-----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, WB83lJMR8nos5LCUuqsZVkBccVUM2WOQ8MHx2q78w43M21fspO0/dgYmJtxiD9OJ rbIF27/ihFKQDFZIFtDylQ== 0001193125-05-088561.txt : 20050428 0001193125-05-088561.hdr.sgml : 20050428 20050428161317 ACCESSION NUMBER: 0001193125-05-088561 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20050428 DATE AS OF CHANGE: 20050428 EFFECTIVENESS DATE: 20050501 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Metropolitan Life Separate Account UL CENTRAL INDEX KEY: 0000858997 IRS NUMBER: 135581829 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06025 FILM NUMBER: 05780813 BUSINESS ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 FORMER COMPANY: FORMER CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Metropolitan Life Separate Account UL CENTRAL INDEX KEY: 0000858997 IRS NUMBER: 135581829 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-57320 FILM NUMBER: 05780814 BUSINESS ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 BUSINESS PHONE: 2125788717 MAIL ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 FORMER COMPANY: FORMER CONFORMED NAME: METROPOLITAN LIFE SEPARATE ACCOUNT UL DATE OF NAME CHANGE: 19920703 485BPOS 1 d485bpos.txt METFLEX As filed with the Securities and Exchange Commission on April 28, 2005 Registration No. 033-57320 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. 17 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 18 [X] Metropolitan Life Separate Account UL (Exact Name of Registrant) Metropolitan Life Insurance Company (Name of Depositor) 200 Park Avenue New York, NY 10166 (Address of depositor's principal executive offices) ---------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Metropolitan Life Insurance Company One MetLife Plaza 27-01 Queens Plaza North Long Island, NY 11101 (Name and address of agent for service) Copy to: Stephen E. Roth, Esquire Mary E. Thornton, Esquire Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2415 It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2005 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 METFLEX, A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ("POLICY") ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE") MAY 1, 2005 This prospectus provides you with important information about MetLife's MetFlex Policies. However, this prospectus is not the Policy. The Policy, rather, is a separate written agreement that MetLife issues to you. The Policy is designed to provide: .. Life insurance coverage .. Flexible premium payments .. A choice among three death benefit options .. A method of financing certain deferred compensation plans, post-retirement benefits and payroll deduction programs You may allocate premium payments to and transfer 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, except where noted): - ------------------------------------------------------------------------ BLACKROCK AGGRESSIVE JENNISON GROWTH GROWTH (FORMERLY STATE STREET (FORMERLY MET/PUTNAM RESEARCH AGGRESSIVE VOYAGER) GROWTH) LEHMAN BROTHERS(R) AGGREGATE BOND INDEX BLACKROCK BOND INCOME LOOMIS SAYLES SMALL CAP (FORMERLY STATE STREET METLIFE MID CAP STOCK RESEARCH BOND INCOME) INDEX BLACKROCK DIVERSIFIED METLIFE STOCK INDEX (FORMERLY STATE STREET RESEARCH DIVERSIFIED) MFS INVESTORS TRUST BLACKROCK INVESTMENT TRUST MFS TOTAL RETURN (CLASS B) (FORMERLY STATE STREET RESEARCH INVESTMENT MORGAN STANLEY EAFE(R) TRUST) INDEX BLACKROCK LEGACY LARGE NEUBERGER BERMAN MID CAP CAP GROWTH VALUE (FORMERLY STATE STREET (FORMERLY NEUBERGER RESEARCH LARGE CAP BERMAN PARTNERS MID CAP GROWTH) VALUE) BLACKROCK MONEY MARKET OPPENHEIMER GLOBAL EQUITY (FORMERLY STATE STREET (FORMERLY SCUDDER RESEARCH MONEY MARKET) GLOBAL EQUITY) BLACKROCK STRATEGIC VALUE RUSSELL 2000(R) INDEX (FORMERLY STATE STREET T. ROWE PRICE LARGE CAP RESEARCH AURORA) GROWTH DAVIS VENTURE VALUE T. ROWE PRICE SMALL CAP GROWTH FI INTERNATIONAL STOCK FI MID CAP OPPORTUNITIES FI VALUE LEADERS HARRIS OAKMARK LARGE CAP VALUE Met Investors Series Trust portfolios: - -------------------------------------- JANUS AGGRESSIVE MET/AIM SMALL CAP GROWTH--CLASS B GROWTH--CLASS B LORD ABBETT BOND MFS RESEARCH DEBENTURE--CLASS A INTERNATIONAL--CLASS B LORD ABBETT GROWTH AND NEUBERGER BERMAN REAL INCOME--CLASS A ESTATE--CLASS B LORD ABBETT GROWTH T. ROWE PRICE MID-CAP OPPORTUNITIES--CLASS B GROWTH--CLASS B LORD ABBETT MID-CAP THIRD AVENUE SMALL CAP VALUE--CLASS B VALUE--CLASS B MET/AIM MID CAP CORE EQUITY--CLASS B AIM Variable Insurance Funds portfolios: - ---------------------------------------- AIM V.I. GOVERNMENT AIM V.I. CORE SECURITIES--SERIES II STOCK--SERIES I AIM V.I. REAL (FORMERLY INVESCO ESTATE--SERIES I VIF--CORE EQUITY) AllianceBernstein Variable Products Series Fund, Inc. portfolios: - ----------------------------------------------------------------- ALLIANCEBERNSTEIN GROWTH AND INCOME--CLASS B ALLIANCEBERNSTEIN US ALLIANCEBERNSTEIN GLOBAL GOVERNMENT/HIGH TECHNOLOGY--CLASS B GRADE SECURITIES--CLASS B (FORMERLY ALLIANCEBERNSTEIN TECHNOLOGY) American Century Variable Portfolios, Inc. portfolios: - ----------------------------------------------------- VP VISTA/SM/--CLASS I Delaware VIP Trust portfolios: - ------------------------------ SMALL CAP VALUE--SERVICE CLASS Dreyfus Investment Portfolios portfolios (Service Shares): - --------------------------------------------------------- EMERGING LEADERS MIDCAP STOCK Dreyfus Variable Investment Fund portfolios (Service Shares): - ------------------------------------------------------------- APPRECIATION INTERNATIONAL VALUE Fidelity Variable Insurance Products portfolios (Service Class): - ---------------------------------------------------------------- VIP ASSET MANAGER(R): GROWTH VIP CONTRAFUND(R) VIP EQUITY-INCOME VIP GROWTH VIP INVESTMENT GRADE BOND Franklin Templeton Variable Insurance Products Trust portfolios: - ---------------------------------------------------------------- MUTUAL DISCOVERY SECURITIES--CLASS 2 TEMPLETON FOREIGN SECURITIES--CLASS 1 TEMPLETON GROWTH SECURITIES--CLASS 2 Goldman Sachs Variable Insurance Trust portfolios: - -------------------------------------------------- CORE/SM/ SMALL CAP EQUITY MID CAP VALUE Janus Aspen Series portfolios: - ---------------------------------- JANUS ASPEN BALANCED--SERVICE SHARES JANUS ASPEN LARGE CAP JANUS ASPEN GROWTH--INSTITUTIONAL FORTY--SERVICE SHARES SHARES (FORMERLY JANUS ASPEN (FORMERLY JANUS ASPEN CAPITAL APPRECIATION) GROWTH) MFS(R) Variable Insurance Trust portfolios (Service Class): - ------------------------------------------------------------------------------- GLOBAL EQUITY NEW DISCOVERY HIGH INCOME VALUE Van Kampen Life Investment Trust portfolios: - -------------------------------------------- GOVERNMENT--CLASS II 2 Wells Fargo Variable Trust portfolios: - ------------------------------------------------ ADVANTAGE ASSET ALLOCATION ADVANTAGE LARGE COMPANY GROWTH ADVANTAGE EQUITY INCOME ADVANTAGE MONEY MARKET ADVANTAGE LARGE COMPANY CORE ADVANTAGE TOTAL RETURN (FORMERLY GROWTH) BOND Separate prospectuses for the Metropolitan Series Fund, Inc., the Met Investors Series Trust, AIM Variable Insurance Funds, the AllianceBernstein Variable Products Series Fund, Inc., American Century Variable Portfolios, Inc., the Delaware VIP Trust, the Dreyfus Investment Portfolio, the Dreyfus Variable Investment Fund, Fidelity Variable Insurance Products, the Franklin Templeton Variable Insurance Products Trust, the Goldman Sachs Variable Insurance Trust, the Janus Aspen Series, the MFS Variable Insurance Trust, the Van Kampen Life Investment Trust and the Wells Fargo Variable Trust (each a "Fund") are available from us. They describe in greater detail an investment in the portfolios listed above. Before purchasing a Policy, read the information in this prospectus and in the prospectus for each Fund. Keep these prospectuses for future reference. We do not guarantee how any of the portfolios will perform. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. Policies issued in your state may provide different features and benefits from, and impose different costs than, those described in this Prospectus. Your actual Policy and any endorsements are the controlling documents. You should read the Policy carefully for any variations in your state. Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved of these securities, nor have they determined if this Prospectus is accurate or complete. Any representation otherwise is a criminal offense. This Prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Interests in the Separate Account, the Fixed Account and the Portfolios are not deposits, 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. 3 TABLE OF CONTENTS
PAGE IN THIS SUBJECT PROSPECTUS ------- ---------- Cover Page Contacting Us............................................... 5 Summary of Benefits and Risks............................... 5 Policy Benefits............................................ 5 Risks of a Policy.......................................... 6 Fee Tables.................................................. 7 Transaction Fees........................................... 8 Periodic Charges Other Than Portfolio Operating Expenses... 10 Periodic Charges Applicable to any Optional Riders That You Choose to Add to Your Policy............................. 11 Portfolio Operating Expenses............................... 12 MetLife..................................................... 19 The Fixed Account.......................................... 19 Separate Account UL........................................ 19 The Funds.................................................. 20 The Portfolio Share Classes that We Offer................ 26 Substitution of Portfolios............................... 26 Voting Rights............................................ 27 Issuing a Policy............................................ 27 Payment and Allocation of Premiums.......................... 28 Paying Premiums............................................ 28 Maximum and Minimum Premium Payments....................... 28 Allocating Net Premiums.................................... 29 Insurance Proceeds.......................................... 29 Death Benefit Options...................................... 30 Minimum Death Benefit...................................... 31 Specified Face Amount...................................... 32 Income Plans............................................... 33 Cash Value, Transfers and Withdrawals....................... 33 Cash Value................................................. 33 Cash Value Transfers....................................... 34 Surrender and Withdrawal Privileges........................ 37 Benefit at Final Date...................................... 38 Loan Privileges............................................. 38 Optional Rider Benefits..................................... 39 Term Benefit............................................... 40 Charges and Deductions...................................... 41 Important Information Applicable to all Policy Charges and Deductions............................................... 41 Charges Deducted From Premiums............................. 42 Charges Included in the Monthly Deduction.................. 43 Charges for Certain Optional Rider Benefits................ 44 Variations in Charges...................................... 44 Portfolio Company Charges.................................. 44 Other Charges.............................................. 44 Policy Termination and Reinstatement........................ 45 Federal Tax Matters......................................... 45 Rights We Reserve........................................... 49 Other Policy Provisions..................................... 49 Sales of Policies........................................... 51 Legal Proceedings........................................... 53 Restrictions on Financial Transactions...................... 53 Experts..................................................... 54 Financial Statements........................................ 54
4 [SIDEBAR:YOU CAN CONTACT US AT OUR DESIGNATED OFFICE.] CONTACTING US You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Designated Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Policy loan; changing your death benefit option; taking a partial withdrawal; surrendering your Policy; making transfer requests (including elections with respect to the systematic investment strategies); or changing your premium allocations. Our Designated Office is MetLife--SBR, 485-B Route One South, Suite 420, Iselin NJ 08830. We may name additional or alternate Designated Offices. If we do, we will notify you in writing. SUMMARY OF BENEFITS AND RISKS This summary gives an overview of the Policy and is qualified by the more detailed information in the balance of this Prospectus and the Policy. MetLife issues the Policies. We offer the Policies to employers, employer sponsored plans, or other organizations or individuals associated with such employers, plans or organizations. We designed the Policies for financing nonqualified deferred compensation plans, other post-employment benefits, certain employer sponsored payroll deduction programs or other purposes. POLICY BENEFITS PREMIUM PAYMENT FLEXIBILITY. The Policy allows flexibility in making premium payments. The Policy will remain in force as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. CASH VALUE. Your cash value in the Policy reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. TRANSFERS AND SYSTEMATIC INVESTMENT STRATEGIES. You may transfer cash value among the funding options, subject to certain limits, including restrictions on "market timing" transactions (see "Cash Value, Transfers and Withdrawals"). 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 Policy is issued. You may also change the amount at any time after the first Policy year, subject to our rules and procedures. DEATH BENEFIT OPTIONS. Generally, you have a choice among three options. These range from an amount equal to the specified face amount to an amount equal to the specified face amount plus the policy cash value at the date of death. INCOME PLANS. The insurance proceeds can be paid under a variety of income plans that are available under the Policy. 5 SURRENDERS, PARTIAL WITHDRAWALS AND LOANS. Within certain limits, you may take partial withdrawals and loans from the Policy. You may also surrender your Policy for its cash surrender value. TAX ADVANTAGES. If you meet certain requirements, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Policy, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. 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. TERM RIDER. This rider provides coverage on the insured to age 95. The amount of sales charge you pay will be less if coverage is obtained through this rider rather than as part of the Policy. If your Policy was issued after May 1, 2004 and is not part of a plan already in existence on that date, the current charges for the cost of insurance are lower for coverage under the term rider than under the base Policy. For details, see "Optional Rider Benefits--Term Benefit." (For Policies under existing plans or Policies issued prior to that date, the charges for the cost of insurance are higher under any term rider than under the base Policy.) OTHER OPTIONAL RIDER BENEFITS. You may be eligible for certain other benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) (other than the charge for the interim term insurance rider) as part of the monthly deduction. RISKS OF A POLICY This Prospectus discusses the risks associated with purchasing the Policy. 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 the Policy 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 Policy fees and charges from your Policy's cash value, which can significantly reduce your Policy's cash value. During times of poor investment performance, these deductions may have an even greater impact on your Policy's cash value. It is possible to lose your full investment and your Policy 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 of 4%. SURRENDER AND WITHDRAWAL RISKS. The Policies 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 the Policy only if you have the financial ability to keep it in force for a substantial 6 period of time. You should not purchase the Policy if you intend to surrender all or part of the Policy's cash value in the near future. RISK OF POLICY TERMINATION. Your Policy 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 Policy 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 policy on which there is an outstanding loan may have adverse tax consequences. POLICY CHARGE AND EXPENSE INCREASE. We have the right to increase certain Policy charges. TAX LAW RISKS. We anticipate that the Policy should generally be deemed a life insurance contract under Federal tax law. There is less guidance, however, with respect to Policies issued on a substandard risk basis, and it is not clear whether such Policies will in all cases satisfy the applicable requirements. Assuming that a Policy qualifies as a life insurance contract for Federal income tax purposes, you should not be deemed to be in receipt of any portion of your Policy's cash value until there is an actual distribution from the Policy. Moreover, insurance proceeds payable under the Policy should be excludable from the gross income of the beneficiary. Although the beneficiary generally should not have to pay Federal income tax on the insurance proceeds, other taxes, such as estate taxes, may apply. If you pay more than a certain amount of premiums, you may cause your Policy to become a "modified endowment contract." If it does, you will pay income taxes on loans and other amounts we pay out to you (except for payment of insurance proceeds), to the extent of any gains in your Policy (which is generally the excess of cash value over the premiums paid). In this case, an additional 10% tax penalty may also apply. If the Policy is not a modified endowment contract, distributions generally will be treated first as a return of basis or investment in the contract and then as taxable income. Moreover, loans will generally not be treated as distributions. Finally, neither distributions nor loans from a Policy that is not a modified endowment contract are subject to the 10% penalty tax. If your Policy is part of an equity split dollar arrangement, there is a risk that some portion of the cash value may be taxed prior to any Policy distribution. Tax laws, regulations, and interpretations have often been changed in the past and such changes continue to be proposed. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. FEE TABLES The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Policy. The charges set forth in the first three tables may vary by group, 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. Our variations in the charges will be made in accordance 7 with our established and uniformly applied administrative procedures. Any variations in charges will be reasonable and will not be unfairly discriminatory to the interests of any Policy owner. In addition to the following tables, certain charges that we don't currently impose (but which we have the right to impose on your Policy in the future) are described under "Charges and Deductions--Other Charges," further back in this Prospectus. In certain cases, we have the right to increase our charges for new Policies, as well as for Policies already outstanding. The maximum charges in such cases are shown in the far right-hand columns of each of the first three tables below. TRANSACTION FEES This table describes the fees and expenses that you will pay at the time that you buy the Policy, surrender the Policy, or transfer cash value among the variable investment options or the Fixed Account.
WHEN CHARGE CURRENT AMOUNT MAXIMUM AMOUNT CHARGE IS DEDUCTED DEDUCTED WE CAN DEDUCT - ------------------------------------------------------------------------------------------ Sales Charge/(1)(3)(4)/ On payment of Up to 6.5% of POLICY YEARS 1 TO 10, premium premiums paid (3% up to 9% of in Policy Years 11 premiums paid./(6)/ and later) until the total of payments in POLICY YEARS 11 AND any Policy year LATER, same as equals the annual Current Amount for target premium/(5)/ for those years that Policy year and 0% on the excess. - ------------------------------------------------------------------------------------------ Charge for average On payment of 2.25% of each Same as Current expected state and premium premium payment Amount local taxes attributable to premiums - ------------------------------------------------------------------------------------------ Charge for expected On payment of 1.2% of each Same as Current federal taxes premium premium payment Amount attributable to premiums - ------------------------------------------------------------------------------------------ Administrative On payment of Up to 1.05% of each Same as Current Charge premium premium payment. Amount We reduce the charge to .05% on the portion of any premiums paid in a Policy year above the annual target premium/(2)/. - ------------------------------------------------------------------------------------------ Transfer Fee On transfer of cash Not currently $25 per transfer, and value among charged none for transfers investment divisions under Systematic or to or from the Investment Fixed Account Strategies - ------------------------------------------------------------------------------------------
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WHEN CHARGE CURRENT AMOUNT MAXIMUM AMOUNT CHARGE IS DEDUCTED DEDUCTED WE CAN DEDUCT - --------------------------------------------------------------------------------------- Interim Term On payment of first Insurance Benefit premium if rider is Highest: $22.69 per Highest: $35.00 per (applies only if you elected $1,000 of term $1,000 of term elected rider at insurance amount insurance amount issue) Lowest: $0.03 per Lowest: $0.09 per Highest and Lowest $1,000 of term $1,000 of term Charge Among All insurance amount insurance amount Possible Insureds $0.16 per $1,000 of $0.40 per $1,000 of Charge for male, term insurance term insurance issue age 45, amount amount Guaranteed Issue underwriting class/(4)/ - --------------------------------------------------------------------------------------- Enhanced Cash On premium 0.25% of each Same as Current Surrender Value payments made premium payment Amount Rider/(2)/ during the first five made during the first Policy years five Policy years - --------------------------------------------------------------------------------------- Underwriting Charge On face amount None Up to $3 per $1,000 (applies only if you increase of increase request an increase in your specified face amount)
- -------- /1/ For Policies issued with the Refund of Sales Charge Rider, if you request a full cash withdrawal during the first three Policy years (first five Policy years for Policies issued on or after August 1, 2000), we will refund any sales charges deducted within 365 days prior to the date the request is received at our Designated office. /2/ For Policies issued on or after February 1, 2004 with the Enhanced Cash Surrender Value Rider, if you request a full cash withdrawal during the first ten Policy years, we will refund (a) part of the cumulative charges we have deducted from your premium payments and (b) part of the cost of term insurance we have deducted in the current Policy year, as shown in Table A below. However, we will not pay this refund if the full cash withdrawal is related to an exchange pursuant to Section 1035 of the Internal Revenue Code. This rider is subject to state approval. For Policies issued with the Enhanced Cash Surrender Value Rider and issued on or after November 23, 2001 and prior to February 1, 2004 or in connection with employer sponsored plans already in existence on that date, if you request a full cash withdrawal during the first seven Policy years, we will refund (a) part of the cumulative charges we have deducted from your premium payments and (b) part of the cost of term insurance we have deducted in the current Policy year, as shown in Table B below. However, we will not pay this refund if the full cash withdrawal is related to an exchange pursuant to Section 1035 of the Internal Revenue Code. TABLE A
PORTION OF COST OF TERM INSURANCE CHARGES DEDUCTED PORTION OF DURING POLICY YEAR OF POLICY YEAR OF CUMULATIVE PREMIUM FULL CASH WITHDRAWAL FULL CASH WITHDRAWAL CHARGES TO BE REFUNDED* TO BE REFUNDED ----------------------------------------------------------------------- 1 100% 95% ----------------------------------------------------------------------- 2 95% 85% ----------------------------------------------------------------------- 3 90% 75% ----------------------------------------------------------------------- 4 85% 65% ----------------------------------------------------------------------- 5 80% 55% ----------------------------------------------------------------------- 6 75% 45% ----------------------------------------------------------------------- 7 70% 35% ----------------------------------------------------------------------- 8 65% 25% ----------------------------------------------------------------------- 9 60% 15% ----------------------------------------------------------------------- 10 55% 5% ----------------------------------------------------------------------- 11 and later None None -----------------------------------------------------------------------
9 TABLE B
PORTION OF COST OF TERM INSURANCE CHARGES DEDUCTED PORTION OF DURING POLICY YEAR OF POLICY YEAR OF CUMULATIVE PREMIUM FULL CASH WITHDRAWAL FULL CASH WITHDRAWAL CHARGES TO BE REFUNDED* TO BE REFUNDED ----------------------------------------------------------------------- 1 100% 75% ----------------------------------------------------------------------- 2 90% 50% ----------------------------------------------------------------------- 3 75% 25% ----------------------------------------------------------------------- 4 60% None ----------------------------------------------------------------------- 5 45% None ----------------------------------------------------------------------- 6 30% None ----------------------------------------------------------------------- 7 15% None ----------------------------------------------------------------------- 8 and later None None -----------------------------------------------------------------------
* The percent shown is applied to the cumulative sales, tax, and administrative charges deducted from your premium. /3/ For Policies issued prior to May 1, 1996 or in connection with certain employer sponsored plans effective prior to August 1, 2000, the maximum we can charge is 1% of each premium payment and we currently charge 0%. /4/ This charge varies based on individual characteristics of the insured or of individuals in the group that the charge was intended to cover, and may not be representative of the charge that you will pay. You can obtain more information about the 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 Policy based on various assumptions. /5/ See "Charges and Deductions--Annual Target Premium" for a detailed discussion of the determination of the annual target premium. /6/ There is no sales charge for payments in excess of the annual target premium in any Policy year. 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 Policy not including the fees and expenses of the Portfolios. PERIODIC CHARGES
MAXIMUM AMOUNT WE CAN CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED DEDUCT - ----------------------------------------------------------------------------------------------------------- Cost of Term Insurance On each monthly for coverage under base anniversary of the Policy Highest: $31.61 per Highest: $35.00 per policy /1, 5/ $1,000 of term insurance $1,000 of term insurance amount amount Highest and Lowest Charge Among All Possible Lowest: $0.03 per $1,000 Lowest: $0.09 per $1,000 Insureds of term insurance amount of term insurance amount $0.16 per $1,000 of term $0.40 per $1,000 of term Charge for male, issue insurance amount insurance amount age 45, Guaranteed Issue underwriting class - ----------------------------------------------------------------------------------------------------------- Cost of Term Insurance On each monthly for coverage under the anniversary of the Policy Highest: $23.70 per Highest: $35.00 per term benefit /5/ $1,000 of term insurance $1,000 of term insurance amount amount Highest and Lowest Charge Among All Possible Lowest: $0.02 per $1,000 Lowest: $0.09 per $1,000 Insureds+ of term insurance amount of term insurance amount $0.12 per $1,000 of term $0.40 per $1,000 of term Charge for male, issue insurance amount insurance amount age 45, Guaranteed Issue underwriting class++ - -----------------------------------------------------------------------------------------------------------
10
MAXIMUM AMOUNT WE CAN CHARGE WHEN CHARGE IS DEDUCTED CURRENT AMOUNT DEDUCTED DEDUCT - ----------------------------------------------------------------------------------------------------------- Mortality and Expense On each monthly Effective annual rate of Effective annual rate up Risk Charge anniversary of the Policy 0.40% of the cash value to .90% in the Separate Account./2/ We intend to reduce this charge after Policy year 9 to 0.20% and after Policy year 20 to 0.10%. - ----------------------------------------------------------------------------------------------------------- Loan Interest Spread/3/ Annually (or on loan Annual rate of 0.25% of Annual rate of 2% of the termination, if earlier) the loan amount loan amount
PERIODIC CHARGES APPLICABLE TO ANY OPTIONAL RIDERS THAT YOU CHOOSE TO ADD TO YOUR POLICY /4/
WHEN CHARGE IS CURRENT AMOUNT MAXIMUM AMOUNT OPTIONAL FEATURE DEDUCTED DEDUCTED WE CAN DEDUCT - ----------------------------------------------------------------------------------------------------------- Disability Waiver of Monthly Monthly Deduction Benefit Highest: $0.28 per $1,000 Highest: $0.28 per $1,000 /5/ of total term insurance of total term insurance amount amount Highest and Lowest Charge Among All Possible Lowest: $0.01 per $1,000 Lowest: $0.01 per $1,000 Insureds of total term insurance of total term insurance amount amount Charge for male, issue $0.03 per $1,000 of total $0.04 per $1,000 of total age 45, Guaranteed Issue term insurance amount term insurance amount underwriting class - ----------------------------------------------------------------------------------------------------------- Accidental Death Benefit Monthly /5/ Highest: $0.07 per $1,000 Highest: $0.12 per $1,000 of accidental death of accidental death Highest and Lowest Charge benefit amount benefit amount Among All Possible Policies Lowest: $0.04 per $1,000 Lowest: $0.07 per $1,000 of accidental death of accidental death benefit amount benefit amount Charge for male, issue age 45, Guaranteed Issue $0.04 per $1,000 of $0.07 per $1,000 of underwriting class accidental death benefit accidental death benefit amount amount - -----------------------------------------------------------------------------------------------------------
- -------- /1/ The cost of term 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. See "Charges and Deductions--Cost of Term 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 Policy based on various assumptions. /2/ For Policies issued on or after August 1, 2000 and prior to February 1, 2004 or in connection with employer sponsored plans that became effective within that period, the charge is currently at an effective annual rate of 0.48% of the cash value in the Separate Account. For those Policies, we intend to reduce this charge after Policy year 9 to .36% and after Policy year 20 to ..30%. For policies issued prior to May 1, 1996 or in connection with employer sponsored plans that became effective prior to August 1, 2000, the charge is currently equivalent to an effective annual rate of 0.60% of the cash value in the Separate Account. For those Policies, we intend to reduce this charge to ..30% for all Policy years after the ninth. /3/ We charge interest on Policy 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. 11 /4/ The charges for the optional Interim Term Insurance Rider and the Enhanced Cash Surrender Value Rider have previously been described in the table of Transaction Fees above, since the charges for those riders are deducted from premiums. /5/ This charge varies based on individual characteristics of the insured or of individuals in the group that the charge was intended to cover, and may not be representative of the charge that you will pay. You can obtain more information about the 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 Policy, based on various assumptions. + For Policies issued prior to May 1, 2004, the highest and lowest cost of insurance charges for this term benefit would be:
MAXIMUM AMOUNT WE CAN CURRENT AMOUNT DEDUCTED DEDUCT ----------------------------------------------------- Highest: $14.34 per Highest: $35.00 per $1,000 of term insurance $1,000 of term insurance amount amount Lowest: $0.03 per $1,000 Lowest: $0.09 per $1,000 of term insurance amount of term insurance amount
++ For Policies issued prior to May 1, 2004, the cost of insurance charges for the term rider for a male, issue age 45, in the guaranteed issue underwriting class would be $.17 per $1,000 of term insurance amount (current amount deducted) and $.40 per $1,000 of term insurance amount (maximum amount we can deduct). PORTFOLIO OPERATING EXPENSES Each of the Funds pays an investment management fee to its investment manager. Each of the Funds also incurs other direct expenses (see the applicable Fund 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. Most of the Funds offer various classes of shares, each of which has a different level of expenses, only one of which is available under a Policy. The available class of each Portfolio is specified in the expense table below and on the front cover pages of the Prospectus. 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, 2004.
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) 0.30% 1.81% - ----------------------------------------------------------------
The table below describes the annual operating expenses for each Portfolio for the year ended December 31, 2004 as a percentage of the Portfolio's average daily net assets for the year.
--------------------------------------------------------------------------- GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ --------------------------------------------------------------------------- --------------------------------------------------------------------------- METROPOLITAN SERIES FUND, INC. (CLASS A, EXCEPT WHERE NOTED) --------------------------------------------------------------------------- --------------------------------------------------------------------------- BlackRock Aggressive Growth .73% .06% .00% .79% .00% .79% ---------------------------------------------------------------------------
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----------------------------------------------------------------------------- GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Bond Income/(b)/ .40% .06% .00% .46% .00% .46% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Diversified .44% .06% .00% .50% .00% .50% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Investment Trust .49% .05% .00% .54% .00% .54% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Legacy Large Cap Growth .74% .06% .00% .80% .00% .80% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Money Market/(b)/ .35% .07% .00% .42% .01% .41% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Strategic Value .83% .06% .00% .89% .00% .89% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Davis Venture Value .72% .06% .00% .78% .00% .78% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI International Stock .86% .22% .00% 1.08% .00% 1.08% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI Mid Cap Opportunities .68% .07% .00% .75% .00% .75% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI Value Leaders .66% .08% .00% .74% .00% .74% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Harris Oakmark Large Cap Value .73% .06% .00% .79% .00% .79% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Jennison Growth .65% .06% .00% .71% .00% .71% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index/(b)/ .25% .07% .00% .32% .01% .31% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Loomis Sayles Small Cap/(b)/ .90% .08% .00% .98% .05% .93% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MetLife Mid Cap Stock Index/(b)/ .25% .10% .00% .35% .01% .34% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MetLife Stock Index/(b)/ .25% .05% .00% .30% .01% .29% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MFS Investors Trust/(b)/ .75% .22% .00% .97% .00% .97% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MFS Total Return (Class B) .50% .14% .25% .89% .00% .89% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Morgan Stanley EAFE Index/(b)/ .30% .29% .00% .59% .01% .58% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Neuberger Berman Mid Cap Value .68% .08% .00% .76% .00% .76% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Oppenheimer Global Equity .62% .19% .00% .81% .00% .81% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Russell 2000 Index/(b)/ .25% .12% .00% .37% .01% .36% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- T. Rowe Price Large Cap Growth/(b)/ .62% .12% .00% .74% .00% .74% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- T. Rowe Price Small Cap Growth .52% .08% .00% .60% .00% .60% -----------------------------------------------------------------------------
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GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ - ------------------------------------------------------------------------------- MET INVESTORS SERIES TRUST - ------------------------------------------------------------------------------- Janus Aggressive Growth (Class B)/(c)(d)/ .68% .14% .25% 1.07% .00% 1.07% - ------------------------------------------------------------------------------- Lord Abbett Bond Debenture (Class A)/(c)/ .52% .06% .00% .58% .00% .58% - ------------------------------------------------------------------------------- Lord Abbett Growth and Income (Class A)/(d)/ .52% .00% .05% .57% .00% .57% - ------------------------------------------------------------------------------- Lord Abbett Growth Opportunities (Class B)/(c)/ .70% .25% .25% 1.20% .05% 1.15% - ------------------------------------------------------------------------------- Lord Abbett Mid- Cap Value (Class B) .69% .09% .25% 1.03% .00% 1.03% - ------------------------------------------------------------------------------- Met/AIM Mid Cap Core Equity (Class B)/(c)(d)/ .73% .10% .25% 1.08% .00% 1.08% - ------------------------------------------------------------------------------- Met/AIM Small Cap Growth (Class B)/(c)(d)/ .90% .14% .25% 1.29% .00% 1.29% - ------------------------------------------------------------------------------- MFS Research International (Class B)/(c)(d)/ .77% .30% .25% 1.32% .07% 1.25% - ------------------------------------------------------------------------------- Neuberger Berman Real Estate (Class B)/(c)/ .70% .03% .25% .98% .00% .98% - ------------------------------------------------------------------------------- T. Rowe Price Mid-Cap Growth (Class B)/(c)(d)/ .75% .16% .25% 1.16% .01% 1.15% - ------------------------------------------------------------------------------- Third Avenue Small Cap Value (Class B)/(c)/ .75% .07% .25% 1.07% .00% 1.07% - ------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS - ------------------------------------------------------------------------------- AIM V.I. Government Securities (Series II)/(e)/ .47% .40% .25% 1.12% .00% 1.12% - ------------------------------------------------------------------------------- AIM V.I. Real Estate (Series I)/(e)(f)/ .90% .52% .00% 1.42% .15% 1.27% - ------------------------------------------------------------------------------- AIM V.I. Core Stock (Series I)/(e)(f)/ .75% .46% .00% 1.21% .06% 1.15% - ------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) - ------------------------------------------------------------------------------- AllianceBernstein Growth and Income/(g)/ .55% .05% .25% .85% .00% .85% - -------------------------------------------------------------------------------
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GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ ------------------------------------------------------------------------------ AllianceBernstein Global Technology/(g)/ .75% .13% .25% 1.13% .00% 1.13% ------------------------------------------------------------------------------ AllianceBernstein US Government/ High Grade Securities/(g)/ .45% .23% .25% .93% .00% .93% ------------------------------------------------------------------------------ AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (CLASS I) ------------------------------------------------------------------------------ VP Vista 1.00% .00% .00% 1.00% .00% 1.00% ------------------------------------------------------------------------------ DELAWARE VIP TRUST (SERVICE CLASS) ------------------------------------------------------------------------------ Small Cap Value/(h)/ .74% .09% .30% 1.13% .05% 1.08% ------------------------------------------------------------------------------ DREYFUS INVESTMENT PORTFOLIOS (SERVICE SHARES) ------------------------------------------------------------------------------ Emerging Leaders/(i)/ .90% .23% .25% 1.38% .00% 1.38% ------------------------------------------------------------------------------ MidCap Stock/(j)/ .75% .03% .25% 1.03% .00% 1.03% ------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE SHARES) ------------------------------------------------------------------------------ Appreciation .75% .04% .25% 1.04% .00% 1.04% ------------------------------------------------------------------------------ International Value/(j)/ 1.00% .24% .25% 1.49% .00% 1.49% ------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS (SERVICE CLASS) ------------------------------------------------------------------------------ VIP Asset Manager: Growth .58% .19% .10% .87% .00% .87% ------------------------------------------------------------------------------ VIP Contrafund .57% .11% .10% .78% .00% .78% ------------------------------------------------------------------------------ VIP Equity- Income .47% .11% .10% .68% .00% .68% ------------------------------------------------------------------------------ VIP Growth .58% .10% .10% .78% .00% .78% ------------------------------------------------------------------------------ VIP Investment Grade Bond .43% .13% .10% .66% .00% .66%
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GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ - ------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - ------------------------------------------------------------------------------- Mutual Discovery Securities (Class 2)/(k)/ .80% .21% .25% 1.26% .00% 1.26% - ------------------------------------------------------------------------------- Templeton Foreign Securities (Class 1)/(l)/ .68% .19% .00% .87% .05% .82% - ------------------------------------------------------------------------------- Templeton Growth Securities (Class 2)/(k)/ .79% .07% .25% 1.11% .00% 1.11% - ------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST - ------------------------------------------------------------------------------- CORE Small Cap Equity/(m)/ .75% .22% .00% .97% .00% .97% - ------------------------------------------------------------------------------- Mid Cap Value .80% .08% .00% .88% .00% .88% - ------------------------------------------------------------------------------- JANUS ASPEN SERIES - ------------------------------------------------------------------------------- Janus Aspen Balanced (Service Shares) .55% .01% .25% .81% .00% .81% - ------------------------------------------------------------------------------- Janus Aspen Forty (Service Shares) .64% .02% .25% .91% .00% .91% - ------------------------------------------------------------------------------- Janus Aspen Large Cap Growth (Institutional Shares) .64% .02% .00% .66% .00% .66% - ------------------------------------------------------------------------------- MFS VARIABLE INSURANCE TRUST (SERVICE CLASS) - ------------------------------------------------------------------------------- Global Equity/(n)/ 1.00% .56% .25% 1.81% .41% 1.40% - ------------------------------------------------------------------------------- High Income/(n)/ .75% .11% .25% 1.11% .00% 1.11% - ------------------------------------------------------------------------------- New Discovery .90% .11% .25% 1.26% .00% 1.26% - ------------------------------------------------------------------------------- Value/(n)/ .75% .18% .25% 1.18% .03% 1.15% - ------------------------------------------------------------------------------- VAN KAMPEN LIFE INVESTMENT TRUST - ------------------------------------------------------------------------------- Government-- Class II/(o)/ .50% .15% .25% .90% .00% .90%
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GROSS MANAGE- TOTAL FEE WAIVERS NET TOTAL MENT OTHER 12B-1 ANNUAL AND EXPENSE ANNUAL FEES EXPENSES FEES EXPENSES REIMBURSEMENTS EXPENSES/(A)/ ---------------------------------------------------------------------------- WELLS FARGO VARIABLE TRUST ---------------------------------------------------------------------------- Advantage Asset Allocation/(p)/ .55% .22% .25% 1.02% .02% 1.00% ---------------------------------------------------------------------------- Advantage Equity Income/(p)/ .55% .23% .25% 1.03% .03% 1.00% ---------------------------------------------------------------------------- Advantage Large Company Core/(p)/ .55% .33% .25% 1.13% .13% 1.00% ---------------------------------------------------------------------------- Advantage Large Company Growth/(p)/ .55% .25% .25% 1.05% .05% 1.00% ---------------------------------------------------------------------------- Advantage Money Market/(p)/ .30% .32% .25% .87% .12% .75% ---------------------------------------------------------------------------- Advantage Total Return Bond/(p)/ .45% .26% .25% .96% .06% .90%
- -------- (a) Net Total Annual Expenses do not reflect any voluntary waivers of fees and expenses, or any expense reductions that certain Portfolios achieved as a result of custodial fee credits or directed brokerage arrangements. (b) Our affiliate, MetLife Advisers, LLC ("MetLife Advisers"), and the Metropolitan Series Fund, Inc. ("Met Series Fund") have entered into an Expense Agreement under which MetLife Advisers will waive management fees and/or pay expenses (other than brokerage costs, interest, taxes or extraordinary expenses) ("Expenses") attributable to the Class A shares of certain Portfolios of the Met Series Fund, so that Net Total Annual Expenses of the MFS Investors Trust Portfolio will not exceed, at any time prior to April 30, 2006, 1.00% of Portfolio's average daily net assets. Under the agreement, if certain conditions are met, the Portfolio may reimburse MetLife Advisers for fees waived and Expenses paid if, in the future, actual Expenses are less than this expense limit. Under the Expense Agreement, MetLife Advisers will also waive the management fee payable by certain Portfolios in the following percentage amounts: .05% for the Loomis Sayles Small Cap Portfolio, .006% for the Lehman Brothers Aggregate Bond Index Portfolio, .007% for the MetLife Stock Index Portfolio, .007% for the MetLife Mid Cap Stock Index Portfolio, .007% for the Morgan Stanley EAFE Index Portfolio, .007% for the Russell 2000 Index Portfolio, .025% on assets in excess of $1 billion and less than $2 billion for the BlackRock Bond Income Portfolio, .005% on the first $500 million of assets and .015% on the next $500 million of assets for the BlackRock Money Market Portfolio and .015% on the first $50 million of assets for the T. Rowe Price Large Cap Growth Portfolio. (c) Our affiliate, Met Investors Advisory LLC ("Met Investors Advisory"), and Met Investors Series Trust have entered into an Expense Limitation Agreement under which Met Investors Advisory has agreed to waive or limit its fees and to assume other expenses so that Net Total Annual Expenses of each 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 each Portfolio's business) will not exceed, at any time prior to April 30, 2006, the following percentages: 1.15% for the Janus Aggressive Growth Portfolio, 1.15% for the Lord Abbett Growth Opportunities Portfolio, 1.15% for the Met/AIM Mid Cap Core Equity Portfolio, 1.30% for the Met/AIM Small Cap Growth Portfolio, 1.25% for the MFS Research International Portfolio, 1.15% for the Neuberger Berman Real Estate Portfolio, 1.15% for the T. Rowe Price Mid-Cap Growth Portfolio and 1.25% for the Third Avenue Small Cap Value Portfolio. Under certain circumstances, any fees waived or expenses reimbursed by Met Investors Advisory may, with the approval of the Trust's Board of Trustees, be repaid to Met Investors Advisory. Expenses of the MFS Research International Portfolio and the T. Rowe Price Mid-Cap Portfolio have been restated to reflect the terms of the Expense Limitation Agreement. Expenses of the Janus Aggressive Growth Portfolio and the Lord Abbett Bond Debenture Portfolio have been restated to reflect management fee reductions that became effective May 1, 2005. 17 (d) Other Expenses for certain Portfolios reflect the repayment of fees previously waived and/or expenses previously paid by Met Investors Advisory, under the terms of prior expense limitation agreements, in the following amounts: .07% for the Janus Aggressive Growth Portfolio, .02% for the Lord Abbett Growth and Income Portfolio, .05% for the Met/AIM Mid Cap Core Equity Portfolio, .06% for the Met/AIM Small Cap Growth Portfolio, .14% for the MFS Research International Portfolio and .09% for the T. Rowe Price Mid-Cap Growth Portfolio. (e) The adviser to the AIM Variable Insurance Funds has contractually agreed to waive advisory fees and/or reimburse expenses of Series I and Series II shares to the extent necessary to limit Net Total Annual Expenses (excluding certain items discussed below) to 1.30% for Series I shares and 1.45% for Series II shares. In determining the adviser's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause Net Total Annual Expenses to exceed the limit stated above: (i) Rule 12b-1 plan fees, if any; (ii) interest; (iii) taxes; (iv) dividend expense of short sales; (v) extraordinary items (these are expenses that are not anticipated to arise from the Fund's day-to day operations), or items designated as such by the Fund's Board of Trustees; (vi) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vii) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. The expense limitation is in effect through April 30, 2006. (f) Effective January 1, 2005 through June 30, 2006, the adviser to the AIM Variable Insurance Funds has contractually agreed to waive a portion of the advisory fee payable by the AIM V.I Real Estate Fund. Effective January 1, 2005 through December 31, 2009, the adviser has contractually agreed to waive a portion of the advisory fee payable by the AIM V.I. Core Stock Fund. The fee waivers shown in the table reflect these agreements. (g) Expense information has been restated to reflect a reduction in management fees effective September 7, 2004. (h) Effective May 1, 2005 through April 30, 2006, Delaware Management Company has contractually agreed to waive its management fee and to pay expenses in order to prevent Net Total Annual Expenses (excluding any 12b-1 fees, taxes, brokerage fees, extraordinary expenses and certain insurance expenses) from exceeding .95%. Effective May 1, 2005 through April 30, 2006, Delaware Distributors, L.P. has contracted to limit the Service Class shares 12b-1 fee to no more than .25% of average daily net assets. (i) The Dreyfus Corporation has agreed, until December 31, 2005, to waive receipt of its fees and/or assume the expenses of the Portfolios so that Net Total Annual Expenses (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) do not exceed 1.50% for the Emerging Leaders Portfolio. Under a waiver agreement in effect through December 31, 2004, Net Total Annual Expenses of the Portfolio were 1.32% for the year ended December 31, 2004. (j) The Dreyfus Corporation has agreed, until December 31, 2005, to waive receipt of its fees and/or assume the expenses of the Portfolios so that Net Total Annual Expenses (excluding taxes, brokerage commissions, extraordinary expenses, interest expenses and commitment fees on borrowings) do not exceed the following amounts: 1.00% for the MidCap Stock Portfolio and 1.40% for the International Value Portfolio. Due to a waiver agreement in effect through December 31, 2004, Net Total Annual Expenses of these Portfolios were equal to these amounts for the year ended December 31, 2004. (k) While the maximum amount payable under the Fund's Class 2 rule 12b-1 plan is .35% per year of the Fund's average daily net assets, the Fund's Board of Trustees has set the current rate at .25% per year through May 1, 2006. (l) The Fund's manager has agreed in advance to reduce fees from assets invested by the Fund in a Franklin Templeton money fund (the Sweep Money Fund). This reduction is required by the Fund's Board of Trustees and an order of the Securities and Exchange Commission. (m) The Investment Adviser has contractually agreed to limit Other Expenses (excluding management fees, transfer agent fees and expenses, taxes, interest, brokerage, litigation and indemnification costs, shareholder meeting and other extraordinary expenses) so that Other Expenses and Net Total Annual Expenses do not exceed, on an annual basis, .11% and .90% respectively. The Investment Adviser has contractually agreed to maintain these expense limitations through June 30, 2005. (n) MFS has contractually agreed, subject to reimbursement, to bear the portfolios' expenses such that Other Expenses (determined without giving effect to any expense reductions resulting from custodial fee credit or directed brokerage arrangements) do not exceed 0.15% annually. This expense limitation arrangement excludes management fees, taxes, extraordinary expenses, brokerage and transaction costs and expenses associated with the portfolios' investing activities. 18 This contractual fee arrangement will continue until at least April 30, 2006, unless the Board of Trustees which oversees the fund consents to any earlier revision or termination of this arrangement. (o) Under the terms of the Advisory agreement, if the total ordinary business expenses, exclusive of taxes, distribution fees and interest, exceed .95% of the average daily assets of the Portfolio, Van Kampen Asset Management will reimburse the Portfolio for the amount of the excess. Additionally, the Adviser has voluntarily agreed to reimburse the Portfolio for all expenses in excess of ..85% of average daily net assets. (p) The adviser to the Wells Fargo Variable Trust Portfolios has committed through April 30, 2006 to waive fees and/or reimburse expenses to the extent necessary to maintain Net Total Annual Expenses at the amounts shown in the table. The expense information regarding the Funds was provided by those Funds. Additional information about the management fees and expenses of the Funds can be obtained in Funds' prospectuses and Statements of Additional Information. FOR INFORMATION CONCERNING COMPENSATION PAID FOR THE SALE OF THE POLICIES, SEE "SALE OF POLICIES." METLIFE Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of MetLife, Inc., a publicly traded company. Our main office is located at 200 Park Avenue, New York, New York 10166. MetLife has the legal obligation to pay all benefits and other amounts to which you are entitled under the terms of your Policy. THE FIXED ACCOUNT The Fixed Account is part of our general assets that are not in any legally segregated separate accounts. Amounts in the Fixed Account are credited with interest at an effective annual rate of 4%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account. Any partial amounts we remove from the Fixed Account (such as any portion of your Policy's monthly deduction that is allocable to the Fixed Account) will be taken from the most recently allocated amounts first. Any excess interest rate will be credited for at least 12 months before a new rate is credited. We can delay transfers, withdrawals, surrender and payment of Policy loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Policy gives you more information on the operation of the Fixed Account. SEPARATE ACCOUNT UL The Separate Account receives premium payments from the Policy 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 creditors. Income and realized and unrealized capital gains and losses of the Separate Account are credited to the Separate Account without regard to any of our other income or capital gains and losses. We will keep an 19 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. 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 YOU HAVE ALSO RECEIVED.] Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the Investment Company Act of 1940 (the "1940 Act"). Each Fund is divided into Portfolios, each of which represents a different class of stock in which a corresponding investment division of the Separate Account invests. You should read each Fund prospectus that you have also received. They contain information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. They also contain information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. 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. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE PORTFOLIOS. An investment adviser (other than our affiliates MetLife Advisers and Met Investors Advisory) or sub-adviser of a Portfolio or its affiliates, may compensate us and/or certain affiliates for administrative or other services relating to the Portfolios. The amount of the compensation is not deducted from Portfolio assets and does not decrease the Portfolio's investment return. The amount of the compensation is based on a percentage of assets of the Portfolio attributable to the Policies and certain other variable insurance products that we and our affiliates issue. These percentages differ and some advisers or sub-advisers (or other affiliates) may pay us more than others. These percentages currently range up to .30%. Additionally, an investment adviser or sub-adviser of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Policies and may pay us and/or certain affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or sub-adviser (or other affiliate) with increased access to persons involved in the distribution of the Policies. We, and certain of our affiliated insurance companies, are joint owners of our affiliated investment advisers, MetLife Advisers and Met Investors Advisory, 20 which are formed as limited liability companies. Our ownership interests entitle us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from a Portfolio. We may benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the advisers. (See "Fee Tables--Annual Portfolio Operating Expenses" for information on the management fees paid to the advisers and the Statement of Additional Information for the Funds for information on the management fees paid by the adviser to sub-advisers.) Certain Funds have adopted a Distribution Plan under Rule 12b-1 of the Investment Company Act of 1940. The Distribution Plan is described in more detail in each Fund's prospectus. (See also "Fee Tables--Portfolio Operating Expenses.") The payments are deducted from the assets of the Portfolios and are paid to MetLife. These payments decrease the Portfolios' investment return. SELECTION OF THE PORTFOLIOS. We select the Portfolios offered through this Policy based on several criteria, including asset class coverage, the strength of the adviser's or subadviser's reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm. Another factor we consider during the selection process is whether the Portfolio's adviser or subadviser is one of our affiliates or whether the Portfolio, its adviser, its subadviser(s), or an affiliate will compensate us or our affiliates for providing certain administrative and other services, as described above. In some cases, we may include Portfolios based on recommendations made by selling firms through which the Policy is sold. We review the Portfolios periodically and may remove a Portfolio or limit its availability if we determine that the Portfolio no longer meets one or more of the selection criteria, and/or if the Portfolio has not attracted significant allocations from owners. We do not provide investment advice and do not recommend or endorse any particular Portfolio. As of the end of each Valuation Period (see "Valuation Period" description below in "Other Policy 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, which 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). .. Policy 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 investment objective of each Portfolio are as follows: METROPOLITAN SERIES FUND, INC. ADVISER: METLIFE ADVISERS, LLC
--------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE --------------------------------------------------------------------- BlackRock Aggressive BlackRock Advisors, Inc./1/ Maximum capital Growth appreciation. ---------------------------------------------------------------------
21
- ------------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------- BlackRock Bond Income BlackRock Advisors, Inc./1/ A competitive total return primarily from investing in fixed-income securities. - ------------------------------------------------------------------------------------- BlackRock Diversified BlackRock Advisors, Inc./1/ High total return while attempting to limit investment risk and preserve capital. - ------------------------------------------------------------------------------------- BlackRock Investment Trust BlackRock Advisors, Inc./1/ Long-term growth of capital and income. - ------------------------------------------------------------------------------------- BlackRock Legacy Large BlackRock Advisors, Inc./1/ Long-term growth of capital. Cap Growth - ------------------------------------------------------------------------------------- BlackRock Money Market/2/ BlackRock Advisors, Inc./1/ A high level of current income consistent with preservation of capital. - ------------------------------------------------------------------------------------- BlackRock Strategic Value BlackRock Advisors, Inc./1/ High total return, consisting principally of capital appreciation. - ------------------------------------------------------------------------------------- Davis Venture Value Davis Selected Advisers, Growth of capital. L.P./3/ - ------------------------------------------------------------------------------------- FI International Stock Fidelity Management Long-term growth of capital. & Research Company - ------------------------------------------------------------------------------------- FI Mid Cap Opportunities Fidelity Management & Long-term growth of capital. Research Company - ------------------------------------------------------------------------------------- FI Value Leaders Fidelity Management & Long-term growth of capital. Research Company - ------------------------------------------------------------------------------------- Harris Oakmark Large Cap Harris Associates L.P. Long-term capital Value appreciation. - ------------------------------------------------------------------------------------- Jennison Growth Jennison Associates LLC Long-term growth of capital. - ------------------------------------------------------------------------------------- Lehman Brothers Aggregate Metropolitan Life Insurance To equal the performance of Bond Index Company the Lehman Brothers Aggregate Bond Index. - ------------------------------------------------------------------------------------- Loomis Sayles Small Cap Loomis, Sayles & Company, Long-term capital growth L.P. from investments in common stocks or other equity securities. - ------------------------------------------------------------------------------------- MetLife Mid Cap Stock Metropolitan Life Insurance To equal the performance of Index Company the Standard & Poor's Mid Cap 400 Composite Stock Price Index. - ------------------------------------------------------------------------------------- MetLife Stock Index Metropolitan Life Insurance To equal the performance of Company the Standard & Poor's 500 Composite Stock Price Index. - ------------------------------------------------------------------------------------- MFS Investors Trust Massachusetts Financial Long-term growth of capital Services Company with a secondary objective to seek reasonable current income. - ------------------------------------------------------------------------------------- MFS Total Return Massachusetts Financial Favorable total return Services Company through investment in a diversified portfolio. - ------------------------------------------------------------------------------------- Morgan Stanley EAFE Metropolitan Life Insurance To equal the performance of Index Company the MSCI EAFE Index. - ------------------------------------------------------------------------------------- Neuberger Berman Mid Cap Neuberger Berman Capital growth. Value Management Inc. - ------------------------------------------------------------------------------------- Oppenheimer Global Equity OppenheimerFunds, Inc./4/ Capital appreciation. - ------------------------------------------------------------------------------------- Russell 2000 Index Metropolitan Life Insurance To equal the return of the Company Russell 2000 Index. - ------------------------------------------------------------------------------------- T. Rowe Price Large Cap T. Rowe Price Associates, Long-term growth of capital Growth Inc. and, secondarily, dividend income. - ------------------------------------------------------------------------------------- T. Rowe Price Small Cap T. Rowe Price Associates, Long-term capital growth. Growth Inc. - -------------------------------------------------------------------------------------
