chief - -------------------------------- Executive Officer Robert H. Benmosche * Vice-Chairman and Director - -------------------------------- Stewart G. Nagler * Executive Vice President and - -------------------------------- Chief Financial Officer William J. Wheeler * Executive Vice President and - -------------------------------- Chief Investment Officer Leland C. Launer, Jr. * Senior Vice President, Financial Operations - -------------------------------- and Chief Accounting Officer Joseph J. Pruchaska, Jr. * - -------------------------------- Curtis H. Barnette Director * - -------------------------------- John C. Danforth Director * - -------------------------------- Burton A. Dole, Jr. Director - -------------------------------- Director Cheryl W. Griese * - -------------------------------- James R. Houghton Director
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* - -------------------------------- Harry P. Kamen Director * - -------------------------------- Helene L. Kaplan Director * - -------------------------------- John M. Keane Director * - -------------------------------- Charles M. Leighton Director * - -------------------------------- Sylvia M. Mathews Director * - -------------------------------- John J. Phelan, Jr. Director * - -------------------------------- Hugh B. Price Director * - -------------------------------- Kenton J. Sicchitano Director * - -------------------------------- William C. Steere, Jr. Director April 29, 2004
/s/ Christopher P. Nicholas - -------------------------------- Christopher P. Nicholas, Esq. Attorney- in - fact * Executed by Christopher P. Nicholas, Esq. on behalf of those indicated pursuant to Powers of Attorney filed with Post-Effective Amendment No. 30 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed October 22, 2003 except for the respective powers of attorney of John M. Keane, William J. Wheeler and Joseph J. Prochaska, Jr., each of which is incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement of Metropolitan Life Separate Account E (File No. 333-69320) filed on February 6, 2004, and the power of attorney of Sylvia M. Mathews which is incorporated by reference to Post-Effective Amendment No. 32 to the Registration Statement of Metropolitan Life Separate Account E (File No. 2-90380) filed on April 20, 2004. C-10 EX-99.L 2 dex99l.txt OPINION LETTER OF MICHAEL ROGALSKI Exhibit L April 28, 2004 Metropolitan Life Insurance Company One Madison Avenue New York, NY 10010 Dear Sirs: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 11 to Registration Statement No. 33-91226 on Form N-6 ("Registration Statement") which covers premium received under Group Variable Universal Life Insurance Policies and Certificates ("Policies") offered by the Metropolitan Life Insurance Company ("MLIC") in each State where they have been approved by appropriate State insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed the Policies and I am familiar with the Registration Statement and Exhibits thereto. In my opinion, the illustrations of the death benefit and cash values referenced as Exhibit (r) in the amended Registration Statement, based on the assumptions stated in the Illustrations, are consistent with the provisions of the Policies. Also, in my opinion, such assumptions, including the assumed current charge levels, are reasonable based on MLIC's current expectations. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in the illustrations, appear to be disproportionately more favorable to a prospective purchaser of a certificate under the Policies for insured persons age 40 in the underwriting categories specified in the illustration, than to prospective purchaser of certificates under the Policies for an insured person at other ages or in other underwriting classes. Nor were the particular illustrations shown selected for the purpose of making this relationship appear more favorable. The hypothetical group and 43 year old Certificate owner assumed for purposes of the Fee Tables in the prospectus have not been selected for the purpose of showing lower charges in those tables than would apply for a different assumed group or Certificate owner. I hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the reference to my name under the heading "Legal and Actuarial Matters" in the Statement of Additional Information contained in the Registration Statement. Very truly yours, /s/ Michael Rogalski - -------------------- Michael Rogalski FSA MAAA Vice-President & Actuary EX-99.1 3 dex991.txt INDEPENDENT AUDITORS' CONSENT FROM DELOITTE & TOUCHE Independent Auditors' Consent We consent to the use in this Post-Effective Amendment No. 11/Amendment No. 10 to Registration Statement No. 033-91226/ 811-06025 of Metropolitan Life Separate Account UL on Form N-6 of our report dated April 16, 2004, relating to Metropolitan Life Separate Account UL appearing in the Prospectus, which is a part of such Registration Statement, our report dated April 9, 2004 relating to Metropolitan Life Insurance Company (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the change in the method of accounting for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on October 1, 2003, and recorded the impact as a cumulative effect of a change in accounting principle), appearing in the Statement of Additional Information, which is part of such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus and Statement of Additional Information which are part of such Registration Statement. Deloitte & Touche LLP Tampa, Florida April 26, 2004 -----END PRIVACY-ENHANCED MESSAGE-----