22 MET INVESTORS SERIES TRUST ADVISER: MET INVESTORS ADVISORY LLC - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ Janus Aggressive Growth Janus Capital Management Long-term growth of capital. LLC - ------------------------------------------------------------------------------------ Lord Abbett Bond Lord, Abbett & Co. LLC High current income and the Debenture opportunity for capital appreciation to produce a high total return. - ------------------------------------------------------------------------------------ Lord Abbett Growth and Lord, Abbett & Co. LLC Long-term growth of capital Income and income without excessive fluctuations in market value. - ------------------------------------------------------------------------------------ Lord Abbett Growth Lord, Abbett & Co. LLC Capital appreciation. Opportunities - ------------------------------------------------------------------------------------ Lord Abbett Mid-Cap Value Lord, Abbett & Co. LLC Capital appreciation through investments, primarily in equity securities. - ------------------------------------------------------------------------------------ Met/AIM Mid Cap Core AIM Capital Management, Long-term growth of capital. Equity Inc. - ------------------------------------------------------------------------------------ Met/AIM Small Cap Growth AIM Capital Management, Long-term growth of capital. Inc. - ------------------------------------------------------------------------------------ MFS Research International Massachusetts Financial Capital appreciation. Services Company - ------------------------------------------------------------------------------------ Neuberger Berman Real Neuberger Berman Total return through Estate Management Inc. investment in real estate securities, emphasizing both capital appreciation and current income. - ------------------------------------------------------------------------------------ T. Rowe Price Mid-Cap T. Rowe Price Associates, Long-term growth of capital. Growth Inc. - ------------------------------------------------------------------------------------ Third Avenue Small Cap Third Avenue Management Long-term capital Value LLC appreciation. - ------------------------------------------------------------------------------------ A I M VARIABLE INSURANCE FUNDS ADVISER: A I M ADVISORS, INC. - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ AIM V.I. Government N/A To achieve a high level of Securities current income consistent with reasonable concern for safety of principal. - ------------------------------------------------------------------------------------ AIM V.I. Real Estate N/A To achieve a high total return. - ------------------------------------------------------------------------------------ AIM V.I. Core Stock INVESCO Institutional, Inc. To provide a high total return through both growth and current income. - ------------------------------------------------------------------------------------ ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES ADVISER: ALLIANCE FUND, INC. CAPITAL MANAGEMENT L.P. - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ AllianceBernstein Global N/A Growth of capital. Technology - ------------------------------------------------------------------------------------ AllianceBernstein Growth N/A To seek reasonable current and Income income and reasonable opportunity for appreciation. - ------------------------------------------------------------------------------------ AllianceBernstein US N/A High current income Government/High Grade consistent with preservation Securities of capital. - ------------------------------------------------------------------------------------
23 AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. ADVISER: AMERICAN CENTURY INVESTMENT MANAGEMENT, INC. - ---------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ---------------------------------------------------------------------------------- VP Vista N/A Long-term capital growth. - ---------------------------------------------------------------------------------- DELAWARE VIP TRUST ADVISER: DELAWARE MANAGEMENT COMPANY - ---------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ---------------------------------------------------------------------------------- Small Cap Value N/A Capital appreciation. - ---------------------------------------------------------------------------------- DREYFUS INVESTMENT PORTFOLIOS ADVISER: THE DREYFUS CORPORATION - ---------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ---------------------------------------------------------------------------------- Emerging Leaders N/A Capital growth. - ---------------------------------------------------------------------------------- MidCap Stock N/A Exceed the total return performance of the S&P 400(R) by investing in stocks of medium-size companies. - ---------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND ADVISER: THE DREYFUS CORPORATION - ---------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ---------------------------------------------------------------------------------- Appreciation Fayez Sarfim & Co. Long-term capital growth consistent with the preservation of capital. Its secondary goal is current income. - ---------------------------------------------------------------------------------- International Value N/A Long-term capital growth. - ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS ADVISER: FIDELITY MANAGEMENT & RESEARCH COMPANY - ---------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ---------------------------------------------------------------------------------- VIP Asset Manager: Growth FMR Co., Inc. To maximize total return by allocating its assets among stocks, bonds, short-term instruments, and other instruments. - ---------------------------------------------------------------------------------- VIP Contrafund FMR Co., Inc. Long-term capital appreciation. - ---------------------------------------------------------------------------------- VIP Equity-Income FMR Co., Inc. Reasonable income by investing primarily in income producing equity securities. The fund will also consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500/SM/ Index (S&P 500(R)). - ---------------------------------------------------------------------------------- VIP Growth FMR Co. Inc. Capital appreciation. - ---------------------------------------------------------------------------------- VIP Investment Grade Bond Fidelity Investments Money High level of current income Management, Inc. as is consistent with preservation of capital. - ----------------------------------------------------------------------------------
24 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ADVISER: SEE BELOW - ------------------------------------------------------------------------------------ PORTFOLIO ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ Templeton Foreign Templeton Investment Long-term capital growth. Securities Counsel, LLC - ------------------------------------------------------------------------------------ Templeton Growth Templeton Global Advisors Long-term capital growth. Securities Limited - ------------------------------------------------------------------------------------ Mutual Discovery Securities Franklin Mutual Advisers, Capital appreciation. LLC - ------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST ADVISER: GOLDMAN SACHS ASSET MANAGEMENT, L.P. - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ CORE Small Cap Equity N/A Long term growth of capital. - ------------------------------------------------------------------------------------ Mid Cap Value N/A Long term capital appreciation. - ------------------------------------------------------------------------------------ JANUS ASPEN SERIES ADVISER: JANUS CAPITAL MANAGEMENT LLC - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ Janus Aspen Large Cap N/A Long-term growth of capital Growth in a manner consistent with the preservation of capital. - ------------------------------------------------------------------------------------ Janus Aspen Balanced N/A Long-term capital growth, consistent with preservation of capital and balanced by current income. - ------------------------------------------------------------------------------------ Janus Aspen Forty N/A Long-term growth of capital. - ------------------------------------------------------------------------------------ MFS VARIABLE INSURANCE TRUST ADVISER: MASSACHUSETTS FINANCIAL SERVICES COMPANY - ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ------------------------------------------------------------------------------------ Global Equity N/A Capital appreciation. - ------------------------------------------------------------------------------------ High Income N/A High current income by investing primarily in a professionally managed diversified portfolio of fixed income securities, some of which may involve equity features. - ------------------------------------------------------------------------------------ New Discovery N/A Capital appreciation. - ------------------------------------------------------------------------------------ Value N/A Capital appreciation and reasonable income. - ------------------------------------------------------------------------------------
25 VAN KAMPEN LIFE INVESTMENT TRUST ADVISER: VAN KAMPEN ASSET MANAGEMENT - ----------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------- Government N/A To provide investors with high current return consistent with preservation of capital. - ----------------------------------------------------------------------------------- WELLS FARGO VARIABLE TRUST ADVISER: WELLS FARGO MANAGEMENT, LLC - ----------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE - ----------------------------------------------------------------------------------- Advantage Asset Allocation Wells Capital Management Long-term total return, Incorporated consistent with reasonable risk. - ----------------------------------------------------------------------------------- Advantage Equity Income Wells Capital Management Long-term capital Incorporated appreciation and above- average dividend income. - ----------------------------------------------------------------------------------- Advantage Large Company Matrix Asset Advisors, Inc. Total return comprised of Core long-term capital appreciation and current income. - ----------------------------------------------------------------------------------- Advantage Large Company Peregrine Capital Long-term capital Growth Management, Inc. appreciation. - ----------------------------------------------------------------------------------- Advantage Money Market Wells Capital Management Current income, while Incorporated preserving capital and liquidity. - ----------------------------------------------------------------------------------- Advantage Total Return Wells Capital Management Total return consisting of Bond Incorporated income and capital appreciation. - -----------------------------------------------------------------------------------
- -------- /1/ Prior to January 31, 2005, State Street Research & Management Company was the sub-adviser to this Portfolio. /2/ An investment in the BlackRock Money Market Portfolio is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Portfolio seeks to preserve the value of your investment at $100 per share, it is possible to lose money by investing in the Portfolio. During extended periods of low interest rates, the yields of the Division investing in the Money Market Portfolio may become extremely low and possibly negative. /3/ Davis Selected Advisers, L.P. may also delegate any of its responsibilities to Davis Selected Advisers-NY, Inc., a wholly-owned subsidiary. /4/ Prior to May 1, 2005, Deutsche Investment Management Americas Inc. was the sub-adviser to this Portfolio. 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 Policy. 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 Policy. The classes of shares that are available under the Policy are indicated in the expense table on pages 12 to 17 and on the front cover pages of the Prospectus. SUBSTITUTION OF PORTFOLIOS If investment in the Portfolios or a particular Portfolio is no longer possible, in our judgment becomes inappropriate for the purposes of the Policies, or for 26 any other reason in our sole discretion, we may substitute another portfolio without your consent. The substituted Portfolio may have different fees and expenses. Substitution may be made with respect to existing investments or the investment of future premium payments, or both. However, we will not make such substitution without any necessary approval of the Securities and Exchange Commission. Furthermore, we may make available or close investment divisions to allocation of premium payments or cash value, or both, for some or all classes of Policies, at any time in our sole discretion. VOTING RIGHTS [SIDEBAR: YOU CAN GIVE US VOTING INSTRUCTIONS ON SHARES OF EACH PORTFOLIO OF A FUND THAT ARE ATTRIBUTED TO YOUR POLICY.] The Funds have shareholder meetings from time to time to, for example, elect directors and approve some changes in investment management arrangements. We will vote the shares of each Portfolio that are attributed to your Policy based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. ISSUING A POLICY If you want to own a Policy, then you must complete an application, which must be received by the Designated Office. We reserve the right to reject an application for any reason permitted by law, and our acceptance of an application is subject to our insurance underwriting rules. We offer other variable life insurance policies that have different death benefits, policy features, Portfolio selections, and optional programs. However, these other policies also have different charges that would affect your performance and cash values. To obtain more information about these other policies, contact our Designated Office or your sales representative. There are three types of underwriting available under the Policy. We decide which type to use based on the total number of eligible possible insureds within the eligible group for whom a Policy could be purchased and the percentage of those insureds for whom a Policy is actually purchased. The three types of underwriting are: GUARANTEED ISSUE--requires the least evidence of insurability and rating classification SIMPLIFIED UNDERWRITING--requires more evidence of insurability and rating classification FULL UNDERWRITING--requires the most evidence of insurability and rating classification An insured who is a standard risk under Simplified Underwriting or Guaranteed Issue may have a higher cost of term insurance rate than would apply to the same insured under Full Underwriting. Generally, we will issue a Policy only for insureds that are age 70 or less (although we may decide to permit an insured that is older) that have provided evidence of insurability that we find acceptable. An "insured" is the person upon whose life we issue the Policy. For the purpose of computing the insured's age under the Policy, we start with the insured's age on the Date of Policy which is set forth in the Policy. Age under the Policy at any other time 27 is then computed using that issue age and adding the number of full Policy years completed. The Date of Policy is usually the date the Policy application is approved and premiums are accepted. We use the Date of Policy to calculate the Policy years (and Policy months and monthly anniversaries). To preserve a younger age for the insured, we may permit a Date of Policy that is earlier than the date the application is approved if there have been no material misrepresentations in the application. You may request that your Date of Policy be the same date the planned periodic premium is received. In these cases, you would incur a charge for insurance protection before insurance coverage starts. Insurance coverage under the Policy will generally begin at the time the application is approved. For coverage to be effective, the insured's health on the date of such approval must be the same as stated in the application and, in most states, we can require that the insured not have sought medical advice or treatment between the date of the application and the date of approval. [SIDEBAR: YOU CAN MAKE VOLUNTARY PLANNED PERIODIC PREMIUM PAYMENTS AND UNSCHEDULED PREMIUM PAYMENTS.] PAYMENT AND ALLOCATION OF PREMIUMS The payment of a given premium won't necessarily guarantee that your Policy will remain in force. Rather, this depends on your Policy's cash surrender value. PAYING PREMIUMS You can make premium payments, subject to certain limitations discussed below, through the: VOLUNTARY PLANNED PERIODIC PREMIUM SCHEDULE: You choose the schedule on your application. The schedule sets forth the amount of premiums, fixed payment intervals and the period of time that you intend to pay premiums. The schedule can be: (a) annual; (b) semi-annual; or (c) through another method to which we agree. After payment of the first planned periodic premium, you do not have to pay premiums in accordance with your voluntary planned period premium schedule. 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. .. After the first Policy year, your voluntary planned periodic payments must be at least $100, whether on an annual or semi-annual basis. .. 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 Policy from terminating. We will let you make premium payments that would turn your Policy into a modified endowment contract, but we will tell you of this status in your annual statement, and if possible, we will tell you how to reverse the status. ("See Tax Matters--Modified Endowment Contracts.") 28 .. We reserve the right not to sell a Policy to any group or individual associated with such group if the total amount of annual premium that is expected to be paid in connection with all Policies sold to the group or individuals associated with such group is less than $500,000. .. We may require evidence of insurability for premium payments that cause the minimum death benefit to exceed the death benefit then in effect under the death benefit option chosen. ALLOCATING NET PREMIUMS [SIDEBAR: NET PREMIUMS ARE YOUR PREMIUMS MINUS THE CHARGES DEDUCTED FROM YOUR PREMIUMS.] Your allocations of net premiums to the Fixed Account are effective as of the Investment Start Date. See "Investment Start Date" description below in "Other Policy Provisions--When Your Requests Become Effective." Your allocations of net premiums to the investment divisions of the Separate Account are effective as of the end of the free look period. See "Other Policy Provisions--Free Look Period." During the free look period, we allocate the net premium payments you allocated to the investment divisions to the BlackRock Money Market investment division. At the end of the free look period, we will allocate your cash value in that investment division among all the Separate Account investment divisions according to your net premium allocation instructions. For policies issued in California, we allocate net premiums to the investment divisions of the Separate Account as of the Investment Start Date. If you are age 60 or older, and you allocate 100% of your initial net premium to the BlackRock Money Market investment division in order to receive a refund of premiums should you cancel the Policy during the free look period, we will not automatically transfer your cash value or reallocate your future premiums once the free look period has ended. You must contact us to request a transfer or reallocation. You can instruct us to allocate your net premiums among the Fixed Account and the investment divisions. The percentage of your net premium allocation into each of these investment options must be in whole numbers. You can change your allocations (effective after the end of the free look period) at any time by giving us written notification at our Designated Office or in any other manner that we permit. If you have cash value of at least $60,000,000 in the Fixed Account for all Policies you own, we will have to give prior approval to any allocation of net premium or transfer of cash value to the Fixed Account. INSURANCE PROCEEDS If the Policy is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the insured's date of death. We will pay this amount after we receive documents that we request as due proof of the insured's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the insured's lifetime. If no selection is made, we will place the amount in an account to which we will credit interest, and the beneficiary will have immediate access to all or part of that amount. This account is part of our general account. It is not a bank account and it is not insured by the FDIC or any other government agency. As part of our general account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in this account. 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 29 we have made no payments from the interest-bearing account. If the terms of the income plan permit the beneficiary to withdraw the entire amount from the plan, the beneficiary can also name contingent beneficiaries. The insurance proceeds equal: .. The death benefit under the death benefit option or minimum death benefit that is in effect on the date of death; plus .. Any additional insurance proceeds provided by rider; minus .. Any unpaid Policy loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. DEATH BENEFIT OPTIONS [SIDEBAR: THE POLICY GENERALLY OFFERS A CHOICE OF THREE DEATH BENEFIT OPTIONS.] You can choose among three options. You select which option you want in the Policy application. The three options are: .. Option A: The death benefit is a level amount and equals the specified face amount of the Policy. .. Option B: The death benefit varies and equals the specified face amount of the Policy plus the cash value on the date of death. .. Option C: The death benefit varies and equals the specified face amount of the Policy plus the amount by which the Policy premiums paid exceed withdrawals made. There are issues that you should consider in choosing your death benefit option. For example, under Options B and C, the cash value or other amounts are added to the specified face amount. Therefore, the death benefit will generally be greater under these options than under Option A, for Policies with the same specified face amount and premium payments. By the same token, the cost of insurance will generally be greater under Options B and C than under Option A. [SIDEBAR: YOU CAN GENERALLY CHANGE YOUR DEATH BENEFIT OPTION.] You can change your death benefit option after the first Policy year, provided that: .. Your cash surrender value after the change would be enough to pay at least two monthly deductions. .. The specified face amount continues to be no less than the minimum we allow after a decrease. .. The total premiums you have paid do not exceed the then current maximum premium limitations permitted under Internal Revenue Service rules. .. You provide evidence satisfactory to us of the insured's insurability, as we may require. Any change will be effective on the monthly anniversary on or immediately following the Date of Receipt of the request (or following the date we approve it if we require evidence of insurability). A change in death benefit option will cause us to automatically increase or decrease your specified face amount so that the amount of the death benefit is not changed on the effective date of the new death benefit option. Before you change your death benefit option you should consider the following: .. If the term insurance portion of your death benefit changes, as it may with a change from Option A to B or C and vice versa, the term insurance charge will also change. This will affect your cash value and, in some cases, the death benefit levels. .. If your specified face amount changes because of the change in death benefit option, consider also the issues presented by changing your specified face amount 30 that are described under "Specified Face Amount," below. These issues include the possibility that your Policy would become a modified endowment contract; that you would receive a taxable distribution; and that the maximum premium amounts that you can pay would change. MINIMUM DEATH BENEFIT In no event will the Policy death benefit (plus the proceeds under any term rider on the insured's life) be lower than the minimum amount required to maintain the Policy as life insurance under the federal income tax laws as in effect on the date your Policy is issued. We determine this minimum by applying either the: I. Cash Value Accumulation Test or II. Guideline Premium/Cash Value Corridor Test. You choose the Cash Value Accumulation Test or the Guideline Premium/Cash Value Corridor Test before we issue your Policy, and the election cannot later be changed. Under the Cash Value Accumulation Test, your death benefit is never less than the amount of your Policy's cash value at the insured's date of death, multiplied by a factor set forth in your Policy. This factor varies depending upon the insured's age at the date of death, and it declines as the insured grows older. Under the Guideline Premium/Cash Value Corridor Test, there is a very similar minimum death benefit based on your Policy's cash value at the date of death. However, the factors set forth in your Policy are higher for the Guideline Premium/Cash Value Corridor Test (which results in a higher minimum death benefit, assuming the same cash value). Also, there are firm limits on the amount of premiums you can pay for the amount of coverage you have in force under the Guideline Premium/Cash Value Corridor Test, while the tax law imposes no such firm limits under the Cash Value Accumulation Test. Before choosing between these two Tests you should consider the following: .. The Cash Value Accumulation Test may allow you to pay a greater amount in premiums for the same amount of death benefit under federal income tax laws and still qualify as life insurance. This is the case because the Policy will qualify as life insurance even though the Policy owner is paying a higher level of premium than allowed under the Guideline Premium/Cash Value Accumulation Test. However, the death benefit under the Cash Value Accumulation Test (and thus the monthly cost of term insurance) could be higher. You should ask for an illustration comparing results under both tests. We reserve the right to return any premium to the extent it would cause the death benefit to increase above certain limits. .. Increases in death benefits by operation of the Cash Value Accumulation Test will result in a higher monthly cost of term insurance. Such increases can also occur under the Guideline Premium/Cash Value Corridor Test, although this is less likely. .. Any advantage of the Cash Value Accumulation Test may be eliminated if premium payments exceed the 7-pay test limit. The 7-pay test sets a limit on the amount of premiums which may be paid under a policy during the 7-pay testing period (usually the first 7 Policy years after issue or after a material modification of the Policy) without incurring possible adverse tax consequences. If premiums paid exceed such limit during any 7-pay testing period, any partial withdrawals, Policy loan and other distributions may be subject to adverse federal income tax consequences. (See "Federal Tax Matters--Modified Endowment Contracts" below.) 31 SPECIFIED FACE AMOUNT CHOOSING YOUR INITIAL SPECIFIED FACE AMOUNT The specified face amount is the basic amount of insurance specified in your Policy. The Minimum Initial Specified Face amount is the smallest amount of specified face amount for which a Policy may be issued. Currently this amount is $100,000. If the term insurance rider is purchased, the specified face amount and term rider amount are combined to determine the Minimum Initial Specified Face Amount. You should consider whether to take all of your coverage as specified face amount or whether to take some coverage, if available, under our term insurance benefit. The term insurance benefit provides coverage on the insured to age 95. You may purchase this rider, if available, only at the time of Policy issue. By electing to take part of your coverage under the term insurance rider, you can reduce the amount of sales charges and current cost of insurance charges that you otherwise would pay. For details, see "Optional Rider Benefits--Term Benefit." [SIDEMARK: YOU CAN GENERALLY INCREASE OR DECREASE YOUR POLICY'S SPECIFIED FACE AMOUNT.] CHANGING YOUR SPECIFIED FACE AMOUNT Generally, you may change your specified face amount at any time after the first Policy year subject to certain criteria specified below. Any change will be effective on: the monthly anniversary on or next following the (a) Date of Receipt of your request; or (b) if we require evidence of insurability, the date we approve your request. The Specified Face Amount of insurance may not be reduced to less than $100,000 during the first five Policy years or to less than $50,000 after the fifth Policy year. These minimums also apply to decreases that result from partial withdrawals or changes in death benefit options. If there have been previous specified face amount increases, any decreases in specified face amount will be made in the following order: (i) the specified face amount provided by the most recent increase; (ii) the next most recent increases successively; and (iii) the initial specified face amount. You may increase the specified face amount only if the cash surrender value after the change is large enough to cover at least two monthly deductions based on your most recent cost of term insurance charge. Any increase may require that we receive additional evidence of insurability that is satisfactory to us. We may also impose a one-time underwriting charge. Before you change your specified face amount you should consider the following: .. The term insurance portion of your death benefit will change and so will the term insurance charge. This will affect the insurance charges, cash value and, in some cases, death benefit levels. .. Reducing your specified face amount may result in our returning an amount to you which, if it occurs during the first 15 Policy years, could then be taxed on an income first basis. .. The amount of additional premiums that the tax laws permit you to pay into your Policy may increase or decrease. The additional amount you can pay without causing your Policy to be a modified endowment contract for tax purposes may also increase or decrease. (See "Tax Matters--Modified Endowment Contracts.") .. In some circumstances, the Policy could become a modified endowment contract. .. For Policies issued on or after May 1, 1996 in connection with other than certain employer sponsored plans that became effective prior to August 1, 2000, the sales charge and the administration charge may change. This is because an increase or decrease in the specified face amount will result in an increase or decrease in the annual target premium on which these charges are based. 32 INCOME PLANS [SIDEBAR: GENERALLY YOU CAN RECEIVE THE POLICY'S INSURANCE PROCEEDS, AMOUNTS PAYABLE AT THE FINAL DATE OR AMOUNTS PAID UPON SURRENDER UNDER AN INCOME PLAN INSTEAD OF IN A LUMP SUM.] The insurance proceeds can be paid under a variety of income plans that are available under the Policy. Generally, 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 .. Single Life Income--Guaranteed Return .. Joint and Survivor Life Income Before you choose an income plan you should consider: .. The tax consequences associated with the Policy proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax adviser about tax consequences. .. That your Policy will terminate at the time you commence an income plan and you will receive a new contract, which describes the terms of the income plan. You should carefully review the terms of the new contract, because it contains important information about the terms and conditions of the income plan. .. That 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: YOUR POLICY IS DESIGNED TO ALLOW YOU TO ACCUMULATE CASH VALUE.] Your Policy's cash value equals: .. The Fixed Account cash value, plus .. The Policy Loan Account cash value, plus .. The Separate Account cash value. Your Policy's cash surrender value equals your cash value minus any outstanding Policy loans (plus any accrued and unpaid loan interest). On your Investment Start Date, the Policy's cash value in an investment division will equal the portion of any net premium allocated to the investment division, reduced by the portion of any monthly deductions allocated to the Policy's cash value in that investment division. 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. 33 CASH VALUE TRANSFERS [SIDEBAR: YOU CAN TRANSFER YOUR CASH VALUE AMONG THE INVESTMENT DIVISIONS AND THE FIXED ACCOUNT AT ANY TIME BEGINNING AFTER THE END OF THE FREE LOOK PERIOD.] The minimum amount you may transfer is $50 or, if less, the total amount in an investment option. You may make transfers at any time. The maximum amount that you may transfer or withdraw from the Fixed Account in any Policy year is the greater of $50 and 25% of the largest amount in the Fixed Account over the last four Policy years. This limit does not apply to a full surrender, any loans taken, or any transfers under a systematic investment strategy. We may also limit the number of investment options to which you may transfer cash value, and, under certain conditions, we may have to approve transfers to the Fixed Account. (See "Payment and Allocation of Premiums--Allocating Net Premiums.") MARKET TIMING: Frequent requests from Policy owners to transfer cash value may dilute the value of a Portfolio's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by the Portfolio and the reflection of that change in the Portfolio's share price ("arbitrage trading"). Regardless of the existence of pricing inefficiencies, frequent transfers may also increase brokerage and administrative costs of the underlying Portfolios and may disrupt portfolio management strategy, requiring a Portfolio to maintain a high cash position and possibly resulting in lost investment opportunities and forced liquidations ("disruptive trading"). Accordingly, arbitrage trading and disruptive trading activities (referred to collectively as "market timing") may adversely affect the long-term performance of the Portfolios, which may in turn adversely affect Policy owners and other persons who may have an interest in the Policies (E.G., beneficiaries). We have policies and procedures that attempt to detect and deter frequent transfers in situations where we determine there is a potential for arbitrage trading. Currently, we believe that such situations may be presented in the international, small-cap, and high-yield Portfolios (I.E., BlackRock Strategic Value, FI International Stock, Loomis Sayles Small Cap, Morgan Stanley EAFE Index, Oppenheimer Global Equity, Russell 2000 Index, T. Rowe Price Small Cap Growth, Lord Abbett Bond Debenture, Met/AIM Small Cap Growth, MFS Research International, Third Avenue Small Cap Value, Delaware VIP Small Cap Value, Dreyfus Emerging Leaders, Dreyfus VIP International Value, Franklin Templeton Mutual Discovery Securities, Templeton Foreign Securities, Templeton Growth Securities, MFS Global Equity, MFS High Income, MFS New Discovery and Goldman Sachs CORE Small Cap Equity) and we monitor transfer activity in those Funds (the "Monitored Portfolios"). We employ various means to monitor transfer activity, such as examining the frequency and size of transfers into and out of the Monitored Portfolios within given periods of time. We do not believe that other Portfolios present a significant opportunity to engage in arbitrage trading and therefore do not monitor transfer activity in those Portfolios. We may change the Monitored Portfolios at any time without notice in our sole discretion. In addition to monitoring transfer activity in certain Portfolios, we rely on the underlying Funds to bring any potential disruptive trading activity they identify to our attention for investigation on a case-by-case basis. We will also investigate any other harmful transfer activity that we identify from time to time. We may revise these policies and procedures in our sole discretion at any time without prior notice. Our policies and procedures may result in transfer restrictions being applied to deter market timing. Currently, when we detect transfer activity in the 34 Monitored Portfolios that exceeds our current transfer limits, or other transfer activity that we believe may be harmful to other Policy owners or other persons who have an interest in the Policies, we require all future transfer requests to or from any Monitored Portfolios or other identified portfolios under that Policy to be submitted in writing with an original signature. If we impose this restriction on your transfer activity, we will reverse upon discovery any transaction inadvertently processed in contravention of such restrictions. The cash value will not be affected by any gain or loss due to the transfer and your cash value will be the same as if the transfer had not occurred. You will receive written confirmation of the transactions effecting such reversal. The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, such as the decision to monitor only those Portfolios that we believe are susceptible to market timing. 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 Policy owners to avoid such detection. Our ability to restrict such transfer activity may be limited by provisions of the Policy. We do not accommodate market timing in any Portfolios and there are no arrangements in place to permit any Policy owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Policy owners and other persons with interests in the Policies. The Funds may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares. The prospectuses for the Funds describe any such policies and procedures, which may be more or less restrictive than the policies and procedures we have adopted. Policy owners and other persons with interests in the Policies should be aware that we may not have the contractual obligation or the operational capacity to apply the frequent trading policies and procedures of the Funds. In addition, Policy owners and other persons with interests in the Policies should be aware that some Portfolios may receive "omnibus" purchase and redemption orders from other insurance companies or intermediaries such as retirement plans. The omnibus orders reflect the aggregation and netting of multiple orders from individual owners of variable insurance policies and/or individual retirement plan participants. The omnibus nature of these orders may limit the Funds in their ability to apply their frequent trading policies and procedures, and we cannot guarantee that the Portfolios (and thus Policy owners) will not be harmed by transfer activity relating to the other insurance companies and/or retirement plans that may invest in the Portfolios. In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time. We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of their shares as a result of their own policies and procedures on market timing activities (even if an entire omnibus order is rejected due to the market timing activity of a single Policy owner). You should read the Fund prospectuses for more details. SYSTEMATIC INVESTMENT STRATEGIES: You can choose one of four currently available strategies described below. You can also change or cancel your choice at any time. 35 .. EQUITY GENERATOR/ SM/. Allows you to transfer the interest earned on amounts in the Fixed Account in any Policy month equal to at least $20 to the MetLife Stock Index investment division or the BlackRock Aggressive Growth investment division. The transfer will be made at the beginning of the Policy month following the Policy month in which the interest was earned. .. EQUALIZER/ SM/. Allows you to periodically equalize amounts in your Fixed Account and either the MetLife Stock Index investment division or the BlackRock Aggressive Growth investment division. We currently make equalization each quarter. We will terminate this strategy if you make a transfer out of either of the investment divisions or the Fixed Account. You may then reelect the Equalizer on your next Policy 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 at the beginning of each quarter. .. ALLOCATOR/ SM/. Allows you to systematically transfer money from the BlackRock Money Market investment division to the Fixed Account and/or any investment division(s). When you elect the Allocator, you must have enough cash value in the BlackRock Money Market investment division 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 BlackRock Money Market investment division is exhausted. .. A specific amount for a specific number of months. .. Amounts in equal installments until the total amount you have requested has been transferred. These transfer privileges allow you to take advantage of investment fluctuations, but none assures a profit nor protects against a loss in declining markets. Because the Allocator involves continuous investment in securities regardless of the price levels of such securities, you should consider your financial ability to continue purchases through periods of fluctuating price levels. TRANSFERS BY TELEPHONE: Subject to our market timing procedures, 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. We may also allow you to authorize your sales representative to make such requests. 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 or your sales representative, as applicable, as long as that person follows our procedures. .. We will institute reasonable procedures to confirm that instructions we receive are genuine. Our procedures will include receiving from the caller your personalized data. Any telephone instructions that we reasonably believe to be genuine are your responsibility, including losses arising from such instructions. Because telephone transactions may be available to anyone who provides certain information about you and your Policy, you should protect that information. We may not be able to verify that you are the person providing telephone instructions, or that you have authorized any such person to act for you. .. 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. 36 Telephone, facsimile, and computer systems may not always be available. Any telephone, facsimile, or computer system, whether it is yours, your service provider's, your sales representative's, or ours, can experience outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request by writing to our Designated Office. SURRENDER AND WITHDRAWAL PRIVILEGES [SIDEBAR: YOU CAN SURRENDER YOUR POLICY FOR ITS CASH SURRENDER VALUE.] We may ask you to return the Policy before we honor your request to surrender your Policy. You can choose to have the proceeds paid in a single sum, or under an income plan. If the insured dies after you surrender the Policy but before the end of the Policy month in which you surrendered the Policy, we will pay your beneficiary an amount equal to the difference between the Policy's death benefit and its cash value, computed as of the surrender date. You can make partial withdrawals if: .. the withdrawal would not result in the cash surrender value being less than sufficient to pay 2 monthly deductions; .. the withdrawal is at least $250; .. the withdrawal would not result in total premiums paid exceeding any then current maximum premium limitation determined by Internal Revenue Code rules; and .. the withdrawal would not result in your specified face amount falling below the minimum allowable amount after a decrease, as described under "Insurance Proceeds--Specified Amount--Changing Your Specified Face Amount," above. If you make a request for a partial withdrawal that is not permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Policy. We will deduct your withdrawal from the Fixed Account and the investment divisions in the same proportion that the Policy's cash value in each such option bears to the total cash value of the Policy 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 your Policy or requesting a partial withdrawal, you should consider the following: .. Amounts received may be taxable as income and, if your Policy is a modified endowment contract, subject to certain tax penalties. (See "Tax Matters--Modified Endowment Contracts.") .. Your Policy could become a modified endowment contract. .. For partial withdrawals, your death benefit will decrease, generally by the amount of the withdrawal. .. For partial withdrawals, your specified face amount may also decrease. For Option A Policies, your specified face amount will decrease by the amount of the withdrawal. For Option B Policies, a withdrawal will not decrease the specified face amount. For Option C Policies, your specified face amount will decrease by the amount, if any, by which cumulative withdrawals exceed cumulative premiums paid. In some cases you may be better off taking a Policy loan, rather than a partial withdrawal. 37 BENEFIT AT FINAL DATE The Final Date is the Policy anniversary on which the insured is Age 95. Subject to certain conditions, we will allow you to extend that date where permitted by state law. If the insured is living on the Final Date, we will pay you the cash surrender value of the Policy. You can receive the cash surrender value in a single sum, in an account that earns interest, or under an available income plan. LOAN PRIVILEGES [SIDEBAR: YOU CAN BORROW FROM US AND USE YOUR POLICY AS SECURITY FOR THE LOAN.] The amount of each loan must be: .. At least $250. .. No more than the greater of the cash surrender value less two monthly deductions and 75% of the cash surrender value (unless state law requires a different percentage to be applied, as set forth in your Policy) when added to all other outstanding Policy loans. As of your loan request's Date of Receipt, we will: .. Remove an amount equal to the loan from your cash value in the Fixed Account and each investment division of the Separate Account in the same proportion as the Policy's cash value in each such option bears to the total cash value of the Policy in the Fixed Account and the investment divisions. .. Transfer such cash value to the Policy 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 Policy loans, determined by us. This percentage charge will not exceed 2%, and the minimum rate we will credit to the Policy Loan Account will be 4% per year. At least once a year, we will transfer any interest earned in your Policy loan account to the Fixed Account and the investment divisions, according to the way that we then allocate your net premiums. .. Charge you interest, which will accrue daily. We will tell you the initial interest rate that applies to your loan and mail you advance notices of any increases applicable to existing loans. The interest rate charged for a Policy year will never be more than the maximum allowed by law and will generally be the greater of: .. The published monthly average for the calendar month ending two months before the start of such year; and .. The guaranteed rate used to credit interest to the cash value allocated to the Fixed Account for the Policy, plus no more than 1%. The published monthly average means (a) Moody's Corporate Bond Yield Average Monthly Average Corporates, as published by Moody's Investors Service, Inc. or any successor service; or (b) If the Moody's average is not published, a substantially similar average established by regulation issued by the insurance supervisory official of the state in which your Policy is delivered. Your interest payments are due at the end of each Policy year and if you don't pay the amount within 31 days after it is due, we will treat it as a new Policy loan, which will be taken from the Fixed Account and the investment divisions by the same method as other loans. Repaying your loans (plus accrued interest) is done by sending in payments at least equal to $25. 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 38 repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated, except that amounts borrowed from the Fixed Account will be repaid to the Fixed Account first. Before taking a Policy loan you should consider the following: .. Interest payments on loans are generally not deductible for tax purposes. .. Under certain situations, Policy loans could be considered taxable distributions. .. Amounts held in your Policy 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 your Policy or if we terminate your Policy, or at the Final Date, any outstanding loan amounts (plus accrued interest) will be taxed as a distribution. (See "Federal Tax Matters--Loans" below.) .. A Policy loan increases the chances of our terminating your Policy due to insufficient cash value. We will terminate your Policy with no value if: (a) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (b) we tell you of the insufficiency and you do not make a sufficient payment within 61 days of the monthly anniversary. .. Your Policy's death proceeds will be reduced by any unpaid loan (plus any accrued and unpaid loan interest). 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) (other than the charge for the interim term insurance rider) as part of the monthly deduction. Generally, we currently make the following benefits available by rider: . Disability Waiver of . Interim Term Insurance Monthly Deduction Benefit Benefit/(1)/ ----------------------------------------------------- . Accidental Death . Term Insurance Benefit/(5)/ Benefit/(3)/ ----------------------------------------------------- . Accelerated Death . Enhanced Cash Benefit/(2)/ Surrender Value Rider/(4)/ ----------------------------------------------------- - -------- /1/ An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Policy's termination. For this reason, it may be advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /2/ Payment under this rider may affect eligibility for benefits under state or federal law. This rider is currently not available in New Jersey or Massachusetts. /3/ This rider is discussed in more detail under "Term Benefit" below. /4/ This rider may be attached at issue if you request it, but not thereafter. /5/ This rider is not available on the portion of the coverage provided under the Term Benefit. 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. These riders may not be available in all states. You should also consider: .. That the addition of certain riders can restrict your ability to exercise certain rights under the Policy. 39 .. That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Policy terminates because of poor investment performance or any other reason, the riders generally will also terminate. .. That there are tax consequences. You should also consult with your tax advisor before purchasing one of the riders. TERM BENEFIT You have the flexibility to include, at Policy issue, a rider that provides a term benefit ("Term Rider"). Such a rider was generally not available with Policies issued prior to May 1, 1996 or in connection with certain employer sponsored plans that became effective prior to that date. The availability of the Term Rider is also subject to governmental approval in your state. The Term Rider is a rider to the Policy that, like the base Policy, provides coverage on the insured to age 95. You may purchase this rider, if available, only at Policy issue. Nevertheless, if you purchase the Term Rider, the amount of coverage under the rider will automatically increase and decrease with any changes to your specified face amount under the Policy, so that the ratio between the Policy's specified face amount and the amount of Term Rider coverage will always remain the same as you originally selected. In almost all respects, coverage taken under the Term Rider has exactly the same effect as coverage taken as specified face amount under the Policy. An important difference, however, is that the sales charge depends on the amount of the coverage provided under the base policy. The amount of Term Rider will impact the sales charge. Thus, in comparing two Policies with identical total insurance amounts, the one with the greater portion provided by the Term Rider will have a lower sales charge. Conversely, the Policy with the higher amount provided under the base policy will have a higher sales charge. Additionally, the cost of term insurance rates currently applicable to coverage provided under the Term Rider are lower than those currently charged for coverage under the base policy. Therefore, the larger the portion of coverage provided under the Term Rider, the lower the overall cost of insurance. Again comparing two Policies with identical total insurance amounts, the cost of insurance will be lower under the Policy with the higher portion of coverage provided under the Term Rider. To summarize, the lower sales charge and lower anticipated current cost of term insurance rates resulting from a greater portion of total coverage provided by the Term Rider will result in better overall performance under the Policy. You may elect to have up to 95% of your total coverage provided by the Term Rider. We are able to make these favorable terms available under the Term Rider largely because our costs of selling it (principally the commissions we pay) are lower than under the base policy. See "Sales of Policies". A disadvantage of the Term Rider is that the Accidental Death Benefit rider is not available in relation to the coverage under the Term Rider. If your Policy was issued prior to May 1, 2004, or if the plan became effective prior to that date, any Term Rider you have differs from the above description in that your cost of insurance charges for the Term Rider are higher (rather than lower) than under the base Policy. 40 CHARGES AND DEDUCTIONS IMPORTANT INFORMATION APPLICABLE TO ALL POLICY CHARGES AND DEDUCTIONS [SIDEBAR: CAREFULLY REVIEW THE FEE TABLES IN THIS PROSPECTUS WHICH SET FORTH THE CHARGES THAT YOU PAY UNDER YOUR POLICY.] The charges discussed in the paragraphs that follow are all included in the Fee Tables on pages 8 to 17 of this Prospectus. You should refer to these Fee Tables for information about the rates and amounts of such charges, as well as other information that is not covered below. The Policy charges compensate us for the services and benefits we provide, the costs and expenses we incur, and the risks we assume. Services and benefits we . the death benefit, cash, and loan benefits under provide: the Policy . investment options, including premium allocations . administration of elective options . the distribution of reports to Policy owners Costs and expenses we incur:. costs associated with processing and underwriting applications, and with issuing and administering the Policy (including any riders) . overhead and other expenses for providing services and benefits . sales and marketing expenses . other costs of doing business, such as collecting premiums, maintaining records, processing claims, effecting transactions, and paying federal, state, and local premium and other taxes and fees Risks we assume: . that the cost of term insurance charges we may deduct are insufficient to meet our actual claims because the insureds die sooner than we estimate . that the charges of providing the services and benefits under the Policies exceed the charges we deduct We may profit from the charges, including the cost of term insurance charge and the mortality and expense risk charge. Any distinctions we make about the specific purposes of the different charges are imprecise, and we are free to keep and use our revenues or profits for any other purpose, including paying any of our costs and expenses in connection with the Policies. Our revenues from any particular charge may be more or less than any costs or expenses that charge may be intended primarily to cover. The following sets forth additional information about Policy charges. 41 CHARGES DEDUCTED FROM PREMIUMS ANNUAL TARGET PREMIUM: We use the concept of annual target premium to determine certain limits on sales and administrative charges (discussed immediately below). We define the annual target premium to be: For Policies issued prior to May 1, 1996 or issued in connection with certain employer sponsored plans that became effective prior to August 1, 2000, 50% of the estimated annual amount which satisfied the 7-Pay test under federal tax law based on the issue age of the insured and the initial specified face amount. (See "Federal Tax Matters--Modified Endowment Contracts".) For all other Policies, 100% of the estimated annual amount that satisfied the 7-Pay test based on the issue age of the insured, the specified face amount of insurance of the base Policy only (excluding the Term Rider) and standard underwriting class. For such Policies, the annual target premium amount is increased and decreased proportionately for increases and decreases in the specified face amount of the Policy. This could, in turn, increase or decrease sales and administrative charges. SALES CHARGE: We deduct this charge primarily to help pay the cost of compensating sales representatives and other direct and indirect expenses of distributing the Policies. The charge is assessed directly against each premium. For premiums received in Policy years 1 through 10, the current rate is up to 6.5% of the premium paid until the total payments in each such year equal the annual target premium, and for Policy years 11 and later the rate we charge is up to 3% of each premium until the total payments in the year equal the annual target premium. No sales charge is or will be assessed against any premiums paid in any Policy year in excess of a total equal to the annual target premium. The maximum rate we can charge for premiums received up to a total equal to the annual target premium during Policy years 1 through 10 is 9%, and the maximum for Policy years 11 and later is the same as currently charged in those years. ADMINISTRATIVE CHARGE: We incur expenses in the administration of the Policy, including our underwriting and start-up expenses. We deduct up to 1.05% of each premium payment primarily to cover this expense up to a total of payments in any Policy year equal to the annual target premium, and .05% on any excess payments in any Policy year exceeding that total amount. Our charge will never exceed this rate. CHARGE FOR AVERAGE EXPECTED STATE AND LOCAL TAXES ATTRIBUTABLE TO PREMIUMS: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Premium taxes vary from state to state and currently range from 0 to 3.5%. Our charge of 2.25% approximates the average tax rate we expect to pay on premiums we receive from all states. 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 1.2% 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. CHARGE FOR INTERIM TERM INSURANCE BENEFIT: This charge is deducted only from your initial premium payment, and only if you elect the interim term insurance benefit. The interim term insurance benefit provides temporary 42 initial life insurance coverage on the insured prior to the time that coverage under the Policy takes effect. This coverage is provided by adding a "rider" and is subject to several conditions and limitations. The charge for this benefit is described in the rider form. This charge is primarily to compensate us for the risk that the insured will die while coverage under this rider is in force. LOAN INTEREST SPREAD: We charge interest on Policy 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 charge is guaranteed to never exceed 2%. CHARGES INCLUDED IN THE MONTHLY DEDUCTION We allocate the monthly deduction (except for the monthly mortality and expense risk charge) among the Fixed Account and each investment division of the Separate Account in the same proportion as the Policy's cash value in each such option bears to the total cash value of the Policy in the Fixed Account and the investment divisions. We deduct the monthly deductions as of each monthly anniversary, commencing with the Date of Policy. .. COST OF TERM INSURANCE. This charge varies monthly based on many factors. Each month, we determine the charge by multiplying your cost of insurance rates by the term insurance amount. This is the amount that we are at risk if the insured dies. The term insurance amount is the death benefit at the beginning of the Policy month divided by a discount factor to account for an assumed return during the month; minus the cash value at the beginning of the Policy month after deduction of all other applicable charges. Factors that affect the term insurance amount include the specified face amount, the cash value and the death benefit option you choose (generally, the term insurance amount will be higher for Options B and C). The term insurance rate is based on our expectations as to future experience, taking into account the insured's sex (if permitted by law and applicable under your Policy), age, underwriting class and rate class. The rates will never exceed the guaranteed rates, which are based on certain 1980 Commissioners Standard Ordinary Mortality Tables. Our current rates are lower than the maximums in most cases. We review our rates periodically and may adjust them, but we will apply the same rates to everyone who has had their Policy for the same amount of time and who is the same age, sex and rate class. As a general rule, the cost of insurance rate increases each year you own your Policy, as the insured's age increases. Rate class relates to the level of mortality risk we assume with respect to an insured. It can be the standard rate class, or one that is higher (and may be divided by smoking status). The insured's rate class will affect your cost of term insurance. You can also have more than one rate class in effect, if the insured's rate class has changed and you change your specified face amount. A better rate class will lower the cost of term insurance on your entire Policy and a worse rate class will affect the portion of your cost of term insurance charge attributable to the specified face amount increase. .. MORTALITY AND EXPENSE RISK CHARGE. We make this monthly charge primarily to compensate us for mortality risks that insureds may live for a shorter period than we expect; and expense risks that our issuing and administrative expenses may be higher than we expect. This monthly charge is allocated proportionately 43 to the cash value in each investment division of the Separate Account. The maximum rate we may charge is equivalent to an effective annual rate of .90% of the cash value in the Separate Account. CHARGES FOR CERTAIN OPTIONAL RIDER BENEFITS The charges for most of the optional benefits that you can add by rider to your Policy will be deducted as part of the monthly deduction. This includes the following riders: .. Disability Waiver of Monthly Deduction Benefit .. Accidental Death Benefit .. Accelerated Death Benefit .. Term Benefit The purpose of the charge for each rider is primarily to compensate us for our direct and indirect costs and risks in providing that rider. The charge we deduct for any such additional benefits you can add by rider is described in the rider form. VARIATIONS IN CHARGES We may vary a charge by group, 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. Our variations in the charges will be made in accordance with our established and uniformly applied administrative procedures. We consider a variety of factors in determining charges, including but not limited to: .. The nature of the group and its organizational framework .. The method by which sales will be made to the individuals associated with the group .. The facility by which premiums will be paid .. The group's capabilities with respect to administrative tasks .. Our anticipated persistency of the Policies .. The size of the group and the number or years it has been in existence .. The aggregate amount of premiums we expect to be paid on the Policies owned by the group or by individuals associated with the group Any variations in charges will be reasonable and will not be unfairly discriminatory to the interests of any Policy owner. 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 44 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. CASH VALUE TRANSFERS. We do not currently charge for any transfer amounts. Except for transfers under Systematic Investment Strategies, we reserve the right to assess up to a $25 charge in the future against all transfers. Currently, transfers are not taxable transactions. POLICY TERMINATION AND REINSTATEMENT TERMINATION: We will terminate your Policy without any cash surrender value if: .. The cash surrender value is less than the monthly deduction; and .. We do not receive a sufficient premium payment within the 61-day grace period to cover the monthly deduction. We will mail you notice if any grace period starts. REINSTATEMENT: Upon your request, we will reinstate your Policy (without reinstating any amounts in a Policy loan account), subject to certain terms and conditions that the Policy provides. We must receive your request within 3 years (or any longer period required by state law) after the end of the grace period and before the Final Date. You also must provide us: .. A written application for reinstatement (the date we approve the application will be the effective date of the reinstatement). .. Evidence of insurability that we find satisfactory. .. An additional premium amount that the Policy prescribes for this purpose. FEDERAL TAX MATTERS [SIDEBAR: YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR TO FIND OUT HOW TAXES CAN AFFECT YOUR BENEFITS AND RIGHTS UNDER YOUR POLICY.] The following is a brief summary of some tax rules that may apply to your Policy. 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 Policy 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 your Policy. Such consultation is especially important before you make unscheduled premium payments, change your specified face amount, change your death benefit option, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the Policy. 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. .. The proceeds may be subject to federal estate tax: (i) if paid to the insured's estate or (ii) if paid to a different beneficiary if the insured possessed incidents of ownership at or within three years before death. .. If you die before the insured, the value of your Policy (determined under IRS rules) is included in your estate and may be subject to federal estate tax. .. Whether or not any federal estate tax is due is based on a number of factors including the estate size. 45 .. The insurance proceeds payable upon death of the insured will never be less than the minimum amount required for the Policy issued on a standard risk basis to be treated as life insurance under section 7702 of the Internal Revenue Code, as in effect on the date the Policy was issued. There is less guidance, however, with respect to Policies issued on a substandard risk basis, and it is not clear that such Policies will in all cases satisfy the applicable requirements to be treated as life insurance under section 7702 of the Internal Revenue Code. CASH VALUE (IF YOUR POLICY IS NOT A MODIFIED ENDOWMENT CONTRACT) .. You are generally not taxed on your cash value until you withdraw it or surrender your Policy or receive a distribution (such as 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 Policy years, when a distribution may be subject to tax on an income-out-first basis if there is a gain in your Policy (which is generally when your cash value exceeds the cumulative premiums you paid). Finally, if your Policy is part of an equity split dollar arrangement, there is a risk that some portion of the cash value may be taxed prior to any Policy distribution. LOANS .. Loan amounts you receive will generally not be subject to income tax, unless your Policy is or becomes a modified endowment contract, is exchanged or terminates. .. Interest on loans is generally not deductible. For businesses that own a Policy, at least part of the interest deduction unrelated to the Policy may be disallowed unless the insured is a 20% owner, officer, director or employee of the business. .. If your Policy terminates (upon surrender, cancellation, lapse, the Final Date or, in most cases, exchanges) while any Policy loan is outstanding, the amount of the loan plus accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Policy distribution. 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 Policy's cash value and any remaining Policy cash value 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 Policy is issued, or after a material change in the Policy, exceed tax law limits referred to as the "7-pay test." Material changes in the Policy include changes in the level of benefits and certain other changes to your Policy after the issue date. Reductions in benefits during a 7-pay period also may cause your Policy to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. The IRS has promulgated a procedure for the correction of inadvertent modified endowment contracts. Due to the flexibility of the Policies as to premiums and benefits, the individual circumstances of each Policy will determine whether it is classified as a MEC. If your Policy 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. 46 .. Amounts withdrawn or distributed before the insured'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 your Policy). 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 591/2 except generally if you are disabled or if the distribution is part of a series of substantially equal periodic payments made over life expectancy. .. If a Policy becomes a modified endowment contract, distributions that occur during the Policy year will be taxed as distributions from a modified endowment contract. In addition, distributions from a Policy within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a Policy that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. DIVERSIFICATION In order for your Policy to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Policy. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in immediate taxation to Policy owners of gains under their Policies. INVESTOR CONTROL In some circumstances, owners of variable policies who retain excessive control over the investment of the underlying Separate Account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the Policies, we believe that the Owner of a Policy should not be treated as an owner of the assets in our Separate Account. We reserve the right to modify the Policies to bring them into conformity with applicable standards should such modification be necessary to prevent Owners of the Policies from being treated as the owners of the underlying Separate Account assets. ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001. The Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") repeals the federal estate tax and replaces it with a carryover basis income tax regime effective for estates of decedents dying after December 31, 2009. EGTRRA also repeals the generation skipping transfer tax, but not the gift tax, for transfers made after December 31, 2009. EGTRRA contains a sunset provision, which essentially returns the federal estate, gift and generation-skipping transfer taxes to their pre-EGTRRA form, beginning in 2011. Congress may or may not enact permanent repeal between now and then. During the period prior to 2010, EGTRRA provides for periodic decreases in the maximum estate tax rate coupled with periodic increases in the estate tax exemption. For 2005, the maximum estate tax rate is 47% and the estate tax exemption is $1,500,000. The complexity of the new tax law, along with uncertainty as to how it might be modified in coming years, underscores the importance of seeking guidance from a qualified advisor to help ensure that your estate plan adequately addresses your needs and that of your beneficiaries under all possible scenarios. 47 WITHHOLDING To the extent that Policy distributions are taxable, they are generally subject to withholding for the recipient's Federal income tax liability. Recipients can generally elect however, not to have tax withheld from distributions. LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS Policy Owners that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from life insurance policies at a 30% rate, unless a lower treaty rate applies. In addition, Policy Owners may be subject to state and/or municipal taxes and taxes that may be imposed by the Policy Owner's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding taxation with respect to a Policy purchase. BUSINESS USES OF POLICY Businesses can use the Policies in various arrangements, including nonqualified deferred compensation or salary continuation plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others. The tax consequences of such plans may vary depending on the particular facts and circumstances. If you are purchasing the Policy for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser. There may be an indirect tax upon the income in the Policy or the proceeds of a Policy under the Federal corporate alternative minimum tax, if you are subject to that tax. The IRS has issued guidance on split dollar insurance plans. A tax adviser should be consulted with respect to this guidance if you have purchased or are considering the purchase of a Policy for a split dollar insurance plan. The Sarbanes-Oxley Act of 2002 (the "Act"), which was signed into law on July 30, 2002, prohibits, with limited exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on exchanges in the United States, from extending, directly or indirectly or through a subsidiary, many types of personal loans to their directors or executive officers. It is possible that this prohibition may be interpreted as applying to split-dollar life insurance policies for directors and executive officers of such companies, since at least some such arrangements can arguably be viewed as involving a loan from the employer for at least some purposes. Although the prohibition on loans is generally effective as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002. Any affected business contemplating the payment of a premium on an existing policy, or the purchase of a new policy in connection with a split-dollar life insurance arrangement should consult legal counsel. CHANGES TO TAX RULES AND INTERPRETATIONS Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Policy. These changes may take effect retroactively. We reserve the right to amend the Policy in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: .. Possible taxation of cash value transfers between investment funds. 48 .. Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. .. Possible limits on the number of investment funds available or the frequency of transfers among them. .. Possible changes in the tax treatment of Policy benefits and rights. 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 Policy owners or would help carry out the purposes of the Policy. We will make these changes in the manner permitted by applicable law and only after getting any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: .. Operating the Separate Account in any other form that is permitted by applicable law. .. Changes to obtain or continue exemptions from the 1940 Act. .. Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. .. Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. .. Changing the way we assess charges without exceeding the aggregate amount of the Policy's guaranteed maximum charges. .. Making any necessary technical changes to the Policy to conform it to the changes we have made. 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. [SIDEBAR: CAREFULLY REVIEW YOUR POLICY, WHICH CONTAINS A FULL DISCUSSION OF ALL ITS PROVISIONS.] OTHER POLICY PROVISIONS FREE LOOK PERIOD You can return the Policy during this period. The period ends on the later of: .. 10 days after you receive the Policy (unless state law requires a longer period); and .. the date we receive a receipt signed by you. If you return your Policy, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. 49 FOR POLICIES ISSUED IN CALIFORNIA: If you are age 60 or older, you may cancel the Policy within 30 days after you receive it. If you elected on the Policy application to allocate 100% of your initial net premium to the BlackRock Money Market investment division, we will refund the premiums you paid; if you elected to allocate your initial net premium to the other investment divisions and/or the Fixed Account, we will refund the Policy's cash value. SUICIDE If the insured commits suicide within the first two Policy years (or any other period required by state law), your beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the insured commits suicide within two years of such increase. ASSIGNMENT AND CHANGE IN OWNERSHIP You can assign your Policy as collateral if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Designated Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax adviser before making any change of ownership or other assignment. REPORTS Generally, you will promptly receive statements confirming your significant transactions such as: .. Change in specified face amount. .. Change in death benefit option. .. Transfers among investment divisions (including those through Systematic Investment Strategies, which are confirmed quarterly). .. Partial withdrawals. .. Loan amounts you request. .. Loan repayments and premium payments. If your premium payments are made through a systematic payment method, we will not send you any confirmation in addition to the one you receive from your employer. We will also send you an annual statement within 30 days after a Policy year. That statement will summarize the year's transactions and include information on: .. Deductions and charges. .. Status of the death benefit. .. Cash and cash surrender values. .. Amounts in the investment divisions and Fixed Account. .. Status of Policy loans. .. Automatic loans to pay interest. .. Information on your modified endowment contract status (if applicable). We will also send you a Fund's annual and semi-annual reports to shareholders. 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 50 time is at the end of the Valuation Period during which we receive them at our Designated Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. Valuation Date is each day on which the New York Stock Exchange is open for trading. Accordingly, if we receive your request, premium, or instructions after the close of regular trading on the New York Stock Exchange, or if the New York Stock Exchange is not open that day, then we will treat it as received on the next day when the New York Stock Exchange is open. These rules apply regardless of the reason we did not receive your request, premium, or instructions by the close of regular trading on the New York Stock Exchange, even if due to our delay (such as a delay in answering your telephone call). The end of the free look period is the effective time of the premium allocation instructions you make in your Policy application (and any changes in allocation or transfer requests you make on or before the end of the free look period). Your Investment Start Date is the date the first net premium is applied to the Fixed Account and/or the Separate Account and is the later of (1) the Date of Policy and (2) the Date of Receipt of your first premium payment. The effective date of your Systematic Investment Strategies will be that set forth in the strategy chosen. 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 Policy owners, and who simultaneously makes the same request or series of requests on behalf of other Policy 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 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 Policy months (or within 24 Policy months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Policy cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy that we make available. SALES OF POLICIES We serve as the "principal underwriter," as defined in the 1940 Act, for the Policy. This offering is continuous. We are registered under the Securities 51 Exchange Act of 1934 as a broker-dealer and are a member of the National Association of Securities Dealers, Inc. We sell the Policies through licensed life insurance sales representatives: .. Registered through us. .. Registered through other broker-dealers, including a wholly owned subsidiary. We may pay commissions to representatives (or the broker-dealers through which they are registered) for the sale of our products. The amount of commissions we pay may vary between different brokers and is based on a detailed formula. The formula generally provides for commissions equal to a certain percentage of premiums that you pay in a given Policy year up to your Policy's annual target premium and a lower percentage on amounts you pay in excess of that amount. In later Policy years, the commissions are lower and may be the same for all premiums, regardless of your Policy's annual target premium. We also may pay an additional amount based on the cash value of your Policy. The commissions that we pay in any year generally will not exceed $47.88 per $1,000 current specified face amount. See "Additional Information About Commissions" in the Statement of Additional Information. Our sales representatives and their managers (and the sales representatives and managers of our affiliates) may also be eligible for cash compensation such as bonuses, equity awards (for example, stock options), training allowances, supplemental salary, payments based on a percentage of the Policy's cash value, financing arrangements, marketing support, medical and retirement benefits and other insurance and non-insurance benefits. The amount of this cash compensation is based primarily on the amount of proprietary products sold. Proprietary products are products issued by MetLife and its affiliates. Sales representatives must meet a minimum level of sales of proprietary products in order to maintain their employment status with us and in order to be eligible for most of the cash compensation listed above. Managers may be eligible for additional cash compensation based on the performance (with emphasis on the sale of proprietary products) of the sales representatives that the manager supervises. Sales representatives and their managers (and the sales representatives and managers of our affiliates) are also eligible for various non-cash compensation programs that we offer such as conferences, trips, prizes, and awards. Other payments may be made for other services that do not directly involve the sale of products. These services may include the recruitment and training of personnel, production of promotional literature, and similar services. In addition to the payments listed above, MetLife makes certain payments to its business unit or to the business unit of its affiliate that is responsible for the operation of the distribution system through which the Policy is sold. This amount is part of the total compensation paid for the sale of the Policy. Receipt of the cash and non-cash compensation described above may provide sales representatives and their managers with an incentive to favor the sale of proprietary products over similar products issued by non-affiliates. One of our affiliated selling firms, MetLife Investors Distribution Company ("MLID"), enters into selling agreements with other unaffiliated selling firms for the sale of the Policies and other variable insurance products, i.e., annuity contracts and life insurance policies, that we and our affiliates issue. MLID may pay additional compensation to certain of these selling firms, including 52 marketing allowances, introduction fees, persistency payments, preferred status fees and industry conference fees. Marketing allowances are periodic payments to certain selling firms based on cumulative periodic (usually quarterly) sales of these variable insurance products. Introduction fees are payments to selling firms in connection with the addition of these variable products to the selling firm's line of investment products, including expenses relating to establishing the data communications systems necessary for the selling firm to offer, sell and administer these products. Persistency payments are periodic payments based on account and/or cash values of these variable insurance products. Preferred status fees are paid to obtain preferred treatment of these products in selling firms' marketing programs, which may include marketing services, participation in marketing meetings, listings in data resources and increased access to their sales representatives. Industry conference fees are amounts paid to cover in part the costs associated with sales conferences and educational seminars for selling firms' sales representatives. The additional types of compensation discussed above are not offered to all selling firms. The terms of any particular agreement governing compensation may vary among selling firms and the amounts may be significant. The prospect of receiving, or the receipt of, additional compensation as described above may provide selling firms or their representatives with an incentive to favor sales of the Policies over other variable insurance policies (or other investments) with respect to which the selling firm does not receive additional compensation, or lower levels of additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the Policies. For more information about any such arrangements, ask your sales representative for further information about what your sales representative and the selling firm for which he or she works may receive in connection with your purchase of a Policy. We retain consultants who provide technical training and sales support to our sales representatives with respect to certain business planning strategies that may involve the sale of life insurance. We pay these consultants fees that are not conditioned on the sale of any insurance products. These consultants may also provide services directly to our clients for a fee. 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 Policy for at least five years. The commissions do not result in a charge against the Policy in addition to the charges already described elsewhere in this Prospectus. LEGAL PROCEEDINGS 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. RESTRICTIONS ON FINANCIAL TRANSACTIONS Applicable laws designed to counter terrorism and prevent money laundering might, in certain circumstances, require us to reject a premium payment and/ 53 or block or "freeze" your Policy. If these laws apply in a particular situation, we would not be allowed to process any request for withdrawals, surrenders, or death benefits, make transfers, or continue making payments under your death benefit option until instructions are received from the appropriate regulator. We also may be required to provide additional information about you or your Policy to government regulators. EXPERTS The financial statements of Metropolitan Life Separate Account UL included in this Prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The principal business address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 33602-5827. 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 Policy. In order to help you understand how the Policy's values would vary over time under different sets of assumptions, we will provide you with personalized illustrations of death benefits, cash surrender values and cash values upon request. These will be based on the age and insurance risk characteristics of the person insured under the Policy 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 without charge. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. 54 Additional information about the Policy and the Separate Account can be found in the Statement of Additional Information. This Prospectus incorporates by reference all of the information contained in the Statement of Additional Information, which is legally part of this Prospectus. You may obtain, without charge, a copy of the Statement of Additional Information or a personalized illustration of death benefits, cash surrender values and cash values, by calling us at 1-732-602-6400 or contacting us through our website at www.metlife.com/sbr. Information about the Policy and the Separate Account, including the Statement of Additional Information, is available for viewing and copying at the SEC's Public Reference Room in Washington, D.C. Information about the operation of the public reference room may be obtained by calling the SEC at 202-942-8090. 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. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policyholders of Metropolitan Life Separate Account UL and the Board of Directors of Metropolitan Life Insurance Company: We have audited the accompanying statement of assets and liabilities 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, 2004 and the related statements of operations and the statements of changes in net assets for each of the three years in the period then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Separate Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian. 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, 2004, the results of their operations and the changes in their net assets for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, FL March 23, 2005 F-1 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
STATE STREET RESEARCH STATE STREET RESEARCH STATE STREET 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 (14,725,660 Shares; cost $437,735,084)............. $ 399,801,661 $ -- $ -- State Street Research Diversified Portfolio (19,543,701 Shares; cost $314,850,469)............. -- 314,849,028 -- State Street Research Aggressive Growth Portfolio (10,244,403 Shares; cost $240,259,945)............. -- -- 207,756,483 MetLife Stock Index Portfolio (16,982,621 Shares; cost $513,726,527)............. -- -- -- FI International Stock Portfolio (4,184,585 Shares; cost $46,020,677)............... -- -- -- FI Mid Cap Opportunities Portfolio (14,027,780 Shares; cost $259,097,978)............. -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,286,550 Shares; cost $63,671,025)............... -- -- -- Scudder Global Equity Portfolio (2,611,247 Shares; cost $29,759,419)............... -- -- -- Harris Oakmark Large Cap Value Portfolio (3,819,785 Shares; cost $42,764,231)............... -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (2,287,663 Shares; cost $34,696,023)............... -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,865,182 Shares; cost $31,808,389)............... -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (6,144,529 Shares; cost $65,884,403)............... -- -- -- Morgan Stanley EAFE Index Portfolio (2,795,997 Shares; cost $24,300,134)............... -- -- -- Russell 2000 Index Portfolio (2,646,884 Shares; cost $27,058,591)............... -- -- -- Met/Putnam Voyager Portfolio (2,204,746 Shares; cost $9,605,022)................ -- -- -- State Street Research Aurora Portfolio (4,188,097 Shares; cost $58,904,132)............... -- -- -- MetLife Mid Cap Stock Index Portfolio (2,690,249 Shares; cost $28,264,724)............... -- -- -- Franklin Templeton Small Cap Growth Portfolio (437,468 Shares; cost $3,581,508).................. -- -- -- State Street Research Large Cap Value Portfolio (274,394 Shares; cost $2,937,412).................. -- -- -- Davis Venture Value Portfolio (1,111,359 Shares; cost $25,578,869)............... -- -- -- Loomis Sayles Small Cap Portfolio (29,039 Shares; cost $4,989,540)................... -- -- -- State Street Research Large Cap Growth Portfolio (316,810 Shares; cost $5,707,793).................. -- -- -- MFS Investors Trust Portfolio (369,455 Shares; cost $2,914,956).................. -- -- -- ---------------- ---------------- ---------------- Total Investments................................... 399,801,661 314,849,028 207,756,483 Cash and Accounts Receivable........................ 14,852 327,701 -- ---------------- ---------------- ---------------- Total Assets........................................ 399,816,513 315,176,729 207,756,483 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- -- 7,121 ---------------- ---------------- ---------------- NET ASSETS.......................................... $ 399,816,513 $ 315,176,729 $ 207,749,362 ================ ================ ================ Outstanding Units (In Thousands).................... 16,507 13,455 11,775 Unit Fair Values.................................... $11.71 to $36.38 $12.79 to $32.95 $13.23 to $18.89
METLIFE STOCK INDEX INVESTMENT DIVISION ------------------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") State Street Research Investment Trust Portfolio (14,725,660 Shares; cost $437,735,084)............. $ -- State Street Research Diversified Portfolio (19,543,701 Shares; cost $314,850,469)............. -- State Street Research Aggressive Growth Portfolio (10,244,403 Shares; cost $240,259,945)............. -- MetLife Stock Index Portfolio (16,982,621 Shares; cost $513,726,527)............. 548,029,171 FI International Stock Portfolio (4,184,585 Shares; cost $46,020,677)............... -- FI Mid Cap Opportunities Portfolio (14,027,780 Shares; cost $259,097,978)............. -- T. Rowe Price Small Cap Growth Portfolio (5,286,550 Shares; cost $63,671,025)............... -- Scudder Global Equity Portfolio (2,611,247 Shares; cost $29,759,419)............... -- Harris Oakmark Large Cap Value Portfolio (3,819,785 Shares; cost $42,764,231)............... -- Neuberger Berman Partners Mid Cap Value Portfolio (2,287,663 Shares; cost $34,696,023)............... -- T. Rowe Price Large Cap Growth Portfolio (2,865,182 Shares; cost $31,808,389)............... -- Lehman Brothers Aggregate Bond Index Portfolio (6,144,529 Shares; cost $65,884,403)............... -- Morgan Stanley EAFE Index Portfolio (2,795,997 Shares; cost $24,300,134)............... -- Russell 2000 Index Portfolio (2,646,884 Shares; cost $27,058,591)............... -- Met/Putnam Voyager Portfolio (2,204,746 Shares; cost $9,605,022)................ -- State Street Research Aurora Portfolio (4,188,097 Shares; cost $58,904,132)............... -- MetLife Mid Cap Stock Index Portfolio (2,690,249 Shares; cost $28,264,724)............... -- Franklin Templeton Small Cap Growth Portfolio (437,468 Shares; cost $3,581,508).................. -- State Street Research Large Cap Value Portfolio (274,394 Shares; cost $2,937,412).................. -- Davis Venture Value Portfolio (1,111,359 Shares; cost $25,578,869)............... -- Loomis Sayles Small Cap Portfolio (29,039 Shares; cost $4,989,540)................... -- State Street Research Large Cap Growth Portfolio (316,810 Shares; cost $5,707,793).................. -- MFS Investors Trust Portfolio (369,455 Shares; cost $2,914,956).................. -- ---------------- Total Investments................................... 548,029,171 Cash and Accounts Receivable........................ 146,607 ---------------- Total Assets........................................ 548,175,778 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- ---------------- NET ASSETS.......................................... $ 548,175,778 ================ Outstanding Units (In Thousands).................... 29,476 Unit Fair Values.................................... $10.59 to $32.05
See Notes to Financial Statements. F-2
FI INTERNATIONAL FI MID CAP T. ROWE PRICE SCUDDER HARRIS OAKMARK NEUBERGER BERMAN STOCK OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY LARGE CAP VALUE PARTNERS MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- ------------------- ------------------- ---------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 48,122,736 -- -- -- -- -- -- 229,213,934 -- -- -- -- -- -- 72,032,359 -- -- -- -- -- -- 34,181,219 -- -- -- -- -- -- 51,070,525 -- -- -- -- -- -- 47,285,989 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- --------------- --------------- ---------------- ---------------- ---------------- 48,122,736 229,213,934 72,032,359 34,181,219 51,070,525 47,285,989 -- 112,274 1,675 1,258 62,627 -- ---------------- --------------- --------------- ---------------- ---------------- ---------------- 48,122,736 229,326,208 72,034,034 34,182,477 51,133,152 47,285,989 47,812 -- -- -- -- 70,728 ---------------- --------------- --------------- ---------------- ---------------- ---------------- $ 48,074,924 $ 229,326,208 $ 72,034,034 $ 34,182,477 $ 51,133,152 $ 47,215,261 ================ =============== =============== ================ ================ ================ 3,241 14,284 5,186 2,201 3,767 2,435 $11.67 to $16.22 $6.66 to $18.87 $7.41 to $15.57 $15.04 to $16.76 $12.79 to $16.08 $16.88 to $23.70
T. ROWE PRICE LEHMAN BROTHERS LARGE CAP GROWTH AGGREGATE BOND INDEX INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- -------------------- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 36,588,372 -- -- 67,712,704 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------- ---------------- 36,588,372 67,712,704 9 -- --------------- ---------------- 36,588,381 67,712,704 -- 2,896 --------------- ---------------- $ 36,588,381 $ 67,709,808 =============== ================ 3,297 4,813 $8.97 to $13.33 $13.17 to $14.23
F-3 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
MORGAN STANLEY RUSSELL MET/PUTNAM EAFE INDEX 2000 INDEX VOYAGER INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") State Street Research Investment Trust Portfolio (14,725,660 Shares; cost $437,735,084)............. $ -- $ -- $ -- State Street Research Diversified Portfolio (19,543,701 Shares; cost $314,850,469)............. -- -- -- State Street Research Aggressive Growth Portfolio (10,244,403 Shares; cost $240,259,945)............. -- -- -- MetLife Stock Index Portfolio (16,982,621 Shares; cost $513,726,527)............. -- -- -- FI International Stock Portfolio (4,184,585 Shares; cost $46,020,677)............... -- -- -- FI Mid Cap Opportunities Portfolio (14,027,780 Shares; cost $259,097,978)............. -- -- -- T. Rowe Price Small Cap Growth Portfolio (5,286,550 Shares; cost $63,671,025)............... -- -- -- Scudder Global Equity Portfolio (2,611,247 Shares; cost $29,759,419)............... -- -- -- Harris Oakmark Large Cap Value Portfolio (3,819,785 Shares; cost $42,764,231)............... -- -- -- Neuberger Berman Partners Mid Cap Value Portfolio (2,287,663 Shares; cost $34,696,023)............... -- -- -- T. Rowe Price Large Cap Growth Portfolio (2,865,182 Shares; cost $31,808,389)............... -- -- -- Lehman Brothers Aggregate Bond Index Portfolio (6,144,529 Shares; cost $65,884,403)............... -- -- -- Morgan Stanley EAFE Index Portfolio (2,795,997 Shares; cost $24,300,134)............... 32,545,410 -- -- Russell 2000 Index Portfolio (2,646,884 Shares; cost $27,058,591)............... -- 37,082,843 -- Met/Putnam Voyager Portfolio (2,204,746 Shares; cost $9,605,022)................ -- -- 10,450,498 State Street Research Aurora Portfolio (4,188,097 Shares; cost $58,904,132)............... -- -- -- MetLife Mid Cap Stock Index Portfolio (2,690,249 Shares; cost $28,264,724)............... -- -- -- Franklin Templeton Small Cap Growth Portfolio (437,468 Shares; cost $3,581,508).................. -- -- -- State Street Research Large Cap Value Portfolio (274,394 Shares; cost $2,937,412).................. -- -- -- Davis Venture Value Portfolio (1,111,359 Shares; cost $25,578,869)............... -- -- -- Loomis Sayles Small Cap Portfolio (29,039 Shares; cost $4,989,540)................... -- -- -- State Street Research Large Cap Growth Portfolio (316,810 Shares; cost $5,707,793).................. -- -- -- MFS Investors Trust Portfolio (369,455 Shares; cost $2,914,956).................. -- -- -- --------------- ---------------- -------------- Total Investments................................... 32,545,410 37,082,843 10,450,498 Cash and Accounts Receivable........................ 6,169 2,918 1,432 --------------- ---------------- -------------- Total Assets........................................ 32,551,579 37,085,761 10,451,930 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- -- -- --------------- ---------------- -------------- NET ASSETS.......................................... $ 32,551,579 $ 37,085,761 $ 10,451,930 =============== ================ ============== Outstanding Units (In Thousands).................... 3,015 2,381 2,202 Unit Fair Values.................................... $9.31 to $12.41 $12.55 to $17.19 $4.56 to $5.02
STATE STREET RESEARCH AURORA INVESTMENT DIVISION --------------------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") State Street Research Investment Trust Portfolio (14,725,660 Shares; cost $437,735,084)............. $ -- State Street Research Diversified Portfolio (19,543,701 Shares; cost $314,850,469)............. -- State Street Research Aggressive Growth Portfolio (10,244,403 Shares; cost $240,259,945)............. -- MetLife Stock Index Portfolio (16,982,621 Shares; cost $513,726,527)............. -- FI International Stock Portfolio (4,184,585 Shares; cost $46,020,677)............... -- FI Mid Cap Opportunities Portfolio (14,027,780 Shares; cost $259,097,978)............. -- T. Rowe Price Small Cap Growth Portfolio (5,286,550 Shares; cost $63,671,025)............... -- Scudder Global Equity Portfolio (2,611,247 Shares; cost $29,759,419)............... -- Harris Oakmark Large Cap Value Portfolio (3,819,785 Shares; cost $42,764,231)............... -- Neuberger Berman Partners Mid Cap Value Portfolio (2,287,663 Shares; cost $34,696,023)............... -- T. Rowe Price Large Cap Growth Portfolio (2,865,182 Shares; cost $31,808,389)............... -- Lehman Brothers Aggregate Bond Index Portfolio (6,144,529 Shares; cost $65,884,403)............... -- Morgan Stanley EAFE Index Portfolio (2,795,997 Shares; cost $24,300,134)............... -- Russell 2000 Index Portfolio (2,646,884 Shares; cost $27,058,591)............... -- Met/Putnam Voyager Portfolio (2,204,746 Shares; cost $9,605,022)................ -- State Street Research Aurora Portfolio (4,188,097 Shares; cost $58,904,132)............... 80,285,815 MetLife Mid Cap Stock Index Portfolio (2,690,249 Shares; cost $28,264,724)............... -- Franklin Templeton Small Cap Growth Portfolio (437,468 Shares; cost $3,581,508).................. -- State Street Research Large Cap Value Portfolio (274,394 Shares; cost $2,937,412).................. -- Davis Venture Value Portfolio (1,111,359 Shares; cost $25,578,869)............... -- Loomis Sayles Small Cap Portfolio (29,039 Shares; cost $4,989,540)................... -- State Street Research Large Cap Growth Portfolio (316,810 Shares; cost $5,707,793).................. -- MFS Investors Trust Portfolio (369,455 Shares; cost $2,914,956).................. -- ---------------- Total Investments................................... 80,285,815 Cash and Accounts Receivable........................ 55,824 ---------------- Total Assets........................................ 80,341,639 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- ---------------- NET ASSETS.......................................... $ 80,341,639 ================ Outstanding Units (In Thousands).................... 4,164 Unit Fair Values.................................... $17.84 to $19.48
See Notes to Financial Statements. F-4
METLIFE FRANKLIN TEMPLETON STATE STREET RESEARCH DAVIS LOOMIS SAYLES MID CAP STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE VENTURE VALUE SMALL CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- --------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 36,883,308 -- -- -- -- -- 4,527,791 -- -- -- -- -- 3,320,165 -- -- -- -- -- 31,373,675 -- -- -- -- -- 6,406,202 -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ----------------- 36,883,308 4,527,791 3,320,165 31,373,675 6,406,202 2,076 -- 728 662 273 ---------------- ---------------- ---------------- ---------------- ----------------- 36,885,384 4,527,791 3,320,893 31,374,337 6,406,475 -- 359 -- -- -- ---------------- ---------------- ---------------- ---------------- ----------------- $ 36,885,384 $ 4,527,432 $ 3,320,893 $ 31,374,337 $ 6,406,475 ================ ================ ================ ================ ================= 2,658 440 271 1,366 38 $12.82 to $14.07 $10.01 to $10.35 $12.02 to $12.31 $11.00 to $31.91 $10.79 to $238.98
STATE STREET RESEARCH MFS LARGE CAP GROWTH INVESTORS TRUST INVESTMENT DIVISION INVESTMENT DIVISION - --------------------- ------------------- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 6,453,416 -- -- 3,384,211 --------------- -------------- 6,453,416 3,384,211 4,108 2,780 --------------- -------------- 6,457,524 3,386,991 -- -- --------------- -------------- $ 6,457,524 $ 3,386,991 =============== ============== 851 367 $7.44 to $11.17 $8.87 to $9.28
F-5 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
STATE STREET RESEARCH FI VALUE HARRIS OAKMARK BOND INCOME LEADERS FOCUSED VALUE INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION ---------------- --------------- ------------------ ASSETS: INVESTMENTS AT VALUE: METROPOLITAN FUND--(CONTINUED) State Street Research Bond Income Portfolio (784,305 Shares; cost $85,142,822)......................................... $ 89,191,094 $ -- $ -- FI Value Leaders Portfolio (6,744 Shares; cost $1,032,734)............................................ -- 1,190,571 -- Harris Oakmark Focused Value Portfolio (155,186 Shares; cost $30,169,634)......................................... -- -- 37,845,315 Salomon Brothers Strategic Bond Opportunities Portfolio (670,446 Shares; cost $8,224,857).......................................... -- -- -- Salomon Brothers U.S. Government Portfolio (763,114 Shares; cost $9,381,744).......................................... -- -- -- State Street Research Money Market Portfolio (291,721 Shares; cost $29,172,133)......................................... -- -- -- MFS Total Return Portfolio (5,184 Shares; cost $727,723).............................................. -- -- -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Growth Portfolio (213,086 Shares; cost $3,687,672).......................................... -- -- -- Janus Aspen Balanced Portfolio (9 Shares; cost $233)...................................................... -- -- -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") Invesco VIF Equity-Income Portfolio (12,962 Shares; cost $227,049)............................................. -- -- -- AIM Government Securities Portfolio (359 Shares; cost $4,330).................................................. -- -- -- AIM Real Estate Portfolio (68,810 Shares; cost $1,066,335)........................................... -- -- -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES FUNDS ("FRANKLIN FUND") Franklin Templeton International Stock Portfolio (365,633 Shares; cost $4,233,003).......................................... -- -- -- ALLIANCE BERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") Alliance Growth & Income Portfolio (133,913 Shares; cost $2,564,063).......................................... -- -- -- Alliance Technology Portfolio (1,368 Shares; cost $16,490)............................................... -- -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (30,902 Shares; cost $658,123)............................................. -- -- -- Fidelity VIP Asset Manager Growth Portfolio (55,996 Shares; cost $649,287)............................................. -- -- -- Fidelity VIP Growth Portfolio (11,704 Shares; cost $333,908)............................................. -- -- -- Fidelity VIP Investment Grade Bond Portfolio (995 Shares; cost $13,106)................................................. -- -- -- Fidelity Equity-Income Portfolio (0 Shares; cost $0)........................................................ -- -- -- ---------------- --------------- ------------------ Total Investments........................................................... 89,191,094 1,190,571 37,845,315 Cash and Accounts Receivable................................................ -- -- -- ---------------- --------------- ------------------ Total Assets................................................................ 89,191,094 1,190,571 37,845,315 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. 17,011 14 582 ---------------- --------------- ------------------ NET ASSETS.................................................................. $ 89,174,083 $ 1,190,557 $ 37,844,733 ================ =============== ================== Outstanding Units (In Thousands)............................................ 4,716 101 154 Unit Fair Values............................................................ $13.46 to $28.07 $9.52 to $12.01 $239.40 to $247.40
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION ---------------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN FUND--(CONTINUED) State Street Research Bond Income Portfolio (784,305 Shares; cost $85,142,822)......................................... $ -- FI Value Leaders Portfolio (6,744 Shares; cost $1,032,734)............................................ -- Harris Oakmark Focused Value Portfolio (155,186 Shares; cost $30,169,634)......................................... -- Salomon Brothers Strategic Bond Opportunities Portfolio (670,446 Shares; cost $8,224,857).......................................... 8,742,620 Salomon Brothers U.S. Government Portfolio (763,114 Shares; cost $9,381,744).......................................... -- State Street Research Money Market Portfolio (291,721 Shares; cost $29,172,133)......................................... -- MFS Total Return Portfolio (5,184 Shares; cost $727,723).............................................. -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Growth Portfolio (213,086 Shares; cost $3,687,672).......................................... -- Janus Aspen Balanced Portfolio (9 Shares; cost $233)...................................................... -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") Invesco VIF Equity-Income Portfolio (12,962 Shares; cost $227,049)............................................. -- AIM Government Securities Portfolio (359 Shares; cost $4,330).................................................. -- AIM Real Estate Portfolio (68,810 Shares; cost $1,066,335)........................................... -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES FUNDS ("FRANKLIN FUND") Franklin Templeton International Stock Portfolio (365,633 Shares; cost $4,233,003).......................................... -- ALLIANCE BERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") Alliance Growth & Income Portfolio (133,913 Shares; cost $2,564,063).......................................... -- Alliance Technology Portfolio (1,368 Shares; cost $16,490)............................................... -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (30,902 Shares; cost $658,123)............................................. -- Fidelity VIP Asset Manager Growth Portfolio (55,996 Shares; cost $649,287)............................................. -- Fidelity VIP Growth Portfolio (11,704 Shares; cost $333,908)............................................. -- Fidelity VIP Investment Grade Bond Portfolio (995 Shares; cost $13,106)................................................. -- Fidelity Equity-Income Portfolio (0 Shares; cost $0)........................................................ -- ---------------- Total Investments........................................................... 8,742,620 Cash and Accounts Receivable................................................ -- ---------------- Total Assets................................................................ 8,742,620 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. 73 ---------------- NET ASSETS.................................................................. $ 8,742,547 ================ Outstanding Units (In Thousands)............................................ 596 Unit Fair Values............................................................ $14.29 to $14.77
See Notes to Financial Statements. F-6
SALOMON BROTHERS STATE STREET RESEARCH MFS JANUS ASPEN JANUS ASPEN INVESCO VIF AIM U.S. GOVERNMENT MONEY MARKET TOTAL RETURN GROWTH BALANCED EQUITY-INCOME GOVERNMENT SECURITIES INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION -------- --------------------- ---------------- ----------- ----------- ------------- --------------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 9,477,878 -- -- -- -- -- -- -- 29,172,133 -- -- -- -- -- -- -- 766,915 -- -- -- -- -- -- -- 4,276,635 -- -- -- -- -- -- -- 237 -- -- -- -- -- -- -- 239,919 -- -- -- -- -- -- -- 4,310 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ---------------- ---------------- ---------------- ---------- -------- -------- -------- 9,477,878 29,172,133 766,915 4,276,635 237 239,919 4,310 260 -- 12 -- -- -- -- - ---------------- ---------------- ---------------- ---------- -------- -------- -------- 9,478,138 29,172,133 766,927 4,276,635 237 239,919 4,310 -- 10,010 -- -- -- -- -- - ---------------- ---------------- ---------------- ---------- -------- -------- -------- $ 9,478,138 $ 29,162,123 $ 766,927 $4,276,635 $ 237 $239,919 $ 4,310 ================ ================ ================ ========== ======== ======== ======== 705 1,880 70 509 0.02184 24 0.42005 $13.08 to $13.52 $15.36 to $15.93 $10.97 to $11.04 $ 8.39 $ 10.85 $ 10.15 $ 10.26
F-7 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
AIM FRANKLIN TEMPLETON ALLIANCE REAL ESTATE INTERNATIONAL STOCK GROWTH & INCOME INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION ----------- ------------------- --------------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN FUND--(CONTINUED) State Street Research Bond Income Portfolio (784,305 Shares; cost $85,142,822)......................................... $ -- $ -- $ -- FI Value Leaders Portfolio (6,744 Shares; cost $1,032,734)............................................ -- -- -- Harris Oakmark Focused Value Portfolio (155,186 Shares; cost $30,169,634)......................................... -- -- -- Salomon Brothers Strategic Bond Opportunities Portfolio (670,446 Shares; cost $8,224,857).......................................... -- -- -- Salomon Brothers U.S. Government Portfolio (763,114 Shares; cost $9,381,744).......................................... -- -- -- State Street Research Money Market Portfolio (291,721 Shares; cost $29,172,133)......................................... -- -- -- MFS Total Return Portfolio (5,184 Shares; cost $727,723).............................................. -- -- -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Growth Portfolio (213,086 Shares; cost $3,687,672).......................................... -- -- -- Janus Aspen Balanced Portfolio (9 Shares; cost $233)...................................................... -- -- -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") Invesco VIF Equity-Income Portfolio (12,962 Shares; cost $227,049)............................................. -- -- -- AIM Government Securities Portfolio (359 Shares; cost $4,330).................................................. -- -- -- AIM Real Estate Portfolio (68,810 Shares; cost $1,066,335)........................................... 1,316,326 -- -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES FUNDS ("FRANKLIN FUND") Franklin Templeton International Stock Portfolio (365,633 Shares; cost $4,233,003).......................................... -- 5,312,654 -- ALLIANCE BERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") Alliance Growth & Income Portfolio (133,913 Shares; cost $2,564,063).......................................... -- -- 3,196,500 Alliance Technology Portfolio (1,368 Shares; cost $16,490)............................................... -- -- -- FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (30,902 Shares; cost $658,123)............................................. -- -- -- Fidelity VIP Asset Manager Growth Portfolio (55,996 Shares; cost $649,287)............................................. -- -- -- Fidelity VIP Growth Portfolio (11,704 Shares; cost $333,908)............................................. -- -- -- Fidelity VIP Investment Grade Bond Portfolio (995 Shares; cost $13,106)................................................. -- -- -- Fidelity Equity-Income Portfolio (0 Shares; cost $0)........................................................ -- -- -- ---------- ---------- ---------- Total Investments........................................................... 1,316,326 5,312,654 3,196,500 Cash and Accounts Receivable................................................ -- -- 3,448 ---------- ---------- ---------- Total Assets................................................................ 1,316,326 5,312,654 3,199,948 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. 8,270 12,971 -- ---------- ---------- ---------- NET ASSETS.................................................................. $1,308,056 $5,299,683 $3,199,948 ========== ========== ========== Outstanding Units (In Thousands)............................................ 55 444 275 Unit Fair Values............................................................ $ 23.91 $ 11.92 $ 11.65
ALLIANCE TECHNOLOGY INVESTMENT DIVISION ---------- ASSETS: INVESTMENTS AT VALUE: METROPOLITAN FUND--(CONTINUED) State Street Research Bond Income Portfolio (784,305 Shares; cost $85,142,822)......................................... $ -- FI Value Leaders Portfolio (6,744 Shares; cost $1,032,734)............................................ -- Harris Oakmark Focused Value Portfolio (155,186 Shares; cost $30,169,634)......................................... -- Salomon Brothers Strategic Bond Opportunities Portfolio (670,446 Shares; cost $8,224,857).......................................... -- Salomon Brothers U.S. Government Portfolio (763,114 Shares; cost $9,381,744).......................................... -- State Street Research Money Market Portfolio (291,721 Shares; cost $29,172,133)......................................... -- MFS Total Return Portfolio (5,184 Shares; cost $727,723).............................................. -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Growth Portfolio (213,086 Shares; cost $3,687,672).......................................... -- Janus Aspen Balanced Portfolio (9 Shares; cost $233)...................................................... -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") Invesco VIF Equity-Income Portfolio (12,962 Shares; cost $227,049)............................................. -- AIM Government Securities Portfolio (359 Shares; cost $4,330).................................................. -- AIM Real Estate Portfolio (68,810 Shares; cost $1,066,335)........................................... -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES FUNDS ("FRANKLIN FUND") Franklin Templeton International Stock Portfolio (365,633 Shares; cost $4,233,003).......................................... -- ALLIANCE BERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") Alliance Growth & Income Portfolio (133,913 Shares; cost $2,564,063).......................................... -- Alliance Technology Portfolio (1,368 Shares; cost $16,490)............................................... 20,636 FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (30,902 Shares; cost $658,123)............................................. -- Fidelity VIP Asset Manager Growth Portfolio (55,996 Shares; cost $649,287)............................................. -- Fidelity VIP Growth Portfolio (11,704 Shares; cost $333,908)............................................. -- Fidelity VIP Investment Grade Bond Portfolio (995 Shares; cost $13,106)................................................. -- Fidelity Equity-Income Portfolio (0 Shares; cost $0)........................................................ -- ------- Total Investments........................................................... 20,636 Cash and Accounts Receivable................................................ -- ------- Total Assets................................................................ 20,636 LIABILITIES Due to/From Metropolitan Life Insurance Company............................. -- ------- NET ASSETS.................................................................. $20,636 ======= Outstanding Units (In Thousands)............................................ 4 Unit Fair Values............................................................ $ 4.77
See Notes to Financial Statements. F-8
FIDELITY FIDELITY FIDELITY FIDELITY FIDELITY CONTRAFUND ASSET MANAGER GROWTH GROWTH INVESTMENT GRADE BOND EQUITY-INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION DIVISION DIVISION ---------- -------------------- ---------- --------------------- ------------- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 814,270 -- -- -- -- -- 706,114 -- -- -- -- -- 370,320 -- -- -- -- -- 13,118 -- -- -- -- -- -- -------- -------- -------- ------- ------- 814,270 706,114 370,320 13,118 -- 4,622 -- 1,041 3 10,110 -------- -------- -------- ------- ------- 818,892 706,114 371,361 13,121 10,110 -- 1,737 -- -- -- -------- -------- -------- ------- ------- $818,892 $704,377 $371,361 $13,121 $10,110 ======== ======== ======== ======= ======= 77 83 57 1 1 $ 10.59 $ 8.47 $ 6.47 $ 10.43 $ 11.02
F-9 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
AMERICAN AMERICAN FUNDS FUNDS GROWTH GROWTH-INCOME INVESTMENT INVESTMENT DIVISION DIVISION ---------------- ---------------- ASSETS: INVESTMENTS AT VALUE: AMERICAN SERIES FUNDS ("AMERICAN FUND") American Funds Growth Portfolio (891,607 Shares; cost $37,505,388)................................... $ 45,561,100 $ -- American Funds Growth-Income Portfolio (946,994 Shares; cost $29,307,695)................................... -- 34,697,870 American Funds Global Small Capitalization Portfolio (736,057 Shares; cost $9,653,215).................................... -- -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid Cap Growth Portfolio (858,035 Shares; cost $5,195,148).................................... -- -- MFS Research International Portfolio (237,623 Shares; cost $2,418,363).................................... -- -- PIMCO Total Return Portfolio (1,668,296 Shares; cost $19,227,119)................................. -- -- PIMCO PEA Innovation Portfolio (1,265,980 Shares; cost $5,437,670).................................. -- -- Lord Abbett Bond Debenture Portfolio (1,200,373 Shares; cost $13,595,055)................................. -- -- Met/AIM Mid Cap Core Equity Portfolio (150,348 Shares; cost $1,889,765).................................... -- -- Met/AIM Small Cap Growth Portfolio (89,047 Shares; cost $1,027,804)..................................... -- -- Harris Oakmark International Portfolio (275,999 Shares; cost $3,503,172).................................... -- -- Janus Aggressive Growth Portfolio (739,664 Shares; cost $4,563,477).................................... -- -- Lord Abbett Growth and Income Portfolio (1,665 Shares; cost $38,838)......................................... -- -- Neuberger Berman Real Estate Portfolio (157,549 Shares; cost $1,839,826).................................... -- -- Lord Abbett Mid-Cap Value Portfolio (12 Shares; cost $236)............................................... -- -- Third Avenue Small Cap Value Portfolio (307 Shares; cost $4,462)............................................ -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (680 Shares; cost $16,474)........................................... -- -- Dreyfus Appreciation Portfolio (98 Shares; cost $3,245)............................................. -- -- GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS FUND") Goldman Sachs Mid Cap Value Portfolio (880 Shares; cost $13,907)........................................... -- -- MASSACHUSETTS FINANCIAL SERVICES VARIABLE INSURANCE TRUST ("MFS FUND") MFS High Income Portfolio (4,953 Shares; cost $47,814)......................................... -- -- WELLS FARGO VARIABLE TURST ("WELLS FARGO FUND") Wells Fargo Large Company Growth Portfolio (488 Shares; cost $4,319)............................................ -- -- Wells Fargo Equity Income Porfolio (266 Shares; cost $4,338)............................................ -- -- ---------------- ---------------- Total Investments..................................................... 45,561,100 34,697,870 Cash and Accounts Receivable.......................................... 10,672 3,833 ---------------- ---------------- Total Assets.......................................................... 45,571,772 34,701,703 LIABILITIES Due to/From Metropolitan Life Insurance Company....................... -- -- ---------------- ---------------- NET ASSETS............................................................ $ 45,571,772 $ 34,701,703 ================ ================ Outstanding Units (In Thousands)...................................... 657 811 Unit Fair Values...................................................... $67.49 to $69.75 $41.61 to $43.00
AMERICAN FUNDS T. ROWE PRICE GLOBAL SMALL CAPITALIZATION MID CAP GROWTH INVESTMENT INVESTMENT DIVISION DIVISION --------------------------- --------------- ASSETS: INVESTMENTS AT VALUE: AMERICAN SERIES FUNDS ("AMERICAN FUND") American Funds Growth Portfolio (891,607 Shares; cost $37,505,388)................................... $ -- $ -- American Funds Growth-Income Portfolio (946,994 Shares; cost $29,307,695)................................... -- -- American Funds Global Small Capitalization Portfolio (736,057 Shares; cost $9,653,215).................................... 12,527,695 -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid Cap Growth Portfolio (858,035 Shares; cost $5,195,148).................................... -- 6,478,155 MFS Research International Portfolio (237,623 Shares; cost $2,418,363).................................... -- -- PIMCO Total Return Portfolio (1,668,296 Shares; cost $19,227,119)................................. -- -- PIMCO PEA Innovation Portfolio (1,265,980 Shares; cost $5,437,670).................................. -- -- Lord Abbett Bond Debenture Portfolio (1,200,373 Shares; cost $13,595,055)................................. -- -- Met/AIM Mid Cap Core Equity Portfolio (150,348 Shares; cost $1,889,765).................................... -- -- Met/AIM Small Cap Growth Portfolio (89,047 Shares; cost $1,027,804)..................................... -- -- Harris Oakmark International Portfolio (275,999 Shares; cost $3,503,172).................................... -- -- Janus Aggressive Growth Portfolio (739,664 Shares; cost $4,563,477).................................... -- -- Lord Abbett Growth and Income Portfolio (1,665 Shares; cost $38,838)......................................... -- -- Neuberger Berman Real Estate Portfolio (157,549 Shares; cost $1,839,826).................................... -- -- Lord Abbett Mid-Cap Value Portfolio (12 Shares; cost $236)............................................... -- -- Third Avenue Small Cap Value Portfolio (307 Shares; cost $4,462)............................................ -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (680 Shares; cost $16,474)........................................... -- -- Dreyfus Appreciation Portfolio (98 Shares; cost $3,245)............................................. -- -- GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS FUND") Goldman Sachs Mid Cap Value Portfolio (880 Shares; cost $13,907)........................................... -- -- MASSACHUSETTS FINANCIAL SERVICES VARIABLE INSURANCE TRUST ("MFS FUND") MFS High Income Portfolio (4,953 Shares; cost $47,814)......................................... -- -- WELLS FARGO VARIABLE TURST ("WELLS FARGO FUND") Wells Fargo Large Company Growth Portfolio (488 Shares; cost $4,319)............................................ -- -- Wells Fargo Equity Income Porfolio (266 Shares; cost $4,338)............................................ -- -- ---------------- --------------- Total Investments..................................................... 12,527,695 6,478,155 Cash and Accounts Receivable.......................................... 172 -- ---------------- --------------- Total Assets.......................................................... 12,527,867 6,478,155 LIABILITIES Due to/From Metropolitan Life Insurance Company....................... -- 2,968 ---------------- --------------- NET ASSETS............................................................ $ 12,527,867 $ 6,475,187 ================ =============== Outstanding Units (In Thousands)...................................... 676 856 Unit Fair Values...................................................... $18.04 to $18.64 $7.35 to $11.44
See Notes to Financial Statements. F-10
MET/AIM MFS PIMCO PIMCO LORD ABBETT MET/AIM SMALL CAP HARRIS OAKMARK RESEARCH INTERNATIONAL TOTAL RETURN PEA INNOVATION BOND DEBENTURE MID CAP CORE EQUITY GROWTH INTERNATIONAL INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION - ---------------------- ---------------- -------------- ---------------- ------------------- ---------------- ---------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 2,784,944 -- -- -- -- -- -- -- 19,018,570 -- -- -- -- -- -- -- 5,848,830 -- -- -- -- -- -- -- 15,160,712 -- -- -- -- -- -- -- 2,124,415 -- -- -- -- -- -- -- 1,143,357 -- -- -- -- -- -- -- 3,963,347 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ----------------- ---------------- -------------- ---------------- ---------------- ---------------- ---------------- 2,784,944 19,018,570 5,848,830 15,160,712 2,124,415 1,143,357 3,963,347 -- 1,289 330 -- -- 1 -- ----------------- ---------------- -------------- ---------------- ---------------- ---------------- ---------------- 2,784,944 19,019,859 5,849,160 15,160,712 2,124,415 1,143,358 3,963,347 4,112 -- -- 18,988 18 138 ----------------- ---------------- -------------- ---------------- ---------------- ---------------- ---------------- $ 2,780,832 $ 19,019,859 $ 5,849,160 $ 15,141,724 $ 2,124,397 $ 1,143,358 $ 3,963,209 ================= ================ ============== ================ ================ ================ ================ 235 1,483 1,273 1,015 172 101 289 $11.51 to $511.90 $12.48 to $12.90 $4.47 to $4.62 $13.83 to $16.22 $12.14 to $12.43 $11.06 to $11.33 $13.45 to $13.77
F-11 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2004
LORD ABBETT JANUS GROWTH & NEUBERGER BERMAN AGGRESSIVE GROWTH INCOME REAL ESTATE INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION ----------------- ----------- ---------------- ASSETS: INVESTMENTS AT VALUE: AMERICAN SERIES FUNDS ("AMERICAN FUND") American Funds Growth Portfolio (891,607 Shares; cost $37,505,388)................................... $ -- $ -- $ -- American Funds Growth-Income Portfolio (946,994 Shares; cost $29,307,695)................................... -- -- -- American Funds Global Small Capitalization Portfolio (736,057 Shares; cost $9,653,215).................................... -- -- -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid Cap Growth Portfolio (858,035 Shares; cost $5,195,148).................................... -- -- -- MFS Research International Portfolio (237,623 Shares; cost $2,418,363).................................... -- -- -- PIMCO Total Return Portfolio (1,668,296 Shares; cost $19,227,119)................................. -- -- -- PIMCO PEA Innovation Portfolio (1,265,980 Shares; cost $5,437,670).................................. -- -- -- Lord Abbett Bond Debenture Portfolio (1,200,373 Shares; cost $13,595,055)................................. -- -- -- Met/AIM Mid Cap Core Equity Portfolio (150,348 Shares; cost $1,889,765).................................... -- -- -- Met/AIM Small Cap Growth Portfolio (89,047 Shares; cost $1,027,804)..................................... -- -- -- Harris Oakmark International Portfolio (275,999 Shares; cost $3,503,172).................................... -- -- -- Janus Aggressive Growth Portfolio (739,664 Shares; cost $4,563,477).................................... 5,657,171 -- -- Lord Abbett Growth and Income Portfolio (1,665 Shares; cost $38,838)......................................... -- 45,684 -- Neuberger Berman Real Estate Portfolio (157,549 Shares; cost $1,839,826).................................... -- -- 1,964,630 Lord Abbett Mid-Cap Value Portfolio (12 Shares; cost $236)............................................... -- -- -- Third Avenue Small Cap Value Portfolio (307 Shares; cost $4,462)............................................ -- -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (680 Shares; cost $16,474)........................................... -- -- -- Dreyfus Appreciation Portfolio (98 Shares; cost $3,245)............................................. -- -- -- GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS FUND") Goldman Sachs Mid Cap Value Portfolio (880 Shares; cost $13,907)........................................... -- -- -- MASSACHUSETTS FINANCIAL SERVICES VARIABLE INSURANCE TRUST ("MFS FUND") MFS High Income Portfolio (4,953 Shares; cost $47,814)......................................... -- -- -- WELLS FARGO VARIABLE TURST ("WELLS FARGO FUND") Wells Fargo Large Company Growth Portfolio (488 Shares; cost $4,319)............................................ -- -- -- Wells Fargo Equity Income Porfolio (266 Shares; cost $4,338)............................................ -- -- -- -------------- ------- ---------------- Total Investments..................................................... 5,657,171 45,684 1,964,630 Cash and Accounts Receivable.......................................... 282 9,000 123 -------------- ------- ---------------- Total Assets.......................................................... 5,657,453 54,684 1,964,753 LIABILITIES Due to/From Metropolitan Life Insurance Company....................... -- -- -- -------------- ------- ---------------- NET ASSETS............................................................ $ 5,657,453 $54,684 $ 1,964,753 ============== ======= ================ Outstanding Units (In Thousands)...................................... 742 6 152 Unit Fair Values...................................................... $6.61 to $7.68 $ 9.15 $12.90 to $12.97
LORD ABBETT MID-CAP VALUE INVESTMENT DIVISION ------------- ASSETS: INVESTMENTS AT VALUE: AMERICAN SERIES FUNDS ("AMERICAN FUND") American Funds Growth Portfolio (891,607 Shares; cost $37,505,388)................................... $ -- American Funds Growth-Income Portfolio (946,994 Shares; cost $29,307,695)................................... -- American Funds Global Small Capitalization Portfolio (736,057 Shares; cost $9,653,215).................................... -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid Cap Growth Portfolio (858,035 Shares; cost $5,195,148).................................... -- MFS Research International Portfolio (237,623 Shares; cost $2,418,363).................................... -- PIMCO Total Return Portfolio (1,668,296 Shares; cost $19,227,119)................................. -- PIMCO PEA Innovation Portfolio (1,265,980 Shares; cost $5,437,670).................................. -- Lord Abbett Bond Debenture Portfolio (1,200,373 Shares; cost $13,595,055)................................. -- Met/AIM Mid Cap Core Equity Portfolio (150,348 Shares; cost $1,889,765).................................... -- Met/AIM Small Cap Growth Portfolio (89,047 Shares; cost $1,027,804)..................................... -- Harris Oakmark International Portfolio (275,999 Shares; cost $3,503,172).................................... -- Janus Aggressive Growth Portfolio (739,664 Shares; cost $4,563,477).................................... -- Lord Abbett Growth and Income Portfolio (1,665 Shares; cost $38,838)......................................... -- Neuberger Berman Real Estate Portfolio (157,549 Shares; cost $1,839,826).................................... -- Lord Abbett Mid-Cap Value Portfolio (12 Shares; cost $236)............................................... 246 Third Avenue Small Cap Value Portfolio (307 Shares; cost $4,462)............................................ -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (680 Shares; cost $16,474)........................................... -- Dreyfus Appreciation Portfolio (98 Shares; cost $3,245)............................................. -- GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS FUND") Goldman Sachs Mid Cap Value Portfolio (880 Shares; cost $13,907)........................................... -- MASSACHUSETTS FINANCIAL SERVICES VARIABLE INSURANCE TRUST ("MFS FUND") MFS High Income Portfolio (4,953 Shares; cost $47,814)......................................... -- WELLS FARGO VARIABLE TURST ("WELLS FARGO FUND") Wells Fargo Large Company Growth Portfolio (488 Shares; cost $4,319)............................................ -- Wells Fargo Equity Income Porfolio (266 Shares; cost $4,338)............................................ -- -------- Total Investments..................................................... 246 Cash and Accounts Receivable.......................................... -- -------- Total Assets.......................................................... 246 LIABILITIES Due to/From Metropolitan Life Insurance Company....................... -- -------- NET ASSETS............................................................ $ 246 ======== Outstanding Units (In Thousands)...................................... 0.02095 Unit Fair Values...................................................... $ 11.76
See Notes to Financial Statements. F-12
DREYFUS GOLDMAN THIRD AVENUE INTERNATIONAL DREYFUS SACHS MID MFS WELLS FARGO WELLS FARGO SMALL CAP VALUE VALUE APPRECIATION CAP VALUE HIGH INCOME LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT INVESTMENT DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION -------- ------------- ------------ ---------- ----------- -------------------- ------------- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4,407 -- -- -- -- -- -- -- 15,540 -- -- -- -- -- -- -- 3,462 -- -- -- -- -- -- -- 13,443 -- -- -- -- -- -- -- 50,966 -- -- -- -- -- -- -- 4,335 -- -- -- -- -- -- -- 4,341 --------- ------- -------- ------- ------- -------- -------- 4,407 15,540 3,462 13,443 50,966 4,335 4,341 -- -- -- -- -- -- -- --------- ------- -------- ------- ------- -------- -------- 4,407 15,540 3,462 13,443 50,966 4,335 4,341 -- -- 125 1,167 -- -- -- --------- ------- -------- ------- ------- -------- -------- $ 4,407 $15,540 $ 3,337 $12,276 $50,966 $ 4,335 $ 4,341 ========= ======= ======== ======= ======= ======== ======== 0.3655 1 0.32426 1 5 0.41596 0.40184 $ 12.06 $ 11.60 $ 10.29 $ 10.97 $ 10.84 $ 10.42 $ 10.80
F-13 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
STATE STREET RESEARCH INVESTMENT TRUST STATE STREET RESEARCH DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------- -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ 2,717,041 $ 2,669,960 $ 1,708,899 $ 5,543,155 $ 9,831,564 $ 5,726,999 Expenses: Mortality and expense charges........... 3,262,909 2,738,164 2,678,347 2,975,584 2,320,042 2,168,000 ----------- ----------- ------------ ----------- ----------- ------------ Net investment (loss) income.............. (545,868) (68,204) (969,448) 2,567,571 7,511,522 3,558,999 ----------- ----------- ------------ ----------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. (689,999) (6,958,914) (6,132,437) (558,940) (2,593,687) (1,810,936) Change in unrealized appreciation (depreciation) of investments............ 37,215,298 88,855,777 (90,883,953) 19,749,208 42,182,763 (41,694,719) ----------- ----------- ------------ ----------- ----------- ------------ Net realized and unrealized gains (losses) on investments........................... 36,525,299 81,896,863 (97,016,390) 19,190,268 39,589,076 (43,505,655) ----------- ----------- ------------ ----------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $35,979,431 $81,828,659 $(97,985,838) $21,757,839 $47,100,598 $(39,946,656) =========== =========== ============ =========== =========== ============
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-14
STATE STREET RESEARCH AGGRESSIVE GROWTH METLIFE STOCK INDEX FI 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ -- $ -- $ 4,172,573 $ 6,468,236 $ 5,409,402 $ 606,588 $ 249,748 $ 317,077 1,651,256 1,367,678 1,263,240 3,998,379 3,080,678 2,704,257 370,691 304,442 298,333 - ----------- ----------- ------------ ----------- ------------ ------------ ---------- ----------- ----------- (1,651,256) (1,367,678) (1,263,240) 174,194 3,387,558 2,705,145 235,897 (54,694) 18,744 - ----------- ----------- ------------ ----------- ------------ ------------ ---------- ----------- ----------- (3,443,419) (8,202,841) (5,953,657) (2,432,174) (10,060,006) (5,045,284) (367,092) (1,630,864) (2,655,399) 27,472,766 62,199,697 (44,703,891) 49,514,290 101,361,307 (82,559,071) 7,284,341 10,924,390 (4,418,288) - ----------- ----------- ------------ ----------- ------------ ------------ ---------- ----------- ----------- 24,029,347 53,996,856 (50,657,548) 47,082,116 91,301,301 (87,604,355) 6,917,249 9,293,526 (7,073,687) - ----------- ----------- ------------ ----------- ------------ ------------ ---------- ----------- ----------- $22,378,091 $52,629,178 $(51,920,788) $47,256,310 $ 94,688,859 $(84,899,210) $7,153,146 $ 9,238,832 $(7,054,943) =========== =========== ============ =========== ============ ============ ========== =========== ===========
F-15 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
FI MID CAP OPPORTUNITIES T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION (C) INVESTMENT DIVISION -------------------------------------- -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ 1,090,068 $ -- $ -- $ -- $ -- $ 2,327 Expenses: Mortality and expense charges........... 1,721,436 1,297,757 1,013,088 530,571 408,933 335,699 ----------- ----------- ------------ ---------- ----------- ------------ Net investment (loss) income.............. (631,368) (1,297,757) (1,013,088) (530,571) (408,933) (333,372) ----------- ----------- ------------ ---------- ----------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. (717,628) (1,145,184) (5,163,698) (69,548) (326,259) (347,510) Change in unrealized appreciation (depreciation) of investments............ 33,098,684 46,019,342 (34,449,605) 7,181,746 18,001,752 (12,608,286) ----------- ----------- ------------ ---------- ----------- ------------ Net realized and unrealized gains (losses) on investments........................... 32,381,056 44,874,158 (39,613,303) 7,112,198 17,675,493 (12,955,796) ----------- ----------- ------------ ---------- ----------- ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $31,749,688 $43,576,401 $(40,626,391) $6,581,627 $17,266,560 $(13,289,168) =========== =========== ============ ========== =========== ============
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-16
SCUDDER GLOBAL EQUITY HARRIS OAKMARK LARGE CAP VALUE NEUBERGER BERMAN PARTNERS MID CAP VALUE 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 478,904 $ 501,419 $ 350,009 $ 216,340 $ -- $ 618,214 $1,060,839 $ 78,805 $ 49,885 246,310 189,917 168,321 366,329 252,368 179,930 312,426 197,793 139,354 ---------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- 232,594 311,502 181,688 (149,989) (252,368) 438,284 748,413 (118,988) (89,469) ---------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- (301,695) (1,005,776) (466,029) 613,781 38,696 173,172 490,187 28,084 105,666 4,666,310 7,242,152 (3,445,540) 4,130,792 6,986,213 (3,824,797) 6,555,902 7,656,793 (1,888,036) ---------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- 4,364,615 6,236,376 (3,911,569) 4,744,573 7,024,909 (3,651,625) 7,046,089 7,684,877 (1,782,370) ---------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- $4,597,209 $ 6,547,878 $(3,729,881) $4,594,584 $6,772,541 $(3,213,341) $7,794,502 $7,565,889 $(1,871,839) ========== =========== =========== ========== ========== =========== ========== ========== ===========
F-17 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
T. ROWE PRICE LARGE CAP GROWTH LEHMAN BROTHERS AGGREGATE BOND INDEX INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ 72,281 $ 30,610 $ 57,106 $1,838,871 $ 2,863,939 $1,283,105 Expenses: Mortality and expense charges........... 289,243 210,672 163,196 414,705 357,739 300,244 ---------- ---------- ----------- ---------- ----------- ---------- Net investment (loss) income.............. (216,962) (180,062) (106,090) 1,424,166 2,506,200 982,861 ---------- ---------- ----------- ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 994,314 (489,389) (317,124) 451,466 1,152,171 515,268 Change in unrealized appreciation (depreciation) of investments............ 2,677,244 7,871,800 (5,333,848) 266,268 (2,185,014) 2,760,523 ---------- ---------- ----------- ---------- ----------- ---------- Net realized and unrealized gains (losses) on investments........................... 3,671,558 7,382,411 (5,650,972) 717,734 (1,032,843) 3,275,791 ---------- ---------- ----------- ---------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $3,454,596 $7,202,349 $(5,757,062) $2,141,900 $ 1,473,357 $4,258,652 ========== ========== =========== ========== =========== ==========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-18
MORGAN STANLEY EAFE INDEX RUSSELL 2000 INDEX MET/PUTNAM VOYAGER 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 DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 31, 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 202,506 $ 280,223 $ 59,278 $ 141,315 $ 134,309 $ 74,869 $ 10,121 $ -- $ -- 230,962 158,241 123,406 255,946 163,522 104,600 79,068 58,697 39,278 ---------- ---------- ----------- ---------- ---------- ----------- -------- ---------- ----------- (28,456) 121,982 (64,128) (114,631) (29,213) (29,731) (68,947) (58,697) (39,278) ---------- ---------- ----------- ---------- ---------- ----------- -------- ---------- ----------- 1,189,725 (497,564) (800,822) 973,061 (125,595) (343,069) (75,290) (624,452) (304,226) 3,997,066 6,516,826 (1,274,363) 4,412,786 7,938,110 (2,545,881) 560,180 2,271,140 (1,227,374) ---------- ---------- ----------- ---------- ---------- ----------- -------- ---------- ----------- 5,186,791 6,019,262 (2,075,185) 5,385,847 7,812,515 (2,888,950) 484,890 1,646,688 (1,531,600) ---------- ---------- ----------- ---------- ---------- ----------- -------- ---------- ----------- $5,158,335 $6,141,244 $(2,139,313) $5,271,216 $7,783,302 $(2,918,681) $415,943 $1,587,991 $(1,570,878) ========== ========== =========== ========== ========== =========== ======== ========== ===========
F-19 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
STATE STREET RESEARCH AURORA METLIFE MID CAP STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ -- $ -- $ 127,494 $ 237,989 $ 100,611 $ 42,658 Expenses: Mortality and expense charges........... 563,943 336,756 225,368 259,163 164,774 98,019 ----------- ----------- ----------- ---------- ---------- ----------- Net investment (loss) income.............. (563,943) (336,756) (97,874) (21,174) (64,163) (55,361) ----------- ----------- ----------- ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 827,418 196,537 81,843 992,035 12,063 (23,095) Change in unrealized appreciation (depreciation) of investments............ 9,427,091 17,391,943 (6,958,922) 3,817,899 6,538,587 (2,089,536) ----------- ----------- ----------- ---------- ---------- ----------- Net realized and unrealized gains (losses) on investments........................... 10,254,509 17,588,480 (6,877,079) 4,809,934 6,550,650 (2,112,631) ----------- ----------- ----------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 9,690,566 $17,251,724 $(6,974,953) $4,788,760 $6,486,487 $(2,167,992) =========== =========== =========== ========== ========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-20
FRANKLIN TEMPLETON SMALL CAP GROWTH STATE STREET RESEARCH LARGE CAP VALUE DAVIS VENTURE VALUE 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 YEAR ENDED 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, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------ ------------ $ -- $ -- $ -- $ -- $ 8,880 $ 869 $ 151,001 $ 69,175 $ 91,596 31,464 16,641 8,397 18,736 4,290 436 210,672 144,858 90,846 -------- -------- --------- -------- -------- ------- ---------- ---------- ----------- (31,464) (16,641) (8,397) (18,736) 4,590 433 (59,671) (75,683) 750 -------- -------- --------- -------- -------- ------- ---------- ---------- ----------- 40,690 (19,016) (42,766) 105,597 41,938 (3,284) 508,082 (213,900) (188,804) 404,946 796,643 (271,373) 229,787 156,144 (3,178) 2,678,225 5,610,390 (2,083,879) -------- -------- --------- -------- -------- ------- ---------- ---------- ----------- 445,636 777,627 (314,139) 335,384 198,082 (6,462) 3,186,307 5,396,490 (2,272,683) -------- -------- --------- -------- -------- ------- ---------- ---------- ----------- $414,172 $760,986 $(322,536) $316,648 $202,672 $(6,029) $3,126,636 $5,320,807 $(2,271,933) ======== ======== ========= ======== ======== ======= ========== ========== ===========
F-21 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
LOOMIS SAYLES SMALL CAP STATE STREET RESEARCH LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ -- $ -- $ 2,322 $ -- $ 2,523 $ -- Expenses: Mortality and expense charges........... 44,015 28,298 18,464 30,183 26,251 13,698 -------- ---------- --------- -------- ---------- ----------- Net investment (loss) income.............. (44,015) (28,298) (16,142) (30,183) (23,728) (13,698) -------- ---------- --------- -------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 142,373 (88,636) (106,829) 117,304 (63,998) (57,097) Change in unrealized appreciation (depreciation) of investments............ 718,393 1,169,772 (414,868) 394,196 1,339,908 (983,355) -------- ---------- --------- -------- ---------- ----------- Net realized and unrealized gains (losses) on investments........................... 860,766 1,081,136 (521,697) 511,500 1,275,910 (1,040,452) -------- ---------- --------- -------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $816,751 $1,052,838 $(537,839) $481,317 $1,252,182 $(1,054,150) ======== ========== ========= ======== ========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-22
MFS INVESTORS TRUST MFS RESEARCH MANAGERS STATE STREET RESEARCH BOND INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------------------------- ---------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED JANUARY 1, 2004 ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, TO APRIL 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ --------------- ------------ ------------ ------------ ------------ ------------ $ 9,640 $ 2,817 $ 3,660 $ 3,656 $ 3,840 $ 705 $ 5,389,446 $2,907,624 $4,937,322 23,709 10,528 6,375 1,616 4,713 3,132 702,302 724,135 658,727 -------- -------- --------- -------- -------- -------- ----------- ---------- ---------- (14,069) (7,711) (2,715) 2,040 (873) (2,427) 4,687,144 2,183,489 4,278,595 -------- -------- --------- -------- -------- -------- ----------- ---------- ---------- 10,690 13,432 (71,866) 57,371 (4,462) (30,794) 1,244,325 880,712 (378,655) 322,040 221,187 (78,498) (53,254) 112,414 (58,814) (2,928,093) 1,572,001 2,444,438 -------- -------- --------- -------- -------- -------- ----------- ---------- ---------- 332,730 234,619 (150,364) 4,117 107,952 (89,608) (1,683,768) 2,452,713 2,065,783 -------- -------- --------- -------- -------- -------- ----------- ---------- ---------- $318,661 $226,908 $(153,079) $ 6,157 $107,079 $(92,035) $ 3,003,376 $4,636,202 $6,344,378 ======== ======== ========= ======== ======== ======== =========== ========== ==========
F-23 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
FI VALUE LEADERS HARRIS OAKMARK FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ 9,363 $ 1,560 $ 527 $ 318,400 $ 24,204 $ 15,621 Expenses: Mortality and expense charges........... 6,936 2,368 457 261,670 151,516 79,292 -------- ------- -------- ---------- ---------- ----------- Net investment (loss) income.............. 2,427 (808) 70 56,730 (127,312) (63,671) -------- ------- -------- ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 13,334 24,426 (9,596) 205,940 31,214 (9,588) Change in unrealized appreciation (depreciation) of investments............ 106,438 58,141 (4,285) 2,796,718 5,537,632 (938,481) -------- ------- -------- ---------- ---------- ----------- Net realized and unrealized gains (losses) on investments........................... 119,772 82,567 (13,881) 3,002,658 5,568,846 (948,069) -------- ------- -------- ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $122,199 $81,759 $(13,811) $3,059,388 $5,441,534 $(1,011,740) ======== ======= ======== ========== ========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-24
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SALOMON BROTHERS U.S. GOVERNMENT STATE STREET RESEARCH MONEY MARKET 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, 2002 TO 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, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $185,168 $ 62,248 $ 83,495 $187,882 $ 91,740 $ 90,377 $291,356 $226,302 $ 527,338 55,535 29,146 10,768 66,814 49,123 18,808 179,180 179,158 268,010 -------- -------- -------- -------- -------- -------- -------- -------- --------- 129,633 33,102 72,727 121,068 42,617 71,569 112,176 47,144 259,328 -------- -------- -------- -------- -------- -------- -------- -------- --------- 74,022 97,650 241 1,624 48,098 10,225 -- (1) (628,588) 217,644 233,146 62,351 55,424 (40,677) 83,661 -- 1 611,711 -------- -------- -------- -------- -------- -------- -------- -------- --------- 291,666 330,796 62,592 57,048 7,421 93,886 -- -- (16,877) -------- -------- -------- -------- -------- -------- -------- -------- --------- $421,299 $363,898 $135,319 $178,116 $ 50,038 $165,455 $112,176 $ 47,144 $ 242,451 ======== ======== ======== ======== ======== ======== ======== ======== =========
F-25 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
MFS FI MID CAP OPPORTUNITIES TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------- ------------------- FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE PERIOD JANUARY 1, 2004 TO ENDED MAY 1, 2002 TO MAY 3, 2004 TO APRIL 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 ------------------ ------------ -------------- ------------------- INVESTMENT INCOME (LOSS) : Income: Dividends........................................... $ 104,762 $ 14,470 $ -- $ -- EXPENSES: Mortality and expense charges....................... 4,465 4,632 333 1,443 --------- -------- ------- ------- Net investment (loss) income.......................... 100,297 9,838 (333) (1,443) --------- -------- ------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions 45,260 19,777 (1,950) 429 Change in unrealized appreciation (depreciation) of investments.......................................... (195,305) 191,546 3,758 39,191 --------- -------- ------- ------- Net realized and unrealized gains (losses) on investments.......................................... (150,045) 211,323 1,808 39,620 --------- -------- ------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................ $ (49,748) $221,161 $ 1,475 $38,177 ========= ======== ======= =======
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-26
JANUS ASPEN AIM JANUS ASPEN GROWTH BALANCED INVESCO VIF EQUITY-INCOME GOVERNMENT SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------------------------- ------------------- ------------------------------------- --------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED MAY 3, 2004 TO ENDED ENDED ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2004 2003 2002 2004 - ------------ ------------ ------------ ------------------- ------------ ------------ ------------ --------------------- $ 5,939 $ 2,873 $ 708 $ 4 $2,041 $ 1,951 $ 2,157 $ 30 17,727 13,156 10,078 -- 951 662 638 1 --------- ---------- --------- --- ------ ------- -------- ---- (11,788) (10,283) (9,370) 4 1,090 1,289 1,519 29 --------- ---------- --------- --- ------ ------- -------- ---- (193,886) (263,013) (179,152) -- (458) (4,599) (7,425) (2) 407,058 1,041,007 (329,490) 4 9,085 30,971 (21,641) (20) --------- ---------- --------- --- ------ ------- -------- ---- 213,172 777,994 (508,642) 4 8,627 26,372 (29,066) (22) --------- ---------- --------- --- ------ ------- -------- ---- $ 201,384 $ 767,711 $(518,012) $ 8 $9,717 $27,661 $(27,547) $ 7 ========= ========== ========= === ====== ======= ======== ====
F-27 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
AIM REAL ESTATE FRANKLIN TEMPLETON INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $ 29,870 $ 2,672 $ 1,881 $ 52,419 $ 50,493 $ 44,446 Expenses: Mortality and expense charges........... 4,827 946 2,129 22,112 16,047 13,035 -------- ------- ------- -------- -------- --------- Net investment (loss) income.............. 25,043 1,726 (248) 30,307 34,446 31,411 -------- ------- ------- -------- -------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 54,384 7,645 12,032 153,352 (71,786) (325,690) Change in unrealized appreciation (depreciation) of investments............ 204,103 41,591 3,016 613,265 947,139 (187,267) -------- ------- ------- -------- -------- --------- Net realized and unrealized gains (losses) on investments........................... 258,487 49,236 15,048 766,617 875,353 (512,957) -------- ------- ------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $283,530 $50,962 $14,800 $796,924 $909,799 $(481,546) ======== ======= ======= ======== ======== =========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-28
ALLIANCE GROWTH & INCOME ALLIANCE TECHNOLOGY FIDELITY CONTRAFUND 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 14,971 $ 11,419 $ 27,692 $ -- $ -- $ -- $ 1,770 $ 830 $ 187 11,504 7,030 4,105 77 181 96 3,453 3,285 1,113 -------- -------- --------- ------ ------- ------- -------- -------- -------- 3,467 4,389 23,587 (77) (181) (96) (1,683) (2,455) (926) -------- -------- --------- ------ ------- ------- -------- -------- -------- 8,499 (27,592) (18,278) 108 (931) (519) 62,282 6,303 (348) 301,218 441,306 (137,057) 2,247 13,613 (9,033) 45,971 139,867 (29,437) -------- -------- --------- ------ ------- ------- -------- -------- -------- 309,717 413,714 (155,335) 2,355 12,682 (9,552) 108,253 146,170 (29,785) -------- -------- --------- ------ ------- ------- -------- -------- -------- $313,184 $418,103 $(131,748) $2,278 $12,501 $(9,648) $106,570 $143,715 $(30,711) ======== ======== ========= ====== ======= ======= ======== ======== ========
F-29 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
FIDELITY ASSET MANAGER GROWTH FIDELITY GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INVESTMENT INCOME (LOSS): Income: Dividends............................... $12,700 $ 8,346 $ 3,640 $ 354 $ 174 $ 132 Expenses: Mortality and expense charges........... 3,079 1,598 623 1,484 1,005 649 ------- ------- -------- ------- ------- -------- Net investment (loss) income.............. 9,621 6,748 3,017 (1,130) (831) (517) ------- ------- -------- ------- ------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 3,245 (4,335) (5,591) (5,015) (2,588) (8,400) Change in unrealized appreciation (depreciation) of investments............ 19,246 59,143 (19,964) 17,311 63,146 (40,968) ------- ------- -------- ------- ------- -------- Net realized and unrealized gains (losses) on investments........................... 22,491 54,808 (25,555) 12,296 60,558 (49,368) ------- ------- -------- ------- ------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $32,112 $61,556 $(22,538) $11,166 $59,727 $(49,885) ======= ======= ======== ======= ======= ========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-30
FIDELITY INVESTMENT FIDELITY GRADE BOND EQUITY-INCOME AMERICAN FUNDS GROWTH AMERICAN FUNDS GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- --------------------------------------- --------------------------------------- FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE PERIOD MAY 3, 2004 TO FOR THE PERIOD ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO DECEMBER 31, MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 DECEMBER 31, 2004 2004 2003 2002 2004 2003 2002 - ------------------- ------------------- ------------ ------------ -------------- ------------ ------------ -------------- $ -- $-- $ 70,060 $ 22,917 $ 3,067 $ 276,574 $ 170,202 $ 83,225 4 5 294,065 141,220 59,610 227,511 112,608 48,157 ---- --- ---------- ---------- ----------- ---------- ---------- ----------- (4) (5) (224,005) (118,303) (56,543) 49,063 57,594 35,068 ---- --- ---------- ---------- ----------- ---------- ---------- ----------- 8 -- 53,047 (100,817) (49,022) 60,134 (26,406) (51,319) 12 -- 4,445,539 5,264,250 (1,636,890) 2,605,294 3,852,340 (1,122,854) ---- --- ---------- ---------- ----------- ---------- ---------- ----------- 20 -- 4,498,586 5,163,433 (1,685,912) 2,665,428 3,825,934 (1,174,173) ---- --- ---------- ---------- ----------- ---------- ---------- ----------- $ 16 $(5) $4,274,581 $5,045,130 $(1,742,455) $2,714,491 $3,883,528 $(1,139,105) ==== === ========== ========== =========== ========== ========== ===========
F-31 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION T. ROWE PRICE MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------- --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ -------------- ------------ ------------ -------------- INVESTMENT INCOME (LOSS): Income: Dividends............................... $ -- $ 19,214 $ 10,794 $ -- $ -- $ 7,906 Expenses: Mortality and expense charges........... 73,946 27,847 12,245 35,600 17,818 6,944 ---------- ---------- --------- -------- -------- --------- Net investment (loss) income.............. (73,946) (8,633) (1,451) (35,600) (17,818) 962 ---------- ---------- --------- -------- -------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions............................. 169,126 (33,362) 35,746 (21,255) (46,026) (55,314) Change in unrealized appreciation (depreciation) of investments............ 1,710,690 1,513,502 (396,292) 874,468 776,010 (378,709) ---------- ---------- --------- -------- -------- --------- Net realized and unrealized gains (losses) on investments........................... 1,879,816 1,480,140 (360,546) 853,213 729,984 (434,023) ---------- ---------- --------- -------- -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,805,870 $1,471,507 $(361,997) $817,613 $712,166 $(433,061) ========== ========== ========= ======== ======== =========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-32
MFS RESEARCH INTERNATIONAL PIMCO TOTAL RETURN PIMCO PEA INNOVATION 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 PERIOD ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 31, 2003 2002 2004 2003 2002 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ -------------- $ 5,870 $ 10,739 $ 1,203 $1,210,628 $255,223 $ -- $ 4,399 $ -- $ -- 17,381 7,953 3,324 130,372 79,517 28,120 45,242 21,608 9,521 -------- -------- -------- ---------- -------- -------- --------- ---------- --------- (11,511) 2,786 (2,121) 1,080,256 175,706 (28,120) (40,843) (21,608) (9,521) -------- -------- -------- ---------- -------- -------- --------- ---------- --------- 226,740 148,987 (66,559) 58,068 175,963 60,373 (35,847) (195,867) (111,879) 176,752 191,049 (2,664) (439,697) (25,434) 270,736 (200,859) 1,260,206 (652,366) -------- -------- -------- ---------- -------- -------- --------- ---------- --------- 403,492 340,036 (69,223) (381,629) 150,529 331,109 (236,706) 1,064,339 (764,245) -------- -------- -------- ---------- -------- -------- --------- ---------- --------- $391,981 $342,822 $(71,344) $ 698,627 $326,235 $302,989 $(277,549) $1,042,731 $(773,766) ======== ======== ======== ========== ======== ======== ========= ========== =========
F-33 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
LORD ABBETT BOND DEBENTURE MET/AIM MID CAP CORE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ -------------- INVESTMENT INCOME (LOSS): Income: Dividends...................... $ 580,234 $ 237,030 $ 1,046,301 $ -- $ 8,411 $ 291 Expenses: Mortality and expense charges....................... 106,961 84,212 73,020 12,732 4,773 638 ---------- ---------- ----------- -------- -------- ------- Net investment (loss) income..... 473,273 152,818 973,281 (12,732) 3,638 (347) ---------- ---------- ----------- -------- -------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions........... 291,351 193,651 (1,917,698) 127,885 6,414 (1,242) Change in unrealized appreciation (depreciation) of investments... 258,228 1,482,057 942,025 100,268 140,733 (6,351) ---------- ---------- ----------- -------- -------- ------- Net realized and unrealized gains (losses) on investments......... 549,579 1,675,708 (975,673) 228,153 147,147 (7,593) ---------- ---------- ----------- -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $1,022,852 $1,828,526 $ (2,392) $215,421 $150,785 $(7,940) ========== ========== =========== ======== ======== =======
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-34
MET/AIM SMALL CAP GROWTH HARRIS OAKMARK INTERNATIONAL JANUS AGGRESSIVE GROWTH 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 PERIOD ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ -------------- $ -- $ -- $ -- $ 1,007 $ 8,848 $ 210 $ -- $ -- $ -- 7,126 2,947 281 15,179 2,473 298 40,203 25,914 13,648 ------- -------- ------- -------- -------- ------- -------- ---------- --------- (7,126) (2,947) (281) (14,172) 6,375 (88) (40,203) (25,914) (13,648) ------- -------- ------- -------- -------- ------- -------- ---------- --------- 6,508 66,977 (593) 87,469 72,432 (843) 40,466 (314,628) (88,254) 68,634 51,242 (4,322) 413,695 49,401 (2,920) 408,503 1,135,120 (439,373) ------- -------- ------- -------- -------- ------- -------- ---------- --------- 75,142 118,219 (4,915) 501,164 121,833 (3,763) 448,969 820,492 (527,627) ------- -------- ------- -------- -------- ------- -------- ---------- --------- $68,016 $115,272 $(5,196) $486,992 $128,208 $(3,851) $408,766 $ 794,578 $(541,275) ======= ======== ======= ======== ======== ======= ======== ========== =========
F-35 METROPOLITAN LIFE SEPARATE UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF OPERATIONS
NEUBERGER BERMAN LORD ABBETT GROWTH & INCOME REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------- ------------------- FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE PERIOD ENDED ENDED OCTOBER 1, 2002 TO MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 ------------ ------------ ------------------ ------------------- INVESTMENT INCOME (LOSS): Income: Dividends.................................................... $ 206 $ -- $ -- $ 73,660 Expenses: Mortality and expense charges................................ 183 47 -- 3,379 ------ ------ ---- -------- Net investment (loss) income................................... 23 (47) -- 70,281 ------ ------ ---- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized (losses) gains from security transactions......... 37 20 -- 5,929 Change in unrealized appreciation (depreciation) of investments 3,095 3,750 -- 124,804 ------ ------ ---- -------- Net realized and unrealized gains (losses) on investments...... 3,132 3,770 -- 130,733 ------ ------ ---- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................................... $3,155 $3,723 $ -- $201,014 ====== ====== ==== ========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-36
LORD ABBETT THIRD AVENUE DREYFUS DREYFUS GOLDMAN SACHS MFS MID-CAP VALUE SMALL CAP VALUE INTERNATIONAL VALUE APPRECIATION MID CAP VALUE HIGH INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- FOR THE PERIOD MAY FOR THE PERIOD MAY FOR THE PERIOD MAY FOR THE PERIOD FOR THE PERIOD MAY FOR THE PERIOD 3, 2004 TO 3, 2004 TO 3, 2004 TO MAY 3, 2004 TO 3, 2004 TO MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2004 2004 2004 2004 2004 - ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 6 $ 95 $1,264 $ 48 $1,224 $ -- -- 1 4 3 6 87 ---- ---- ------ ---- ------ ------ 6 94 1,260 45 1,218 (87) ---- ---- ------ ---- ------ ------ -- 21 47 -- 1 69 10 (54) (934) 217 (464) 3,152 ---- ---- ------ ---- ------ ------ 10 (33) (887) 217 (463) 3,221 ---- ---- ------ ---- ------ ------ $ 16 $ 61 $ 373 $262 $ 755 $3,134 ==== ==== ====== ==== ====== ======
WELLS FARGO WELLS FARGO LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION - -------------------- ------------------- FOR THE PERIOD FOR THE PERIOD MAY MAY 3, 2004 TO 3, 2004 TO DECEMBER 31, DECEMBER 31, 2004 2004 - -------------------- ------------------- $ -- $ -- 1 1 ---- ---- (1) (1) ---- ---- 6 10 16 3 ---- ---- 22 13 ---- ---- $ 21 $ 12 ==== ====
F-37 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
STATE STREET RESEARCH INVESTMENT TRUST STATE STREET RESEARCH DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------- ---------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (545,868) $ (68,204) $ (969,448) $ 2,567,571 $ 7,511,522 $ 3,558,999 Net realized (losses) gains from security transactions............................. (689,999) (6,958,914) (6,132,437) (558,940) (2,593,687) (1,810,936) Change in unrealized appreciation (depreciation) of investments............ 37,215,298 88,855,777 (90,883,953) 19,749,208 42,182,763 (41,694,719) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations................ 35,979,431 81,828,659 (97,985,838) 21,757,839 47,100,598 (39,946,656) ------------ ------------ ------------ ------------ ------------ ------------ From capital transactions: Net premiums.............................. 62,785,148 67,707,999 78,160,135 50,420,345 52,190,961 54,194,120 Redemptions............................... (18,448,900) (15,137,546) (10,399,853) (13,235,955) (14,264,879) (9,523,000) Net investment division transfers......... (11,723,921) (7,863,696) (11,186,400) (1,916,785) (2,178,352) (383,162) Other net transfers....................... (35,862,546) (36,428,084) (38,309,389) (30,882,102) (31,835,294) (32,044,615) ------------ ------------ ------------ ------------ ------------ ------------ Net (decrease) increase in net assets resulting from capital transactions...... (3,250,219) 8,278,673 18,264,493 4,385,503 3,912,436 12,243,343 ------------ ------------ ------------ ------------ ------------ ------------ NET CHANGE IN NET ASSETS.................... 32,729,212 90,107,332 (79,721,345) 26,143,342 51,013,034 (27,703,313) NET ASSETS - BEGINNING OF PERIOD............ 367,087,301 276,979,969 356,701,314 289,033,387 238,020,353 265,723,666 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS - END OF PERIOD.................. $399,816,513 $367,087,301 $276,979,969 $315,176,729 $289,033,387 $238,020,353 ============ ============ ============ ============ ============ ============
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-38
STATE STREET RESEARCH AGGRESSIVE GROWTH METLIFE STOCK INDEX FI 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (1,651,256) $ (1,367,678) $ (1,263,240) $ 174,194 $ 3,387,558 $ 2,705,145 $ 235,897 $ (54,694) $ 18,744 (3,443,419) (8,202,841) (5,953,657) (2,432,174) (10,060,006) (5,045,284) (367,092) (1,630,864) (2,655,399) 27,472,766 62,199,697 (44,703,891) 49,514,290 101,361,307 (82,559,071) 7,284,341 10,924,390 (4,418,288) - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 22,378,091 52,629,178 (51,920,788) 47,256,310 94,688,859 (84,899,210) 7,153,146 9,238,832 (7,054,943) - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 31,507,761 34,182,901 40,003,786 111,296,549 108,236,751 114,022,950 7,277,661 7,903,805 9,783,594 (10,380,355) (7,318,523) (4,831,140) (21,662,848) (14,265,812) (13,779,170) (2,707,112) (1,780,012) (1,287,021) (5,174,527) (5,104,646) (6,485,783) 2,484,658 (11,228,029) 11,797,286 (3,803,574) (552,252) (2,781,604) (17,849,981) (17,936,155) (17,642,321) (48,313,238) (46,545,385) (47,844,806) (3,829,486) (3,792,182) (3,974,969) - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- (1,897,102) 3,823,577 11,044,542 43,805,121 36,197,525 64,196,260 (3,062,511) 1,779,359 1,740,000 - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 20,480,989 56,452,755 (40,876,246) 91,061,431 130,886,384 (20,702,950) 4,090,635 11,018,191 (5,314,943) 187,268,373 130,815,618 171,691,864 457,114,347 326,227,963 346,930,913 43,984,289 32,966,098 38,281,041 - ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- $207,749,362 $187,268,373 $130,815,618 $548,175,778 $457,114,347 $326,227,963 $48,074,924 $43,984,289 $32,966,098 ============ ============ ============ ============ ============ ============ =========== =========== ===========
F-39 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
FI MID CAP OPPORTUNITIES T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION (C) INVESTMENT DIVISION ---------------------------------------- -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (631,368) $ (1,297,757) $ (1,013,088) $ (530,571) $ (408,933) $ (333,372) Net realized (losses) gains from security transactions............................. (717,628) (1,145,184) (5,163,698) (69,548) (326,259) (347,510) Change in unrealized appreciation (depreciation) of investments............ 33,098,684 46,019,342 (34,449,605) 7,181,746 18,001,752 (12,608,286) ------------ ------------ ------------ ----------- ----------- ------------ Net increase (decrease) in net assets resulting from operations................ 31,749,688 43,576,401 (40,626,391) 6,581,627 17,266,560 (13,289,168) ------------ ------------ ------------ ----------- ----------- ------------ From capital transactions: Net premiums.............................. 48,069,931 53,673,455 64,528,237 12,623,285 12,642,407 14,372,408 Redemptions............................... (8,654,425) (5,340,392) (2,804,544) (3,606,677) (1,578,439) (1,348,311) Net investment division transfers......... (5,135,559) (5,185,372) (5,298,371) (1,032,512) (166,606) 1,749,269 Other net transfers....................... (20,781,515) (21,665,579) (21,964,497) (5,720,496) (5,656,171) (5,565,937) ------------ ------------ ------------ ----------- ----------- ------------ Net (decrease) increase in net assets resulting from capital transactions...... 13,498,432 21,482,112 34,460,825 2,263,600 5,241,191 9,207,429 ------------ ------------ ------------ ----------- ----------- ------------ NET CHANGE IN NET ASSETS.................... 45,248,120 65,058,513 (6,165,566) 8,845,227 22,507,751 (4,081,739) NET ASSETS - BEGINNING OF PERIOD............ 184,078,088 119,019,575 125,185,141 63,188,807 40,681,056 44,762,795 ------------ ------------ ------------ ----------- ----------- ------------ NET ASSETS - END OF PERIOD.................. $229,326,208 $184,078,088 $119,019,575 $72,034,034 $63,188,807 $ 40,681,056 ============ ============ ============ =========== =========== ============
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-40
SCUDDER GLOBAL EQUITY HARRIS OAKMARK LARGE CAP VALUE NEUBERGER BERMAN PARTNERS MID CAP VALUE 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 232,594 $ 311,502 $ 181,688 $ (149,989) $ (252,368) $ 438,284 $ 748,413 $ (118,988) $ (89,469) (301,695) (1,005,776) (466,029) 613,781 38,696 173,172 490,187 28,084 105,666 4,666,310 7,242,152 (3,445,540) 4,130,792 6,986,213 (3,824,797) 6,555,902 7,656,793 (1,888,036) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 4,597,209 6,547,878 (3,729,881) 4,594,584 6,772,541 (3,213,341) 7,794,502 7,565,889 (1,871,839) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,683,708 6,014,790 7,029,500 13,168,295 11,430,624 10,115,432 9,617,754 8,682,614 8,172,686 (1,588,385) (1,735,572) (936,418) (2,460,777) (991,704) (287,586) (2,004,438) (629,059) (1,215,338) (734,504) (125,590) (322,915) 3,020,747 1,835,698 6,291,525 4,985,822 650,401 2,321,678 (2,471,269) (2,481,721) (2,670,700) (4,693,326) (4,616,084) (4,169,815) (4,123,930) (3,610,116) (3,236,171) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 889,550 1,671,907 3,099,467 9,034,939 7,658,534 11,949,556 8,475,208 5,093,840 6,042,855 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,486,759 8,219,785 (630,414) 13,629,523 14,431,075 8,736,215 16,269,710 12,659,729 4,171,016 28,695,718 20,475,933 21,106,347 37,503,629 23,072,554 14,336,339 30,945,551 18,285,822 14,114,806 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $34,182,477 $28,695,718 $20,475,933 $51,133,152 $37,503,629 $23,072,554 $47,215,261 $30,945,551 $18,285,822 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-41 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
T. ROWE PRICE LARGE CAP GROWTH LEHMAN BROTHERS AGGREGATE BOND INDEX INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (216,962) $ (180,062) $ (106,090) $ 1,424,166 $ 2,506,200 $ 982,861 Net realized (losses) gains from security transactions............................. 994,314 (489,389) (317,124) 451,466 1,152,171 515,268 Change in unrealized appreciation (depreciation) of investments............ 2,677,244 7,871,800 (5,333,848) 266,268 (2,185,014) 2,760,523 ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ 3,454,596 7,202,349 (5,757,062) 2,141,900 1,473,357 4,258,652 ----------- ----------- ----------- ----------- ----------- ----------- From capital transactions: Net premiums.............................. 8,138,358 8,620,553 9,447,412 15,979,551 13,565,785 10,479,062 Redemptions............................... (6,471,579) (982,056) (125,856) (4,291,570) (1,812,183) (1,839,866) Net investment division transfers......... 1,130,128 (78,277) 873,833 5,023,325 (6,698,353) 8,318,943 Other net transfers....................... (3,183,456) (3,337,120) (3,453,967) (6,137,705) (5,580,587) (4,492,832) ----------- ----------- ----------- ----------- ----------- ----------- Net (decrease) increase in net assets resulting from capital transactions...... (386,549) 4,223,100 6,741,422 10,573,601 (525,338) 12,465,307 ----------- ----------- ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................... 3,068,047 11,425,449 984,360 12,715,501 948,019 16,723,959 NET ASSETS - BEGINNING OF PERIOD............ 33,520,334 22,094,885 21,110,525 54,994,307 54,046,288 37,322,329 ----------- ----------- ----------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................. $36,588,381 $33,520,334 $22,094,885 $67,709,808 $54,994,307 $54,046,288 =========== =========== =========== =========== =========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-42
MORGAN STANLEY EAFE INDEX RUSSELL 2000 INDEX MET/PUTNAM VOYAGER 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (28,456) $ 121,982 $ (64,128) $ (114,631) $ (29,213) $ (29,731) $ (68,947) $ (58,697) $ (39,278) 1,189,725 (497,564) (800,822) 973,061 (125,595) (343,069) (75,290) (624,452) (304,226) 3,997,066 6,516,826 (1,274,363) 4,412,786 7,938,110 (2,545,881) 560,180 2,271,140 (1,227,374) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,158,335 6,141,244 (2,139,313) 5,271,216 7,783,302 (2,918,681) 415,943 1,587,991 (1,570,878) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 8,790,918 7,425,875 6,625,665 8,664,945 7,659,016 7,082,371 2,907,203 3,213,111 3,461,165 (1,870,632) (362,211) (1,101,621) (1,577,160) (486,878) (266,570) (242,420) (93,468) (27,865) (311,398) 438,708 1,672,217 458,588 991,151 2,834,125 (199,548) (151,453) 548,678 (3,505,821) (2,849,511) (2,360,586) (3,458,107) (3,048,846) (2,527,437) (1,080,005) (1,158,137) (1,159,060) - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 3,103,067 4,652,861 4,835,675 4,088,266 5,114,443 7,122,489 1,385,230 1,810,053 2,822,918 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 8,261,402 10,794,105 2,696,362 9,359,482 12,897,745 4,203,808 1,801,173 3,398,044 1,252,040 24,290,177 13,496,072 10,799,710 27,726,279 14,828,534 10,624,726 8,650,757 5,252,713 4,000,673 - ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $32,551,579 $24,290,177 $13,496,072 $37,085,761 $27,726,279 $14,828,534 $10,451,930 $ 8,650,757 $ 5,252,713 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-43 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
STATE STREET RESEARCH AURORA METLIFE MID CAP STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (563,943) $ (336,756) $ (97,874) $ (21,174) $ (64,163) $ (55,361) Net realized (losses) gains from security transactions............................. 827,418 196,537 81,843 992,035 12,063 (23,095) Change in unrealized appreciation (depreciation) of investments............ 9,427,091 17,391,943 (6,958,922) 3,817,899 6,538,587 (2,089,536) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ 9,690,566 17,251,724 (6,974,953) 4,788,760 6,486,487 (2,167,992) ----------- ----------- ----------- ----------- ----------- ----------- From capital transactions: Net premiums.............................. 19,308,810 16,618,731 15,376,489 9,137,346 8,658,518 7,438,484 Redemptions............................... (2,545,879) (920,139) (302,359) (1,570,548) (315,294) (109,971) Net investment division transfers......... 4,975,092 1,566,557 6,843,668 306,699 960,729 4,006,261 Other net transfers....................... (7,626,612) (7,037,769) (5,887,521) (3,701,760) (3,433,510) (2,617,681) ----------- ----------- ----------- ----------- ----------- ----------- Net (decrease) increase in net assets resulting from capital transactions...... 14,111,411 10,227,380 16,030,277 4,171,737 5,870,443 8,717,093 ----------- ----------- ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................... 23,801,977 27,479,104 9,055,324 8,960,497 12,356,930 6,549,101 NET ASSETS - BEGINNING OF PERIOD............ 56,539,662 29,060,558 20,005,234 27,924,887 15,567,957 9,018,856 ----------- ----------- ----------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................. $80,341,639 $56,539,662 $29,060,558 $36,885,384 $27,924,887 $15,567,957 =========== =========== =========== =========== =========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-44
FRANKLIN TEMPLETON SMALL CAP GROWTH STATE STREET RESEARCH LARGE CAP VALUE DAVIS VENTURE VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------------------------- -------------------------------------- ------------------------------------- FOR THE FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR PERIOD MAY 1, FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED 2002 TO ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------- ------------ ------------ ------------ $ (31,464) $ (16,641) $ (8,397) $ (18,736) $ 4,590 $ 433 $ (59,671) $ (75,683) $ 750 40,690 (19,016) (42,766) 105,597 41,938 (3,284) 508,082 (213,900) (188,804) 404,946 796,643 (271,373) 229,787 156,144 (3,178) 2,678,225 5,610,390 (2,083,879) ---------- ---------- ---------- ---------- ---------- -------- ----------- ----------- ----------- 414,172 760,986 (322,536) 316,648 202,672 (6,029) 3,126,636 5,320,807 (2,271,933) ---------- ---------- ---------- ---------- ---------- -------- ----------- ----------- ----------- 1,182,207 844,482 626,488 918,978 405,361 64,977 7,205,230 6,492,659 5,157,409 (73,602) (27,310) (5,592) (35,177) (5,862) (313) (2,608,194) (286,620) (86,825) 410,526 610,392 745,849 1,361,717 469,287 153,138 2,046,419 2,147,532 5,300,022 (444,118) (416,036) (235,608) (351,401) (149,915) (23,188) (2,825,249) (2,675,075) (2,166,021) ---------- ---------- ---------- ---------- ---------- -------- ----------- ----------- ----------- 1,075,013 1,011,528 1,131,137 1,894,117 718,871 194,614 3,818,206 5,678,496 8,204,585 ---------- ---------- ---------- ---------- ---------- -------- ----------- ----------- ----------- 1,489,185 1,772,514 808,601 2,210,765 921,543 188,585 6,944,842 10,999,303 5,932,652 3,038,247 1,265,733 457,132 1,110,128 188,585 -- 24,429,495 13,430,192 7,497,540 ---------- ---------- ---------- ---------- ---------- -------- ----------- ----------- ----------- $4,527,432 $3,038,247 $1,265,733 $3,320,893 $1,110,128 $188,585 $31,374,337 $24,429,495 $13,430,192 ========== ========== ========== ========== ========== ======== =========== =========== ===========
F-45 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
LOOMIS SAYLES SMALL CAP STATE STREET RESEARCH LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (44,015) $ (28,298) $ (16,142) $ (30,183) $ (23,728) $ (13,698) Net realized (losses) gains from security transactions............................. 142,373 (88,636) (106,829) 117,304 (63,998) (57,097) Change in unrealized appreciation (depreciation) of investments............ 718,393 1,169,772 (414,868) 394,196 1,339,908 (983,355) ---------- ---------- ---------- ---------- ---------- ----------- Net increase (decrease) in net assets resulting from operations................ 816,751 1,052,838 (537,839) 481,317 1,252,182 (1,054,150) ---------- ---------- ---------- ---------- ---------- ----------- From capital transactions: Net premiums.............................. 1,479,121 1,387,309 1,200,038 1,206,954 1,035,783 40,283 Redemptions............................... (139,707) (49,105) (11,815) (7,273) -- -- Net investment division transfers......... 391,267 159,941 268,407 276,437 359 4,290,312 Other net transfers....................... (563,896) (536,437) (436,811) (433,343) (337,622) (338,952) ---------- ---------- ---------- ---------- ---------- ----------- Net (decrease) increase in net assets resulting from capital transactions...... 1,166,785 961,708 1,019,819 1,042,775 698,520 3,991,643 ---------- ---------- ---------- ---------- ---------- ----------- NET CHANGE IN NET ASSETS.................... 1,983,536 2,014,546 481,980 1,524,092 1,950,702 2,937,493 NET ASSETS - BEGINNING OF PERIOD............ 4,422,939 2,408,393 1,926,413 4,933,432 2,982,730 45,237 ---------- ---------- ---------- ---------- ---------- ----------- NET ASSETS - END OF PERIOD.................. $6,406,475 $4,422,939 $2,408,393 $6,457,524 $4,933,432 $ 2,982,730 ========== ========== ========== ========== ========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-46
MFS INVESTORS TRUST MFS RESEARCH MANAGERS STATE STREET RESEARCH BOND INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------------------------- ------------------------------------------ -------------------------------------- FOR THE FOR THE YEAR FOR THE YEAR FOR THE YEAR PERIOD JANUARY 1, FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED 2004 TO ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, APRIL 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ----------------- ------------ ------------ ------------ ------------ ------------ $ (14,069) $ (7,711) $ (2,715) $ 2,040 $ (873) $ (2,427) $ 4,687,144 $ 2,183,489 $ 4,278,595 10,690 13,432 (71,866) 57,371 (4,462) (30,794) 1,244,325 880,712 (378,655) 322,040 221,187 (78,498) (53,254) 112,414 (58,814) (2,928,093) 1,572,001 2,444,438 ---------- ---------- --------- --------- -------- --------- ------------ ----------- ----------- 318,661 226,908 (153,079) 6,157 107,079 (92,035) 3,003,376 4,636,202 6,344,378 ---------- ---------- --------- --------- -------- --------- ------------ ----------- ----------- 898,597 701,861 657,381 86,003 278,607 256,687 16,181,503 16,159,717 18,007,464 (45,911) (14,052) (4,428) (2,929) (4,854) (250) (10,462,036) (4,549,369) (3,078,401) 975,437 164,766 480,329 (725,791) 57,895 151,712 (8,366,427) (3,340,166) 1,121,089 (303,839) (229,330) (608,417) (31,981) (84,526) (153,237) (7,901,923) (9,344,726) (8,719,726) ---------- ---------- --------- --------- -------- --------- ------------ ----------- ----------- 1,524,284 623,245 524,865 (674,698) 247,122 254,912 (10,548,883) (1,074,544) 7,330,426 ---------- ---------- --------- --------- -------- --------- ------------ ----------- ----------- 1,842,945 850,153 371,786 (668,541) 354,201 162,877 (7,545,507) 3,561,658 13,674,804 1,544,046 693,893 322,107 668,541 314,340 151,463 96,719,590 93,157,932 79,483,128 ---------- ---------- --------- --------- -------- --------- ------------ ----------- ----------- $3,386,991 $1,544,046 $ 693,893 $ -- $668,541 $ 314,340 $ 89,174,083 $96,719,590 $93,157,932 ========== ========== ========= ========= ======== ========= ============ =========== ===========
F-47 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
FI VALUE LEADERS HARRIS OAKMARK FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ 2,427 $ (808) $ 70 $ 56,730 $ (127,312) $ (63,671) Net realized (losses) gains from security transactions............................. 13,334 24,426 (9,596) 205,940 31,214 (9,588) Change in unrealized appreciation (depreciation) of investments............ 106,438 58,141 (4,285) 2,796,718 5,537,632 (938,481) ---------- -------- -------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ 122,199 81,759 (13,811) 3,059,388 5,441,534 (1,011,740) ---------- -------- -------- ----------- ----------- ----------- From capital transactions: Net premiums.............................. 394,566 167,405 51,077 9,971,788 8,198,287 6,333,512 Redemptions............................... (3,529) (10,046) -- (683,199) (450,269) (161,171) Net investment division transfers......... 293,780 229,644 41,277 3,578,452 3,144,705 5,880,885 Other net transfers....................... (121,742) (56,377) (10,863) (3,947,334) (3,347,152) (2,377,498) ---------- -------- -------- ----------- ----------- ----------- Net (decrease) increase in net assets resulting from capital transactions...... 563,075 330,626 81,491 8,919,707 7,545,571 9,675,728 ---------- -------- -------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................... 685,274 412,385 67,680 11,979,095 12,987,105 8,663,988 NET ASSETS - BEGINNING OF PERIOD............ 505,283 92,898 25,218 25,865,638 12,878,533 4,214,545 ---------- -------- -------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................. $1,190,557 $505,283 $ 92,898 $37,844,733 $25,865,638 $12,878,533 ========== ======== ======== =========== =========== ===========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-48
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SALOMON BROTHERS U.S. GOVERNMENT STATE STREET RESEARCH MONEY MARKET 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 129,633 $ 33,102 $ 72,727 $ 121,068 $ 42,617 $ 71,569 $ 112,176 $ 47,144 $ 259,328 74,022 97,650 241 1,624 48,098 10,225 -- (1) (628,588) 217,644 233,146 62,351 55,424 (40,677) 83,661 -- 1 611,711 - ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------- ------------ 421,299 363,898 135,319 178,116 50,038 165,455 112,176 47,144 242,451 - ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------- ------------ 2,921,606 1,996,763 890,271 3,283,565 3,454,837 1,641,232 6,959,659 4,560,820 25,769,284 (184,201) (108,331) (17,732) (178,344) (137,457) (35,283) (6,466,006) (1,186,158) (4,958,930) 1,525,465 1,486,748 1,049,918 190,342 916,767 2,382,469 2,796,932 (4,975,125) (33,048,287) (1,104,691) (749,672) (348,947) (1,300,443) (1,344,693) (637,762) (1,587,065) (1,910,867) 10,079,748 - ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------- ------------ 3,158,179 2,625,508 1,573,510 1,995,120 2,889,454 3,350,656 1,703,520 (3,511,330) (2,158,185) - ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------- ------------ 3,579,478 2,989,406 1,708,829 2,173,236 2,939,492 3,516,111 1,815,696 (3,464,186) (1,915,734) 5,163,069 2,173,663 464,834 7,304,902 4,365,410 849,299 27,346,427 30,810,613 32,726,347 - ----------- ---------- ---------- ----------- ----------- ---------- ----------- ----------- ------------ $ 8,742,547 $5,163,069 $2,173,663 $ 9,478,138 $ 7,304,902 $4,365,410 $29,162,123 $27,346,427 $ 30,810,613 =========== ========== ========== =========== =========== ========== =========== =========== ============
F-49 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
FI MID CAP OPPORTUNITIES INVESTMENT DIVISION ------------------------------------------ FOR THE PERIOD FOR THE YEAR FOR THE PERIOD JANUARY 1, 2004 ENDED MAY 1, 2002 TO TO APRIL 30, DECEMBER 31, DECEMBER 31, 2004 2003 2002 --------------- ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.................................... $ 100,297 $ 9,838 $ (333) Net realized (losses) gains from security transactions.......... 45,260 19,777 (1,950) Change in unrealized appreciation (depreciation) of investments. (195,305) 191,546 3,758 ----------- ---------- -------- Net increase (decrease) in net assets resulting from operations. (49,748) 221,161 1,475 ----------- ---------- -------- From capital transactions: Net premiums.................................................... 202,888 324,317 49,033 Redemptions..................................................... (8,599) (43,946) (19) Net investment division transfers............................... (1,171,865) 537,734 149,230 Other net transfers............................................. (84,447) (95,364) (31,850) ----------- ---------- -------- Net (decrease) increase in net assets resulting from capital transactions................................................... (1,062,023) 722,741 166,394 ----------- ---------- -------- NET CHANGE IN NET ASSETS.......................................... (1,111,771) 943,902 167,869 NET ASSETS - BEGINNING OF PERIOD.................................. 1,111,771 167,869 -- ----------- ---------- -------- NET ASSETS - END OF PERIOD........................................ $ -- $1,111,771 $167,869 =========== ========== ========
MFS TOTAL RETURN INVESTMENT DIVISION ------------------- FOR THE PERIOD MAY 3, 2004 TO DECEMBER 31, 2004 ------------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.................................... $ (1,443) Net realized (losses) gains from security transactions.......... 429 Change in unrealized appreciation (depreciation) of investments. 39,191 -------- Net increase (decrease) in net assets resulting from operations. 38,177 -------- From capital transactions: Net premiums.................................................... 133,508 Redemptions..................................................... (793) Net investment division transfers............................... 628,279 Other net transfers............................................. (32,244) -------- Net (decrease) increase in net assets resulting from capital transactions................................................... 728,750 -------- NET CHANGE IN NET ASSETS.......................................... 766,927 NET ASSETS - BEGINNING OF PERIOD.................................. -- -------- NET ASSETS - END OF PERIOD........................................ $766,927 ========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-50
JANUS ASPEN AIM JANUS ASPEN GROWTH BALANCED INVESCO VIF EQUITY-INCOME GOVERNMENT SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------------------------- ------------------- ------------------------------------- --------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED MAY 3, 2004 TO ENDED ENDED ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2004 2003 2002 2004 - ------------ ------------ ------------ ------------------- ------------ ------------ ------------ --------------------- $ (11,788) $ (10,283) $ (9,370) $ 4 $ 1,090 $ 1,289 $ 1,519 $ 29 (193,886) (263,013) (179,152) -- (458) (4,599) (7,425) (2) 407,058 1,041,007 (329,490) 4 9,085 30,971 (21,641) (20) ---------- ---------- ---------- ---- -------- -------- -------- ------ 201,384 767,711 (518,012) 8 9,717 27,661 (27,547) 7 ---------- ---------- ---------- ---- -------- -------- -------- ------ 846,747 839,829 913,602 234 51,947 44,937 30,604 2,238 (5,912) (88,894) (13,590) -- (1,369) (13,395) -- -- (96,893) (5,665) 34,319 -- -- 6,492 7,548 2,151 (168,584) (176,510) (211,649) (5) (4,782) (6,352) (8,020) (86) ---------- ---------- ---------- ---- -------- -------- -------- ------ 575,358 568,760 722,682 229 45,796 31,682 30,132 4,303 ---------- ---------- ---------- ---- -------- -------- -------- ------ 776,742 1,336,471 204,670 237 55,513 59,343 2,585 4,310 3,499,893 2,163,422 1,958,752 -- 184,406 125,063 122,478 -- ---------- ---------- ---------- ---- -------- -------- -------- ------ $4,276,635 $3,499,893 $2,163,422 $237 $239,919 $184,406 $125,063 $4,310 ========== ========== ========== ==== ======== ======== ======== ======
F-51 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
AIM REAL ESTATE FRANKLIN TEMPLETON INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ 25,043 $ 1,726 $ (248) $ 30,307 $ 34,446 $ 31,411 Net realized (losses) gains from security transactions............................. 54,384 7,645 12,032 153,352 (71,786) (325,690) Change in unrealized appreciation (depreciation) of investments............ 204,103 41,591 3,016 613,265 947,139 (187,267) ---------- -------- -------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................ 283,530 50,962 14,800 796,924 909,799 (481,546) ---------- -------- -------- ---------- ---------- ---------- From capital transactions: Net premiums.............................. 652,190 20,763 9,629 1,157,933 571,285 937,164 Redemptions............................... (86,973) (74,780) -- (986,244) (219,304) (90,063) Net investment division transfers......... 306,861 8,373 64,182 542,291 342,850 643,475 Other net transfers....................... (26,160) (5,943) 1,520 (264,753) (163,132) (163,651) ---------- -------- -------- ---------- ---------- ---------- Net (decrease) increase in net assets resulting from capital transactions...... 845,918 (51,587) 75,331 449,227 531,699 1,326,925 ---------- -------- -------- ---------- ---------- ---------- NET CHANGE IN NET ASSETS.................... 1,129,448 (625) 90,131 1,246,151 1,441,498 845,379 NET ASSETS - BEGINNING OF PERIOD..................................... 178,608 179,233 89,102 4,053,532 2,612,034 1,766,655 ---------- -------- -------- ---------- ---------- ---------- NET ASSETS - END OF PERIOD.................. $1,308,056 $178,608 $179,233 $5,299,683 $4,053,532 $2,612,034 ========== ======== ======== ========== ========== ==========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-52
ALLIANCE GROWTH & INCOME ALLIANCE TECHNOLOGY FIDELITY CONTRAFUND 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 3,467 $ 4,389 $ 23,587 $ (77) $ (181) $ (96) $ (1,683) $ (2,455) $ (926) 8,499 (27,592) (18,278) 108 (931) (519) 62,282 6,303 (348) 301,218 441,306 (137,057) 2,247 13,613 (9,033) 45,971 139,867 (29,437) ---------- ---------- ---------- -------- ------- ------- --------- --------- -------- 313,184 418,103 (131,748) 2,278 12,501 (9,648) 106,570 143,715 (30,711) ---------- ---------- ---------- -------- ------- ------- --------- --------- -------- 891,420 581,532 560,351 5,469 15,245 17,162 134,841 53,210 22,932 (3,193) (87,076) (14,526) (31,398) (316) -- (325,384) (213,750) -- 32,466 41,687 192,482 -- 727 -- 34,413 657,697 237,002 (97,014) (82,296) (71,035) (1,308) (792) (1,833) (25,225) 3,584 (3,862) ---------- ---------- ---------- -------- ------- ------- --------- --------- -------- 823,679 453,847 667,272 (27,237) 14,864 15,329 (181,355) 500,741 256,072 ---------- ---------- ---------- -------- ------- ------- --------- --------- -------- 1,136,863 871,950 535,524 (24,959) 27,365 5,681 (74,785) 644,456 225,361 2,063,085 1,191,135 655,611 45,595 18,230 12,549 893,677 249,221 23,860 ---------- ---------- ---------- -------- ------- ------- --------- --------- -------- $3,199,948 $2,063,085 $1,191,135 $ 20,636 $45,595 $18,230 $ 818,892 $ 893,677 $249,221 ========== ========== ========== ======== ======= ======= ========= ========= ========
F-53 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
FIDELITY ASSET MANAGER GROWTH FIDELITY GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ 9,621 $ 6,748 $ 3,017 $ (1,130) $ (831) $ (517) Net realized (losses) gains from security transactions............................. 3,245 (4,335) (5,591) (5,015) (2,588) (8,400) Change in unrealized appreciation (depreciation) of investments............ 19,246 59,143 (19,964) 17,311 63,146 (40,968) -------- -------- -------- -------- -------- -------- Net increase (decrease) in net assets resulting from operations................ 32,112 61,556 (22,538) 11,166 59,727 (49,885) -------- -------- -------- -------- -------- -------- From capital transactions: Net premiums.............................. 261,139 194,197 105,094 110,310 101,957 102,972 Redemptions............................... (20,112) (1,698) (2,162) (53,801) (738) -- Net investment division transfers......... 38,214 74,992 (31,085) 12,180 6,224 (1,143) Other net transfers....................... (39,605) (27,293) (12,942) (4,852) (4,423) (5,581) -------- -------- -------- -------- -------- -------- Net (decrease) increase in net assets resulting from capital transactions...... 239,636 240,198 58,905 63,837 103,020 96,248 -------- -------- -------- -------- -------- -------- NET CHANGE IN NET ASSETS.................... 271,748 301,754 36,367 75,003 162,747 46,363 NET ASSETS - BEGINNING OF PERIOD............ 432,629 130,875 94,508 296,358 133,611 87,248 -------- -------- -------- -------- -------- -------- NET ASSETS - END OF PERIOD.................. $704,377 $432,629 $130,875 $371,361 $296,358 $133,611 ======== ======== ======== ======== ======== ========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-54
FIDELITY INVESTMENT FIDELITY GRADE BOND EQUITY-INCOME AMERICAN FUNDS GROWTH AMERICAN FUNDS GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- --------------------------------------- ------------------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR MAY 3, 2004 TO MAY 3, 2004 TO 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, 2004 2004 2004 2003 2002 2004 2003 2002 - ------------------- ------------------- ------------ ------------ -------------- ------------ ------------ ------------ $ (4) $ (5) $ (224,005) $ (118,303) $ (56,543) $ 49,063 $ 57,594 $ 35,068 8 -- 53,047 (100,817) (49,022) 60,134 (26,406) (51,319) 12 -- 4,445,539 5,264,250 (1,636,890) 2,605,294 3,852,340 (1,122,854) ------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 16 (5) 4,274,581 5,045,130 (1,742,455) 2,714,491 3,883,528 (1,139,105) ------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 2,238 2,238 13,227,421 8,746,040 5,515,691 10,343,250 7,049,440 4,324,156 -- -- (620,701) (274,455) (51,220) (577,432) (184,181) (62,519) 10,966 7,499 7,788,495 5,353,241 5,147,713 5,800,181 3,708,586 4,404,613 (99) 378 (4,857,964) (3,102,038) (2,053,980) (3,947,698) (2,495,963) (1,573,001) ------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 13,105 10,115 15,537,251 10,722,788 8,558,204 11,618,301 8,077,882 7,093,249 ------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 13,121 10,110 19,811,832 15,767,918 6,815,749 14,332,792 11,961,410 5,954,144 -- -- 25,759,940 9,992,022 3,176,273 20,368,911 8,407,501 2,453,357 ------- ------- ----------- ----------- ----------- ----------- ----------- ----------- $13,121 $10,110 $45,571,772 $25,759,940 $ 9,992,022 $34,701,703 $20,368,911 $ 8,407,501 ======= ======= =========== =========== =========== =========== =========== ===========
F-55 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION T. ROWE PRICE MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ (73,946) $ (8,633) $ (1,451) $ (35,600) $ (17,818) $ 962 Net realized (losses) gains from security transactions............................. 169,126 (33,362) 35,746 (21,255) (46,026) (55,314) Change in unrealized appreciation (depreciation) of investments............ 1,710,690 1,513,502 (396,292) 874,468 776,010 (378,709) ----------- ---------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................ 1,805,870 1,471,507 (361,997) 817,613 712,166 (433,061) ----------- ---------- ---------- ---------- ---------- ---------- From capital transactions: Net premiums.............................. 3,240,987 1,663,445 1,071,636 1,669,261 1,283,521 820,210 Redemptions............................... (154,532) (60,720) (8,869) (112,831) (26,453) (1,344) Net investment division transfers......... 3,070,772 1,303,948 1,067,611 1,315,562 481,182 375,032 Other net transfers....................... (1,236,090) (610,233) (354,525) (589,688) (448,143) 47,743 ----------- ---------- ---------- ---------- ---------- ---------- Net (decrease) increase in net assets resulting from capital transactions...... 4,921,137 2,296,440 1,775,853 2,282,304 1,290,107 1,241,641 ----------- ---------- ---------- ---------- ---------- ---------- NET CHANGE IN NET ASSETS.................... 6,727,007 3,767,947 1,413,856 3,099,917 2,003,273 808,580 NET ASSETS - BEGINNING OF PERIOD............ 5,800,860 2,032,913 619,057 3,375,270 1,372,997 564,417 ----------- ---------- ---------- ---------- ---------- ---------- NET ASSETS - END OF PERIOD.................. $12,527,867 $5,800,860 $2,032,913 $6,475,187 $3,375,270 $1,372,997 =========== ========== ========== ========== ========== ==========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-56
MFS RESEARCH INTERNATIONAL PIMCO TOTAL RETURN PIMCO PEA INNOVATION 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, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (11,511) $ 2,786 $ (2,121) $ 1,080,256 $ 175,706 $ (28,120) $ (40,843) $ (21,608) $ (9,521) 226,740 148,987 (66,559) 58,068 175,963 60,373 (35,847) (195,867) (111,879) 176,752 191,049 (2,664) (439,697) (25,434) 270,736 (200,859) 1,260,206 (652,366) ---------- ---------- -------- ----------- ----------- ---------- ---------- ---------- ---------- 391,981 342,822 (71,344) 698,627 326,235 302,989 (277,549) 1,042,731 (773,766) ---------- ---------- -------- ----------- ----------- ---------- ---------- ---------- ---------- 654,113 514,658 323,700 5,789,117 5,176,301 1,998,260 1,896,573 1,268,741 931,879 (49,447) (15,626) (1,956) (352,146) (300,049) (31,798) (90,002) (47,295) (7,020) 530,150 140,125 254,704 2,455,515 3,254,351 3,693,012 570,609 1,385,317 627,449 (243,185) (198,441) (28,935) (2,268,320) (1,973,454) (851,347) (731,284) (437,762) (258,151) ---------- ---------- -------- ----------- ----------- ---------- ---------- ---------- ---------- 891,631 440,716 547,513 5,624,166 6,157,149 4,808,127 1,645,896 2,169,001 1,294,157 ---------- ---------- -------- ----------- ----------- ---------- ---------- ---------- ---------- 1,283,612 783,538 476,169 6,322,793 6,483,384 5,111,116 1,368,347 3,211,732 520,391 1,497,220 713,682 237,513 12,697,066 6,213,682 1,102,566 4,480,813 1,269,081 748,690 ---------- ---------- -------- ----------- ----------- ---------- ---------- ---------- ---------- $2,780,832 $1,497,220 $713,682 $19,019,859 $12,697,066 $6,213,682 $5,849,160 $4,480,813 $1,269,081 ========== ========== ======== =========== =========== ========== ========== ========== ==========
F-57 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
LORD ABBETT BOND DEBENTURE MET/AIM MID CAP CORE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------- --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 ------------ ------------ ------------ ------------ ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income.............. $ 473,273 $ 152,818 $ 973,281 $ (12,732) $ 3,638 $ (347) Net realized (losses) gains from security transactions............................. 291,351 193,651 (1,917,698) 127,885 6,414 (1,242) Change in unrealized appreciation (depreciation) of investments............ 258,228 1,482,057 942,025 100,268 140,733 (6,351) ----------- ----------- ------------ ---------- --------- -------- Net increase (decrease) in net assets resulting from operations................ 1,022,852 1,828,526 (2,392) 215,421 150,785 (7,940) ----------- ----------- ------------ ---------- --------- -------- From capital transactions: Net premiums.............................. 2,983,780 2,591,207 2,717,585 685,733 376,221 70,763 Redemptions............................... (964,051) (564,230) (441,582) (25,490) (9,516) (929) Net investment division transfers......... 337,183 1,098,872 11,021,486 562,287 345,361 212,616 Other net transfers....................... (1,084,450) (1,180,205) (13,341,702) (302,486) (126,899) (21,530) ----------- ----------- ------------ ---------- --------- -------- Net (decrease) increase in net assets resulting from capital transactions...... 1,272,462 1,945,644 (44,213) 920,044 585,167 260,920 ----------- ----------- ------------ ---------- --------- -------- NET CHANGE IN NET ASSETS.................... 2,295,314 3,774,170 (46,605) 1,135,465 735,952 252,980 NET ASSETS - BEGINNING OF PERIOD............ 12,846,410 9,072,240 9,118,845 988,932 252,980 -- ----------- ----------- ------------ ---------- --------- -------- NET ASSETS - END OF PERIOD.................. $15,141,724 $12,846,410 $ 9,072,240 $2,124,397 $ 988,932 $252,980 =========== =========== ============ ========== ========= ========
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-58
MET/AIM SMALL CAP GROWTH HARRIS OAKMARK INTERNATIONAL JANUS AGGRESSIVE GROWTH 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 PERIOD ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2003 2002 2004 2003 2002 2004 2003 2002 - ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ -------------- $ (7,126) $ (2,947) $ (281) $ (14,172) $ 6,375 $ (88) $ (40,203) $ (25,914) $ (13,648) 6,508 66,977 (593) 87,469 72,432 (843) 40,466 (314,628) (88,254) 68,634 51,242 (4,322) 413,695 49,401 (2,920) 408,503 1,135,120 (439,373) ---------- -------- -------- ---------- -------- -------- ---------- ---------- ---------- 68,016 115,272 (5,196) 486,992 128,208 (3,851) 408,766 794,578 (541,275) ---------- -------- -------- ---------- -------- -------- ---------- ---------- ---------- 398,392 201,753 30,362 717,538 111,653 59,332 1,751,040 1,735,338 1,597,876 (10,096) (5,605) (129) (18,505) (357) (178) (82,547) (28,560) (23,600) 177,443 286,464 84,320 2,229,550 446,278 122,434 96,192 112,849 546,414 (133,848) (70,229) 6,439 (265,382) (22,736) (27,767) (602,774) (614,940) (542,904) ---------- -------- -------- ---------- -------- -------- ---------- ---------- ---------- 431,891 412,383 120,992 2,663,201 534,838 153,821 1,161,911 1,204,687 1,577,786 ---------- -------- -------- ---------- -------- -------- ---------- ---------- ---------- 499,907 527,655 115,796 3,150,193 663,046 149,970 1,570,677 1,999,265 1,036,511 643,451 115,796 -- 813,016 149,970 -- 4,086,776 2,087,511 1,051,000 ---------- -------- -------- ---------- -------- -------- ---------- ---------- ---------- $1,143,358 $643,451 $115,796 $3,963,209 $813,016 $149,970 $5,657,453 $4,086,776 $2,087,511 ========== ======== ======== ========== ======== ======== ========== ========== ==========
F-59 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
NEUBERGER BERMAN LORD ABBETT GROWTH & INCOME REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- ------------------- FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE PERIOD ENDED ENDED OCTOBER 1, 2002 MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, TO DECEMBER DECEMBER 31, 2004 2003 31, 2002 2004 ------------ ------------ --------------- ------------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income..................... $ 23 $ (47) $-- $ 70,281 Net realized (losses) gains from security transactions.................................... 37 20 -- 5,929 Change in unrealized appreciation (depreciation) of investments.................................. 3,095 3,750 -- 124,804 ------- ------- --- ---------- Net increase (decrease) in net assets resulting from operations................................. 3,155 3,723 -- 201,014 ------- ------- --- ---------- From capital transactions: Net premiums..................................... 15,555 4,885 -- 228,551 Redemptions...................................... -- -- -- (7,728) Net investment division transfers................ 13,764 12,124 -- 1,619,564 Other net transfers.............................. 1,681 (203) -- (76,648) ------- ------- --- ---------- Net (decrease) increase in net assets resulting from capital transactions....................... 31,000 16,806 -- 1,763,739 ------- ------- --- ---------- NET CHANGE IN NET ASSETS........................... 34,155 20,529 -- 1,964,753 NET ASSETS - BEGINNING OF PERIOD................... 20,529 -- -- -- ------- ------- --- ---------- NET ASSETS - END OF PERIOD......................... $54,684 $20,529 $-- $1,964,753 ======= ======= === ==========
LORD ABBETT MID-CAP VALUE INVESTMENT DIVISION ------------------- FOR THE PERIOD MAY 3, 2004 TO DECEMBER 31, 2004 ------------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment (loss) income..................... $ 6 Net realized (losses) gains from security transactions.................................... -- Change in unrealized appreciation (depreciation) of investments.................................. 10 ---- Net increase (decrease) in net assets resulting from operations................................. 16 ---- From capital transactions: Net premiums..................................... 234 Redemptions...................................... -- Net investment division transfers................ -- Other net transfers.............................. (4) ---- Net (decrease) increase in net assets resulting from capital transactions....................... 230 ---- NET CHANGE IN NET ASSETS........................... 246 NET ASSETS - BEGINNING OF PERIOD................... -- ---- NET ASSETS - END OF PERIOD......................... $246 ====
- -------- (c) Formerly, Janus Mid Cap Investment Division See Notes to Financial Statements. F-60
THIRD AVENUE DREYFUS DREYFUS GOLDMAN SACHS MFS SMALL CAP VALUE INTERNATIONAL VALUE APPRECIATION MID CAP VALUE HIGH INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- ------------------- ------------------- FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD MAY 3, 2004 TO MAY 3, 2004 TO MAY 3, 2004 TO MAY 3, 2004 TO MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2004 2004 2004 2004 2004 - ------------------- ------------------- ------------------- ------------------- ------------------- $ 94 $ 1,260 $ 45 $ 1,218 $ (87) 21 47 -- 1 69 (54) (934) 217 (464) 3,152 ------ ------- ------ ------- ------- 61 373 262 755 3,134 ------ ------- ------ ------- ------- 2,238 2,238 341 -- -- -- -- -- -- -- 2,151 12,947 2,943 12,663 48,923 (43) (18) (209) (1,142) (1,091) ------ ------- ------ ------- ------- 4,346 15,167 3,075 11,521 47,832 ------ ------- ------ ------- ------- 4,407 15,540 3,337 12,276 50,966 -- -- -- -- -- ------ ------- ------ ------- ------- $4,407 $15,540 $3,337 $12,276 $50,966 ====== ======= ====== ======= =======
WELLS FARGO WELLS FARGO LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION - -------------------- ------------------- FOR THE PERIOD FOR THE PERIOD MAY 3, 2004 TO MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2004 2004 - -------------------- ------------------- $ (1) $ (1) 6 10 16 3 ------ ------ 21 12 ------ ------ 2,238 2,238 -- -- 2,151 2,151 (75) (60) ------ ------ 4,314 4,329 ------ ------ 4,335 4,341 -- -- ------ ------ $4,335 $4,341 ====== ======
F-61 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 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 insurance 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 supports 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 ("Equity Advantage VUL"), Variable Additional Insurance ("VAI") and Variable Additional Benefits Rider ("VABR"). The Separate Account is divided into eighty-five investment divisions. The separate account presently does not have assets invested in each of the investment divisions but each investment division is available as an investment option. 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, AIM Funds, Franklin Fund, Alliance Fund, Fidelity Funds, American Fund, Met Investors Fund, American Century Fund, Delaware Fund, Dreyfus Fund, Goldman Sachs Fund, MFS Fund, Van Kampen Fund, or Wells Fargo 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 universal life policies is not chargeable with liabilities arising out of any other business Metropolitan Life may conduct. The table below presents the fund divisions within the Separate Account: State Street Research Investment Trust Fidelity Contrafund Investment Division Investment Division State Street Research Fidelity Asset Manager Diversified Investment Growth Investment Division Division State Street Research Aggressive Growth Fidelity Growth Investment Division Investment Division MetLife Stock Index Fidelity Investment Grade Investment Division Bond Investment Division (c) FI International Stock Fidelity Equity-Income Investment Division Investment Division (c) FI Mid Cap Opportunities American Funds Growth Investment Division Investment Division T. Rowe Price Small Cap American Funds Growth Investment Growth-Income Investment Division Division Scudder Global Equity American Funds Global Investment Division Small Capitalization Investment Division Harris Oakmark Large Cap T. Rowe Price Mid Cap Value Investment Division Growth Investment Division Neuberger Berman Partners MFS Research Mid Cap Value Investment International Investment Division Division T. Rowe Price Large Cap Growth Investment PIMCO Total Return Division Investment Division Lehman Brothers Aggregate Bond Index Investment PIMCO PEA Innovation Division Investment Division Morgan Stanley EAFE Index Lord Abbett Bond Investment Division Debenture Investment Division Russell 2000 Index Met/AIM Mid Cap Core Investment Division Equity Investment Division (a) Met/Putnam Voyager Met/AIM Small Cap Growth Investment Division Investment Division (a) State Street Research Harris Oakmark Aurora Investment International Investment Division Division (a) MetLife Mid Cap Stock Janus Aggressive Growth Index Investment Division Investment Division Franklin Templeton Small Lord Abbett Growth & Cap Growth Investment Income Investment Division Division (b) State Street Research Neuberger Berman Real Large Cap Value Estate Investment Investment Division (a) Division (c) Davis Venture Value Lord Abbett Growth Investment Division Opportunities Investment Division (c) Loomis Sayles Small Cap Lord Abbett Mid-Cap Value Investment Division Investment Division (c) State Street Research Third Avenue Small Cap Large Cap Growth Value Investment Investment Division Division (c) MFS Investors Trust American Century Investment Division International Investment Division (c) State Street Research Bond Income Investment American Century Vista Division Investment Division (c) FI Value Leaders American Century Value Investment Division Investment Division (c) Harris Oakmark Focused Delaware Small Cap Value Value Investment Division Investment Division (c) Salomon Brothers Strategic Bond Opportunities Investment Dreyfus Mid Cap Stock Division Investment Division (c) Salomon Brothers U.S. Government Investment Dreyfus Emerging Leaders Division Investment Division (c) F-62 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 1. BUSINESS -- (CONTINUED) State Street Research Dreyfus International Money Market Investment Value Investment Division Division (c) MFS Total Return Dreyfus Appreciation Investment Division (c) Investment Division (c) Janus Aspen Growth Goldman Sachs Mid Cap Investment Division Value Investment Division (c) Janus Aspen Balanced Goldman Sachs Core Small Investment Division (c) Cap Equity Investment Division (c) Janus Aspen Capital Appreciation Investment MFS Global Equity Division (c) Investment Division (c) Invesco VIF Equity Income MFS High Income Investment Division Investment Division (c) AIM Government Securities MFS Value Investment Investment Division (c) Division (c) AIM Real Estate MFS New Discovery Investment Division Investment Division (c) Franklin Templeton International Stock Van Kampen Government Investment Division Investment Division (c) Franklin Templeton Growth Wells Fargo Total Return Securities Investment Bond Investment Division Division (c) (c) Franklin Mutual Discovery Wells Fargo Money Market Investment Division (c) Investment Division (c) Alliance Growth & Income Wells Fargo Asset Investment Division Allocation Investment Division (c) Alliance Technology Wells Fargo Growth Investment Division Investment Division (c) Alliance U.S. Government Wells Fargo Large Company Investment Division (c) Growth Investment Division (c) Wells Fargo Equity Income Investment Division (c) (a) Operations commenced on May 1, 2002, for five new investment divisions added to the Separate Account on that date. (b) Operations commenced on October 31, 2002, for one new investment division added to the Separate Account on that date. (c) Operations commenced on May 3, 2004, for thirty-five new investment divisions added to the Separate Account on that date. 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 portfolios are valued at fair value. Money market portfolio 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 contracts. 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 contracts. 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 F-63 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) D. NET PREMIUMS -- (CONTINUED) 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. 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. A charge of 0.60% is assessed against the cash value of the assets in the separate account for MetFlex policies, 0.48% for MetFlex C policies and 0.40% for MetFlex Experience policies. F-64 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. PURCHASES AND SALES OF INVESTMENTS The cost of purchases and the proceeds from sales of investments for the year ended December 31, 2004 are as follows:
PURCHASES SALES --------- ------- (IN THOUSANDS) State Street Research Investment Trust Investment Division....... 22,300 25,718 State Street Research Diversified Investment Division............ 21,941 15,354 State Street Research Aggressive Growth Investment Division...... 10,234 13,655 MetLife Stock Index Investment Division.......................... 71,689 27,010 FI International Stock Investment Division....................... 7,174 9,878 FI Mid Cap Opportunities Investment Division (c)................. 20,605 6,601 T. Rowe Price Small Cap Growth Investment Division............... 10,008 8,136 Scudder Global Equity Investment Division........................ 4,300 3,101 Harris Oakmark Large Cap Value Investment Division............... 13,190 4,304 Neuberger Berman Partners Mid Cap Value Investment Division...... 11,604 2,274 T. Rowe Price Large Cap Growth Investment Division............... 7,322 7,790 Lehman Brothers Aggregate Bond Index Investment Division......... 19,113 7,060 Morgan Stanley EAFE Index Investment Division.................... 9,604 6,349 Russell 2000 Index Investment Division........................... 8,183 4,176 Met/Putnam Voyager Investment Division........................... 1,793 416 State Street Research Aurora Investment Division................. 17,372 3,880 MetLife Mid Cap Stock Index Investment Division.................. 9,379 5,203 Franklin Templeton Small Cap Growth Investment Division.......... 1,487 446 State Street Research Large Cap Value Investment Division........ 2,346 471 Davis Venture Value Investment Division.......................... 7,790 3,996 Loomis Sayles Small Cap Investment Division...................... 2,050 920 State Street Research Large Cap Growth Investment Division....... 2,621 1,613 MFS Investors Trust Investment Division.......................... 1,600 87 MFS Research Managers Investment Division (a).................... 124 795 State Street Research Bond Income Investment Division............ 22,635 28,566 FI Value Leaders Investment Division............................. 660 95 Harris Oakmark Focused Value Investment Division................. 9,902 954 Salomon Brothers Strategic Bond Opportunities Investment Division 3,816 532 Salomon Brothers U.S. Government Investment Division............. 3,191 1,078 State Street Research Money Market Investment Division........... 19,338 17,518 FI Mid Cap Opportunities Investment Division (a)................. 864 1,826 MFS Total Return Investment Division (b)......................... 745 18 Janus Aspen Growth Investment Division........................... 851 288 Janus Aspen Balanced Investment Division (b)..................... .238 .005 Invesco VIF Equity Income Investment Division.................... 55 8 AIM Government Securities Investment Division.................... 6 1 AIM Real Estate Investment Division.............................. 1,249 370 Franklin Templeton International Stock Investment Division....... 2,177 1,684 Alliance Growth & Income Investment Division..................... 958 135 Alliance Technology Investment Division.......................... 6 33 Fidelity Contrafund Investment Division.......................... 235 422 Fidelity Asset Manager Growth Investment Division................ 366 115 Fidelity Growth Investment Division.............................. 125 64 Fidelity Investment Grade Bond Investment Division (b)........... 14 1 Fidelity Equity-Income Investment Division (b)................... - - American Funds Growth Investment Division........................ 16,126 343 American Funds Growth-Income Investment Division................. 12,321 472 American Funds Global Small Capitalization Investment Division... 5,531 668 T. Rowe Price Mid Cap Growth Investment Division................. 2,494 238 MFS Research International Investment Division................... 3,156 2,272 PIMCO Total Return Investment Division........................... 7,487 787 PIMCO PEA Innovation Investment Division......................... 2,475 857 Lord Abbett Bond Debenture Investment Division................... 4,897 3,028 Met/AIM Mid Cap Core Equity Investment Division.................. 1,543 636 Met/AIM Small Cap Growth Investment Division..................... 642 218 Harris Oakmark International Investment Division................. 3,991 1,343 Janus Aggressive Growth Investment Division...................... 1,441 304 Lord Abbett Growth & Income Investment Division.................. 22 .124 Neuberger Berman Real Estate Investment Division (b)............. 1,867 34 Lord Abbett Mid-Cap Value Investment Division (b)................ .242 .005 Third Avenue Small Cap Value Investment Division (b)............. 6 1 Dreyfus International Value Investment Division (b).............. 18 1 Dreyfus Appreciation Investment Division (b)..................... 3 - Goldman Sachs Mid Cap Value Investment Division (b).............. 14 .047 MFS High Income Investment Division (b).......................... 49 1 Wells Fargo Large Company Growth Investment Division (b)......... 6 1 Wells Fargo Equity Income Investment Division (b)................ 6 1 ------- ------- Total............................................................ 415,117 224,146 ======= =======
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-65 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS The changes in units outstanding for the years ended December 31, 2004, 2003, 2002 and 2001 are as follows:
STATE STREET RESEARCH STATE STREET RESEARCH STATE STREET RESEARCH METLIFE INVESTMENT TRUST DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------- --------------------- --------------------- ------------------- (IN THOUSANDS) Outstanding at December, 2003... 16,151 12,881 11,833 25,747 Activity during 2004: Issued........................ 3,924 3,355 2,393 9,696 Redeemed...................... (3,568) (2,781) (2,451) (5,967) ------ ------ ------ ------ Outstanding at December 31, 2004 16,507 13,455 11,775 29,476 ====== ====== ====== ====== Outstanding at December, 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, 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 ====== ====== ====== ======
FI INTERNATIONAL STOCK INVESTMENT DIVISION ------------------- (IN THOUSANDS) Outstanding at December, 2003... 3,484 Activity during 2004: Issued........................ 836 Redeemed...................... (1,079) ------ Outstanding at December 31, 2004 3,241 ====== Outstanding at December, 2002... 3,296 Activity during 2003: Issued........................ 1,224 Redeemed...................... (1,036) ------ Outstanding at December 31, 2003 3,484 ====== Outstanding at December, 2001... 3,106 Activity during 2002: Issued........................ 1,176 Redeemed...................... (986) ------ Outstanding at December 31, 2002 3,296 ====== Outstanding at December 31, 2000 2,709 Activity during 2001: Issued........................ 1,578 Redeemed...................... (1,181) ------ Outstanding at December 31, 2001 3,106 ======
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004, to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-66
FI MID CAP T. ROWE PRICE SCUDDER HARRIS OAKMARK NEUBERGER BERMAN T. ROWE PRICE OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY LARGE CAP VALUE PARTNERS MID CAP VALUE LARGE CAP GROWTH INVESTMENT DIVISION (C) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ----------------------- ------------------- ------------------- ------------------- ---------------------- ------------------- 13,348 5,032 2,140 3,060 1,946 3,290 3,916 1,399 582 1,554 1,038 1,153 (2,980) (1,245) (521) (847) (549) (1,146) ------ ------ ----- ----- ----- ------ 14,284 5,186 2,201 3,767 2,435 3,297 ====== ====== ===== ===== ===== ====== 11,521 4,460 1,978 2,346 1,567 2,853 5,469 1,729 768 1,639 892 1,408 (3,642) (1,157) (606) (925) (513) (971) ------ ------ ----- ----- ----- ------ 13,348 5,032 2,140 3,060 1,946 3,290 ====== ====== ===== ===== ===== ====== 8,481 3,561 2,000 1,242 1,076 2,124 5,867 1,777 687 1,697 906 1,289 (2,827) (878) (709) (593) (415) (560) ------ ------ ----- ----- ----- ------ 11,521 4,460 1,978 2,346 1,567 2,853 ====== ====== ===== ===== ===== ====== 5,367 2,995 1,848 220 456 632 3,701 918 209 1,076 790 2,004 (587) (352) (57) (54) (170) (512) ------ ------ ----- ----- ----- ------ 8,481 3,561 2,000 1,242 1,076 2,124 ====== ====== ===== ===== ===== ======
LEHMAN BROTHERS MORGAN STANLEY AGGREGATE BOND INDEX EAFE INDEX INVESTMENT DIVISION INVESTMENT DIVISION - -------------------- ------------------- 4,064 2,676 2,030 1,732 (1,281) (1,393) ------ ------ 4,813 3,015 ====== ====== 4,147 2,044 2,097 2,174 (2,180) (1,542) ------ ------ 4,064 2,676 ====== ====== 3,153 1,352 1,774 1,485 (780) (793) ------ ------ 4,147 2,044 ====== ====== 1,730 544 2,267 1,865 (844) (1,057) ------ ------ 3,153 1,352 ====== ======
F-67 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2004, 2003, 2002 and 2001 are as follows:
RUSSELL MET/PUTNAM STATE STREET RESEARCH METLIFE MID 2000 INDEX VOYAGER AURORA CAP STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------- ------------------- (IN THOUSANDS) Outstanding at December, 2003... 2,085 1,913 3,372 2,338 Activity during 2004: Issued........................ 1,030 770 1,705 1,212 Redeemed...................... (734) (481) (913) (892) ----- ----- ------ ----- Outstanding at December 31, 2004 2,381 2,202 4,164 2,658 ===== ===== ====== ===== Outstanding at December, 2002... 1,614 1,463 2,599 1,762 Activity during 2003: Issued........................ 1,138 1,235 1,832 1,301 Redeemed...................... (667) (785) (1,059) (725) ----- ----- ------ ----- Outstanding at December 31, 2003 2,085 1,913 3,372 2,338 ===== ===== ====== ===== Outstanding at December, 2001... 920 792 1,317 867 Activity during 2002: Issued........................ 1,015 1,075 1,944 1,231 Redeemed...................... (321) (404) (662) (336) ----- ----- ------ ----- Outstanding at December 31, 2002 1,614 1,463 2,599 1,762 ===== ===== ====== ===== Outstanding at December 31, 2000 512 131 164 210 Activity during 2001: Issued........................ 1,181 704 1,201 693 Redeemed...................... (773) (43) (48) (36) ----- ----- ------ ----- Outstanding at December 31, 2001 920 792 1,317 867 ===== ===== ====== =====
FRANKLIN TEMPLETON SMALL CAP GROWTH INVESTMENT DIVISION ------------------- (IN THOUSANDS) Outstanding at December, 2003... 329 Activity during 2004: Issued........................ 240 Redeemed...................... (129) ---- Outstanding at December 31, 2004 440 ==== Outstanding at December, 2002... 198 Activity during 2003: Issued........................ 266 Redeemed...................... (135) ---- Outstanding at December 31, 2003 329 ==== Outstanding at December, 2001... 52 Activity during 2002: Issued........................ 215 Redeemed...................... (69) ---- Outstanding at December 31, 2002 198 ==== Outstanding at December 31, 2000 -- Activity during 2001: Issued........................ 54 Redeemed...................... (2) ---- Outstanding at December 31, 2001 52 ====
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004, to December 31, 2004 (c) Formerly, Janus Mid Cap Value Investment Division F-68
STATE STREET RESEARCH DAVIS LOOMIS SAYLES STATE STREET RESEARCH MFS MFS LARGE CAP VALUE VENTURE VALUE SMALL CAP LARGE CAP GROWTH INVESTORS TRUST RESEARCH MANAGERS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (A) - --------------------- ------------------- ------------------- --------------------- ------------------- ----------------------- 103 1,322 30 721 186 81 264 446 17 211 272 21 (96) (402) (9) (81) (91) (102) --- ----- -- --- ---- ---- 271 1,366 38 851 367 -- === ===== == === ==== ==== 23 901 18 589 104 47 147 650 21 200 272 54 (67) (229) (9) (68) (190) (20) --- ----- -- --- ---- ---- 103 1,322 30 721 186 81 === ===== == === ==== ==== -- 297 11 6 43 13 27 754 12 624 110 73 (4) (150) (5) (41) (49) (39) --- ----- -- --- ---- ---- 23 901 18 589 104 47 === ===== == === ==== ==== -- 39 2 -- -- -- -- 267 10 6 47 83 -- (9) (1) -- (4) (70) --- ----- -- --- ---- ---- -- 297 11 6 43 13 === ===== == === ==== ====
STATE STREET RESEARCH FI BOND INCOME VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION - --------------------- ------------------- 5,517 49 1,298 78 (2,099) (26) ------ --- 4,716 101 ====== === 5,564 12 1,494 75 (1,541) (38) ------ --- 5,517 49 ====== === 4,202 3 2,094 15 (732) (6) ------ --- 5,564 12 ====== === 3,980 -- 1,197 3 (975) -- ------ --- 4,202 3 ====== ===
F-69 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2004, 2003, 2002 and 2001 are as follows:
HARRIS OAKMARK SALOMON BROTHERS SALOMON BROTHERS STATE STREET RESEARCH FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ---------------------------- ------------------- --------------------- (IN THOUSANDS) Outstanding at December, 2003... 115 375 559 1,760 Activity during 2004: Issued........................ 74 412 425 965 Redeemed...................... (35) (191) (279) (845) --- ---- ---- ------ Outstanding at December 31, 2004 154 596 705 1,880 === ==== ==== ====== Outstanding at December, 2002... 76 177 340 1,981 Activity during 2003: Issued........................ 72 430 626 526 Redeemed...................... (33) (232) (407) (747) --- ---- ---- ------ Outstanding at December 31, 2003 115 375 559 1,760 === ==== ==== ====== Outstanding at December, 2001... 23 41 71 2,156 Activity during 2002: Issued........................ 72 195 393 1,770 Redeemed...................... (19) (59) (124) (1,945) --- ---- ---- ------ Outstanding at December 31, 2002 76 177 340 1,981 === ==== ==== ====== Outstanding at December 31, 2000 -- -- -- 1,479 Activity during 2001: Issued........................ 24 42 99 2,983 Redeemed...................... (1) (1) (28) (2,306) --- ---- ---- ------ Outstanding at December 31, 2001 23 41 71 2,156 === ==== ==== ======
FI MID CAP OPPORTUNITIES INVESTMENT DIVISION (A) ----------------------- (IN THOUSANDS) Outstanding at December, 2003... 96 Activity during 2004: Issued........................ 78 Redeemed...................... (174) ---- Outstanding at December 31, 2004 -- ==== Outstanding at December, 2002... 21 Activity during 2003: Issued........................ 107 Redeemed...................... (32) ---- Outstanding at December 31, 2003 96 ==== Outstanding at December, 2001... -- Activity during 2002: Issued........................ 22 Redeemed...................... (1) ---- Outstanding at December 31, 2002 21 ==== Outstanding at December 31, 2000 -- Activity during 2001: Issued........................ -- Redeemed...................... -- ---- Outstanding at December 31, 2001 -- ====
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-70
MFS JANUS ASPEN JANUS ASPEN INVESCO VIF AIM TOTAL RETURN GROWTH BALANCED EQUITY INCOME GOVERNMENT SECURITIES INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION (B) - ----------------------- ------------------- ----------------------- ------------------- ----------------------- -- 435 -- 19 -- 79 110 0.02235 6 0.42839 (9) (36) (0.00051) (1) (0.00834) -- ---- -------- -- -------- 70 509 0.02184 24 0.42005 == ==== ======== == ======== -- 354 -- 15 -- -- 123 -- 6 -- -- (42) -- (2) -- -- ---- -------- -- -------- -- 435 -- 19 -- == ==== ======== == ======== -- 236 -- 12 -- -- 149 -- 5 -- -- (31) -- (2) -- -- ---- -------- -- -------- -- 354 -- 15 -- == ==== ======== == ======== -- 473 -- 2 -- -- 84 -- 12 -- -- (321) -- (2) -- -- ---- -------- -- -------- -- 236 -- 12 -- == ==== ======== == ========
AIM FRANKLIN TEMPLETON ALLIANCE REAL ESTATE INTERNATIONAL STOCK GROWTH & INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- 10 403 197 55 184 90 (10) (143) (12) --- ---- --- 55 444 275 === ==== === 14 344 150 2 118 67 (6) (59) (20) --- ---- --- 10 403 197 === ==== === 7 189 65 61 183 95 (54) (28) (10) --- ---- --- 14 344 150 === ==== === 10 99 6 1 118 60 (4) (28) (1) --- ---- --- 7 189 65 === ==== ===
F-71 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2004, 2003, 2002 and 2001 are as follows:
ALLIANCE FIDELITY FIDELITY FIDELITY TECHNOLOGY CONTRAFUND ASSET MANAGER GROWTH GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- (IN THOUSANDS) Outstanding at December, 2003... 10 97 54 47 Activity during 2004: Issued........................ 1 19 37 20 Redeemed...................... (7) (39) (8) (10) --- --- -- --- Outstanding at December 31, 2004 4 77 83 57 === === == === Outstanding at December, 2002... 6 35 20 28 Activity during 2003: Issued........................ 5 90 39 20 Redeemed...................... (1) (28) (5) (1) --- --- -- --- Outstanding at December 31, 2003 10 97 54 47 === === == === Outstanding at December, 2001... 2 3 13 13 Activity during 2002: Issued........................ 4 33 15 18 Redeemed...................... -- (1) (8) (3) --- --- -- --- Outstanding at December 31, 2002 6 35 20 28 === === == === Outstanding at December 31, 2000 -- -- -- -- Activity during 2001: Issued........................ 26 3 14 17 Redeemed...................... (24) -- (1) (4) --- --- -- --- Outstanding at December 31, 2001 2 3 13 13 === === == ===
FIDELITY FIDELITY INVESTMENT GRADE BOND EQUITY-INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) ----------------------- ----------------------- (IN THOUSANDS) Outstanding at December, 2003... -- -- Activity during 2004: Issued........................ 1 1 Redeemed...................... -- -- -- -- Outstanding at December 31, 2004 1 1 == == Outstanding at December, 2002... -- -- Activity during 2003: Issued........................ -- -- Redeemed...................... -- -- -- -- Outstanding at December 31, 2003 -- -- == == Outstanding at December, 2001... -- -- Activity during 2002: Issued........................ -- -- Redeemed...................... -- -- -- -- Outstanding at December 31, 2002 -- -- == == Outstanding at December 31, 2000 -- -- Activity during 2001: Issued........................ -- -- Redeemed...................... -- -- -- -- Outstanding at December 31, 2001 -- -- == ==
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-72
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS T. ROWE PRICE MFS GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION MID CAP GROWTH RESEARCH INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- --------------------------- ------------------- ---------------------- 417 525 378 527 151 379 469 517 519 416 (139) (183) (219) (190) (332) ---- ---- ---- ---- ---- 657 811 676 856 235 ==== ==== ==== ==== ==== 221 287 203 294 95 313 387 375 387 397 (117) (149) (200) (154) (341) ---- ---- ---- ---- ---- 417 525 378 527 151 ==== ==== ==== ==== ==== 53 68 49 68 28 217 287 226 328 239 (49) (68) (72) (102) (172) ---- ---- ---- ---- ---- 221 287 203 294 95 ==== ==== ==== ==== ==== -- -- -- -- -- 67 76 55 71 113 (14) (8) (6) (3) (85) ---- ---- ---- ---- ---- 53 68 49 68 28 ==== ==== ==== ==== ====
PIMCO PIMCO PEA LORD ABBETT TOTAL RETURN INNOVATION BOND DEBENTURE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- 1,042 932 963 865 889 444 (424) (548) (392) ----- ----- ----- 1,483 1,273 1,015 ===== ===== ===== 534 416 813 1,055 896 478 (547) (380) (328) ----- ----- ----- 1,042 932 963 ===== ===== ===== 103 121 811 623 437 216 (192) (142) (214) ----- ----- ----- 534 416 813 ===== ===== ===== -- -- 603 123 128 291 (20) (7) (83) ----- ----- ----- 103 121 811 ===== ===== =====
F-73 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 5. CHANGES IN OUTSTANDING UNITS -- (CONTINUED) The changes in units outstanding for the years ended December 31, 2004, 2003, 2002 and 2001 are as follows:
MET/AIM MET/AIM HARRIS OAKMARK JANUS MID CAP CORE EQUITY SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- (IN THOUSANDS) Outstanding at December, 2003... 92 60 72 583 Activity during 2004: Issued........................ 172 80 431 350 Redeemed...................... (92) (39) (214) (191) --- --- ---- ----- Outstanding at December 31, 2004 172 101 289 742 === === ==== ===== Outstanding at December, 2002... 30 15 18 390 Activity during 2003: Issued........................ 96 99 180 1,093 Redeemed...................... (34) (54) (126) (900) --- --- ---- ----- Outstanding at December 31, 2003 92 60 72 583 === === ==== ===== Outstanding at December, 2001... -- -- -- 136 Activity during 2002: Issued........................ 33 17 22 414 Redeemed...................... (3) (2) (4) (160) --- --- ---- ----- Outstanding at December 31, 2002 30 15 18 390 === === ==== ===== Outstanding at December 31, 2000 -- -- -- -- Activity during 2001: Issued........................ -- -- -- 162 Redeemed...................... -- -- -- (26) --- --- ---- ----- Outstanding at December 31, 2001 -- -- -- 136 === === ==== =====
LORD ABBETT NEUBERGER BERMAN GROWTH & INCOME REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION (B) ------------------- ----------------------- (IN THOUSANDS) Outstanding at December, 2003... 3 -- Activity during 2004: Issued........................ 3 172 Redeemed...................... -- (20) -- --- Outstanding at December 31, 2004 6 152 == === Outstanding at December, 2002... -- -- Activity during 2003: Issued........................ 3 -- Redeemed...................... -- -- -- --- Outstanding at December 31, 2003 3 -- == === Outstanding at December, 2001... -- -- Activity during 2002: Issued........................ -- -- Redeemed...................... -- -- -- --- Outstanding at December 31, 2002 -- -- == === Outstanding at December 31, 2000 -- -- Activity during 2001: Issued........................ -- -- Redeemed...................... -- -- -- --- Outstanding at December 31, 2001 -- -- == ===
- -------- (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-74
LORD ABBETT THIRD AVENUE DREYFUS DREYFUS GOLDMAN SACHS MID-CAP VALUE SMALL CAP VALUE INTERNATIONAL VALUE APPRECIATION MID CAP VALUE INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) - ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- -- -- -- -- -- 0.02145 0.3729 1 0.33635 1 (0.00050) (0.0074) -- (0.01209) -- -------- ------- -- -------- -- 0.02095 0.3655 1 0.32426 1 ======== ======= == ======== == -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -------- ------- -- -------- -- -- -- -- -- -- ======== ======= == ======== == -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -------- ------- -- -------- -- -- -- -- -- -- ======== ======= == ======== == -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -------- ------- -- -------- -- -- -- -- -- -- ======== ======= == ======== ==
MFS WELLS FARGO WELLS FARGO HIGH INCOME LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) - ----------------------- ----------------------- ----------------------- -- -- -- 5 0.42421 0.40988 -- (0.00825) (0.00803) -- -------- -------- 5 0.41596 0.40184 == ======== ======== -- -- -- -- -- -- -- -- -- -- -------- -------- -- -- -- == ======== ======== -- -- -- -- -- -- -- -- -- -- -------- -------- -- -- -- == ======== ======== -- -- -- -- -- -- -- -- -- -- -------- -------- -- -- -- == ======== ========
F-75 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
STATE STREET RESEARCH STATE STREET RESEARCH INVESTMENT TRUST DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION --------------------- --------------------- 2004 Units (In Thousands).............................................. 16,507 13,455 Unit Fair Value, Lowest to Highest (1)............................ $11.71 to $36.38 $12.79 to $32.95 Net Assets (In Thousands)......................................... $399,817 $315,177 Investment Income Ratio to Net Assets (2)......................... 0.71% 1.83% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)............................... 9.87% to 10.86% 7.54% to 8.51% 2003 Units (In Thousands).............................................. 16,151 12,881 Unit Fair Value, Lowest to Highest (1)............................ $10.57 to $33.12 $11.79 to $30.64 Net Assets (In Thousands)......................................... $367,087 $289,033 Investment Income Ratio to Net Assets (2)......................... 0.83% 3.73% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 29.08% to 30.24% 19.48% to 20.56% 2002 Units (In Thousands).............................................. 15,060 12,268 Unit Fair Value, Lowest to Highest (1)............................ $8.11 to $25.66 $9.78 to $25.64 Net Assets (In Thousands)......................................... $276,980 $238,020 Investment Income Ratio to Net Assets (2)......................... 0.54% 2.27% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... -27% to -26% -15% to -14% 2001 Units (In Thousands).............................................. 13,264 11,138 Unit Fair Value, Lowest to Highest (1)............................ $10.98 to $35.04 $11.35 to $30.04 Net Assets (In Thousands)......................................... $356,701 $265,724 Investment Income Ratio to Net Assets (2)......................... 13.53% 9.67% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... -18% to -17% -7% to -6%
STATE STREET RESEARCH METLIFE AGGRESSIVE GROWTH STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION --------------------- ------------------- 2004 Units (In Thousands).............................................. 11,775 29,476 Unit Fair Value, Lowest to Highest (1)............................ $13.23 to $18.89 $10.59 to $32.05 Net Assets (In Thousands)......................................... $207,749 $548,176 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.83% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.40% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)............................... 11.97% to 12.98% 9.55% to 10.53% 2003 Units (In Thousands).............................................. 11,833 25,747 Unit Fair Value, Lowest to Highest (1)............................ $11.71 to $16.87 $9.58 to $29.26 Net Assets (In Thousands)......................................... $187,268 $457,114 Investment Income Ratio to Net Assets (2)......................... 0.00% 1.65% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 39.53% to 40.79% 27.06% to 28.20% 2002 Units (In Thousands).............................................. 11,447 22,140 Unit Fair Value, Lowest to Highest (1)............................ $8.32 to $12.09 $7.48 to $23.03 Net Assets (In Thousands)......................................... $130,816 $326,228 Investment Income Ratio to Net Assets (2)......................... 0.00% 1.61% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... -29% -23% to -22% 2001 Units (In Thousands).............................................. 10,503 17,015 Unit Fair Value, Lowest to Highest (1)............................ $11.67 to $17.12 $9.62 to $29.91 Net Assets (In Thousands)......................................... $171,692 $346,931 Investment Income Ratio to Net Assets (2)......................... 24.84% 1.17% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... -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 policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-76
FI FI MID CAP T. ROWE PRICE SCUDDER GLOBAL HARRIS OAKMARK INTERNATIONAL STOCK OPPORTUNITIES SMALL CAP GROWTH EQUITY LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION (C) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ----------------------- ------------------- ------------------- ------------------- 3,241 14,284 5,186 2,201 3,767 $11.67 to $16.22 $6.66 to $18.87 $7.41 to $15.57 $15.04 to $16.76 $12.79 to $16.08 $48,075 $229,326 $72,034 $34,182 $51,133 1.32% 0.53% 0.00% 1.52% 0.49% 0.40% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.40% to 0.90% 17.14% to 18.19% 16.15% to 17.19% 9.58% to 11.08% 15.38% to 16.42% 10.42% to 11.42% 3,484 13,348 5,231 2,140 3,060 $9.92 to $13.85 $5.69 to $16.17 $6.76 to $14.08 $12.92 to $14.39 $11.53 to $14.56 $43,984 $184,078 $66,227 $28,696 $37,504 0.65% 0.00% 0.00% 2.04% 0.00% 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% 26.90% to 28.04% 33.38% to 35.10% 37.24% to 44.93% 29.29% to 30.45% 24.38% to 25.49% 3,296 11,521 4,622 1,978 2,346 $7.78 to $10.91 $4.22 to $12.07 $4.93 to $10.04 $9.90 to $11.03 $9.23 to $11.71 $32,966 $119,020 $41,947 $20,476 $23,073 0.89% 0.00% 0.51% 1.68% 3.31% 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% -29% to -28% -17% to -16% -15% to -14% 3,106 8,481 3,577 2,000 1,242 $9.47 to $13.35 $5.95 to $17.08 $6.91 to $13.76 $11.79 to $12.88 $10.80 to $13.76 $38,281 $125,185 $45,220 $21,106 $14,336 3.67% 0.00% 0.05% to 8.16% 11.32% 0.15% 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% -21% to -20% -37% to -33% -12% to 2% -16% to -15% 17% to 20%
NEUBERGER BERMAN T. ROWE PRICE PARTNERS MID CAP VALUE LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION - ---------------------- ------------------- 2,435 3,297 $16.88 to $23.70 $8.97 to $13.33 $47,215 $36,588 2.71% 0.21% 0.40% to 0.90% 0.40% to 0.90% 21.81% to 22.91% 8.94% to 9.93% 1,946 3,290 $13.86 to $19.29 $8.23 to $12.13 $30,946 $33,520 0.32% 0.11% 0.60% to 0.90% 0.60% to 0.90% 35.30% to 36.52% 29.64% to 30.81% 1,567 2,853 $10.24 to $14.13 $6.35 to $9.27 $18,286 $22,095 0.31% 0.26% 0.45% to 0.90% 0.45% to 0.90% -10% -24% to 23% 1,076 2,124 $11.44 to $15.63 $8.35 to $12.08 $14,115 $21,111 1.94% 0.06% 0.60% to 0.90% 0.60% to 0.90% -3% to 0% -11% to -6%
F-77 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
LEHMAN BROTHERS MORGAN STANLEY RUSSELL AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- ------------------- 2004 Units (In Thousands).............................................. 4,813 3,015 2,381 Unit Fair Value, Lowest to Highest (1)............................ $13.17 to $14.23 $9.31 to 12.41 $12.55 to $17.19 Net Assets (In Thousands)......................................... $67,710 $32,552 $37,086 Investment Income Ratio to Net Assets (2)......................... 3.00% 0.71% 0.44% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.40% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 3.17% to 4.10% 18.58% to 19.64% 16.71% to 17.77% 2003 Units (In Thousands).............................................. 4,064 2,676 2,085 Unit Fair Value, Lowest to Highest (1)............................ $12.77 to $13.67 $7.85 to $10.37 $10.75 to $14.59 Net Assets (In Thousands)......................................... $54,994 $24,290 $27,726 Investment Income Ratio to Net Assets (2)......................... 5.25% 1.48% 0.63% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 2.71% to 3.63% 36.41% to 37.70% 44.77% to 46.07% 2002 Units (In Thousands).............................................. 4,147 2,044 1,614 Unit Fair Value, Lowest to Highest (1)............................ $12.43 to $13.19 $5.76 to $7.53 $7.43 to $9.99 Net Assets (In Thousands)......................................... $54,046 $13,496 $14,829 Investment Income Ratio to Net Assets (2)......................... 2.81% 0.49% 0.59% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 9% to 10% -17% -21% to -20% 2001 Units (In Thousands).............................................. 3,153 1,352 920 Unit Fair Value, Lowest to Highest (1)............................ $11.38 to $11.97 $6.97 to $9.04 $9.42 to $12.56 Net Assets (In Thousands)......................................... $37,322 $10,800 $10,625 Investment Income Ratio to Net Assets (2)......................... 1.29% 0.31% 0.26% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)............................... 7% -22% to -21% 0% to 6%
MET/PUTNAM VOYAGER INVESTMENT DIVISION ------------------- 2004 Units (In Thousands).............................................. 2,202 Unit Fair Value, Lowest to Highest (1)............................ $4.56 to $5.02 Net Assets (In Thousands)......................................... $10,452 Investment Income Ratio to Net Assets (2)......................... 0.11% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.48% to 0.90% Total Return, Lowest to Highest (4)............................... 4.04% to 4.98% 2003 Units (In Thousands).............................................. 1,913 Unit Fair Value, Lowest to Highest (1)............................ $4.38 to $4.78 Net Assets (In Thousands)......................................... $8,651 Investment Income Ratio to Net Assets (2)......................... 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... 24.78% to 25.91% 2002 Units (In Thousands).............................................. 1,463 Unit Fair Value, Lowest to Highest (1)............................ $3.51 to $3.79 Net Assets (In Thousands)......................................... $5,253 Investment Income Ratio to Net Assets (2)......................... 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.50% to 0.90% Total Return, Lowest to Highest (4)............................... -30% to -29% 2001 Units (In Thousands).............................................. 792 Unit Fair Value, Lowest to Highest (1)............................ $4.98 to $5.04 Net Assets (In Thousands)......................................... $4,001 Investment Income Ratio to Net Assets (2)......................... 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... -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 policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-78
STATE STREET RESEARCH METLIFE FRANKLIN TEMPLETON STATE STREET RESEARCH DAVIS AURORA MID CAP STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE VENTURE VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - --------------------- ------------------- ------------------- --------------------- ------------------- 4,164 2,658 440 271 1,366 $17.84 to $19.48 $12.82 to $14.07 $10.01 to $10.35 $12.02 to $12.31 $11.00 to $31.91 $80,342 $36,885 $4,527 $3,321 $31,374 0.00% 0.73% 0.00% 0.00% 0.54% 0.40% to 0.90% 0.48% to 0.90% 0.90% 0.90% 0.40% to 0.90% 14.31% to 15.34% 15.01% to 16.05% 10.41% to 11.41% 12.39% to 13.40% 11.36% to 12.37% 3,372 2,338 329 103 1,322 $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 $56,540 $27,925 $3,038 $1,110 $24,429 0.00% 0.46% 0.00% 1.37% 0.37% 0.60% to 0.90% 0.60% to 0.90% 0.90% 0.90% 0.60% to 0.90% 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% 2,599 1,762 198 23 901 $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 $29,061 $15,568 $1,268 $189 $13,430 0.52% 0.35% 0.00% 0.92% 0.88% 0.50% to 0.90% 0.50% to 0.90% 0.90% 0.90% 0.50% to 0.90% -22% to -21% -16% to -15% -28% -20% -17% to -16% 1,317 867 52 -- 297 $13.09 to $14.29 $9.62 to $10.56 $8.83 to $8.88 $ -- $8.94 to $25.95 $20,005 $9,019 $457 $ -- $7,498 0.38% 0.43% 0.00% -- 4.47% 0.60% to 0.90% 0.60% to 0.90% 0.60% -- 0.60% to 0.90% 16% to 19% -1% to 3% -12% to -11% -- -11% to -9%
LOOMIS SAYLES STATE STREET RESEARCH SMALL CAP LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- --------------------- 38 851 $10.79 to $238.98 $7.44 to $11.17 $6,406 $6,458 0.00% 0.00% 0.40% to 0.90% 0.48% to 0.90% 15.31% to 16.35% 8.81% to 11.74% 30 721 $9.27 to $205.39 $6.84 $4,423 $4,933 0.00% 0.06% 0.60% to 0.90% 0.60% 35.25% to 36.47% 35.15% 18 589 $6.80 to $150.51 $5.06 $2,408 $2,983 0.11% 0.00% 0.50% to 0.90% 0.60% -22% -33% 11 6 $8.66 to $191.87 $7.57 $1,926 45 7.28% 0.00% 0.60% to 0.90% 0.60% -9% to -4% -16%
F-79 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
MFS MFS INVESTORS TRUST RESEARCH MANAGERS INVESTMENT DIVISION INVESTMENT DIVISION (A) ------------------- ----------------------- 2004 Units (In Thousands).............................................. 367 -- Unit Fair Value, Lowest to Highest (1)............................ $8.87 to $9.28 $ -- Net Assets (In Thousands)......................................... $3,387 $ -- Investment Income Ratio to Net Assets (2)......................... 0.39% 0.52% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.48% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... 10.37% to 11.37% 1.36% to 1.66% 2003 Units (In Thousands).............................................. 186 81 Unit Fair Value, Lowest to Highest (1)............................ $7.96 to $8.33 $6.57 to $8.51 Net Assets (In Thousands)......................................... $1,544 $669 Investment Income Ratio to Net Assets (2)......................... 0.25% 0.78% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... 20.76% to 21.85% 23.00% to 24.10% 2002 Units (In Thousands).............................................. 104 47 Unit Fair Value, Lowest to Highest (1)............................ $6.54 to $6.84 $5.29 to $6.86 Net Assets (In Thousands)......................................... $694 $314 Investment Income Ratio to Net Assets (2)......................... 0.72% 0.30% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to .90% 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... -21% to -20% -25% to -24% 2001 Units (In Thousands).............................................. 43 13 Unit Fair Value, Lowest to Highest (1)............................ $8.19 to $8.57 $6.97 to $9.04 Net Assets (In Thousands)......................................... $322 $151 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.25% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (4)............................... -14% to -3% -17% to -14%
STATE STREET RESEARCH FI BOND INCOME VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION --------------------- ------------------- 2004 Units (In Thousands).............................................. 4,716 101 Unit Fair Value, Lowest to Highest (1)............................ $13.46 to $28.07 $9.52 to $12.01 Net Assets (In Thousands)......................................... $89,174 $1,191 Investment Income Ratio to Net Assets (2)......................... 5.80% 1.10% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.40% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)............................... 3.50% to 4.43% 12.71% to 13.73% 2003 Units (In Thousands).............................................. 5,517 49 Unit Fair Value, Lowest to Highest (1)............................ $12.89 to $27.12 $8.37 to $10.56 Net Assets (In Thousands)......................................... $96,720 $505 Investment Income Ratio to Net Assets (2)......................... 3.06% 0.52% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% 0.60% to .90% Total Return, Lowest to Highest (4)............................... 4.91% to 5.85% 25.79% to 26.92% 2002 Units (In Thousands).............................................. 5,564 12 Unit Fair Value, Lowest to Highest (1)............................ $12.18 to $25.85 $6.59 to $8.32 Net Assets (In Thousands)......................................... $93,158 $93 Investment Income Ratio to Net Assets (2)......................... 5.72% 0.89% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% to 0.90% 0.60% to .090% Total Return, Lowest to Highest (4)............................... 7% to 8% -19% to -17% 2001 Units (In Thousands).............................................. 4,202 3 Unit Fair Value, Lowest to Highest (1)............................ $11.23 to $24.08 $8.19 Net Assets (In Thousands)......................................... $79,483 $25 Investment Income Ratio to Net Assets (2)......................... 5.64% to 7.28% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) .45% to 0.90% 0.60% Total Return, Lowest to Highest (4)............................... 7% to 8% -11%
- -------- (1) Metropolitan Life sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-80
HARRIS OAKMARK SALOMON BROTHERS SALOMON BROTHERS STATE STREET RESEARCH FI MID CAP FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT MONEY MARKET OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (A) - ------------------- ---------------------------- ------------------- --------------------- ----------------------- 154 596 705 1,880 -- $239.40 to $247.40 $14.29 to $14.77 $13.08 to $13.52 $15.36 to $15.93 $ -- $37,845 $8,743 $9,478 $29,162 $ -- 1.00% 2.66% 2.24% 1.03% 9.18% 0.90% 0.90% 0.90% 0.40% to 0.90% 0.90% 8.95% to 9.93% 5.66% to 6.61% 2.09% to 3.01% 0.08% to 0.99% -1.66% to -1.37% 115 375 559 1,760 96 $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 $25,866 $5,163 $7,305 $27,346 $1,112 0.12% 1.70% 1.57% 0.78% 2.26% 0.90% 0.90% 0.90% 0.60% to 0.90% 0.90% 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% 76 177 340 1,981 21 $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 $12,879 $2,174 $4,365 $30,811 $168 0.18% 6.33% 3.47% 1.57% 0.00% 0.90% 0.90% 0.90% 0.45% to 0.90% 0.90% -10% to -9% 9% to 10% 7% to 8% 0% to 1% -19% to -18% 23 41 71 2,156 -- $184.98 to $186.09 $11.15 to $11.22 $11.89 to $11.96 $14.88 to $15.85 $ -- $4,215 $465 $849 $32,726 $ -- 0.00% 0.00% 0.00% 4.18% -- 0.90% 0.90% 0.90% 0.60% to 0.90% -- 12% to 13% 3% to 4% 4% 3% to 4% --
MFS JANUS TOTAL RETURN ASPEN GROWTH INVESTMENT DIVISION (B) INVESTMENT DIVISION - ----------------------- ------------------- 70 509 $10.97 to $11.04 $8.39 $767 $4,277 0.00% 0.15% 0.40% to 0.90% 0.48% to 0.60% 9.73% to 10.39% 4.52% -- 435 $ -- $8.03 $ -- $3,500 -- 0.10% -- 0.60% -- 31.73% -- 354 $ -- $6.10 $ -- $2,163 -- 0.03% -- 0.60% -- -27% -- 236 $ -- $8.30 $ -- $1,959 -- 6.04% -- 0.60% -- -19%
F-81 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
JANUS ASPEN INVESCO VIF BALANCED EQUITY INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION ----------------------- ------------------- 2004 Units (In Thousands).............................................. 0.02184 24 Unit Fair Value, Lowest to Highest (1)............................ $10.85 $10.15 Net Assets (In Thousands)......................................... .237 $240 Investment Income Ratio to Net Assets (2)......................... 3.38% 0.96% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.60% 0.48% Total Return, Lowest to Highest (4)............................... 8.52% 4.24% 2003 Units (In Thousands).............................................. -- 19 Unit Fair Value, Lowest to Highest (1)............................ $ -- $9.73 Net Assets (In Thousands)......................................... $ -- $184 Investment Income Ratio to Net Assets (2)......................... -- 1.26% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- 22.60% 2002 Units (In Thousands).............................................. -- 15 Unit Fair Value, Lowest to Highest (1)............................ $ -- $7.94 Net Assets (In Thousands)......................................... $ -- $125 Investment Income Ratio to Net Assets (2)......................... -- 1.74% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- -19% 2001 Units (In Thousands).............................................. -- 12 Unit Fair Value, Lowest to Highest (1)............................ $ -- $9.81 Net Assets (In Thousands)......................................... $ -- $122 Investment Income Ratio to Net Assets (2)......................... -- 2.61% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- -7%
AIM AIM GOVERNMENT SECURITIES REAL ESTATE INVESTMENT DIVISION (B) INVESTMENT DIVISION (A) ----------------------- ----------------------- 2004 Units (In Thousands).............................................. 0.42005 55 Unit Fair Value, Lowest to Highest (1)............................ $10.26 $23.91 Net Assets (In Thousands)......................................... $4 $1,308 Investment Income Ratio to Net Assets (2)......................... 1.39% 4.02% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.40% 0.40% to 0.60% Total Return, Lowest to Highest (4)............................... 2.60% 34.40% 2003 Units (In Thousands).............................................. -- 10 Unit Fair Value, Lowest to Highest (1)............................ $ -- $17.79 Net Assets (In Thousands)......................................... $ -- $179 Investment Income Ratio to Net Assets (2)......................... -- 1.49% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- 38.82% 2002 Units (In Thousands).............................................. -- 14 Unit Fair Value, Lowest to Highest (1)............................ $ -- $12.82 Net Assets (In Thousands)......................................... $ -- $179 Investment Income Ratio to Net Assets (2)......................... -- 1.40% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- -6% 2001 Units (In Thousands).............................................. -- 7 Unit Fair Value, Lowest to Highest (1)............................ $ -- $12.05 Net Assets (In Thousands)......................................... $ -- $89 Investment Income Ratio to Net Assets (2)......................... -- 1.16% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.60% Total Return, Lowest to Highest (4)............................... -- 1%
- -------- (1) Metropolitan Life sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-82
FRANKLIN TEMPLETON ALLIANCE ALLIANCE FIDELITY FIDELITY INTERNATIONAL STOCK GROWTH & INCOME TECHNOLOGY CONTRAFUND ASSET MANAGER GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- ------------------- ------------------- -------------------- 444 275 4 77 83 $11.92 $11.65 $4.77 $10.59 $8.47 $5,300 $3,200 $21 $819 $704 1.12% 0.57% 0.00% 0.21% 2.23% 0.48% to 0.60% 0.48% to 0.60% 0.48% to 0.60% 0.40% to 0.60% 0.48% 18.87% 11.22% 5.09% 15.34% 5.85% 403 197 10 97 54 $10.03 $10.47 $4.54 $9.18 $8.00 $4,054 $2,063 $46 $894 $433 1.52% 0.70% 0.00% 0.15% 2.96% 0.60% 0.60% 0.60% 0.60% 0.60% 32.55% 32.18% 43.79% 28.35% 23.15% 344 150 6 35 20 $7.57 $7.92 $3.16 $7.16 $6.50 $2,612 $1,191 $18 $249 $131 2.03% 3.31% 5.08% 0.14% 3.23% 0.60% 0.60% 0.60% 0.60% 0.60% -18% -22% -42% -10% -18% 189 65 2 3 13 $9.27 $10.19 $5.43 $7.96 $7.89 $1,767 $656 $13 $24 $95 14.19% 0.91% 6.23% 0.00% 0.00% 0.60% 0.60% 0.60% 0.60% 0.60% -16% 2% -35% -12% -10%
FIDELITY FIDELITY GROWTH INVESTMENT GRADE BOND INVESTMENT DIVISION INVESTMENT DIVISION (B) - ------------------- ----------------------- 57 1 $6.47 $10.43 $371 $13 0.11% 0.00% 0.40% to 0.60% .40% 3.26% 4.27% 47 -- $6.27 $ -- $296 $ -- 0.08% -- 0.60% -- 32.78% -- 28 -- $4.72 $ -- $134 $ -- 0.12% -- 0.60% -- -30% -- 13 -- $6.77 $ -- $87 $ -- 0.00% -- 0.60% -- -20% --
F-83 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
FIDELITY AMERICAN FUNDS EQUITY-INCOME GROWTH INVESTMENT DIVISION (B) INVESTMENT DIVISION ----------------------- ------------------- 2004 Units (In Thousands).............................................. 1 657 Unit Fair Value, Lowest to Highest (1)............................ $11.02 $67.49 to $69.75 Net Assets (In Thousands)......................................... $10 $45,572 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.20% Expenses as a percent of Average Net Assets, Lowest to Highest (3) .40% 0.90% Total Return, Lowest to Highest (4)............................... 10.25% 11.49% to 12.50% 2003 Units (In Thousands).............................................. -- 417 Unit Fair Value, Lowest to Highest (1)............................ $ -- $60.53 to $62.00 Net Assets (In Thousands)......................................... $ -- $25,760 Investment Income Ratio to Net Assets (2)......................... -- 0.13% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.90% Total Return, Lowest to Highest (4)............................... -- 35.59% to 36.81% 2002 Units (In Thousands).............................................. -- 221 Unit Fair Value, Lowest to Highest (1)............................ $ -- $44.64 to $45.32 Net Assets (In Thousands)......................................... $ -- $9,992 Investment Income Ratio to Net Assets (2)......................... -- 0.05% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.90% Total Return, Lowest to Highest (4)............................... -- -25% to -24% 2001 Units (In Thousands).............................................. -- 53 Unit Fair Value, Lowest to Highest (1)............................ $ -- $59.63 to $59.99 Net Assets (In Thousands)......................................... $ -- $3,176 Investment Income Ratio to Net Assets (2)......................... -- 4.25% Expenses as a percent of Average Net Assets, Lowest to Highest (3) -- 0.90% Total Return, Lowest to Highest (4)............................... -- -15% to -14%
AMERICAN FUNDS AMERICAN FUNDS GROWTH-INCOME GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------------- 2004 Units (In Thousands).............................................. 811 676 Unit Fair Value, Lowest to Highest (1)............................ $41.61 to $43.00 $18.04 to $18.64 Net Assets (In Thousands)......................................... $34,702 $12,528 Investment Income Ratio to Net Assets (2)......................... 1.00% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.90% 0.90% Total Return, Lowest to Highest (4)............................... 9.39% to 10.37% 19.80% to 20.88% 2003 Units (In Thousands).............................................. 525 378 Unit Fair Value, Lowest to Highest (1)............................ $38.04 to $38.96 $15.06 to $15.42 Net Assets (In Thousands)......................................... $20,369 $5,801 Investment Income Ratio to Net Assets (2)......................... 1.18% 0.49% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.90% 0.90% Total Return, Lowest to Highest (4)............................... 31.25% to 32.43% 52.16% to 53.53% 2002 Units (In Thousands).............................................. 287 203 Unit Fair Value, Lowest to Highest (1)............................ $28.98 to $29.42 $9.90 to $10.05 Net Assets (In Thousands)......................................... $8,408 $2,033 Investment Income Ratio to Net Assets (2)......................... 1.74% 0.81% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.90% 0.90% Total Return, Lowest to Highest (4)............................... -19% to -18% -20% to -19% 2001 Units (In Thousands).............................................. 68 49 Unit Fair Value, Lowest to Highest (1)............................ $35.81 to $36.03 $12.34 to $12.41 Net Assets (In Thousands)......................................... $2,453 $619 Investment Income Ratio to Net Assets (2)......................... 0.82% 1.15% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.90% 0.90% Total Return, Lowest to Highest (4)............................... -3% -9% to -8%
- -------- (1) Metropolitan Life sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-84
T. ROWE PRICE MFS PIMCO PIMCO LORD ABBETT MID CAP GROWTH RESEARCH INTERNATIONAL TOTAL RETURN PEA INNOVATION BOND DEBENTURE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ---------------------- ------------------- ------------------- ------------------- 856 235 1,483 1,273 1,015 $7.35 to $11.44 $11.51 to $11.90 $12.48 to $12.90 $4.47 to 4.62 $13.83 to $16.22 $6,475 $2,781 $19,020 $5,849 $15,142 0.00% 0.27% 7.63% 0.09% 4.15% 0.60% to 0.90% 0.90% 0.90% 0.90% 0.40% to 0.90% 14.40% to 18.15% 18.65% to 19.72% 4.31% to 5.25% -5.13% to -4.28% 7.46% to 9.61% 527 151 1,042 932 963 $6.28 to $6.43 $9.70 to $9.94 $11.96 to $12.25 $4.72 to $4.83 $9.21 to $14.95 $3,375 $1,497 $12,697 $4,481 $12,846 0.00% 0.97% 2.70% 0.00% 1.85% 0.90% 0.90% 0.90% 0.90% 0.45% to 0.90% 35.90% to 37.12% 31.01% to 32.19% 3.59% to 4.52% 56.44% to 57.84% 17.17% to 25.04% 294 95 534 416 748 $4.62 to $4.69 $7.41 to $7.52 $11.55 to $11.72 $3.01 to $3.06 $7.37 to $12.51 $1,373 $714 $6,214 $1,269 $9,072 0.82% 0.25% 0.00% 0.00% 11.43% 0.90% 0.90% 0.90% 0.90% 0.45% to 0.90% -44% -12% 9% to 10% -51% -1% to 1% 68 28 103 121 774 $8.32 to $8.37 $8.44 to $8.50 $10.64 to $10.70 $6.15 to $6.19 $10.83 to $12.35 $564 $238 $1,103 $749 $8,845 0.00% 0.07% 2.37% 0.00% 11.73% 0.90% 0.90% 0.90% 0.90% 0.45% to 0.90% -16% to -15% -13% to -12% 6% -25% -2% to -1%
MET/AIM MET/AIM MID CAP CORE EQUITY SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION - ------------------- ------------------- 172 101 $12.14 to $12.43 $11.06 to $11.33 $2,124 $1,143 0.00% 0.00% 0.90% 0.90% 13.57% to 14.60% 5.78% to 6.73% 92 60 $10.69 to $10.85 $10.46 to $10.62 $989 $643 1.35% 0.00% 0.90% 0.90% 25.29% to 26.42% 37.84% to 39.08% 30 15 $8.53 to $8.58 $7.59 to $7.63 $253 $116 0.00% 0.00% 0.90% 0.90% -15% to -14% -24% -- -- $ -- $ -- $ -- $ -- -- -- -- -- -- --
F-85 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. UNIT VALUES -- (CONTINUED) The following table is 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 portfolios, for the periods ended December 31, 2004, 2003, 2002 and 2001, respectively, or lesser time period if applicable.
HARRIS OAKMARK JANUS LORD ABBETT NEUBERGER BERMAN INTERNATIONAL AGGRESSIVE GROWTH GROWTH & INCOME REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (B) ------------------- ------------------- ------------------- ----------------------- 2004 Units (In Thousands)........................ 289 742 6 152 Unit Fair Value, Lowest to Highest (1)...... $13.45 to $13.77 $6.60 to $7.68 $9.15 $12.90 to $12.97 Net Assets (In Thousands)................... $3,963 $5,657 $54,684 $1,965 Investment Income Ratio to Net Assets (2)... 0.04% 0.00% 0.55% 7.50% Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... 0.90% 0.48% to 0.90% 0.48% to 0.60% 0.40% to 0.90% Total Return, Lowest to Highest (4)......... 19.73% to 20.80% 7.85% to 8.82% 12.92% 28.97% to 29.74% 2003 Units (In Thousands)........................ 72 583 3 -- Unit Fair Value, Lowest to Highest (1)...... $11.23 to $11.40 $6.10 to $7.06 $8.10 $ -- Net Assets (In Thousands)................... $814 $4,087 $20,529 $ -- Investment Income Ratio to Net Assets (2)... 1.84% 0.00% 0.00% -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... 0.90% 0.60% to 0.90% 0.60% -- Total Return, Lowest to Highest (4)......... 34.16% to 35.37% 23.37% to 29.93% 29.15% -- 2002 Units (In Thousands)........................ 18 381 -- -- Unit Fair Value, Lowest to Highest (1)...... $8.37 to $8.42 $4.94 to $5.43 $ -- $ -- Net Assets (In Thousands)................... $150 $2,088 $ -- $ -- Investment Income Ratio to Net Assets (2)... 0.00% 0.00% -- -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... 0.90% 0.60% to 0.90% -- -- Total Return, Lowest to Highest (4)......... -16% -31% -- -- 2001 Units (In Thousands)........................ -- 122 -- -- Unit Fair Value, Lowest to Highest (1)...... $ -- $7.15 to $7.82 $ -- $ -- Net Assets (In Thousands)................... $ -- $1,051 $ -- $ -- Investment Income Ratio to Net Assets (2)... -- 0.00% -- -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... -- 0.60% to 0.90% -- -- Total Return, Lowest to Highest (4)......... -- -23% to -14% -- --
LORD ABBETT MID-CAP VALUE INVESTMENT DIVISION (B) ----------------------- 2004 Units (In Thousands)........................ 0.02095 Unit Fair Value, Lowest to Highest (1)...... $11.76 Net Assets (In Thousands)................... .246 Investment Income Ratio to Net Assets (2)... 4.88% Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... 0.60% Total Return, Lowest to Highest (4)......... 17.59% 2003 Units (In Thousands)........................ -- Unit Fair Value, Lowest to Highest (1)...... $ -- Net Assets (In Thousands)................... $ -- Investment Income Ratio to Net Assets (2)... -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... -- Total Return, Lowest to Highest (4)......... -- 2002 Units (In Thousands)........................ -- Unit Fair Value, Lowest to Highest (1)...... $ -- Net Assets (In Thousands)................... $ -- Investment Income Ratio to Net Assets (2)... -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... -- Total Return, Lowest to Highest (4)......... -- 2001 Units (In Thousands)........................ -- Unit Fair Value, Lowest to Highest (1)...... $ -- Net Assets (In Thousands)................... $ -- Investment Income Ratio to Net Assets (2)... -- Expenses as a percent of Average Net Assets, Lowest to Highest (3)...................... -- Total Return, Lowest to Highest (4)......... --
- -------- (1) Metropolitan Life sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy 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 portfolio manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that are assessed against policy owner accounts either through the reduction of 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 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. (a) For the Period January 1, 2004 to April 30, 2004 (b) For the Period May 3, 2004 to December 31, 2004 (c) Formerly, Janus Mid Cap Investment Division F-86
THIRD AVENUE DREYFUS DREYFUS GOLDMAN SACHS MFS SMALL CAP VALUE INTERNATIONAL VALUE APPRECIATION MID CAP VALUE HIGH INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) - ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- 0.36550 1 0.32426 1 5 $12.06 $11.60 $10.29 $10.97 $10.84 $4 $16 $3 $12 $51 4.31% 16.27% 2.88% 19.94% 0.00% 0.40% 0.40% 0.60% 0.40% to 0.48% 0.48% 20.58% 15.99% 2.91% 9.71% 8.43% -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
WELLS FARGO WELLS FARGO LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) - ----------------------- ----------------------- 0.41596 0.40184 $10.42 $10.80 $4 $4 0.00% 0.00% 0.40% 0.40% 4.23% 8.03% -- -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- $ -- $ -- $ -- $ -- -- -- -- -- -- --
F-87 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED) 7. PORTFOLIO MERGERS, CHANGE OF PORTFOLIO NAME AND SHARE SUBSTITUTIONS Effective May 3, 2004, FI Mid Cap Opportunities Portfolio and MFS Research Managers Portfolio merged into Janus Mid Cap Portfolio and MFS Investors Trust Portfolio, respectively. Janus Mid Cap Portfolio subsequently changed its name to FI Mid Cap Opportunities Portfolio. Effective May 3, 2004, Invesco Real Estate Opportunities Portfolio, PIMCO Innovation Portfolio and FI Structured Equity Portfolio changed their names to AIM Real Estate Portfolio, PIMCO PEA Innovation Portfolio and FI Value Leaders Portfolio, respectively. Effective May 3, 2004, Alger Equity Growth Investment Division and Franklin Templeton Small Cap Valuemark Investment Division substituted all of their shares in Alger Equity Growth Portfolio of the Metropolitan Fund and Franklin Templeton Small Cap Valuemark Portfolio of the Franklin Fund, respectively for shares in State Street Research Large Cap Growth Portfolio and T. Rowe Price Small Cap Growth Portfolio of the Metropolitan Fund, respectively and subsequently changed their names to State Street Research Large Cap Growth Investment Division and T. Rowe Price Small Cap Investment Division. Effective May 3, 2004, Alliance Premier Growth Investment Division and Invesco High Yield Investment Division substituted all of their shares in Alliance Premier Growth Portfolio of the Alliance Fund and Invesco High Yield Portfolio of the Invesco Fund, respectively, for shares in Janus Aggressive Growth Portfolio and Lord Abbett Bond Debenture Portfolio of the Met Investors Fund, respectively and subsequently changed their names to Janus Aggressive Growth Investment Division and Lord Abbett Bond Debenture Investment Division. 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. 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 and 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. 8. SUBSEQUENT EVENT On August 25, 2004, Metropolitan Life entered into an agreement to sell its wholly owned subsidiary, SSRM Holdings Inc. ("SSRM") and its subsidiaries State Street Research & Management Company and SSR Realty Advisors Inc. to BlackRock Inc. Effective January 31, 2005, BlackRock Advisors, Inc. replaced State Street Research & Management Company as subadvisor to all portfolios, series or funds previously managed by State Street Research & Management Company. F-88 METFLEX A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE POLICY METROPOLITAN LIFE SEPARATE ACCOUNT UL ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2005 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the prospectus dated May 1, 2005 for MetFlex--A Flexible Premium Variable Universal Life Policy. A copy of that prospectus may be obtained by writing to MetLife--SBR, 485-B Route One South, Suite 420, Iselin, NJ 08830. B-1 TABLE OF CONTENTS The Company and the Separate Account....................... 3 Additional Information about the Operations of the Policies 3 Limits to MetLife's Right to Challenge the Policy......... 3 Misstatement of Age or Sex................................ 3 Dividends................................................. 3 Payment and Deferment..................................... 3 Additional Information about Voting........................ 4 Additional Information about Commissions................... 4 Legal and Actuarial Matters................................ 4 Experts.................................................... 5 Financial Statements....................................... 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 200 Park Avenue, New York, New York 10166. 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 individuals in approximately 13 million households in the U.S. and provide benefits to 37 million employees and family members through their plan sponsors. Outside the U.S., the MetLife companies serve approximately 9 million customers through direct insurance operations in Argentina, Brazil, Chile, China, Hong Kong, India, Indonesia, Mexico, South Korea, Taiwan and Uruguay. 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 OPERATION OF THE POLICIES LIMITS TO METLIFE'S RIGHT TO CHALLENGE THE POLICY We will not contest: .. Your Policy after 2 Policy years from issue or reinstatement (excluding riders added later). .. An increase in a death benefit after it has been in effect for two years. MISSTATEMENT OF AGE OR SEX We will adjust benefits to reflect the correct age and sex of the insured, if this information isn't correct in the Policy application. DIVIDENDS The Policy is "nonparticipating," which means it is not eligible for dividends from us and does not share in any distributions of our surplus. PAYMENT AND DEFERMENT We can delay transfers, withdrawals, surrender and payment of Policy 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 a Policy. .. The Securities and Exchange Commission by order permits us to do so for the protection of Policy owners (provided that the delay is permitted under New York State insurance law and regulations). .. With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. .. We are paying amounts attributable to a check. In that case we can wait for a reasonable time (15 days or less) to let the check clear. We currently pay interest on the amount of insurance proceeds at 3% per year (or higher if state law requires) from the date of death until the date we pay the benefit. B-3 ADDITIONAL INFORMATION ABOUT 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 Policy owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: .. Your Policy's cash value in the corresponding investment division; by .. The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Policy owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. Also, we will vote Fund shares that are not attributable to insurance or annuity owners (including shares that we hold in our general account) or that are held in separate accounts that are not registered under the 1940 Act in the same proportion as the aggregate of the shares for which we received voting instructions from all insurance and annuity owners. ADDITIONAL INFORMATION ABOUT COMMISSIONS Maximum commissions are generally: .. Policy Year 1: 28% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 2-4: 8.25% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 5-7: 2.5% of premiums paid up to the target premium 2.5% of premiums paid above the target premium .. Policy Years 8 and Later: 2.5% of premiums paid up to the target premium 2.5% of premiums paid above the target premium We may pay up to .10% of the cash value of a Policy in certain circumstances. We paid commissions of $5,115,258, $2,617,461 and $2,825,616 in 2002, 2003 and 2004 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 Marie C. Swift, Associate General Counsel at MetLife, has passed upon the legality of the Policies. The law firm of Sutherland Asbill & Brennan LLP, Washington, D.C., has advised us on certain matters relating to the federal securities laws. Sebastian Janssen, 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. B-4 EXPERTS The financial statements of 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 certain non-traditional long duration contracts and separate accounts, and for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on January 1, 2004 and October 1, 2003, respectively) included in this Statement of Additional Information have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein, and are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The principal business address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, FL 33602-5827. FINANCIAL STATEMENTS The financial statements of MetLife are attached to the Statement of Additional Information. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Policy. B-5 INDEPENDENT AUDITOR'S REPORT The Board of Directors and Shareholder of Metropolitan Life Insurance Company New York, New York We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2004 and 2003, 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, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Metropolitan Life Insurance Company and subsidiaries at December 31, 2004 and 2003, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 2004 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 certain non-traditional long duration contracts and separate accounts, and for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on January 1, 2004 and October 1, 2003, respectively, and recorded the impact as cumulative effects of changes in accounting principles. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York March 31, 2005 1 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2004 AND 2003 (DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2004 2003 -------- -------- ASSETS Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $141,512 and $134,844, respectively)................................................................... $150,246 $143,148 Equity securities, at fair value (cost: $1,646 and $885, respectively)......................... 1,903 1,232 Mortgage and other loans....................................................................... 31,571 26,637 Policy loans................................................................................... 8,256 8,180 Real estate and real estate joint ventures held-for-investment................................. 3,069 2,654 Real estate held-for-sale...................................................................... 252 472 Other limited partnership interests............................................................ 2,891 2,584 Short-term investments......................................................................... 1,195 1,303 Other invested assets.......................................................................... 4,908 4,795 -------- -------- Total investments........................................................................... 204,291 191,005 Cash and cash equivalents.......................................................................... 2,373 2,343 Accrued investment income.......................................................................... 2,006 1,922 Premiums and other receivables..................................................................... 5,498 6,170 Deferred policy acquisition costs.................................................................. 11,071 10,232 Assets of subsidiaries held-for-sale............................................................... 379 183 Other assets....................................................................................... 5,863 5,749 Separate account assets............................................................................ 68,507 63,661 -------- -------- Total assets................................................................................ $299,988 $281,265 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Future policy benefits......................................................................... $ 91,603 $ 86,802 Policyholder account balances.................................................................. 68,369 61,725 Other policyholder funds....................................................................... 8,553 6,948 Policyholder dividends payable................................................................. 1,058 1,046 Policyholder dividend obligation............................................................... 2,243 2,130 Short-term debt................................................................................ 1,445 3,536 Long-term debt................................................................................. 2,050 2,055 Shares subject to mandatory redemption......................................................... 278 277 Liabilities of subsidiaries held-for-sale...................................................... 240 70 Current income taxes payable................................................................... 709 791 Deferred income taxes payable.................................................................. 2,671 2,696 Payables under securities loaned transactions.................................................. 25,230 24,065 Other liabilities.............................................................................. 8,040 7,990 Separate account liabilities................................................................... 68,507 63,661 -------- -------- Total liabilities........................................................................... 280,996 263,792 -------- -------- Stockholder's Equity: Parent's interest in preferred stock of a subsidiary, 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, 2004 and 2003..................................................... 5 5 Additional paid-in capital......................................................................... 13,827 13,730 Retained earnings.................................................................................. 2,696 1,261 Accumulated other comprehensive income............................................................. 2,464 2,384 -------- -------- Total stockholder's equity..................................................................... 18,992 17,473 -------- -------- Total liabilities and stockholder's equity..................................................... $299,988 $281,265 ======== ========
See accompanying notes to consolidated financial statements. 2 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (DOLLARS IN MILLIONS)
2004 2003 2002 ------- ------- ------- REVENUES Premiums........................................................... $17,512 $18,151 $18,461 Universal life and investment-type product policy fees............. 2,042 1,921 1,927 Net investment income.............................................. 10,805 10,279 10,553 Other revenues..................................................... 712 919 1,188 Net investment gains (losses)...................................... 289 (557) (832) ------- ------- ------- Total revenues.................................................. 31,360 30,713 31,297 ------- ------- ------- EXPENSES Policyholder benefits and claims................................... 18,735 18,444 18,709 Interest credited to policyholder account balances................. 2,358 2,379 2,711 Policyholder dividends............................................. 1,743 1,897 1,911 Other expenses..................................................... 5,382 5,633 6,348 ------- ------- ------- Total expenses.................................................. 28,218 28,353 29,679 ------- ------- ------- Income from continuing operations before provision for income taxes 3,142 2,360 1,618 Provision for income taxes......................................... 894 667 498 ------- ------- ------- Income from continuing operations.................................. 2,248 1,693 1,120 Income from discontinued operations, net of income taxes........... 43 334 492 ------- ------- ------- Income before cumulative effect of a change in accounting.......... 2,291 2,027 1,612 Cumulative effect of a change in accounting, net of income taxes... (52) (26) -- ------- ------- ------- Net income......................................................... $ 2,239 $ 2,001 $ 1,612 ======= ======= =======
See accompanying notes to consolidated financial statements. 3 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (DOLLARS IN MILLIONS)
PARENT'S INTEREST IN ADDITIONAL PREFERRED STOCK COMMON PAID-IN RETAINED OF A SUBSIDIARY STOCK CAPITAL EARNINGS --------------- ------ ---------- -------- Balance at January 1, 2002........................... $ -- $ 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 (loss): Net income........................................ 1,612 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... Foreign currency translation adjustments........ Other comprehensive income (loss)............... Comprehensive income (loss)....................... ---- --- ------- ------- Balance at December 31, 2002......................... -- 5 13,474 708 Issuance of preferred stock by subsidiary to the Holding Company..................................... 93 Issuance of shares--by subsidiary.................... 24 Issuance of stock options--by subsidiary............. 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 (loss): Net income........................................ 2,001 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... Foreign currency translation adjustments........ Minimum pension liability adjustment............ Other comprehensive income (loss)............... Comprehensive income (loss)....................... ---- --- ------- ------- Balance at December 31, 2003......................... 93 5 13,730 1,261 Contribution of preferred stock by Holding Company to subsidiary and retirement thereof................ (93) Issuance of shares--by subsidiary.................... 4 Issuance of stock options--by subsidiary............. 2 Capital contribution from the Holding Company........ 94 Return of capital to the Holding Company............. (3) Dividends on preferred stock......................... (7) Dividends on common stock............................ (797) Comprehensive income (loss): Net income........................................ 2,239 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... Cumulative effect of a change in accounting, net of income taxes............................ Foreign currency translation adjustments........ Minimum pension liability adjustment............ Other comprehensive income (loss)............... Comprehensive income (loss)....................... ---- --- ------- ------- Balance at December 31, 2004......................... $ -- $ 5 $13,827 $ 2,696 ==== === ======= =======
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) -------------------------------------------- NET FOREIGN MINIMUM UNREALIZED CURRENCY PENSION INVESTMENT TRANSLATION LIABILITY GAINS (LOSSES) ADJUSTMENT ADJUSTMENT TOTAL -------------- ----------- ---------- ------- Balance at January 1, 2002........................... $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 (loss): Net income........................................ 1,612 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... (58) (58) Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... 250 250 Foreign currency translation adjustments........ 72 72 ------- Other comprehensive income (loss)............... 264 ------- Comprehensive income (loss)....................... 1,876 ------ ----- ----- ------- Balance at December 31, 2002......................... 1,991 (67) (46) 16,065 Issuance of preferred stock by subsidiary to the Holding Company..................................... 93 Issuance of shares--by subsidiary.................... 24 Issuance of stock options--by subsidiary............. 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 (loss): Net income........................................ 2,001 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... (228) (228) Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... 642 642 Foreign currency translation adjustments........ 174 174 Minimum pension liability adjustment............ (82) (82) ------- Other comprehensive income (loss)............... 506 ------- Comprehensive income (loss)....................... 2,507 ------ ----- ----- ------- Balance at December 31, 2003......................... 2,405 107 (128) 17,473 Contribution of preferred stock by Holding Company to subsidiary and retirement thereof................ (93) Issuance of shares--by subsidiary.................... 4 Issuance of stock options--by subsidiary............. 2 Capital contribution from the Holding Company........ 94 Return of capital to the Holding Company............. (3) Dividends on preferred stock......................... (7) Dividends on common stock............................ (797) Comprehensive income (loss): Net income........................................ 2,239 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............... (77) (77) Unrealized investment gains (losses), net of related offsets, reclassification adjustments and income taxes................... 19 19 Cumulative effect of a change in accounting, net of income taxes............................ 61 61 Foreign currency translation adjustments........ 79 79 Minimum pension liability adjustment............ (2) (2) ------- Other comprehensive income (loss)............... 80 ------- Comprehensive income (loss)....................... 2,319 ------ ----- ----- ------- Balance at December 31, 2004......................... $2,408 $ 186 $(130) $18,992 ====== ===== ===== =======
See accompanying notes to consolidated financial statements. 4 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (DOLLARS IN MILLIONS)
2004 2003 2002 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................................. $ 2,239 $ 2,001 $ 1,612 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.............................. 342 386 432 Amortization of premiums and accretion of discounts associated with investments, net.................................................. (15) (162) (456) (Gains) losses from sales of investments and businesses, net........ (289) 125 256 Interest credited to other policyholder account balances............ 2,358 2,379 2,711 Universal life and investment-type product policy fees.............. (2,042) (1,921) (1,927) Change in premiums and other receivables............................ 460 (81) (1,878) Change in deferred policy acquisition costs, net.................... (752) (902) (766) Change in insurance-related liabilities............................. 4,939 4,210 4,550 Change in income taxes payable...................................... (101) 250 684 Change in other assets.............................................. (71) (351) (1,011) Change in other liabilities......................................... 51 319 118 Other, net.......................................................... (205) (134) 74 -------- -------- -------- Net cash provided by operating activities.............................. 6,914 6,119 4,399 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturities.................................................... 78,494 69,292 61,473 Equity securities................................................... 1,587 576 2,676 Mortgage and other loans............................................ 3,961 3,221 2,555 Real estate and real estate joint ventures.......................... 382 865 888 Other limited partnership interests................................. 800 330 213 Purchases of: Fixed maturities.................................................... (83,243) (90,122) (79,509) Equity securities................................................... (2,107) (104) (1,235) Mortgage and other loans............................................ (8,639) (4,354) (3,111) Real estate and real estate joint ventures.......................... (484) (255) (146) Other limited partnership interests................................. (893) (643) (507) Net change in short-term investments................................... 215 (183) (308) Proceeds from sales of businesses...................................... 18 1,995 749 Net change in payable under securities loaned transactions............. 1,166 7,744 3,659 Net change in other invested assets.................................... (459) (940) (486) Other, net............................................................. (371) (201) (329) -------- -------- -------- Net cash used in investing activities.................................. $ (9,573) $(12,779) $(13,418) -------- -------- --------
See accompanying notes to consolidated financial statements. 5 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (DOLLARS IN MILLIONS)
2004 2003 2002 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits............................................................. $ 28,277 $ 29,054 $ 30,350 Withdrawals.......................................................... (22,702) (22,268) (24,773) Net change in short-term debt........................................... (2,072) 2,624 567 Long-term debt issued................................................... 20 145 537 Long-term debt repaid................................................... (28) (714) (221) Capital contribution from the Holding Company........................... -- 148 649 Proceeds from offering of common stock by subsidiary, net............... -- 398 -- Dividends on preferred stock............................................ (7) -- -- Dividends on common stock............................................... (797) (1,448) (904) Other, net.............................................................. 3 8 (12) -------- -------- -------- Net cash provided by financing activities............................... 2,694 7,947 6,193 -------- -------- -------- Change in cash and cash equivalents..................................... 35 1,287 (2,826) Cash and cash equivalents, beginning of year............................ 2,393 1,106 3,932 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR.................................. $ 2,428 $ 2,393 $ 1,106 ======== ======== ======== Cash and cash equivalents, subsidiaries held-for-sale, beginning of year 50 54 50 ======== ======== ======== CASH AND CASH EQUIVALENTS, SUBSIDIARIES HELD-FOR-SALE, END OF YEAR...... 55 50 54 ======== ======== ======== Cash and cash equivalents, from continuing operations, beginning of year 2,343 1,052 3,882 ======== ======== ======== CASH AND CASH EQUIVALENTS, FROM CONTINUING OPERATIONS, END OF YEAR...... 2,373 2,343 1,052 ======== ======== ======== Supplemental disclosures of cash flow information: Net cash paid during the year for: Interest......................................................... $ 140 $ 307 $ 243 ======== ======== ======== Income taxes..................................................... $ 950 $ 789 $ 96 ======== ======== ======== Non-cash transactions during the year: Purchase money mortgage on real estate sale...................... $ 2 $ 196 $ 954 ======== ======== ======== Real estate acquired in satisfaction of debt..................... $ 7 $ 14 $ 30 ======== ======== ======== Transfer from funds withheld at interest to fixed maturities..... $ 606 $ -- $ -- ======== ======== ======== Contribution of equity securities to MetLife Foundation.......... $ 50 $ -- $ -- ======== ======== ========
See accompanying notes to consolidated financial statements. 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 individual and institutional customers. The Company offers life insurance and annuities, to individuals, as well as group insurance, reinsurance and retirement & savings products and services to corporations and other institutions. Metropolitan Life is a wholly-owned subsidiary of MetLife, Inc. (the "Holding Company"). The Company offered automobile and homeowners insurance through Metropolitan Property and Casualty Insurance Company and its subsidiaries ("Met P&C"), which was sold to the Holding Company in 2003. BASIS OF PRESENTATION 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 control; and (iii) variable interest entities ("VIEs") for 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). Assets, liabilities, revenues and expenses of the general account for 2004 include amounts related to certain separate accounts previously reported in separate account assets and liabilities. See "--Application of Recent Accounting Pronouncements." Intercompany accounts and transactions have been eliminated. 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 the Holding Company in 2002; Met P&C, Metropolitan Tower Life Insurance Company ("MTL"), MetLife General Insurance Agency, Inc. and its subsidiaries, MetLife Securities, Inc. and N.L. Holding Corporation and its subsidiaries, which were sold to the Holding Company in 2003; and Newbury Insurance Company, Limited which was sold to the Holding Company and New England Pension and Annuity Company which was sold to MTL in 2004, are included in the accompanying consolidated financial statements until the respective dates of sale. On August 25, 2004, the Company entered into an agreement to sell its wholly owned subsidiary, SSRM Holdings, Inc. ("SSRM"), to a third party. On January 31, 2005, the Company completed the sale of SSRM. The Company has reclassified the assets, liabilities and operations of SSRM into discontinued operations for all periods presented in the consolidated financial statements. (See Note 15). The Company uses the equity method of accounting for investments in equity securities in which it has more than a 20% interest and for 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 and is not the primary beneficiary. The Company uses the cost method of accounting for real estate joint ventures and other limited partnership 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 $1,325 million and $1,233 million at December 31, 2004 and 2003, respectively. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2004 presentation. SUMMARY OF CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to adopt accounting policies and make estimates and 7 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) assumptions that affect amounts reported in the consolidated financial statements. The most critical estimates include those used in determining: (i) investment impairments; (ii) the fair value of investments in the absence of quoted market values; (iii) application of the consolidation rules to certain investments; (iv) the fair value of and accounting for derivatives; (v) the capitalization and amortization of deferred policy acquisition costs ("DAC"), including value of business acquired ("VOBA"); (vi) the liability for future policyholder benefits; (vii) the liability for litigation and regulatory matters; and (viii) accounting for reinsurance transactions and employee benefit plans. 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. Actual results could differ from those estimates. INVESTMENTS The Company's principal investments are in fixed maturities, mortgage and other 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 or amortized 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) the Company's ability and intent to hold the security for a period of time sufficient to allow for the recovery of its value to an amount equal to or greater than cost or amortized cost; (vii) unfavorable changes in forecasted cash flows on asset-backed securities; and (viii) 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. 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 8 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) and engages in certain reinsurance contracts that have embedded 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 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 common industry practice, in its determination of the capitalization and amortization of DAC including 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. LIABILITY FOR FUTURE POLICY BENEFITS The Company establishes liabilities for amounts payable under insurance policies, including traditional life insurance, traditional annuities and non-medical health 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. Differences between actual experience and the assumptions used in pricing these policies and in the establishment of liabilities result in variances in profit and could result in losses. The effects of changes in such estimated reserves are included in the results of operations in the period in which the changes occur. 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 9 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to 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 and regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact 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 assumptions 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. On a quarterly and annual basis the Company reviews relevant information with respect to liabilities for litigation, regulatory investigations and contingencies to be reflected in the Company's consolidated financial statements. The review includes senior legal and financial personnel. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, 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. 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- 10 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) than-temporary in the period that determination is made. These adjustments are recorded as investment losses. The assessment of whether such impairment has 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, as described in "Summary of Critical Accounting Estimates-Investments," 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. The Company's review of its fixed maturities and equity securities for impairments also includes an analysis of the total gross unrealized losses by three categories of securities: (i) securities where the estimated fair value had declined and remained below cost or amortized cost by less than 20%; (ii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for less than six months; and (iii) securities where the estimated fair value had declined and remained below cost or amortized cost by 20% or more for six months or greater. Investment gains and losses on sales of securities are determined on a specific identification basis. All security transactions are recorded on a trade date basis. Amortization of premium and accretion of discount on fixed maturity securities is recorded using the effective interest method. Mortgage loans on real estate are stated at amortized cost, net of valuation allowances. Valuation allowances are recorded 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 established for the excess carrying value of the mortgage loan over the present value of expected future cash flows discounted at the loan's original effective interest rate, the value of the loan's collateral or the loan's market value if the loan is being sold. 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 55 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, 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. 11 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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. The SPEs used to securitize assets generally are not consolidated by the Company because the Company has determined that it is not the primary beneficiary of these entities. Prior to the adoption of FASB Interpretation No. 46 (revised December 31, 2003), CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51 ("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 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 (losses). DERIVATIVE FINANCIAL INSTRUMENTS Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, or other financial indices. Derivatives may be exchange traded or contracted in the over-the-counter market. The 12 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Company uses a variety of derivatives, including swaps, forwards, futures and option contracts, to manage its various risks. Additionally, the Company enters into income generation and replication derivatives as permitted by its insurance subsidiaries' Derivatives Use Plans approved by the applicable state insurance departments. Freestanding derivatives are carried on the Company's consolidated balance sheet either as assets within Other invested assets or as liabilities within Other liabilities at fair value as determined by quoted market prices or through the use of pricing models. Values can be affected by changes in interest rates, foreign exchange rates, financial indices, credit spreads, market volatility, and liquidity. Values can also be affected by changes in estimates and assumptions used in pricing models. If a derivative does not qualify for hedge accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"), as amended, changes in the fair value of the derivative are reported in Net investment gains (losses), or in Interest credited to policyholder account balances for hedges of liabilities embedded in certain variable annuity products offered by the Company. To qualify for hedge accounting, at the inception of the hedging relationship, the Company formally documents its risk management objective and strategy for undertaking the hedging transaction, as well as its designation of the hedge as either (i) a hedge of the fair value of a recognized asset or liability or an unrecognized firm commitment ("fair value hedge"); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"); or (iii) a hedge of a net investment in a foreign operation. In this documentation, the Company sets forth 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 instrument's effectiveness and the method which will be used to measure ineffectiveness. A derivative designated as a hedging instrument must be highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and throughout the life of the hedging relationship. The ineffective portion of the changes in fair value of the hedging instrument is recorded in net investment gains (losses). Under a fair value hedge, changes in the fair value of the derivative, along with changes in the fair value of the hedged item related to the risk being hedged, are reported in Net investment gains (losses). In a cash flow hedge, changes in the fair value of the derivative are recorded in Other comprehensive income (loss), a separate component of shareholders' equity, and the deferred gains or losses on the derivative are reclassified into the income statement when the Company's earnings are affected by the variability in cash flows of the hedged item. In a hedge of a net investment in a foreign operation, changes in the fair value of the derivative are recorded in Other comprehensive income (loss). The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly 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) it is no longer probable that the forecasted transaction will occur; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; or (v) the derivative is de-designated as a hedging instrument. When hedge accounting is discontinued because it is determined that the derivative is not highly effective in offsetting changes in the fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its fair value, with changes in fair value recognized currently in Net investment gains (losses). The carrying value of the hedged recognized asset or liability under a fair value hedge is no longer adjusted for changes in its fair value due to hedged risk, and the cumulative adjustment to its carrying value is 13 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) amortized into income over the remaining life of the hedged item. The changes in fair value of derivatives recorded in Other comprehensive income (loss) related to discontinued cash flow hedges are amortized into income over the remaining life of the hedging instruments. When hedge accounting is discontinued because it is probable that the forecasted transactions will not occur by the end of the specified time period or 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, with changes in fair value recognized currently in Net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in Net investment gains (losses). Deferred gains and losses of a derivative recorded in Other comprehensive income (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in Net investment gains (losses). 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 (losses). The Company is also a party to financial instruments in which a derivative is "embedded." For each financial instrument in which a derivative is embedded, 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, as defined in SFAS 133. 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 freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheet at fair value with the host contract and changes in their fair value are reported currently in Net investment gains (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 balance sheet at fair value, with changes in fair value recognized in the current period in Net investment gains (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 generally range from five to ten years for leasehold improvements and three to five years for all other property and equipment. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $439 million and $396 million at December 31, 2004 and 2003, respectively. Related depreciation and amortization expense was $93 million, $99 million and $77 million for the years ended December 31, 2004, 2003 and 2002, 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 14 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. Accumulated amortization of capitalized software was $490 million and $377 million at December 31, 2004 and 2003, respectively. Related amortization expense was $126 million, $143 million and $152 million for the years ended December 31, 2004, 2003 and 2002, 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 used to compute the present value of estimated gross margins and profits 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 common 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 re-estimated 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 estimated future profits to be 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. SALES INDUCEMENTS The Company has two different types of sales inducements: (i) the policyholder receives a bonus whereby the policyholder's initial account balance is increased by an amount equal to a specified percentage of the customer's deposit and (ii) the policyholder receives a higher interest rate than the normal general account interest rate credited on money in the enhanced dollar cost averaging program. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. 15 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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, ("SFAS 142"). In accordance with SFAS 142, goodwill is not amortized but is tested for impairment at least annually to determine whether a writedown 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 10 to 30 years and impairments were recognized in operating results when permanent diminution in value was deemed to have occurred. Changes in net goodwill were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ---- ----- ----- (DOLLARS IN MILLIONS) Balance, beginning of year $218 $ 405 $ 575 Acquisitions.............. 1 3 7 Impairment losses......... -- -- (2) Disposition and other..... (2) (190) (175) ---- ----- ----- Balance, end of year...... $217 $ 218 $ 405 ==== ===== =====
Accumulated amortization from goodwill was as follows at:
DECEMBER 31, --------------------- 2004 2003 2002 ---- ---- ---- (DOLLARS IN MILLIONS) Accumulated amortization $32 $32 $71 === === ===
LIABILITY FOR 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 non-forfeiture 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 benefits for non-participating traditional life insurance policies are equal to the aggregate of (i) the present value of future benefit payments and related expenses less the present value of future net premiums and (ii) premium deficiency reserves. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rates for the aggregate future policy benefit liabilities range from 3.3% to 10.0%. Participating business represented approximately 12% and 13% of the Company's life insurance in-force, and 87% and 88% of the number of life insurance policies in-force, at December 31, 2004 and 2003, respectively. Participating policies represented approximately 37% and 37%, 40% and 41%, and 40% and 41% of gross and net life insurance premiums for the years ended December 31, 2004, 2003 and 2002, respectively. The percentages indicated are calculated excluding the business of the Reinsurance segment. 16 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Future policy benefit liabilities for individual and group traditional fixed annuities after annuitization are equal to the present value of expected future payments and premium deficiency reserves. Interest rates used in establishing such liabilities range from 3% to 10%. 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%. Liabilities for unpaid claims and claim expenses for property and casualty insurance are included in future policyholder benefits and 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. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. Policyholder account balances relate to investment-type contracts and universal life-type policies. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and non-variable group annuity contracts. Policyholder account balances are equal to the policy account values, which consist of an accumulation of gross premium payments plus credited interest, ranging from 1% to 12%, less expenses, mortality charges, and withdrawals. The Company issues fixed and floating rate obligations under its guaranteed investment contract ("GIC") program. During the years ended December 31, 2004, 2003 and 2002, the Company issued $3,941 million, $4,341 million and $500 million, respectively, in such obligations. There have been no repayments of any of the contracts. Accordingly, the GICs outstanding, which are included in policyholder account balances in the accompanying consolidated balance sheets, were $8,978 and $4,862, respectively, at December 31, 2004 and 2003. Interest credited on the contracts for the years ended December 31, 2004, 2003 and 2002 was $139 million, $56 million and $12 million, respectively. The Company establishes liabilities for minimum death and income benefit guarantees relating to certain annuity contracts and secondary and paid up guarantees relating to certain life policies. Annuity guaranteed death benefit liabilities are determined by estimating the expected value of death benefits in excess of the projected account balance and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the liabilities are consistent with those used for amortizing DAC, including the mean reversion assumption. The assumptions of investment performance and volatility are consistent with the historical experience of the Standard & Poor's 500 Index ("S&P"). The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. Guaranteed annuitization benefit liabilities are determined by estimating the expected value of the annuitization benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balance, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The 17 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) assumptions used for calculating such guaranteed annuitization benefit liabilities are consistent with those used for calculating the guaranteed death benefit liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates a percentage of the potential annuitizations that may be elected by the contractholder. Liabilities for universal and variable life secondary guarantees and paid-up guarantees are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments. The Company regularly evaluates estimates used and adjusts the additional liability balances, with a related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in estimating the secondary and paid up guarantee liabilities are consistent with those used for amortizing DAC. The assumptions of investment performance and volatility for variable products are consistent with historical S&P experience. The benefits used in calculating the liabilities are based on the average benefits payable over a range of scenarios. 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 and disability 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. OTHER REVENUES Other revenues include advisory fees, broker/dealer commissions and fees, and administrative service fees. Such fees and commissions are recognized in the period in which services are 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 18 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. INCOME TAXES The Company joins with the Holding Company and its includable affiliates in filing a consolidated Federal income tax return. The consolidating companies have executed a tax allocation agreement. Under the agreement, current Federal income tax expense (benefit) is computed on a separate return basis and provides that members shall make payments (receive reimbursement) to the Holding Company to the extent that their income (losses and other credits) contributes to (reduces) the consolidated federal tax expense. The consolidating companies are reimbursed for net operating losses or other tax attributes they have generated when utilized in the consolidated return. The Company files state income tax returns on an individual corporate basis. The Company applies the concepts of Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, which establishes deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. SFAS No. 109 allows recognition of deferred tax assets if future realization of the tax benefit is more likely than not, with a valuation allowance for the portion that is not likely to be realized. 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 revenues. SEPARATE ACCOUNTS Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent the value of such assets exceeds the separate account liabilities. Effective with the adoption of Statement of Position 03-1, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS AND FOR SEPARATE ACCOUNTS ("SOP 03-1"), on January 1, 2004, the Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value. Investment performance (including investment income, net investment gains (losses) and changes in unrealized gains (losses)) and the corresponding amounts credited to contractholders of such separate accounts are offset within 19 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the same line in the consolidated statements of income. In connection with the adoption of SOP 03-1, separate account assets with a fair value of $1.7 billion were reclassified to general account investments with a corresponding transfer of separate account liabilities to future policy benefits and policyholder account balances. See "--Application of Recent Accounting Pronouncements." The Company's revenues reflect fees charged to the separate accounts, including mortality charges, risk charges, policy administration fees, investment management fees and surrender charges. Separate accounts not meeting the above criteria are combined on a line-by-line basis with the Company's general account assets, liabilities, revenues and expenses. STOCK-BASED COMPENSATION Effective January 1, 2003, MetLife, Inc. and the Company account for stock-based compensation plans using the prospective fair value accounting method prescribed by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"), as amended by SFAS No. 148, ACCOUNTING FOR STOCK-BASED COMPENSATION--TRANSITION AND DISCLOSURE ("SFAS 148"). The fair value method requires compensation cost to be measured based on the fair value of the equity instrument at the grant or award date. MetLife, Inc. allocates 100% of stock option expense to the Company. Stock-based compensation grants prior to January 1, 2003 are accounted for using the intrinsic value method prescribed by Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25"). Note 12 includes the pro forma disclosures required by SFAS No. 123, as amended. The intrinsic value method represents the quoted market price or fair value of the equity award at the measurement date less the amount, if any, the employee is required to pay. Stock-based compensation is accrued over the vesting period of the grant or award. 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 in the respective financial statement lines to which they relate. 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 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 In December 2004, the Financial Accounting Standards Board ("FASB") issued Staff Position Paper ("FSP") 109-2, ACCOUNTING AND DISCLOSURE GUIDANCE FOR THE FOREIGN EARNINGS REPATRIATION PROVISION WITHIN THE 20 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) AMERICAN JOBS CREATION ACT OF 2004 ("AJCA"). The AJCA introduced a one-time dividend received deduction on the repatriation of certain earnings to a U.S. taxpayer. FSP 109-2 provides companies additional time beyond the financial reporting period of enactment to evaluate the effects of the AJCA on their plans to repatriate foreign earnings for purposes of applying SFAS 109, ACCOUNTING FOR INCOME TAXES. The Company has completed its evaluation of the repatriation provision and determined that there will not be any impact on the Company's tax provision and deferred tax assets and liabilities. In December 2004, the FASB issued SFAS No. 153, EXCHANGE OF NONMONETARY ASSETS, AN AMENDMENT OF APB OPINION NO. 29 ("SFAS 153"). SFAS 153 amends prior guidance to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005 and shall be applied prospectively. SFAS 153 is not expected to have a material impact on the Company's consolidated financial statements at the date of adoption. In December 2004, FASB revised SFAS 123 to Share-Based Payment ("SFAS 123(r)"). SFAS 123(r) provides additional guidance on determining whether certain financial instruments awarded in share-based payment transactions are liabilities. SFAS 123(r) also requires that the cost of all share-based transactions be recorded in the financial statements. The revised pronouncement must be adopted by the Company by July 1, 2005. As all stock options currently accounted for under APB 25 will vest prior to the effective date, implementation of SFAS 123(r) will not have a significant impact on the Company's consolidated financial statements. Effective January 1, 2003, the Company adopted SFAS 148, which provides guidance on how to apply the fair value method of accounting for share-based payments. As permitted under SFAS 148, the Company elected to use the prospective method of accounting for stock options granted subsequent to December 31, 2002. Options granted prior to January 1, 2003 will continue to be accounted for under the intrinsic value method until the adoption of SFAS 123(r), 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 12. In March 2004, the Emerging Issues Task Force ("EITF") reached further consensus on Issue No. 03-1, THE MEANING OF OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS ("EITF 03-1"). EITF 03-1 provides accounting guidance regarding the determination of when an impairment of debt and marketable equity securities and investments accounted for under the cost method should be considered other-than-temporary and recognized in income. An EITF 03-1 consensus reached in November 2003 also requires certain quantitative and qualitative disclosures for debt and marketable equity securities classified as available-for-sale or held-to-maturity under SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The Company has complied with the disclosure requirements of EITF 03-1, which were effective December 31, 2003. The accounting guidance of EITF 03-1 relating to the recognition of investment impairment which was to be effective in the third quarter of 2004 has been delayed pending the development of additional guidance. The Company is actively monitoring the deliberations relating to this issue at the FASB and currently is unable to determine the ultimate impact EITF 03-1 will have on its consolidated financial statements. In March 2004, the EITF reached consensus on Issue No. 03-16, ACCOUNTING FOR INVESTMENTS IN LIMITED LIABILITY COMPANIES ("EITF 03-16"). EITF 03-16 provides guidance regarding whether a limited liability company should be viewed as similar to a corporation or similar to a partnership for purposes of determining 21 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) whether a noncontrolling investment should be accounted for using the cost method or the equity method of accounting. EITF 03-16 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2004, the Company adopted SOP 03-1, as interpreted by Technical Practices Aids issued by the American Institute of Certified Public Accountants. 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. In June 2004, the FASB released FSP No. 97-1, SITUATIONS IN WHICH PARAGRAPHS 17(B) AND 20 OF FASB STATEMENT NO. 97, ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES FOR CERTAIN LONG-DURATION CONTRACTS AND FOR REALIZED GAINS AND LOSSES FROM THE SALE OF INVESTMENTS, PERMIT OR REQUIRE ACCRUAL OF AN UNEARNED REVENUE LIABILITY ("FSP 97-1") which included clarification that unearned revenue liabilities should be considered in determining the necessary insurance benefit liability required under SOP 03-1. Since the Company had considered unearned revenue in determining its SOP 03-1 benefit liabilities, FSP 97-1 did not impact its consolidated financial statements. As a result of the adoption of SOP 03-1, effective January 1, 2004, the Company decreased the liability for future policyholder benefits for changes in the methodology relating to various guaranteed death and annuitization benefits and for determining liabilities for certain universal life insurance contracts by $8 million, which has been reported as a cumulative effect of a change in accounting. This amount is net of corresponding changes in DAC, including VOBA and unearned revenue liability ("offsets") under certain variable annuity and life contracts and income taxes. Certain other contracts sold by the Company provide for a return through periodic crediting rates, surrender adjustments or termination adjustments based on the total return of a contractually referenced pool of assets owned by the Company. To the extent that such contracts are not accounted for as derivatives under the provisions of SFAS 133 and not already credited to the contract account balance, under SOP 03-1 the change relating to the fair value of the referenced pool of assets is recorded as a liability with the change in the liability recorded as policyholder benefits and claims. Prior to the adoption of SOP 03-1, the Company recorded the change in such liability as other comprehensive income. At adoption, this change decreased net income and increased other comprehensive income by $33 million, net of income taxes, which were recorded as cumulative effects of a change in accounting. 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. Since the Company followed a similar approach prior to adoption of SOP 03-1, the provisions of SOP 03-1 relating to sales inducements had no significant impact on the Company's consolidated financial statements. At adoption, the Company reclassified $116 million of ownership in its own separate accounts from other assets to fixed maturities, equity securities and cash and cash equivalents. This reclassification had no significant impact on net income or other comprehensive income at adoption. In accordance with SOP 03-1's guidance for the reporting of certain separate accounts, at adoption, the Company also reclassified $1.7 billion of separate account assets to general account investments and $1.7 billion of separate account liabilities to future policy benefits and policyholder account balances. This reclassification decreased net income and increased other comprehensive income by $27 million, net of income taxes, which were reported as cumulative effects of a change in accounting. The application of SOP 03-1 decreased the Company's 2004 net income by $36 million, including the cumulative effect of adoption of a decrease in net income of $52 million as described above. In December 2003, 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 postretirement plans. SFAS 132(r) was primarily effective for fiscal years ending after December 15, 2003; however, certain disclosures about foreign plans and estimated future benefit payments were 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 revised disclosure requirements. 22 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In May 2004, the FASB issued FASB Staff Position ("FSP") No. 106-2, ACCOUNTING AND DISCLOSURE REQUIREMENTS RELATED TO THE MEDICARE PRESCRIPTION DRUG, IMPROVEMENT AND MODERNIZATION ACT OF 2003 ("FSP 106-2"), which provides accounting guidance to a sponsor of a postretirement health care plan that provides prescription drug benefits. The Company expects to receive subsidies on prescription drug benefits beginning in 2006 under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 based on the Company's determination that the prescription drug benefits offered under certain postretirement plans are actuarially equivalent to the benefits offered under Medicare Part D. FSP 106-2 was effective for interim periods beginning after June 15, 2004 and provides for either retroactive application to the date of enactment of the legislation or prospective application from the date of adoption of FSP 106-2. Effective July 1, 2004, the Company adopted FSP 106-2 prospectively and the postretirement benefit plan assets and accumulated benefit obligation were remeasured to determine the effect of the expected subsidies on net periodic postretirement benefit cost. As a result, the accumulated postretirement benefit obligation and net periodic postretirement benefit cost was reduced by $201 million and $16 million for 2004, respectively. Effective October 1, 2003, the Company adopted 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 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 is measured at fair value on the balance sheet and changes in fair value are reported in income. The Company's application of Issue B36 increased (decreased) net income by $4 million and ($12) million, net of amortization of DAC and income taxes, for 2004 and 2003, respectively. The 2003 impact includes a decrease in net income of $26 million relating to the cumulative effect of a change in accounting from the adoption of the new guidance. Effective July 1, 2003, the Company adopted SFAS No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 149"). SFAS 149 amended and clarified the accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. Except for certain previously issued and effective guidance, SFAS 149 was effective for contracts entered into or modified after June 30, 2003. The Company's adoption of SFAS 149 did not have a significant impact on its consolidated financial statements. During 2003, the Company adopted FASB Interpretation ("FIN") 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 investments in real estate joint ventures and other limited partnership interests meet the definition of a VIE and have been consolidated, in accordance with the transition rules and effective dates, because 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. 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. In accordance with the provisions of FIN 46(r), the Company elected to defer until March 31, 2004 the consolidation of interests in VIEs for non-SPEs acquired prior to February 1, 2003 for which 23 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) it is the primary beneficiary. As of March 31, 2004, the Company consolidated assets and liabilities relating to real estate joint ventures of $78 million and $11 million, respectively, and assets and liabilities relating to other limited partnerships of $29 million and less than $1 million, respectively, for VIEs for which the Company was deemed to be the primary beneficiary. There was no impact to net income from the adoption of FIN 46. 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 were 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 10. 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 2004 and 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 No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS ("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. 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 24 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) by reporting unit. There was no impairment of identified intangibles or significant reclassifications between goodwill and other intangible assets at January 1, 2002. Amortization of other intangible assets was not material for the years ended December 31, 2004, 2003 and 2002. 2. INVESTMENTS FIXED MATURITIES AND EQUITY SECURITIES Fixed maturities and equity securities at December 31, 2004 were as follows:
GROSS COST OR UNREALIZED AMORTIZED ----------- ESTIMATED COST GAIN LOSS FAIR VALUE --------- ------ ---- ---------- (DOLLARS IN MILLIONS) Fixed Maturities: Bonds: U.S. treasury/agency securities................ $ 14,938 $1,271 $ 19 $ 16,190 State and political subdivision securities..... 340 16 1 355 U.S. corporate securities...................... 51,398 3,561 144 54,815 Foreign government securities.................. 4,666 767 12 5,421 Foreign corporate securities................... 21,545 2,381 65 23,861 Residential mortgage-backed securities......... 28,155 573 52 28,676 Commercial mortgage-backed securities.......... 10,395 408 30 10,773 Asset-backed securities........................ 9,282 115 29 9,368 Other fixed maturity securities................ 519 46 33 532 -------- ------ ---- -------- Total bonds................................. 141,238 9,138 385 149,991 Redeemable preferred stocks........................ 274 -- 19 255 -------- ------ ---- -------- Total fixed maturities...................... $141,512 $9,138 $404 $150,246 ======== ====== ==== ======== Equity Securities: Common stocks.................................. $ 1,329 $ 238 $ 5 $ 1,562 Nonredeemable preferred stocks................. 317 24 -- 341 -------- ------ ---- -------- Total equity securities..................... $ 1,646 $ 262 $ 5 $ 1,903 ======== ====== ==== ========
25 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. treasury/agency securities................ $ 13,249 $1,208 $ 23 $ 14,434 State and political subdivision securities..... 282 11 8 285 U.S. corporate securities...................... 49,466 3,486 228 52,724 Foreign government securities.................. 4,847 752 20 5,579 Foreign corporate securities................... 18,680 2,005 70 20,615 Residential mortgage-backed securities......... 28,049 687 81 28,655 Commercial mortgage-backed securities.......... 9,080 480 15 9,545 Asset-backed securities........................ 10,414 169 54 10,529 Other fixed maturity securities................ 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.................................. $ 506 $ 323 $ 1 $ 828 Nonredeemable preferred stocks................. 379 25 -- 404 -------- ------ ---- -------- Total equity securities..................... $ 885 $ 348 $ 1 $ 1,232 ======== ====== ==== ========
The Company held foreign currency derivatives with notional amounts of $4,642 million and $3,472 million to hedge the exchange rate risk associated with foreign bonds and loans at December 31, 2004 and 2003, 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. The Company held fixed maturities at estimated fair values that were below investment grade or not rated by an independent rating agency that totaled $11,216 million and $11,814 million at December 31, 2004 and 2003, respectively. These securities had a net unrealized gain of $877 million and $839 million at December 31, 2004 and 2003, respectively. Non-income producing fixed maturities were $84 million and $357 million at December 31, 2004 and 2003, respectively. 26 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, 2004, 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.......................... $ 5,491 $ 5,578 Due after one year through five years............ 24,326 25,491 Due after five years through ten years........... 28,853 31,053 Due after ten years.............................. 34,736 39,052 -------- -------- Subtotal...................................... 93,406 101,174 Mortgage-backed and other asset-backed securities 47,832 48,817 -------- -------- Subtotal...................................... 141,238 149,991 Redeemable preferred stock....................... 274 255 -------- -------- Total fixed maturities........................ $141,512 $150,246 ======== ========
Bonds not due at a single maturity date have been included in the above table in the year of final contractual maturity. Actual maturities may differ from contractual maturities due to the exercise of prepayment options. Sales or disposals of fixed maturities and equity securities classified as available-for-sale were as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Proceeds............... $53,643 $48,390 $34,918 Gross investment gains. $ 792 $ 446 $ 1,683 Gross investment losses $ (468) $ (452) $ (973)
Gross investment losses above exclude writedowns recorded during 2004, 2003 and 2002 for other-than-temporarily impaired available-for-sale fixed maturities and equity securities of $93 million, $328 million and $1,342 million, respectively. The Company periodically disposes of fixed maturity and equity securities at a loss. Generally, such losses are insignificant in amount or in relation to the cost basis of the investment or are attributable to declines in fair value occurring in the period of disposition. 27 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 equity securities in an unrealized loss position, aggregated by length of time that the securities have been in a continuous unrealized loss position at December 31, 2004 and 2003:
DECEMBER 31, 2004 -------------------------------------------------------------- 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. treasury/agency securities............ $ 4,399 $ 19 $ 1 $ -- $ 4,400 $ 19 States and political subdivision securities 37 -- 14 1 51 1 U.S. corporate securities.................. 8,122 97 1,081 47 9,203 144 Foreign government securities.............. 493 8 39 4 532 12 Foreign corporate securities............... 3,234 52 413 13 3,647 65 Residential mortgage-backed securities..... 7,257 49 215 3 7,472 52 Commercial mortgage-backed securities...... 3,137 27 136 3 3,273 30 Asset-backed securities.................... 3,424 22 203 7 3,627 29 Other fixed maturity securities............ 37 33 12 -- 49 33 ------- ---- ------ ---- ------- ---- Total bonds............................. 30,140 307 2,114 78 32,254 385 Redeemable preferred stocks................ 255 19 -- -- 255 19 ------- ---- ------ ---- ------- ---- Total fixed maturities.................. $30,395 $326 $2,114 $ 78 $32,509 $404 ======= ==== ====== ==== ======= ==== Equity Securities.......................... $ 78 $ 5 $ 4 $ -- $ 82 $ 5 ======= ==== ====== ==== ======= ==== Total number of securities in an unrealized loss position............................ 2,866 244 3,110 ======= ====== ======= 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. treasury/agency securities............ $ 3,526 $ 23 $ -- $ -- $ 3,526 $ 23 States and political subdivision securities 131 8 -- -- 131 8 U.S. corporate securities.................. 6,338 136 962 92 7,300 228 Foreign government securities.............. 225 20 2 -- 227 20 Foreign corporate securities............... 2,446 57 331 13 2,777 70 Residential mortgage-backed securities..... 7,133 78 18 3 7,151 81 Commercial mortgage-backed securities...... 1,998 13 227 2 2,225 15 Asset-backed securities.................... 2,295 29 780 25 3,075 54 Other fixed maturity securities............ 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 ======= ==== ====== ==== ======= ==== Equity Securities.......................... $ 18 $ 1 $ 21 $ -- $ 39 $ 1 ======= ==== ====== ==== ======= ====
28 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SECURITIES LENDING PROGRAM The Company participates in a securities lending program 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 $23,325 million and $22,290 million and an estimated fair value of $24,625 million and $23,461 million were on loan under the program at December 31, 2004 and 2003, respectively. The Company was liable for cash collateral under its control of $25,230 million and $24,065 million at December 31, 2004 and 2003, 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 $1,315 million and $1,286 million at December 31, 2004 and 2003, respectively. Company securities held in trust to satisfy collateral requirements had an amortized cost of $1,880 million and $1,711 million at December 31, 2004 and 2003, respectively. MORTGAGE AND OTHER LOANS Mortgage and other loans were categorized as follows:
DECEMBER 31, ------------------------------ 2004 2003 -------------- -------------- AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------- ------- (DOLLARS IN MILLIONS) Commercial mortgage loans... $25,432 80% $21,597 81% Agricultural mortgage loans. 5,654 18 5,166 19 Other loans................. 639 2 -- -- ------- --- ------- --- Total.................... 31,725 100% 26,763 100% === === Less: Valuation allowances.. 154 126 ------- ------- Mortgage and other loans. $31,571 $26,637 ======= =======
Mortgage loans are collateralized by properties primarily located throughout the United States. At December 31, 2004, approximately 19%, 11% 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, 2004 and 2003 include $1,480 million and $1,998 million, respectively to MTL, a related party, in connection with Metropolitan Insurance and Annuity Company's ("MIAC") purchase of real estate from the Company in 2001 and 2003. MIAC was merged into MTL in 2004. In addition, certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $641 million and $639 million at December 31, 2004 and 2003, respectively. 29 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Changes in loan valuation allowances for mortgage and other loans were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ---- ---- ---- (DOLLARS IN MILLIONS) Balance, beginning of year $126 $122 $144 Additions................. 56 50 39 Deductions................ (28) (46) (56) Acquisitions of affiliates -- -- (5) ---- ---- ---- Balance, end of year...... $154 $126 $122 ==== ==== ====
A portion of the Company's mortgage and other loans was impaired and consisted of the following:
DECEMBER 31, ------------------ 2004 2003 ---- ---- (DOLLARS IN MILLIONS) Impaired mortgage loans with valuation allowances... $178 $286 Impaired mortgage loans without valuation allowances 115 146 ---- ---- Total............................................ 293 432 Less: Valuation allowances on impaired loans........ 40 61 ---- ---- Impaired loans................................... $253 $371 ==== ====
The average investment in impaired loans was $376 million, $615 million and $1,068 million for the years ended December 31, 2004, 2003 and 2002, respectively. Interest income on impaired loans was $25 million, $55 million and $88 million for the years ended December 31, 2004, 2003 and 2002, respectively. The investment in restructured loans was $121 million and $188 million at December 31, 2004 and 2003, respectively. Interest income of $9 million, $19 million and $44 million was recognized on restructured loans for the years ended December 31, 2004, 2003 and 2002, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $11 million, $24 million and $41 million for the years ended December 31, 2004, 2003 and 2002, respectively. Mortgage and other loans with scheduled payments of 60 days (90 days for agricultural mortgages) or more past due or in foreclosure had an amortized cost of $35 million at both December 31, 2004 and 2003, respectively. REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate and real estate joint ventures consisted of the following:
DECEMBER 31, -------------------- 2004 2003 ------ ------ (DOLLARS IN MILLIONS) Real estate and real estate joint ventures held-for-investment $3,193 $2,786 Impairments................................................... (124) (132) ------ ------ Total...................................................... 3,069 2,654 ------ ------ Real estate held-for-sale..................................... 262 635 Impairments................................................... (6) (151) Valuation allowance........................................... (4) (12) ------ ------ Total...................................................... 252 472 ------ ------ Real estate and real estate joint ventures............. $3,321 $3,126 ====== ======
30 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Accumulated depreciation on real estate was $1,222 million and $1,226 million at December 31, 2004 and 2003, respectively. Related depreciation expense was $116 million, $124 million and $180 million for the years ended December 31, 2004, 2003 and 2002, respectively. These amounts include $14 million, $34 million and $83 million of depreciation expense related to discontinued operations for the years ended December 31, 2004, 2003 and 2002, respectively. Real estate and real estate joint ventures were categorized as follows:
DECEMBER 31, ---------------------------- 2004 2003 ------------- ------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (DOLLARS IN MILLIONS) Office..... $1,800 55% $1,597 51% Retail..... 556 17 660 21 Apartments. 514 15 496 16 Land....... 47 1 77 2 Agriculture 1 -- 1 -- Other...... 403 12 295 10 ------ --- ------ --- Total... $3,321 100% $3,126 100% ====== === ====== ===
The Company's real estate holdings are primarily located throughout the United States. At December 31, 2004, approximately 27%, 24% and 14% 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, ----------------------- 2004 2003 2002 ---- ---- ---- (DOLLARS IN MILLIONS) Balance, beginning of year $ 12 $ 11 $ 35 Additions................. 13 17 21 Deductions................ (21) (16) (45) ---- ---- ---- Balance, end of year...... $ 4 $ 12 $ 11 ==== ==== ====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $15 million, $34 million and $49 million for the years ended December 31, 2004, 2003 and 2002, respectively. Investment income (expense) related to impaired real estate and real estate joint ventures held-for-sale was ($1) million, $1 million, and $2 million for the years ended December 31, 2004, 2003 and 2002, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $38 million and $67 million at December 31, 2004 and 2003, respectively. The Company owned real estate acquired in satisfaction of debt of $1 million at both December 31, 2004 and 2003, respectively. 31 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, -------------------- 2004 2003 ------ ------ (DOLLARS IN MILLIONS) Investment............... $1,059 $ 974 Estimated residual values 480 386 ------ ------ Total................. 1,539 1,360 Unearned income.......... (424) (380) ------ ------ Leveraged leases...... $1,115 $ 980 ====== ======
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 income tax liability related to leveraged leases was $757 million and $870 million at December 31, 2004 and 2003, respectively. FUNDS WITHHELD AT INTEREST Included in other invested assets at December 31, 2004 and 2003, were funds withheld at interest of $2,788 million and $2,890 million, respectively. NET INVESTMENT INCOME The components of net investment income were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Fixed maturities................................. $ 8,071 $ 7,757 $ 7,844 Equity securities................................ 65 26 42 Mortgage and other loans......................... 1,840 1,811 1,840 Real estate and real estate joint ventures....... 579 528 600 Policy loans..................................... 492 510 512 Other limited partnership interests.............. 324 80 58 Cash, cash equivalents and short-term investments 64 83 228 Other............................................ 249 251 230 ------- ------- ------- Total......................................... 11,684 11,046 11,354 Less: Investment expenses........................ 879 767 801 ------- ------- ------- Net investment income......................... $10,805 $10,279 $10,553 ======= ======= =======
32 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NET INVESTMENT GAINS (LOSSES) Net investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ----- ----- ----- (DOLLARS IN MILLIONS) Fixed maturities.......................... $ 81 $(373) $(862) Equity securities......................... 150 39 230 Mortgage and other loans.................. (54) (51) (21) Real estate and real estate joint ventures 12 20 (6) Other limited partnership interests....... 53 (84) (2) Sales of businesses....................... -- 5 (7) Derivatives............................... (232) (122) (140) Other..................................... 279 9 (24) ----- ----- ----- Total net investment gains (losses).... $ 289 $(557) $(832) ===== ===== =====
NET UNREALIZED INVESTMENT GAINS The components of net unrealized investment gains, included in accumulated other comprehensive income, were as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Fixed maturities.................................... $ 8,571 $ 8,094 $ 6,701 Equity securities................................... 270 353 56 Derivatives......................................... (494) (395) (24) Other invested assets............................... (69) (55) 1 ------- ------- ------- Total............................................ 8,278 7,997 6,734 ------- ------- ------- Amounts allocated from: Future policy benefit loss recognition........... (1,953) (1,453) (1,242) Deferred policy acquisition costs................ (407) (495) (366) Participating contracts.......................... -- (117) (129) Policyholder dividend obligation................. (2,119) (2,130) (1,882) ------- ------- ------- Total............................................ (4,479) (4,195) (3,619) ------- ------- ------- Deferred income taxes............................... (1,391) (1,397) (1,124) ------- ------- ------- Total............................................ (5,870) (5,592) (4,743) ------- ------- ------- Net unrealized investment gains (losses)..... $ 2,408 $ 2,405 $ 1,991 ======= ======= =======
33 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The changes in net unrealized investment gains were as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ------ ------ ------- (DOLLARS IN MILLIONS) Balance, beginning of year........................................... $2,405 $1,991 $ 1,799 Unrealized investment gains (losses) during the year................. 281 994 2,803 Unrealized investment gains (losses) relating to: Future policy benefit gains (losses) recognition.................. (500) (211) (1,212) Deferred policy acquisition costs................................. 88 (129) (204) Participating contracts........................................... 117 12 (2) Policyholder dividend obligation.................................. 11 (248) (1,174) Deferred income taxes................................................ 6 (179) (72) Unrealized investment gains (losses) of subsidiaries at date of sale, net of deferred income taxes....................................... -- 175 53 ------ ------ ------- Balance, end of year................................................. $2,408 $2,405 $ 1,991 ------ ------ ------- Net change in unrealized investment gains (losses)................... $ 3 $ 414 $ 192 ====== ====== =======
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 $1,341 million and $1,431 million in financial assets as of December 31, 2004 and 2003, respectively. The Company's beneficial interests in these SPEs as of December 31, 2004 and 2003 and the related investment income for the years ended December 31, 2004, 2003 and 2002 were insignificant. The Company 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 $636 million and $849 million at December 31, 2004 and 2003, respectively. The related net investment income recognized was $44 million and $78 million for the years ended December 31, 2004 and 2003, respectively. For the year ended December 31, 2002, there was insignificant related income. 34 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) VARIABLE INTEREST ENTITIES As discussed in Note 1, the Company has adopted the provisions of FIN 46 and FIN 46(r). The adoption of FIN 46(r) required the Company to consolidate certain VIEs for which it is the primary beneficiary. 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 are consolidated in the Company's consolidated financial statements at December 31, 2004, and (ii) it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
DECEMBER 31, 2004 ------------------------------------------------------- PRIMARY BENEFICIARY NOT PRIMARY BENEFICIARY --------------------------- --------------------------- TOTAL MAXIMUM EXPOSURE TOTAL MAXIMUM EXPOSURE ASSETS (1) TO LOSS (2) ASSETS (1) TO LOSS (2) ---------- ---------------- ---------- ---------------- (DOLLARS IN MILLIONS) Asset-backed securitizations and collateralized debt obligations $ -- $ -- $1,418 $ 3 Real estate joint ventures (3)... 15 13 132 -- Other limited partnerships (4)... 245 188 900 146 Other structured investments (5). -- -- 856 103 ---- ---- ------ ---- Total......................... $260 $201 $3,306 $252 ==== ==== ====== ====
- -------- (1)The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value at December 31, 2004. The assets of the real estate joint ventures, other limited partnerships and other structured investments 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. (2)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, other limited partnerships and other structured investments is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by other partners. (3)Real estate joint ventures include partnerships and other ventures, which engage in the acquisition, development, management and disposal of real estate investments. (4)Other limited partnerships include partnerships established for the purpose of investing in real estate funds, 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. (5)Other structured investments include an offering of a collateralized fund of funds based on the securitization of a pool of private equity funds. 35 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 3. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE INSTRUMENTS The following table provides a summary of the notional amounts and fair value of derivative financial instruments held at:
DECEMBER 31, 2004 DECEMBER 31, 2003 --------------------------- --------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL ------------------ NOTIONAL ------------------ AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (DOLLARS IN MILLIONS) Interest rate swaps...... $12,215 $276 $ 19 $ 9,921 $189 $ 36 Interest rate floors..... 2,065 24 -- 325 5 -- Interest rate caps....... 7,045 12 -- 9,195 29 -- Financial futures........ 417 -- 5 1,015 8 24 Foreign currency swaps... 7,457 149 1,274 4,679 9 791 Foreign currency forwards 888 -- 57 528 -- 10 Options.................. 263 8 7 6,065 7 -- Financial forwards....... 326 -- -- 1,310 2 3 Credit default swaps..... 1,879 10 5 605 2 1 Synthetic GICs........... 5,869 -- -- 5,177 -- -- Other.................... 450 1 1 -- -- -- ------- ---- ------ ------- ---- ---- Total................. $38,874 $480 $1,368 $38,820 $251 $865 ======= ==== ====== ======= ==== ====
The following table provides a summary of the notional amounts of derivative financial instruments by maturity at December 31, 2004:
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) Interest rate swaps...... $1,878 $ 6,427 $ 2,051 $1,859 $12,215 Interest rate floors..... -- -- 2,065 -- 2,065 Interest rate caps....... 2,025 5,020 -- -- 7,045 Financial futures........ 417 -- -- -- 417 Foreign currency swaps... 268 3,405 3,110 674 7,457 Foreign currency forwards 888 -- -- -- 888 Options.................. 6 -- 256 1 263 Financial forwards....... 326 -- -- -- 326 Credit default swaps..... 301 1,204 374 -- 1,879 Synthetic GICs........... 1,000 1,000 3,869 -- 5,869 Other.................... 450 -- -- -- 450 ------ ------- ------- ------ ------- Total................. $7,559 $17,056 $11,725 $2,534 $38,874 ====== ======= ======= ====== =======
Interest rate swaps are used by the Company primarily to reduce market risks from changes in interest rates and to alter interest rate exposure arising from mismatches between assets and liabilities (duration mismatches). In an interest rate swap, the Company agrees with another party to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts as calculated by reference to an agreed notional principal amount. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. 36 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Interest rate caps and floors are used by the Company primarily to protect its floating rate liabilities against rises in interest rates above a specified level, and to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In exchange-traded Treasury and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of Treasury and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the exchanges. Exchange-traded Treasury futures are used primarily to hedge mismatches between the duration of assets in a portfolio and the duration of liabilities supported by those assets, to hedge against changes in value of securities the Company owns or anticipates acquiring, and to hedge against changes in interest rates on anticipated liability issuances by replicating Treasury performance. The value of Treasury futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Foreign currency derivatives, including foreign currency swaps and foreign currency forwards, are used by the Company to reduce the risk from fluctuations in foreign currency exchange rates associated with its assets and liabilities denominated in foreign currencies. The Company also uses foreign currency forwards to hedge the foreign currency risk associated with certain of its net investments in foreign operations. In a foreign currency forward transaction, the Company agrees with another party to deliver a specified amount of an identified currency at a specified future date. The price is agreed upon at the time of the contract and payment for such a contract is made in a different currency at the specified future date. In a foreign currency swap transaction, the Company agrees with another party to exchange, at specified intervals, the difference between one currency and another at a forward exchange rate calculated by reference to an agreed upon principal amount. The principal amount of each currency is exchanged at the inception and termination of the currency swap by each party. Swaptions are used by the Company primarily to sell, or monetize, embedded call options in its fixed rate liabilities. A swaption is an option to enter into a swap with an effective date equal to the exercise date of the embedded call and a maturity date equal to the maturity date of the underlying liability. The Company receives a premium for entering into the swaption. Equity options are used by the Company primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. The Company enters into financial forwards, primarily "to-be-announced" ("TBA") securities, to gain exposure to the investment risk and return of securities not yet available. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments. In a credit default swap transaction, the Company agrees with another party, at specified intervals, to pay a premium to insure credit risk. If a credit event, as defined by the contract, occurs, generally the contract will require the swap to be settled gross by the delivery of par quantities of the referenced investment equal to the specified swap notional in exchange for the payment of cash amounts by the counterparty equal to the par value of the investment surrendered. 37 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Credit default swaps are also used in replication synthetic asset transactions ("RSATs") to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. RSATs are a combination of a derivative and usually a U.S. Treasury or Agency security. RSATs that involve the use of credit default swaps are included in such classification in the preceding table. Total rate of return swaps ("TRRs") are swaps whereby the Company agrees with another party to exchange, at specified intervals, the difference between the economic risk and reward of an asset or a market index and LIBOR, calculated by reference to an agreed notional principal amount. No cash is exchanged at the outset of the contract. Cash is paid and received over the life of the contract based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by the counterparty at each due date. TRRs can be used as hedges or RSATs and are included in the other classification in the preceding table. A synthetic GIC is a contract that simulates the performance of a traditional GIC through the use of financial instruments. Under a synthetic GIC, the policyholder owns the underlying assets. The Company guarantees a rate return on those assets for a premium. HEDGING The table below provides a summary of the notional amount and fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2004 DECEMBER 31, 2003 --------------------------- --------------------------- FAIR VALUE FAIR VALUE NOTIONAL ------------------ NOTIONAL ------------------ AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (DOLLARS IN MILLIONS) Fair value........ $ 4,850 $173 $ 233 $ 3,678 $ 27 $291 Cash flow......... 8,057 40 664 12,968 54 422 Foreign operations 535 -- 47 527 -- 10 Non-qualifying.... 25,432 267 424 21,647 170 142 ------- ---- ------ ------- ---- ---- Total.......... $38,874 $480 $1,368 $38,820 $251 $865 ======= ==== ====== ======= ==== ====
The following table provides the settlement payments recorded in income for the:
YEAR ENDED DECEMBER 31, ---------------------- 2004 2003 2002 ----- ---- ---- (DOLLARS IN MILLIONS) Qualifying hedges: Net investment income.............................. $(144) $(61) $(4) Interest credited to policyholder account balances. 45 -- -- Non-qualifiying hedges: Net investment gains (losses)...................... 51 84 32 ----- ---- --- Total.......................................... $ (48) $ 23 $28 ===== ==== ===
FAIR VALUE HEDGES The Company designates and accounts for the following as fair value hedges when they have met the requirements of SFAS 133: (i) interest rate swaps to convert fixed rate investments to floating rate investments; (ii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities; and (iii) treasury futures to hedge against changes in value of fixed rate securities. 38 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company recognized Net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ----- ----- ---- (DOLLARS IN MILLIONS) Changes in the fair value of derivatives............ $ 196 $(184) $(30) Changes in the fair value of items hedged........... (152) 158 34 ----- ----- ---- Net ineffectiveness of fair value hedging activities $ 44 $ (26) $ 4 ===== ===== ====
All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. There were no instances in which the Company discontinued fair value hedge accounting due to a hedged firm commitment no longer qualifying as a fair value hedge. CASH FLOW HEDGES The Company designates and accounts for the following as cash flow hedges, when they have met the requirements of SFAS 133: (i) interest rate swaps to convert floating rate investments to fixed rate investments; (ii) interest rate swaps to convert floating rate liabilities into fixed rate liabilities; (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities; (iv) treasury futures to hedge against changes in value of securities to be acquired; (v) treasury futures to hedge against changes in interest rates on liabilities to be issued; and (vi) financial forwards to gain exposure to the investment risk and return of securities not yet available. For the years ended December 31, 2004, 2003 and 2002, the Company recognized Net investment gains (losses) of ($5) million, ($69) million, and ($3) million, respectively, which represented the ineffective portion of all cash flow hedges. All components of each derivative's gains or loss were included in the assessment of hedge ineffectiveness. There were no instances in which the Company discontinued cash flow hedge accounting because the forecasted transactions did not occur on the anticipated date or in the additional time period permitted by SFAS 133. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments. Presented below is a roll forward of the components of other comprehensive income (loss), before income taxes, related to cash flow hedges:
YEAR ENDED DECEMBER 31, ---------------------- 2004 2003 2002 ----- ----- ----- (DOLLARS IN MILLIONS) Other comprehensive income (loss) balance at the beginning of the year $(385) $ (24) $ 71 Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges............................... (57) (355) (142) Amounts reclassified to net investment income......................... 2 2 57 Amortization of transition adjustment................................. (7) (8) (10) ----- ----- ----- Other comprehensive income (losses) balance at the end of the year.... $(447) $(385) $ (24) ===== ===== =====
At December 31, 2004, approximately $34 million of the deferred net gains on derivatives accumulated in Other comprehensive income (loss) are expected to be reclassified to earnings during the year ending December 31, 2005. 39 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses forward exchange contracts to hedge portions of its net investment in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness based upon the change in forward rates. There was no ineffectiveness recorded in 2004, 2003, or 2002. For the years ended December 31, 2004 and 2003, the Company recorded net unrealized foreign currency losses of $47 million and $10 million, respectively, in other comprehensive income (loss) related to hedges of its net investments in foreign operations. For the year ended December 31, 2004, the Company recorded a foreign currency translation loss of $10 million, in Other comprehensive income (loss) related to the disposal of certain hedges of net investments in foreign operations. There were no disposals of such hedges for the year ended December 31, 2003. NON-QUALIFYING DERIVATIVES AND DERIVATIVES FOR PURPOSES OTHER THAN HEDGING The Company enters into the following derivatives that do not qualify for hedge accounting under SFAS 133 or for purposes other than hedging: (i) interest rate swaps, purchased caps and floors, and Treasury futures to minimize its exposure to interest rate volatility; (ii) foreign currency forwards and swaps to minimize its exposure to adverse movements in exchange rates; (iii) swaptions to sell embedded call options in fixed rate liabilities; (iv) credit default swaps to minimize its exposure to adverse movements in credit; (v) equity futures and equity options to economically hedge liabilities embedded in certain variable annuity products; (vi) synthetic GICs to synthetically create traditional GICs; and (vii) RSATs and TRRs to synthetically create investments. For the years ended December 31, 2004, 2003 and 2002, the Company recognized as Net investment gains (losses) changes in fair value of ($163) million, ($118) million and ($172) million, respectively, related to derivatives that do not qualify as hedge accounting. EMBEDDED DERIVATIVES The Company has certain embedded derivatives which are required to be separated from their host contracts and accounted for as derivatives. These host contracts include guaranteed rate of return contracts, and modified coinsurance contracts. The fair value of the Company's embedded derivative assets was $43 million at both December 31, 2004 and 2003. The fair value of the Company's embedded derivative liabilities was $26 million and $33 million at December 31, 2004 and 2003, respectively. The amount recorded to Net investment gains (losses) during the years ended December 31, 2004 and 2003 were gains of $34 million and $19 million, respectively. There were no amounts recorded to Net investment gains (losses) during the year ended December 31, 2002 related to embedded derivatives. CREDIT RISK The Company may be exposed to credit related losses in the event of nonperformance by counterparties to derivative financial instruments. Generally, the current credit exposure of the Company's derivative contracts is limited to the fair value at the reporting date. The credit exposure of the Company's derivative transactions is represented by the fair value of contracts with a net positive fair value at the reporting date. Because exchange traded futures and options are effected through regulated exchanges, and positions are marked to market on a daily basis, the Company has minimal exposure to credit related losses in the event of nonperformance by counterparties to such derivative financial instruments. The Company manages its credit risk by entering into derivative transactions with creditworthy counterparties. In addition, the Company enters into over-the-counter derivatives pursuant to master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Likewise, the Company effects exchange traded futures and options through regulated exchanges and these positions are marked to market and margined on a daily basis. 40 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, 2002, 2003 and 2004 is as follows:
DEFERRED VALUE OF POLICY BUSINESS ACQUISITION ACQUIRED COSTS TOTAL -------- ----------- ------- (DOLLARS IN MILLIONS) Balance at January 1, 2002.............. $1,502 $ 8,969 $10,471 Capitalizations......................... -- 2,227 2,227 ------ ------- ------- Total............................ 1,502 11,196 12,698 Amortization related 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 related 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 Capitalizations......................... -- 1,817 1,817 ------ ------- ------- Total............................ 836 11,213 12,049 Amortization related to: Net investment gains (losses)........ 1 5 6 Unrealized investment gains (losses). (76) (12) (88) Other expenses....................... 81 1,055 1,136 ------ ------- ------- Total amortization............... 6 1,048 1,054 Dispositions and other.................. (23) 99 76 ------ ------- ------- Balance at December 31, 2004............ $ 807 $10,264 $11,071 ====== ======= =======
The estimated future amortization expense allocated to other expenses for VOBA is $73 million in 2005, $68 million in 2006, $65 million in 2007, $63 million in 2008 and $63 million in 2009. Amortization of VOBA and DAC is related to (i) investment gains and losses and the impact of such gains and losses on the amount of the amortization, (ii) unrealized investment gains and losses to provide information 41 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) regarding the amount that would 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. SALES INDUCEMENTS Changes in deferred sales inducements are as follows:
SALES INDUCEMENTS --------------------- (DOLLARS IN MILLIONS) Balance at January 1, 2004.. $52 Capitalization.............. 29 Amortization................ (6) --- Balance at December 31, 2004 $75 ===
LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES The following table provides an analysis of the activity in the liability for unpaid claims and claim expenses relating to property and casualty group accident and non-medical health policies and contracts:
YEARS ENDED DECEMBER 31, ------------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Balance at January 1............. $ 3,560 $ 4,821 $ 4,597 Reinsurance recoverables...... (284) (496) (457) ------- ------- ------- Net balance at January 1......... 3,276 4,325 4,140 ------- ------- ------- Incurred related to: Current year.................. 2,491 3,816 4,219 Prior years................... (9) 28 (81) ------- ------- ------- 2,482 3,844 4,138 ------- ------- ------- Paid related to: Current year.................. (1,519) (2,153) (2,559) Prior years................... (679) (1,290) (1,332) ------- ------- ------- (2,198) (3,443) (3,891) ------- ------- ------- Dispositions..................... -- (1,450) (62) Net Balance at December 31....... 3,560 3,276 4,325 Add: Reinsurance recoverables. 287 284 496 ------- ------- ------- Balance at December 31........... $ 3,847 $ 3,560 $ 4,821 ======= ======= =======
GUARANTEES The Company issues annuity contracts which may include contractual guarantees to the contractholder for: (i) return of no less than total deposits made to the contract less any partial withdrawals ("return of net deposits") and (ii) the highest contract value on a specified anniversary date minus any withdrawals following the contract anniversary, or total deposits made to the contract less any partial withdrawals plus a minimum return 42 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) ("anniversary contract value" or "minimum return"). The Company also issues annuity contracts that apply a lower rate of funds deposited if the contractholder elects to surrender the contract for cash and a higher rate if the contractholder elects to annuitize ("two tier annuities"). These guarantees include benefits that are payable in the event of death or at annuitization. The Company also issues universal and variable life contracts where the Company contractually guarantees to the contractholder a secondary guarantee or a guaranteed paid up benefit. The Company had the following types of guarantees relating to annuity and universal and variable life contracts at:
DECEMBER 31, 2004 ANNUITY CONTRACTS -------------------------- IN THE AT EVENT OF DEATH ANNUITIZATION -------------- ------------- (DOLLARS IN MILLIONS) RETURN OF NET DEPOSITS Separate account value................... $ 2,039 N/A Net amount at risk....................... $ 11(1) N/A Average attained age of contractholders.. 58 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value................... $ 29,834 $ 2,659 Net amount at risk....................... $ 735(1) $ 7(2) Average attained age of contractholders.. 61 years 56 years TWO TIER ANNUITIES General account value.................... N/A $ 301 Net amount at risk....................... N/A $ 36(3) Average attained age of contractholders.. N/A 58 years DECEMBER 31, 2004 UNIVERSAL AND VARIABLE LIFE CONTRACTS -------------------------- SECONDARY PAID UP GUARANTEES GUARANTEES -------------- ------------- (DOLLARS IN MILLIONS) Account value (general and separate account) $ 4,715 $ 1,659 Net amount at risk.......................... $ 94,163(1) $ 16,830(1) Average attained age of policyholders....... 45 years 51 years
- -------- (1)The net amount at risk for guarantees of amounts in the event of death is defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. (2)The net amount at risk for guarantees of amounts at annuitization is defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. (3)The net amount at risk for two tier annuities is based on the excess of the upper tier, adjusted for a profit margin, less the lower tier. The net amount at risk is based on the direct amount at risk (excluding reinsurance). The Company's annuity and life contracts with guarantees may offer more than one type of guarantee in each contract. Therefore, the amounts listed above may not be mutually exclusive. 43 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts are as follows:
UNIVERSAL AND VARIABLE ANNUITY CONTRACTS LIFE CONTRACTS --------------------------- --------------------- GUARANTEED GUARANTEED ANNUITIZATION SECONDARY PAID UP DEATH BENEFITS BENEFITS GUARANTEES GUARANTEES TOTAL -------------- ------------- ---------- ---------- ----- (DOLLARS IN MILLIONS) Balance at January 1, 2004.. $ 8 $16 $ 6 $ 6 $ 36 Incurred guaranteed benefits 4 (9) 4 1 -- Paid guaranteed benefits.... (6) -- (4) -- (10) --- --- --- --- ---- Balance at December 31, 2004 $ 6 $ 7 $ 6 $ 7 $ 26 === === === === ====
Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows at:
DECEMBER 31, 2004 --------------------- (DOLLARS IN MILLIONS) Mutual Fund Groupings Equity............ $18,873 Bond.............. 2,270 Balanced.......... 886 Money Market...... 212 Specialty......... 79 ------- Total......... $22,320 =======
SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $53,382 million and $47,198 million at December 31, 2004 and 2003, respectively, for which the policyholder assumes all investment risk, and separate accounts with a minimum return or account value for which the Company contractually guarantees either a minimum return or account value to the policyholder which totaled $15,125 million and $16,463 million at December 31, 2004 and 2003, respectively. The latter category consisted primarily of Met Managed Guaranteed Interest Contracts and participating close-out contracts. The average interest rates credited on these contracts were 4.7% and 4.5% at December 31, 2004 and 2003, respectively. 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 $518 million, $451 million and $461 million for the years ended December 31, 2004, 2003 and 2002, respectively. At December 31, 2004, fixed maturities, equity securities, and cash and cash equivalents reported on the consolidated balance sheet include $27 million, $20 million and $1 million, respectively, of the Company's proportional interest in separate accounts. For the year ended December 31, 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. 44 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. The Company retains up to $25 million on single life policies and $30 million on survivorship policies and reinsures 100% of amounts in excess of the Company's retention limits. The Company reinsures a portion of the mortality risk on its universal life policies. 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 for 2003 and 2002, among others. The Company also reinsures with affiliates certain guarantees in connection with benefit features offered under some of its individual variable annuities. In the Reinsurance Segment, Reinsurance Group of America, Incorporated ("RGA"), retains a maximum of $6 million of coverage per individual life with respect to its assumed reinsurance business. See Note 10 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, ------------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Direct premiums............................................ $15,419 $16,843 $17,859 Reinsurance assumed........................................ 4,334 3,568 2,948 Reinsurance ceded.......................................... (2,241) (2,260) (2,346) ------- ------- ------- Net premiums............................................... $17,512 $18,151 $18,461 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits $ 1,821 $ 2,175 $ 2,478 ======= ======= =======
Reinsurance recoverables, included in premiums and other receivables, were $3,597 million and $3,692 million at December 31, 2004 and 2003, respectively, including $1,302 million and $1,341 million, respectively, 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 $68 million and $102 million at December 31, 2004 and 2003, respectively. 45 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Included in Premiums and other receivables are reinsurance due from Exeter Reassurance Company, Limited, a related party, of $493 million and $507 million at December 31, 2004 and 2003, respectively. Included in future policy benefits, other policyholder funds and policyholder account balances are reinsurance liabilities assumed from MTL, MetLife Investors Group, Inc., First MetLife Investor's Insurance Company, MetLife Investor's Insurance Company, and Cova Corporation related parties, of $796 million, $2,505 million, and $243 million, respectively, at December 31, 2004. Included in future policy benefits, other policyholder funds and policyholder account balances are reinsurance liabilities assumed from MIAC, Cova Corporation, and MetLife International Holdings, Inc., related parties of $790 million, $1,807 million, and $190 million, respectively, at December 31, 2003. 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. 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 46 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. Closed block liabilities and assets designated to the closed block are as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 ------- ------- (DOLLARS IN MILLIONS) CLOSED BLOCK LIABILITIES Future policy benefits.................................................. $42,348 $41,928 Other policyholder funds................................................ 258 260 Policyholder dividends payable.......................................... 690 682 Policyholder dividend obligation........................................ 2,243 2,130 Payables under securities loaned transactions........................... 4,287 6,418 Other liabilities....................................................... 199 180 ------- ------- Total closed block liabilities................................... 50,025 51,598 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $27,757 and $30,381, respectively)................ 29,766 32,348 Equity securities, at fair value (cost: $898 and $217, respectively). 979 250 Mortgage loans on real estate........................................ 8,165 7,431 Policy loans......................................................... 4,067 4,036 Short-term investments............................................... 101 123 Other invested assets................................................ 221 108 ------- ------- Total investments................................................ 43,299 44,296 Cash and cash equivalents............................................... 325 531 Accrued investment income............................................... 511 527 Deferred income taxes................................................... 1,002 1,043 Premiums and other receivables.......................................... 103 164 ------- ------- Total assets designated to the closed block...................... 45,240 46,561 ------- ------- Excess of closed block liabilities over assets designated to the closed block................................................................. 4,785 5,037 ------- ------- Amounts included in accumulated other comprehensive loss: Net unrealized investment gains, net of deferred income tax of $752 and $730, respectively.......................... 1,338 1,270 Unrealized derivative gains (losses), net of deferred income tax benefit of ($31) and ($28), respectively....................... (55) (48) Allocated from policyholder dividend obligation, net of deferred income tax benefit of ($763) and ($778), respectively..... (1,356) (1,352) ------- ------- (73) (130) ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities.......................................... $ 4,712 $ 4,907 ======= =======
47 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, ------------------------ 2004 2003 2002 ------ ------ ------ (DOLLARS IN MILLIONS) Balance at beginning of year................................. $2,130 $1,882 $ 708 Impact on revenues, net of expenses and income taxes......... 124 -- -- Change in unrealized investment and derivative gains (losses) (11) 248 1,174 ------ ------ ------ Balance at end of year....................................... $2,243 $2,130 $1,882 ====== ====== ======
Closed block revenues and expenses were as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2004 2003 2002 ------ ------ ------ (DOLLARS IN MILLIONS) REVENUES Premiums.................................... $3,156 $3,365 $3,551 Net investment income and other revenues.... 2,504 2,554 2,568 Net investment gains (losses)............... (19) (128) 11 ------ ------ ------ Total revenues........................... 5,641 5,791 6,130 ------ ------ ------ EXPENSES Policyholder benefits and claims............ 3,480 3,660 3,770 Policyholder dividends...................... 1,458 1,509 1,573 Change in policyholder dividend obligation.. 124 -- -- Other expenses.............................. 275 297 310 ------ ------ ------ Total expenses........................... 5,337 5,466 5,653 ------ ------ ------ Revenues net of expenses before income taxes 304 325 477 Income taxes................................ 109 118 173 ------ ------ ------ Revenues net of expenses and income taxes... $ 195 $ 207 $ 304 ====== ====== ======
The change in maximum future earnings of the closed block is as follows:
YEARS ENDED DECEMBER 31, ---------------------- 2004 2003 2002 ------ ------ ------ (DOLLARS IN MILLIONS) Balance at end of year.......... $4,712 $4,907 $5,114 Less: Reallocation of assets....... -- -- 85 Balance at beginning of year. 4,907 5,114 5,333 ------ ------ ------ Change during year.............. $ (195) $ (207) $ (304) ====== ====== ======
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. 48 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. DEBT Debt consisted of the following:
DECEMBER 31, --------------------- 2004 2003 ------ ------ (DOLLARS IN MILLIONS) Surplus notes, interest rates ranging from 7.00% to 7.88%, maturity dates ranging from 2005 to 2025.............................................................. $ 946 $ 940 Capital notes, interest rates 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.............................................................. 300 299 Fixed rate notes, interest rates ranging from 2.99% to 6.38%, maturity dates ranging from 2005 to 2006...................................................... 106 103 Capital lease obligations........................................................ 65 74 Other notes with varying interest rates.......................................... 133 139 ------ ------ Total long-term debt............................................................. 2,050 2,055 Total short-term debt............................................................ 1,445 3,536 ------ ------ Total......................................................................... $3,495 $5,591 ====== ======
The Company maintains committed and unsecured credit facilities aggregating $2.7 billion ($1.06 billion expiring in 2005, $175 million expiring in 2006 and $1.5 billion expiring in 2009). If these facilities were drawn upon, they would bear interest at varying rates in accordance with the respective agreements. The facilities can be used for general corporate purposes and $2.5 billion of the facilities also serve as back-up lines of credit for the Company's commercial paper programs. At December 31, 2004, the Company had drawn approximately $56 million under the facilities expiring in 2005 at interest rates ranging from 5.44% to 6.38% and approximately another $50 million under the facility expiring in 2006 at an interest rate of 2.99%. 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. In April 2004, the Company replaced the $2.25 billion credit facilities expiring in 2004 and 2005, with a $1.0 billion 364-day credit facility expiring in 2005 and a $1.5 billion five-year credit facility expiring in 2009. At December 31, 2004, the Company had $569 million in outstanding 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. The aggregate maturities of long-term debt for the Company are $430 million in 2005, $160 million in 2006, $11 million in 2007, $24 million in 2008, $14 million in 2009 and $1,411 million thereafter. Short-term debt of the Company consisted of commercial paper with a weighted average interest rate of 2.3% and a weighted average maturity of 27 days at December 31, 2004. 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. The Company has no other collateralized borrowings at December 31, 2004. Such securities had a weighted average coupon rate of 5.07% and a weighted average maturity of 30 days at December 31, 2003. 49 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Interest expense related to the Company's indebtedness included in other expenses was $201 million, $265 million and $208 million for the years ended December 31, 2004, 2003 and 2002, 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, 2004 and 2003. Interest expense on these instruments is included in other expenses and was $11 million for each of the years ended December 31, 2004, 2003 and 2002. RGA CAPITAL TRUST I. In December 2001, 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 $159 million and $158 million for the years ended December 31, 2004 and 2003, respectively, net of unamortized discount of $66 million and $67 million for the years ended December 31, 2004 and 2003, respectively. 9. INCOME TAXES The provision for income taxes for continuing operations was as follows:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ---- ---- ----- (DOLLARS IN MILLIONS) Current: Federal................ $838 $347 $ 820 State and local........ 45 19 (18) Foreign................ 5 2 (5) ---- ---- ----- 888 368 797 ---- ---- ----- Deferred: Federal................ 13 272 (328) State and local........ (7) 27 17 Foreign................ -- -- 12 ---- ---- ----- 6 299 (299) ---- ---- ----- Provision for income taxes $894 $667 $ 498 ==== ==== =====
50 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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, ----------------------- 2004 2003 2002 ------ ----- ---- (DOLLARS IN MILLIONS) Tax provision at U.S. statutory rate.............. $1,100 $ 826 $566 Tax effect of: Tax exempt investment income................... (69) (101) (86) State and local income taxes................... 17 42 18 Prior year taxes............................... (104) (25) (8) Foreign operations net of foreign income taxes. (25) (17) 4 Other, net..................................... (25) (58) 4 ------ ----- ---- Provision for income taxes........................ $ 894 $ 667 $498 ====== ===== ====
The Company is under continuous examination by the Internal Revenue Service ("IRS") and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction. In 2004 the Company recorded an adjustment of $91 million for the settlement of all federal income tax issues relating to the IRS's audit of the Company's tax returns for the years 1997-1999. Such settlement is reflected in the current year tax expense as an adjustment to prior year taxes. The Company also received $22 million in interest on such settlement and incurred an $8 million tax expense on such settlement for a total impact to net income of $105 million. The current IRS examination covers the years 2000-2002. The Company regularly assesses the likelihood of additional assessments in each taxing jurisdiction resulting from current and subsequent years' examinations. Liabilities for income taxes have been established for future income tax assessments when it is probable there will be future assessments and the amount thereof can be reasonably estimated. Once established, liabilities for uncertain tax positions are adjusted only when there is more information available or when an event occurs necessitating a change to the liabilities. The Company believes that the resolution of income tax matters for open years will not have a material effect on its consolidated financial statements although the resolution of income tax matters could impact the Company's effective tax rate for a particular future period. 51 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, -------------------- 2004 2003 ------- ------- (DOLLARS IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables................. $ 2,998 $ 2,618 Net operating losses..................................... 216 245 Capital loss carryforwards............................... 108 92 Litigation related....................................... 84 86 Other.................................................... 124 52 ------- ------- 3,530 3,093 Less: Valuation allowance................................ 16 16 ------- ------- 3,514 3,077 ------- ------- Deferred income tax liabilities: Investments.............................................. 1,554 1,352 Deferred policy acquisition costs........................ 3,095 2,815 Employee benefits........................................ 114 151 Net unrealized investment gains.......................... 1,391 1,397 Other.................................................... 31 58 ------- ------- 6,185 5,773 ------- ------- Net deferred income tax liability........................... $(2,671) $(2,696) ======= =======
Domestic net operating loss carryforwards amount to $561 million at December 31, 2004 and will expire beginning in 2014. Domestic capital loss carryforwards amount to $249 million at December 31, 2004 and will expire beginning in 2005. Foreign net operating loss carryforwards amount to $45 million at December 31, 2004 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. 10. COMMITMENTS, CONTINGENCIES AND GUARANTEES LITIGATION The Company is a defendant in a large number of litigation matters. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the United States permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding reasonably possible verdicts in the jurisdiction for similar matters. This variability in pleadings, together with the actual experience of the Company in litigating or resolving through settlement numerous claims over an extended period of time, demonstrate to management 52 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value. Thus, unless stated below, the specific monetary relief sought is not noted. Due to the vagaries of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time may normally be inherently impossible to ascertain with any degree of certainty. Inherent uncertainties can include how fact finders will view individually and in their totality documentary evidence, the credibility and effectiveness of witnesses' testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. On a quarterly and yearly basis, the Company reviews relevant information with respect to liabilities for litigation and contingencies to be reflected in the Company's consolidated financial statements. The review includes senior legal and financial personnel. Unless stated below, estimates of possible additional losses or ranges of loss for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. Liabilities are established when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some of the matters could require the Company to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of December 31, 2004. 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." 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, Metropolitan Insurance and Annuity Company 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, 2004, there are approximately 328 sales practices lawsuits pending against Metropolitan Life; approximately 49 sales practices lawsuits pending against New England Mutual, New England Life Insurance Company, and New England Securities Corporation (collectively, "New England"); and approximately 54 sales practices lawsuits pending against General American. Metropolitan Life, New England and General 53 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 and General American. Regulatory authorities in a small number of states have had investigations or inquiries relating to Metropolitan Life's, New England'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 principally have been based upon allegations relating to certain research, publication and 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, 2003 or 2004, trial courts in California, Utah, Georgia, New York, Texas, and Ohio 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. 54 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Metropolitan Life continues 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. Bankruptcies of other companies involved in asbestos litigation, as well as advertising by plaintiffs' asbestos lawyers, may be resulting in an increase in the cost of resolving claims and could result in an increase in the number of trials and possible adverse verdicts Metropolitan Life may experience. Plaintiffs are seeking additional funds from defendants, including Metropolitan Life, in light of such bankruptcies by certain other defendants. In addition, publicity regarding legislative reform efforts may result in an increase or decrease in the number of claims. 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 are set forth in the following table:
AT OR FOR THE YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Asbestos personal injury claims at year end (approximate)............. 108,000 111,700 106,500 Number of new claims during the year (approximate).................... 23,500 58,650 66,000 Settlement payments during the year (1)............................... $85.5 $84.2 $95.1
- -------- (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. 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. 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) was within the coverage of the excess insurance policies discussed below. Metropolitan Life regularly reevaluates its exposure from asbestos litigation and has updated its liability analysis for asbestos-related claims through December 31, 2004. 55 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 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 and 2004 for the amounts paid with respect to asbestos litigation in excess of the retention. As the performance of the indices impacts the return in the reference fund, it is possible that loss reimbursements to the Company and the recoverable with respect to later periods may be 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. If at some point in the future, the Company believes the liability for probable and reasonably 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. The foregone loss reimbursements were approximately $8.3 million with respect to 2002 claims, $15.5 million with respect to 2003 claims and are estimated to be $10.2 million with respect to 2004 claims and estimated to be approximately $54 million in the aggregate, including future years. 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 named as defendants some or all of Metropolitan Life, MetLife, Inc. (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. On February 21, 2003, a trial court within the commercial part of the New York State court granted the defendants' motions to dismiss two purported class actions. On April 27, 2004, the appellate court modified the trial court's order by reinstating certain claims against Metropolitan Life, the Holding Company and the individual directors. Plaintiffs in these actions have filed a consolidated amended complaint. Defendants' motion to dismiss part of the consolidated amended complaint, and plaintiffs' motion to certify a litigation class are pending. Another purported class action filed in New York State court in Kings County has been consolidated with this action. The plaintiffs in the state court class actions seek compensatory relief and punitive damages. Five persons 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. Respondents have moved to dismiss the proceeding. In a purported class action against Metropolitan Life and the Holding Company pending in the United States District Court for the Eastern District of New York, plaintiffs served a second consolidated amended complaint on April 2, 2004. In this action, plaintiffs assert violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in 56 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) connection with the plan, claiming that the Policyholder Information Booklets failed to disclose certain material facts. They seek rescission and compensatory damages. On June 22, 2004, the court denied the defendants' motion to dismiss the claim of violation of the Securities Exchange Act of 1934. The court had previously denied defendants' motion to dismiss the claim for violation of the Securities Act of 1933. On December 10, 2004, the court reaffirmed its earlier decision denying defendants' motion for summary judgment as premature. 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. On April 30, 2004, a lawsuit was filed in New York state court in New York County against the Holding Company and Metropolitan Life 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. In July 2004, the plaintiffs served an amended complaint. The amended complaint challenges the treatment of the cost of the sales practices settlement in the demutualization of Metropolitan Life and asserts claims of breach of fiduciary duty, common law fraud, and unjust enrichment. Plaintiffs seek compensatory and punitive damages, as well as attorneys' fees and costs. The Holding Company and Metropolitan Life have moved to dismiss the amended complaint. In October 2003, the United States District Court for the Western District of Pennsylvania dismissed plaintiffs' similar complaint alleging that the demutualization breached the terms of the 1999 settlement agreement and unjustly enriched the Holding Company and Metropolitan Life. The Holding Company and Metropolitan Life intend to contest this matter vigorously. 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 concluded its examination of Metropolitan Life concerning possible past race-conscious underwriting practices. On April 28, 2003, the United States District Court for the Southern District of New York approved a class action settlement of a consolidated action against Metropolitan Life alleging racial discrimination in the marketing, sale, and administration of life insurance policies. Metropolitan Life also entered into settlement agreements to resolve the regulatory examination. Twenty lawsuits involving approximately 140 plaintiffs were 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 resolved the claims of some of these plaintiffs through settlement, and some additional plaintiffs have voluntarily dismissed their claims. Metropolitan Life resolved claims of some additional persons who opted out of the settlement class referenced in the preceding paragraph but who had not filed suit. The actions filed in Alabama and Tennessee have been dismissed; one action filed in Mississippi remains pending. In the pending action, Metropolitan Life is contesting plaintiffs' claims vigorously. 57 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company believes that adequate provision has been made to cover the costs associated with the resolution of these matters. OTHER 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. As previously reported, the SEC is conducting a formal investigation of New England Securities Corporation ("NES"), a subsidiary of New England Life Insurance Company ("NELICO"), 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. Prior to filing MetLife, Inc.'s June 30, 2003 Form 10-Q, the Holding Company and/or its subsidiaries announced a $31 million charge, net of income taxes, resulting from certain improperly deferred expenses at an affiliate, New England Financial. The Holding Company and/or its subsidiaries notified the SEC about the nature of this charge prior to its announcement. The SEC is pursuing a formal investigation of the matter and, in December 2004, NELICO received a so-called "Wells Notice" in connection with the SEC investigation. The Wells Notice provides notice that the SEC staff is considering recommending that the SEC bring a civil action alleging violations of the U.S. securities laws. Under the SEC's procedures, a recipient can respond to the SEC staff before the staff makes a formal recommendation regarding whether any action alleging violations of the U.S. securities laws should be considered. The Holding Company and/or its subsidiaries continue to cooperate fully with the SEC in its investigation. The American Dental Association and two individual providers have sued the Holding Company and/or its subsidiaries, 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. The Holding Company and/or its subsidiaries are vigorously defending the case. In March 2005, the district court granted in part and denied in part defendants' motion to dismiss. On November 16, 2004, a New York state court granted plaintiffs' motion to certify a litigation class of owners of certain participating life insurance policies and a sub-class of New York owners of such policies in an action asserting that Metropolitan Life breached their policies and violated New York's General Business Law in the manner in which it allocated investment income across lines of business during a period ending with the 2000 demutualization. Metropolitan Life has filed a notice of appeal from the order granting this motion. In August 2003, an appellate court affirmed the dismissal of fraud claims in this action. Plaintiffs seek compensatory damages. Metropolitan Life 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 and, generally, the marketing of products. The 58 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Company believes that many of these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various regulatory agencies. 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. As previously reported, in May 2004, General American received a Wells Notice stating that the SEC staff is considering recommending that the SEC bring a civil action alleging violations of the U.S. securities laws against General American. Under the SEC procedures, General American can avail itself of the opportunity to respond to the SEC staff before it makes a formal recommendation regarding whether any action alleging violations of the U.S. securities laws should be considered. General American has responded to the Wells Notice. The Company 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. In October 2004, the SEC informed the Holding Company and/or its subsidiaries that it anticipates issuing a formal order of investigation related to certain sales by a former sales representative to the Sheriff's Department of Fulton County, Georgia. The Holding Company and/or its subsidiaries are fully cooperating with respect to inquiries from the SEC. The Holding Company and/or its subsidiaries have received a number of subpoenas and other requests from the Office of the Attorney General of the State of New York seeking, among other things, information regarding and relating to compensation agreements between insurance brokers and the Holding Company and/or its subsidiaries, whether the Holding Company and/or its subsidiaries have provided or are aware of the provision of "fictitious" or "inflated" quotes and information regarding tying arrangements with respect to reinsurance. Based upon an internal review, the Holding Company and/or its subsidiaries advised the Attorney General for the State of New York that the Holding Company and/or its subsidiaries were not aware of any instance in which they had provided a "fictitious" or "inflated" quote. The Holding Company and/or its subsidiaries also have received a subpoena, including a set of interrogatories, from the Office of the Attorney General of the State of Connecticut seeking information and documents concerning contingent commission payments to brokers and their awareness of any "sham" bids for business. The Holding Company and/or its subsidiaries also have received a Civil Investigative Demand from the Office of the Attorney General for the State of Massachusetts seeking information and documents concerning bids and quotes that the Holding Company and/or its subsidiaries submitted to potential customers in Massachusetts, the identity of agents, brokers, and producers to whom the Holding Company and/or its subsidiaries submitted such bids or quotes, and communications with a certain broker. The Holding Company and/or its subsidiaries is continuing to conduct an internal review of its commission payment practices. The Holding Company and/or its subsidiaries continue to fully cooperate with these inquiries and are responding to the subpoenas and other requests. Approximately twelve broker related lawsuits have been received. Two class action lawsuits were filed in the United States District Court for the Southern District of New York on behalf of proposed classes of all persons who purchased the securities of MetLife, Inc. between April 5, 2000 and October 19, 2004 against MetLife, Inc. and certain officers of MetLife, Inc. In the context of contingent commissions, the complaints allege that defendants violated the federal securities laws by issuing materially false and misleading statements and failing to disclose material facts regarding MetLife, Inc.'s financial performance throughout the class period that had the effect of artificially inflating the market price of MetLife Inc.'s securities. Three class action lawsuits were filed in the United States District Court for the Southern District of New York on behalf of proposed classes of participants in and beneficiaries of Metropolitan Life Insurance Company's Savings and Investment Plan against MetLife, Inc., the MetLife, Inc. Employee Benefits Committee, certain officers of Metropolitan Life Insurance Company, and members of MetLife, Inc.'s board of directors. In the context of contingent 59 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) commissions, the complaints allege that defendants violated their fiduciary obligations under ERISA by failing to disclose to plan participants who had the option of allocating funds in the plan to the MetLife Company Stock Fund material facts regarding MetLife, Inc.'s financial performance. The plaintiffs in these actions seek compensatory and other relief. Two cases have been brought in California state court against MetLife, Inc., other companies, and an insurance broker. One of these cases alleges that the insurers and the broker violated Section 17200 of the California Business and Professions Code by engaging in unfair trade practices concerning contingent commissions and fees paid to the broker; the other case has been brought by the California Insurance Commissioner and alleges that the defendants violated certain provisions of the California Insurance Code. Additionally, two civil RICO or antitrust related class action lawsuits have been brought against MetLife, Inc., and other companies in California federal court with respect to issues concerning contingent commissions and fees paid to one or more brokers. Three class action lawsuits have been brought in Illinois federal court against MetLife, Inc. and other companies alleging that insurers and brokers violated antitrust laws or engaged in civil RICO violations. The Company intends to vigorously defend these cases. In addition to those discussed above, regulators and others have made a number of inquiries of the insurance industry regarding industry brokerage practices and related matters and others may begin. It is reasonably possible that the Holding Company and/or its subsidiaries will receive additional subpoenas, interrogatories, requests and lawsuits. The Holding Company and/or its subsidiaries will fully cooperate with all regulatory inquiries and intends to vigorously defend all lawsuits. Metropolitan Life also has been named as a defendant in a number of silicosis, welding and mixed dust cases in various states. The Company intends to defend itself vigorously against these cases. 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. 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 60 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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) 2005.............................................. $ 451 $19 $162 2006.............................................. $ 425 $19 $147 2007.............................................. $ 386 $13 $124 2008.............................................. $ 315 $10 $ 92 2009.............................................. $ 260 $ 4 $ 68 Thereafter........................................ $1,376 $12 $388
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 approximately $1,320 million and $1,378 million at December 31, 2004 and 2003, 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 less than $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 during 2004 was insignificant. The Company's recorded liability at December 31, 2004 and 2003 for indemnities, guarantees and commitments is insignificant. In conjunction with replication synthetic asset transaction, as described in Note 3, 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 61 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) credits become worthless, is $1.1 billion at December 31, 2004. The credit default swaps expire at various times during the next seven years. 11. 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 (including employees of certain affiliates) who meet specified eligibility requirements. 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 (including retirees of certain affiliates) 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 or certain affiliates. 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 -------------- --------------- 2004 2003 2004 2003 ------ ------ ------ ------- (DOLLARS IN MILLIONS) Change in projected benefit obligation: Projected benefit obligation at beginning of year........... $5,052 $4,744 $2,001 $ 1,878 Service cost............................................. 116 122 27 38 Interest cost............................................ 297 311 114 122 Acquisitions and divestitures............................ (3) (1) -- -- Actuarial losses (gains)................................. 134 352 (132) 167 Curtailments and terminations............................ -- (7) -- (4) Change in benefits....................................... -- (1) 1 (1) Transfers in (out) of controlled group................... (8) (181) (1) (77) Benefits paid............................................ (323) (287) (127) (122) ------ ------ ------ ------- Projected benefit obligation at end of year................. 5,265 5,052 1,883 2,001 ------ ------ ------ ------- Change in plan assets: Fair value of plan assets at beginning of year.............. 4,504 4,006 999 965 Actual return on plan assets............................. 389 636 94 112 Employer contribution.................................... 549 335 90 46 Transfers in (out) of controlled group................... (5) (186) -- (2) Benefits paid............................................ (323) (287) (127) (122) ------ ------ ------ ------- Fair value of plan assets at end of year.................... 5,114 4,504 1,056 999 ------ ------ ------ ------- Under funded................................................ (151) (548) (827) (1,002) Unrecognized net actuarial losses........................... 1,483 1,438 194 352 Unrecognized prior service cost............................. 67 82 (156) (175) ------ ------ ------ ------- Prepaid (accrued) benefit cost.............................. $1,399 $ 972 $ (789) $ (825) ====== ====== ====== ======= Qualified plan prepaid pension cost......................... $1,725 $1,297 Non-qualified plan accrued pension cost..................... (469) (467) Intangible assets........................................... 13 14 Accumulated other comprehensive income...................... 130 128 ------ ------ Prepaid benefit cost........................................ $1,399 $ 972 ====== ======
62 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 ---------------- ----------------- ---------------- 2004 2003 2004 2003 2004 2003 ------- ------- ----- ----- ------- ------- (DOLLARS IN MILLIONS) Aggregate fair value of plan assets (principally company contracts).. $ 5,114 $ 4,504 $ -- $ -- $ 5,114 $ 4,504 Aggregate projected benefit obligation....................... (4,751) (4,523) (514) (529) (5,265) (5,052) ------- ------- ----- ----- ------- ------- Over (under) funded................ $ 363 $ (19) $(514) $(529) $ (151) $ (548) ======= ======= ===== ===== ======= =======
The accumulated benefit obligation for all defined benefit pension plans was $4,928 million and $4,866 million at December 31, 2004 and 2003, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets:
DECEMBER 31, ------------------ 2004 2003 ---- ---- (DOLLARS IN MILLIONS) Projected benefit obligation................................ $532 $543 Accumulated benefit obligation.............................. $468 $465 Fair value of plan assets................................... $ 14 $ 10
Information for pension and postretirement plans with a projected benefit obligation in excess of plan assets:
DECEMBER 31, ------------------------------ PENSION BENEFITS OTHER BENEFITS ---------------- ------------- 2004 2003 2004 2003 ---- ------ ------ ------ (DOLLARS IN MILLIONS) Projected benefit obligation............ $532 $5,043 $1,883 $2,001 Fair value of plan assets............... $ 14 $4,484 $1,056 $ 999
As a result of additional pension contributions and favorable investment returns during the year ended December 31, 2004, a significant plan that was included in the pension benefits section of the above table as of December 31, 2003 was no longer included as of December 31, 2004. This plan had a fair value of plan assets of $5,079 with a projected benefit obligation of $4,726 and a fair value of plan assets of $4,474 with a projected benefit obligation of $4,500 as of December 31, 2004 and 2003, respectively. The components of net periodic benefit cost were as follows:
PENSION BENEFITS OTHER BENEFITS ------------------- ---------------- 2004 2003 2002 2004 2003 2002 ----- ----- ----- ---- ---- ---- (DOLLARS IN MILLIONS) Service cost.................................. $ 116 $ 122 $ 104 $ 27 $ 38 $ 36 Interest cost................................. 297 311 307 114 122 123 Expected return on plan assets................ (406) (331) (354) (76) (71) (93) Amortization of prior actuarial losses (gains) and prior service cost...................... 116 102 33 (12) (12) (9) Curtailment cost.............................. -- 10 11 -- 3 4 ----- ----- ----- ---- ---- ---- Net periodic benefit cost..................... $ 123 $ 214 $ 101 $ 53 $ 80 $ 61 ===== ===== ===== ==== ==== ====
63 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company expects to receive subsidies on prescription drug benefits beginning in 2006 under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The postretirement benefit plan assets and accumulated benefit obligation were remeasured effective July 1, 2004 in order to determine the effect of the expected subsidies on net periodic postretirement benefit cost. As a result, the accumulated postretirement benefit obligation was reduced $201 million which will be recognized as adjustments of future benefits through the amortization of actuarial losses (gains) in accordance with FASB staff position 106-2 on a prospective basis and net periodic postretirement benefit cost for the year ended 2004 was reduced $16 million. The reduction of net periodic benefit cost is due to reductions in service cost of $2 million, interest cost of $6 million, and amortization of prior actuarial loss of $8 million. ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ------------------------------- PENSION BENEFITS OTHER BENEFITS ---------------- -------------- 2004 2003 2004 2003 ----- ----- ----- ----- Weighted average discount rate 5.86% 6.10% 5.86% 6.10% 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 ----------------- ----------------- 2004 2003 2002 2004 2003 2002 ----- ----- ----- ----- ----- ----- Weighted average discount rate..... 6.11% 6.75% 7.27% 6.10% 6.75% 7.40% Weighted average expected return on plan assets...................... 8.47% 8.50% 9.00% 7.91% 7.77% 8.16% Rate of compensation increase...... 4%-8% 4%-8% 4%-6% N/A N/A N/A
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 reasonable tolerance from the derived rate. The weighted expected return on plan assets for use in that plan's valuation in 2005 is currently anticipated to be 8.50% for pension benefits and other postretirement medical benefits and 6.25% for postretirement life benefits. The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation were as follows:
DECEMBER 31, ----------------------------------------------- 2004 2003 ---------------------- ------------------------ Pre-Medicare eligible claims 8% down to 5% in 2010 8.5% down to 5% in 2010 Medicare eligible claims.... 10% down to 5% in 2014 10.5% down to 5% in 2014
64 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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..... $104 $(100)
PLAN ASSETS The weighted average allocation of pension plan and other benefit plan assets is as follows:
DECEMBER 31, ------------------------------ PENSION BENEFITS OTHER BENEFITS --------------- ------------- 2004 2003 2004 2003 ASSET CATEGORY ---- ---- ---- ---- Equity securities........................................... 50% 48% 41% 38% Fixed maturities............................................ 36% 39% 57% 61% Other (Real Estate and Alternative investments)............. 14% 13% 2% 1% --- --- --- --- Total.................................................... 100% 100% 100% 100% === === === ===
The weighted average target allocation of pension plan and other benefit plan assets for 2005 is as follows:
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- ASSET CATEGORY Equity securities........................................... 30%-65% 25%-45% Fixed maturities............................................ 20%-70% 45%-70% Other (Real Estate and Alternative investments)............. 0%-25% 0%-10%
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification. Adjustments are made to target allocations based on an assessment of the impact of economic factors and market conditions. CASH FLOWS The Company expects to contribute $31 million to its pension plans and $91 million to its other benefit plans during 2005. The following gross benefit payments, which reflect expected future service as appropriate, are expected to be paid:
PENSION BENEFITS OTHER BENEFITS ---------------- -------------- (DOLLARS IN MILLIONS) 2005........................................................ $ 295 $119 2006........................................................ $ 306 $124 2007........................................................ $ 313 $128 2008........................................................ $ 324 $132 2009........................................................ $ 333 $135 2010-2014................................................... $1,823 $724
65 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Gross subsidy payments expected to be received under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 are as follows:
OTHER BENEFITS --------------------- (DOLLARS IN MILLIONS) 2005.......................... $-- 2006.......................... $ 9 2007.......................... $10 2008.......................... $11 2009.......................... $11 2010-2014..................... $67
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 $58 million, $59 million and $58 million for the years ended December 31, 2004, 2003 and 2002, respectively. 12. EQUITY PARENT'S INTEREST IN PREFERRED STOCK OF A SUBSIDIARY On December 16, 2003, the Holding Company contributed 2,532,600 shares of RGA's common stock to a subsidiary of 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. On December 21, 2004, the Holding Company contributed the 93,402 Preferred Shares to a subsidiary of the Company. The subsidiary of the Company retired the shares and recorded a contribution of capital of $93 million from MetLife, Inc. DIVIDEND RESTRICTIONS Under New York State Insurance Law, Metropolitan Life is permitted, without prior insurance regulatory clearance, to pay a 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 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 New York Superintendent of Insurance (the "Superintendent") and the Superintendent does not disapprove the distribution. Under New York State 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 New York State Department of Insurance has established informal guidelines for such determinations. The guidelines, among other things, focus on the insurer's overall financial condition and profitability under statutory accounting practices. For the years ended December 31, 2004, 2003 and 2002, Metropolitan Life paid to MetLife, Inc. $797 million, $698 million and $535 million, respectively, in dividends for which prior insurance regulatory clearance was not required and $0 million, $750 million and $369 million, respectively, in special dividends, as approved by the Superintendent. At 66 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) December 31, 2004, the maximum amount of the dividend which may be paid to the Holding Company from Metropolitan Life in 2005, without prior regulatory approval is $880 million. For the years ended December 31, 2004, 2003 and 2002, Metropolitan Life received dividends from affiliates of $14 million, $32 million and $230 million, respectively. STOCK COMPENSATION PLANS Under the MetLife, Inc. 2000 Stock Incentive Plan, as amended, (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. The aggregate number of options to purchase shares of stock that may be awarded under the Stock Incentive Plan is subject to a maximum limit of 37,823,333. All options granted have an exercise price equal to the fair market value price of the Holding Company's 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. 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, -------------------------- 2004 2003 2002 -------- -------- -------- Dividend yield.............................................. 0.70% 0.79% 0.68% Risk-free rate of return.................................... 3.69% 3.62% 5.08% Volatility.................................................. 34.85% 38.56% 26.70% Expected duration........................................... 6 years 6 years 6 years YEARS ENDED DECEMBER 31, -------------------------- 2004 2003 2002 -------- -------- -------- Weighted average fair value of options granted.............. $ 13.25 $ 10.41 $ 10.48 ======== ======== ========
MetLife, Inc. allocated stock option expense to the Company in each of the years ended December 31, 2004, 2003 and 2002. Options outstanding attributable to the expense allocated to Company were as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 2004 2003 2002 ---------- ---------- ---------- Outstanding Options......................................... 21,510,200 20,295,028 16,259,630 Exercisable Options......................................... 12,634,118 4,566,265 1,357,034
67 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Effective January 1, 2003, MetLife, Inc. and the Company elected to prospectively apply the fair value method of accounting for stock options granted by the Holding 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 APB 25. Had compensation expense for grants awarded prior to January 1, 2003 been determined based on fair value at the date of grant in accordance with SFAS 123, the Company's net income would have been reduced to the following pro forma amounts:
YEARS ENDED DECEMBER 31, ---------------------- 2004 2003 2002 ------ ------ ------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Net Income............................................................ $2,239 $2,001 $1,612 Add: Stock option-based employee compensation expense included in reported net income, net of income taxes............................ $ 24 $ 11 $ 1 Deduct: Total Stock option-based employee compensation determined under fair value based method for all awards, net of income taxes... $ (42) $ (40) $ (33) ------ ------ ------ Pro forma net income (1).............................................. $2,221 $1,972 $1,580 ====== ====== ======
- -------- (1)The pro forma earnings disclosures are not necessarily representative of the effects on net income. Certain levels of Company management also received awards of stock-based compensation under the MetLife, Inc. Long Term Performance Compensation Plan ("LTPCP"). LTPCP awards vest in their entirety at the end of the three year performance period. Each participant is assigned a target compensation amount at the inception of the performance period with the final compensation amount determined by the performance of the Holding Company's stock over the three-year vesting period, subject to management's discretion. Final awards may be paid in whole or in part with shares of the Holding Company's stock. Compensation expense related to the LTPCP was $45 million, $42 million and $19 million for the years ended December 31, 2004, 2003 and 2002, respectively. For the years ended December 31, 2004, 2003 and 2002, stock-based compensation expense related to the Stock Incentive Plan and LTPCP was $82 million, $60 million, and $21 million, respectively, including stock- based compensation for non-employees of $468 thousand, $550 thousand and $2 million, respectively. STATUTORY EQUITY AND INCOME The National Association of Insurance Commissioners ("NAIC") adopted the Codification of Statutory Accounting Principles ("Codification") in 2001. Codification was intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting principles continue to be established by individual state laws and permitted practices. The New York State Department of Insurance has adopted Codification with certain modifications for the preparation of statutory financial statements of insurance companies domiciled in New York. Modifications by the various state insurance departments may impact the effect of Codification on the statutory capital and surplus of the Company. Statutory accounting practices differ from GAAP primarily 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. Statutory net income of Metropolitan Life, a New York domiciled insurer, was $2,648 million, $2,169 million and $1,455 million for the years ended December 31, 2004, 2003 and 2002, respectively. Statutory capital and surplus, as filed with the New York State Department of Insurance, was $8,804 million and $7,967 million at December 31, 2004 and 2003, respectively. 68 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, 2004, 2003 and 2002 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:
2004 2003 2002 ----- ----- ------- (DOLLARS IN MILLIONS) Holding gains on investments arising during the year.............................. $ 520 $ 783 $ 2,575 Income tax effect of holding gains................................................ (182) (323) (859) Reclassification adjustments: Recognized holding (gains) losses included in current year income.............. (236) 363 668 Amortization of premiums and accretion of discounts associated with investments.................................................................. (3) (152) (440) Income tax effect.............................................................. 86 (84) (71) Allocation of holding losses on investments relating to other policyholder amounts (284) (576) (2,592) Income tax effect of allocation of holding losses to other policyholder amounts... 102 228 858 Unrealized investment gains of subsidiary at date of sale......................... -- 269 68 Deferred income taxes on unrealized investment gains of subsidiary at date of sale -- (94) (15) ----- ----- ------- Net unrealized investment gains (losses).......................................... 3 414 192 ----- ----- ------- Foreign currency translation adjustment arising during the year................... 79 174 137 Foreign currency translation adjustment of subsidiary at date of sale............. -- -- (65) ----- ----- ------- Foreign currency translation adjustment........................................... 79 174 72 ----- ----- ------- Minimum pension liability adjustment arising during the year...................... (2) (81) -- Minimum pension liability adjustment of subsidiary at date of sale................ -- (1) -- ----- ----- ------- Minimum pension liability adjustment.............................................. (2) (82) -- ----- ----- ------- Other comprehensive income (loss)................................................. $ 80 $ 506 $ 264 ===== ===== =======
13. OTHER EXPENSES Other expenses were comprised of the following:
YEARS ENDED DECEMBER 31, ------------------------- 2004 2003 2002 ------- ------- ------- (DOLLARS IN MILLIONS) Compensation................................................ $ 2,038 $ 2,060 $ 2,441 Commissions................................................. 1,746 1,712 1,938 Interest and debt issue costs............................... 183 313 242 Amortization of policy acquisition costs.................... 1,142 1,355 1,512 Capitalization of policy acquisition costs.................. (1,817) (1,982) (2,227) Rent, net of sublease income................................ 216 226 289 Minority interest........................................... 168 119 74 Other....................................................... 1,706 1,830 2,079 ------- ------- ------- Total other expenses..................................... $ 5,382 $ 5,633 $ 6,348 ======= ======= =======
69 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 14. BUSINESS SEGMENT INFORMATION The Company provides insurance and financial services to customers in the United States, Canada, Central America, South Africa and Asia. At December 31, 2004, the Company's business is divided into three operating segments: Institutional, Individual and Reinsurance, as well as Corporate & Other. These segments are managed separately because they either provide different products and services, require different strategies or have different technology requirements. Auto & Home, operated through Met P&C, was sold to the Holding Company in October 2003. See Note 1. Significant operations of the International segment were sold to the Holding Company in the fourth quarter of 2002. The Company's remaining international operations consisting of the Company's Canadian branch, a subsidiary in Indonesia and a joint venture in China are reported in Corporate & Other for the year ended December 31, 2004. Institutional offers a broad range of group insurance and retirement & 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 protection and asset accumulation products, including life insurance, annuities and mutual funds. 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. Corporate & Other contains the excess capital not allocated to the business segments, various start up entities and run off entities, the Company's ancillary international operations in 2004, as well as the interest expense related to the majority of the Company's outstanding debt and expenses associated with the resolution of certain legal proceedings and income tax audit issues. Corporate & Other also includes the elimination of all intersegment amounts, which generally relate to intersegment loans, which bear interest rates commensurate with related borrowings, as well as intersegment transactions. Additionally, the Company's ancillary asset management business is included in the results of operations for Corporate & Other for all periods. See Note 16 for disclosures regarding discontinued operations, including real estate. Set forth in the tables below is certain financial information with respect to the Company's operating segments for the years ended December 31, 2004, 2003 and 2002. 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 (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 (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, such as expenses associated with certain legal proceedings, to Corporate & Other. 70 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF OR FOR THE YEAR ENDED CORPORATE DECEMBER 31, 2004 INSTITUTIONAL INDIVIDUAL REINSURANCE & OTHER (1) TOTAL - --------------------------- ------------- ---------- ----------- ----------- -------- (DOLLARS IN MILLIONS) Premiums.................................................... $ 10,103 $ 4,051 $ 3,349 $ 9 $ 17,512 Universal life and investment-type product policy fees...... 716 1,325 -- 1 2,042 Net investment income....................................... 4,470 5,496 539 300 10,805 Other revenues.............................................. 632 3 56 21 712 Net investment gains (losses)............................... 185 68 60 (24) 289 Policyholder benefits and claims............................ 11,134 4,870 2,694 37 18,735 Interest credited to policyholder account balances.......... 958 1,187 212 1 2,358 Policyholder dividends...................................... 107 1,634 -- 2 1,743 Other expenses.............................................. 1,906 2,264 965 247 5,382 Income from continuing operations before provision for income taxes............................................... 2,001 988 133 20 3,142 Income from discontinued operations, net of income taxes.... 10 4 -- 29 43 Cumulative effect of a change in accounting, net of income taxes...................................................... (59) 9 -- (2) (52) Net income.................................................. 1,270 679 88 202 2,239 Total assets................................................ 120,766 137,693 14,573 26,956 299,988 Deferred policy acquisition costs........................... 965 7,517 2,580 9 11,071 Goodwill, net............................................... 61 39 99 18 217 Separate account assets..................................... 36,913 31,594 14 (14) 68,507 Policyholder liabilities.................................... 70,051 91,049 10,463 263 171,826 Separate account liabilities................................ 36,913 31,594 14 (14) 68,507
AS OF OR FOR THE YEAR ENDED CORPORATE AUTO & DECEMBER 31, 2003 INSTITUTIONAL INDIVIDUAL REINSURANCE & OTHER INTERNATIONAL (1) HOME (2) TOTAL - --------------------------- ------------- ---------- ----------- --------- ----------------- -------- -------- (DOLLARS IN MILLIONS) Premiums.................................... $ 9,093 $ 4,242 $ 2,648 $ (6) $ 6 $2,168 $ 18,151 Universal life and investment-type product policy fees........................ 633 1,287 -- -- 1 -- 1,921 Net investment income....................... 4,027 5,585 431 67 50 119 10,279 Other revenues.............................. 592 204 48 38 14 23 919 Net investment gains (losses)............... (293) (299) 31 15 (7) (4) (557) Policyholder benefits and claims............ 9,842 4,876 2,102 4 16 1,604 18,444 Interest credited to policyholder account balances........................... 914 1,280 184 -- 1 -- 2,379 Policyholder dividends...................... 198 1,697 -- (1) 3 -- 1,897 Other expenses.............................. 1,782 2,436 741 78 24 572 5,633 Income from continuing operations before provision for income taxes.......... 1,316 730 131 33 20 130 2,360 Income from discontinued operations, net of income taxes............................... 37 34 -- 263 -- -- 334 Cumulative effect of a change in accounting, net of income taxes........................ (26) -- -- -- -- -- (26) Net income.................................. 849 519 86 423 13 111 2,001 Total assets................................ 109,492 133,335 12,879 24,490 1,069 -- 281,265 Deferred policy acquisition costs........... 739 7,363 2,122 2 6 -- 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 9,272 (579) 297 -- 158,651 Separate account liabilities................ 35,632 28,028 13 (12) -- -- 63,661
71 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF OR FOR THE YEAR ENDED CORPORATE AUTO & DECEMBER 31, 2002 INSTITUTIONAL INDIVIDUAL REINSURANCE & OTHER INTERNATIONAL (1) HOME (2) TOTAL - --------------------------- ------------- ---------- ----------- --------- ----------------- -------- ------- (DOLLARS IN MILLIONS) Premiums................................... $8,245 $4,419 $1,984 $ (7) $992 $2,828 $18,461 Universal life and investment-type product policy fees....................... 623 1,267 -- -- 37 -- 1,927 Net investment income...................... 3,907 6,013 378 (163) 241 177 10,553 Other revenues............................. 607 454 42 49 10 26 1,188 Net investment gains (losses).............. (491) (255) 7 (38) (9) (46) (832) Policyholder benefits and claims........... 9,343 5,005 1,517 3 821 2,020 18,709 Interest credited to policyholder account balances.......................... 930 1,608 146 (1) 28 -- 2,711 Policyholder dividends..................... 115 1,769 -- -- 28 (1) 1,911 Other expenses............................. 1,529 2,555 616 481 373 794 6,348 Income (loss) from continuing operations before provision (benefit) for income taxes..................................... 974 961 132 (642) 21 172 1,618 Income from discontinued operations, net of income taxes.............................. 127 203 -- 162 -- -- 492 Net income (loss).......................... 759 811 86 (196) 21 131 1,612
- -------- (1)Ancillary international results are reported in Corporate & Other for the year ended December 31, 2004. (2)Auto & Home, operated through Met P&C, was sold to the Holding Company in October 2003. See Note 1. 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 are 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. 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 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. 72 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 year ended December 31, 2002. The amounts shown as pro forma reflect net investment income that would have been reported in 2002 had the Company allocated capital based on Economic Capital rather than on the basis of RBC.
NET INVESTMENT INCOME -------------------- FOR THE YEAR ENDED DECEMBER 31, 2002 -------------------- ACTUAL PRO FORMA ------- --------- (DOLLARS IN MILLIONS) Institutional..................................... $ 3,907 $ 3,969 Individual........................................ 6,013 5,924 Reinsurance....................................... 378 339 Corporate & Other................................. (163) (43) International..................................... 241 204 Auto & Home....................................... 177 160 ------- ------- Total.......................................... $10,553 $10,553 ======= =======
Revenues derived from any customer did not exceed 10% of consolidated revenues. Revenues from U.S. operations were $30,049 million, $29,708 million and $29,344 million for the years ended December 31, 2004, 2003 and 2002, respectively, which represented 96%, 97% and 94%, respectively, of consolidated revenues. 15. ACQUISITIONS AND DISPOSITIONS On January 31, 2005, the Company completed the sale of SSRM to a third party for $328 million of cash and stock. As a result of the sale of SSRM, the Company recognized income from discontinued operations of approximately $150 million, net of income taxes, comprised of a realized gain of $166 million, net of income taxes, and an operating expense related to a lease abandonment of $16 million, net of income taxes. Under the terms of the agreement, the Company will have an opportunity to receive, prior to the end of 2006, additional payments aggregating up to approximately 25% of the base purchase price, based on, among other things, certain revenue retention and growth measures. The purchase price is also subject to reduction over five years, depending on retention of certain Company-related business. The Company has reclassified the assets, liabilities and operations of SSRM into discontinued operations for all periods presented in the consolidated financial statements. Additionally, the sale of SSRM resulted in the elimination of the Company's Asset Management segment. The remaining asset management business, which is insignificant, has been reclassified into Corporate & Other. The Company's discontinued operations for the year ended December 31, 2004 also includes expenses of approximately $20 million, net of income taxes, related to the sale of SSRM. See Note 16. In 2003, RGA entered into a 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 $278 billion of life reinsurance in-force, $246 million of premium and $11 million of income before income tax expense, excluding minority interest expense, in 2003. The effects of such transaction are included within the Reinsurance segment. In October 2003, the Company completed its sale of MTL, 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 and $218 million for the years ended December 31, 2003 and 2002, respectively. 73 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 and $3,013 million for the years ended December 31, 2003 and 2002, respectively. In December 2002, the Company completed its sale 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 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 the income were $1,648 million for the year ended December 31, 2002. 16. DISCONTINUED OPERATIONS REAL ESTATE The Company actively manages its real estate portfolio with the objective to maximize earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented as discontinued operations. These assets are carried at the lower of depreciated cost or fair value less expected disposition costs. The following table presents the components of income from discontinued real estate operations:
YEARS ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ---- ----- ----- (DOLLARS IN MILLIONS) Investment income........................................... $ 84 $ 199 $ 530 Investment expense.......................................... (67) (125) (350) Net investment gains (losses)............................... 20 420 581 ---- ----- ----- Total revenues........................................... 37 494 761 Interest expense............................................ -- 1 1 Provision for income taxes.................................. 13 180 276 ---- ----- ----- Income from discontinued operations, net of income taxes. $ 24 $ 313 $ 484 ==== ===== =====
The carrying value of real estate related to discontinued operations was $252 million and $472 million at December 31, 2004 and 2003, respectively. 74 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table shows the real estate discontinued operations by segment:
YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 ---- ---- ---- (DOLLARS IN MILLIONS) Net investment income Institutional............................... $ 6 $ 12 $ 42 Individual.................................. 7 12 57 Corporate & Other........................... 4 50 81 --- ---- ---- Total net investment income............. $17 $ 74 $180 === ==== ==== Net investment gains (losses).................. Institutional............................... $ 9 $ 45 $156 Individual.................................. (2) 43 262 Corporate & Other........................... 13 332 163 --- ---- ---- Total net investment gains (losses)..... $20 $420 $581 === ==== ==== Interest Expense............................... Individual.................................. $-- $ 1 $ 1 --- ---- ---- Total interest expense.................. $-- $ 1 $ 1 === ==== ====
OPERATIONS During the third quarter of 2004, the Company entered into an agreement to sell its wholly-owned subsidiary, SSRM, to a third party, which was sold on January 31, 2005. Accordingly, the assets, liabilities and operations of SSRM have been reclassified into discontinued operations for all periods presented. The operations of SSRM include affiliated revenues of $59 million, $54 million and $56 million, for the years ended December 31, 2004, 2003 and 2002, respectively, related to asset management services provided by SSRM to the Company that have not been eliminated from discontinued operations as these transactions will continue after the sale of SSRM. The following tables present the amounts related to operations of SSRM that have been combined with the discontinued real estate operations in the consolidated income statements:
YEARS ENDED DECEMBER 31, ------------------------ 2004 2003 2002 ---- ---- ---- (DOLLARS IN MILLIONS) Revenues from discontinued operations........................................... $328 $231 $239 ==== ==== ==== Income from discontinued operations before provision for income taxes........... $ 32 $ 34 $ 14 Provision for income taxes...................................................... 13 13 6 ---- ---- ---- Income from discontinued operations, net of income taxes..................... $ 19 $ 21 $ 8 ==== ==== ====
75 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, ------------------ 2004 2003 ---- ---- (DOLLARS IN MILLIONS) Equity securities..................................................... $ 49 $ 14 Real estate and real estate joint ventures............................ 96 3 Short term investments................................................ 33 17 Other invested assets................................................. 20 8 Cash and cash equivalents............................................. 55 50 Premiums and other receivables........................................ 38 23 Other assets.......................................................... 88 68 ---- ---- Total assets held-for-sale......................................... $379 $183 ==== ==== Short-term debt....................................................... $ 19 $ -- Current income taxes payable.......................................... 1 1 Deferred income taxes payable......................................... 1 2 Other liabilities..................................................... 219 67 ---- ---- Total liabilities held-for-sale.................................... $240 $ 70 ==== ====
See Note 15 for further discussion of SSRM disposition. 17. 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, 2004 -------- -------- ---------- (DOLLARS IN MILLIONS) ASSETS: Fixed maturities............................. $150,246 $150,246 Equity securities............................ $ 1,903 $ 1,903 Mortgage and other loans..................... $ 31,571 $ 33,006 Policy loans................................. $ 8,256 $ 8,256 Short-term investments....................... $ 1,195 $ 1,195 Cash and cash equivalents.................... $ 2,373 $ 2,373 Mortgage loan commitments.................... $1,161 $ -- $ 4 Commitments to fund partnership investments.. $1,320 $ -- $ -- LIABILITIES: Policyholder account balances................ $ 59,270 $ 58,456 Short-term debt.............................. $ 1,445 $ 1,445 Long-term debt............................... $ 2,050 $ 2,244 Shares subject to mandatory redemption....... $ 278 $ 361 Payable under securities loaned transactions. $ 25,230 $ 25,230
76 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE DECEMBER 31, 2003 -------- -------- ---------- (DOLLARS IN MILLIONS) ASSETS: Fixed maturities............................. $143,148 $143,148 Equity securities............................ $ 1,232 $ 1,232 Mortgage and other loans..................... $ 26,637 $ 28,572 Policy loans................................. $ 8,180 $ 8,180 Short-term investments....................... $ 1,303 $ 1,303 Cash and cash equivalents.................... $ 2,343 $ 2,343 Mortgage loan commitments.................... $ 555 $ -- $ (4) Commitments to fund partnership investments.. $1,378 $ -- $ -- LIABILITIES: Policyholder account balances................ $ 53,503 $ 55,195 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
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 AND OTHER LOANS, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS Fair values for mortgage and other loans 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. 77 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SHORT-TERM AND LONG-TERM DEBT, PAYABLES UNDER SECURITIES LOANED TRANSACTIONS AND SHARES SUBJECT TO MANDATORY REDEMPTION The fair values of short-term and long-term debt, payables under securities loaned transactions and shares subject to mandatory redemption 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, and options are based upon quotations obtained from dealers or other reliable sources. See Note 3 for derivative fair value disclosures. 18. 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 $1,713 million and $1,680 million in 2004 and 2003, respectively. (See Note 15.) 19. SUBSEQUENT EVENTS On January 31, 2005, the Holding Company entered into an agreement to acquire all of the outstanding shares of capital stock of certain indirect subsidiaries of Citigroup, Inc., including The Travelers Insurance Company ("Travelers"), and substantially all of Citigroup Inc.'s international insurance businesses for a purchase price of $11.5 billion, subject to adjustment as described in the acquisition agreement. The transaction is expected to close in the summer of 2005. Some portion of the purchase price will be paid in Holding Company common stock issued to Citigroup, Inc. The remaining purchase price will be financed through a combination of cash on hand, debt, perpetual preferred stock, mandatorily convertible securities and selected asset sales depending on market conditions, timing, valuation considerations and the relative attractiveness of funding alternatives. On March 30, 2005, the Company announced that it had entered into a contract for the sale of one of its real estate investments. One Madison Avenue in New York City, to a third party. The sale is expected to close during the second quarter of 2005, subject to customary closing conditions. The carrying value of the property was $222 million as of December 31, 2004. The Company is also contemplating other asset sales, including selling some or all of its beneficially owned shares in RGA. The Company's reinsurance segment consists primarily of the operations of RGA. See also Note 15 for subsequent event related to the disposition of SSRM. 78 Metropolitan Life Separate Account UL PART C. OTHER INFORMATION ITEM 26. EXHIBITS (a) Resolution of the Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL 6 (b) Not Applicable (c) (i) Not Applicable (ii) Form of Selected Broker Agreement 5 (iii) Schedule of Sales Commissions 1 (d) (i) Specimen Flexible Premium Variable Life Insurance Policy 5 (ii) Alternative pages required by state law 5 (iii) Endorsement for calculation of minimum death benefit using the Cash Value Accumulation test 5 (iv) Accelerated Death Benefit and Zero Cost Loan Riders 5 (v) Yearly Renewable Term rider 4 (vi) Refund of sales load rider 4 (vii) Amended Policy Specifications Page indicating alternate premium expense charges 4 (viii) Enhanced Cash Surrender Value Rider 12 (ix) Term Insurance Rider 14 (e) Amended Application Forms for Policy and Form of Receipt (including State variations) 5 (f) (i) Restated Charter and By-Laws of Metropolitan Life 9 (ii) Amended and Restated By-Laws of Metropolitan Life 15 (g) Reinsurance Contracts 13 (h) (i) Participation Agreements with INVESCO and Janus Aspen 8 (ii) Form of Participation Agreement with Templeton Variable 8 (iii) Participation Agreements with Alliance 10 (iv) Form of Participation Agreement with Met Investors Series Trust 11 (v) Participation Agreement with Fidelity Investments 7 (vi) Supplemental Agreements with Fidelity Investments 10 (vii) Form of Participation Agreements with AIM, American Century, Delaware Management, Dreyfus, Templeton, Goldman Sachs, MFS, Janus, Van Kampen and Wells Fargo 14 (i) Not Applicable (j) Not Applicable (k) Opinion and Consent of Marie C. Swift as to the legality of the securities being registered (l) Actuarial Opinion (m) Not Applicable (n) (i) Consent of Independent Registered Public Accounting Firm (ii) Consent of Sutherland Asbill & Brennan LLP (o) Not Applicable (p) Not Applicable (q) (i) Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii) 5 (r) Powers of Attorney 3 (s) Form of Personalized Illustration 10 1 Incorporated by reference from "Sales and Administration of the Policies" in the Prospectuses included herein and "Distribution of the Policies" in the Statement of Additional Information. 2 Incorporated herein by reference to Post-Effective Amendment No. 4 to this Registration Statement (File No. 033-57320) filed March 1, 1996. 3 Incorporated herein by reference to the Security Equity Separate Account Thirteen Registration Statement (File No. 333-110185) filed November 3, 2003 except for John M. Keane, William J. Wheeler and Joseph J. Prochaska, Jr.'s powers of attorney, which are incorporated by reference to Post-Effective Amendment No. 4 to the Registration Statement for Metropolitan Life Separate Account E (File No. 333-69320) filed on February 6, 2004 and Sylvia M. Mathews 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. 4 Incorporated herein by reference to Post-Effective Amendment No. 5 to the Registration Statement (File No. 033-57320) filed on April 26, 1996. 5 Incorporated herein by reference to Post-Effective Amendment No. 6 to the Registration Statement (File No. 033-57320) filed on April 30, 1997. 6 Incorporated herein by reference to Post-Effective Amendment No. 5 to the Registration Statement of Separate Account UL (File No. 33-47927) filed on April 30, 1997. 7 Incorporated herein by reference to Post-Effective Amendment No. 26 to the Registration Statement of MetLife Separate Account E (File No. 002-90380) on Form N-4 filed on April 30, 1997. 8 Incorporated herein by reference to Post-Effective Amendment No. 8 to the Registration Statement (File No. 033-57320) filed on April 23, 1999. 9 Incorporated herein by reference to Post-Effective Amendment No. 3 to the Registration Statement (File No. 333-40161) filed on April 6, 2000. 10 Incorporated herein by reference to Post-Effective Amendment No. 10 to the Registration Statement (File No. 033-57320) filed on September 18, 2000. 11 Incorporated herein by reference to the Registration Statement for MetLife Separate Account E (File No. 333-83716) filed on March 5, 2002. 12 Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement (File No. 033-57320) filed on April 22, 2002. 13 Incorporated herein by reference to Post-Effective Amendment No. 18 to the Registration Statement (File No. 033-47927) filed on April 30, 2004 14 Incorporated herein by reference to Post-Effective Amendment No. 16 to the Registration Statement (File No. 033-57320) filed on April 30, 2004. 15 Incorporated herein by reference to the Registration Statement for MetLife Separate Account E (File No. 333-122883) filed on February 17, 2005. ITEM 27. DIRECTORS AND OFFICERS OF DEPOSITOR Name and Principal Business Address Positions and Offices with Depositor - ----------------------------------- ------------------------------------ Robert H. Benmosche Chairman of the Board and Chief MetLife, Inc. and Metropolitan Life Executive Officer Insurance Company One MetLife Plaza 27-01 Queens Plaza North Long Island City, NY 11101 Curtis H. Barnette Director Chairman Emeritus Bethlehem Steel Corporation 1170 Eighth Avenue, Martin Tower 2118 Bethlehem, PA 18016-7699 Burton A. Dole, Jr. Director Pauma Valley Country Club 15835 Pauma Valley Road Pauma Valley, CA 92018 Cheryl W. Grise Director President Northeast Utilities P.O. Box 270 Hartford, CT 06141 James R. Houghton Director Chairman and Chief Executive Officer Corning Incorporated One Riverfront Plaza, MP HQ E2-6 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 2200 Wilson Blvd., Suite 102-542 Arlington, VA 22201-3324 James M. Kilts Director The Gillette Company Prudential Tower Building, 48th floor Boston, MA 02199 Charles H. Leighton Director Retired Chairman and Chief Executive Officer CML Group, Inc. 330 Gray Craig Road Middletown, RI 02842 Sylvia M. Mathews Director Chief Operating Officer and Executive Director The Bill & Melinda Gates Foundation 1551 Eastlake Avenue East Seattle, WA 98102 Hugh B. Price Director Piper Rudnick LLP 1251 Avenue of the Americas New York, NY 10020-1104 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 10017 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 MetLife Plaza, 27-01 Queens Plaza North, Long Island City, NY 11101. Name Position with Metropolitan Life - ------------------------ ----------------------------------------------------- Robert H. Benmosche Chairman of the Board and Chief Executive Officer Gwenn L. Carr Senior Vice President and Secretary C. Robert Henrikson President and Chief Operating Officer Leland C. Launer, Jr. Executive Vice President and Chief Investment Officer James L. Lipscomb Executive Vice President and General Counsel Joseph J. Prochaska, Jr. Senior Vice President and Chief Accounting Officer Catherine A. Rein Senior Executive Vice President and Chief Administrative Officer Stanley J. Talbi Senior Vice President and Chief Actuary William J. Toppeta President of International Lisa Weber President, Individual Business Judy E. Weiss Executive Vice President and Chief Actuary William J. Wheeler Executive Vice President and Chief Financial Officer Anthony J. Williamson Senior Vice President and Treasurer ITEM 28. 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 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: ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF MARCH 31, 2005 The following is a list of subsidiaries of MetLife, Inc. updated as of March 31, 2005. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, if any) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) F. MetLife Pensiones S.A. (Mexico)- 97.4738% is owned by Metlife, Inc. and 2.5262% is owned by Metropolitan Asset Management Corporation. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada, and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A., and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by Metlife, Inc., 1.27483% is owned by Metropolitan Asset Management Corporation and 0.01976% is owned by Metlife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. (Mexico) and 0.01% is owned by MetLife Pensiones S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. and 0.01% is owned by MetLife Mexico S.A. (Mexico) b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. and 0.01% is owned by MetLife Mexico S.A. (Mexico) I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) a) Texas Life Agency Services, Inc. (TX) b) Texas Life Agency Services of Kansas, Inc. (KS) 2. Cova Life Management Company (DE) O. MetLife Investors Insurance Company (MO) 1. MetLife Investors Insurance Company of California (CA) P. First MetLife Investors Insurance Company Q. N.L. Holding Corp. (DEL) (NY) 1. Nathan & Lewis Associates, Inc. (NY) a) Nathan and Lewis Insurance Agency of Massachusetts, Inc. (MA) b) Nathan and Lewis Associates of Texas, Inc. (TX) R. Walnut Street Securities, Inc. (MO) 1. Walnut Street Advisers, Inc. (MO) S. Newbury Insurance Company, Limited T. MetLife Investors Group, Inc. (DE) 1. MetLife Investors USA Insurance Company (DE) 2. MetLife Investors Distribution Company (MO) 3. Met Investors Advisory, LLC (DE) 4. MetLife Investors Financial Agency, Inc. (TX) 2 U. MetLife International Holdings, Inc. (DE) 1. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) (1) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. (2) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 2. MetLife India Insurance Company Private Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 3. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.9987% is owned by Metlife International Holdings, Inc. and 0.0013% is owned by Natiloporterm Holdings, Inc. 4. Metropolitan Life Seguros de Retiro S.A. (Argentina)- 95% is owned by MetLife International Holdings, Inc. and 5% is owned by Natiloportem Holdings, Inc. 5. Metropolitan Life Seguros de Vida S.A. (Argentina)- 95% is owned by MetLife International Holdings, Inc. and 5% is owned by Natiloportem Holdings, Inc. a) Met AFJP S.A. (Argentina)- 95% of the shares of Met AFJP S.A. are owned by Metropolitan Life Seguros de Vida S.A. and 5% of the shares of Met AFJP S.A. are held by Metropolitan Seguros de Retiro S.A. 6. MetLife Insurance Company of Korea Limited (South Korea) 7. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 99.999999% is owned by MetLife International Holdings, Inc. and 0.000001% is owned by Natiloportem Holdings, Inc. a) Soma Seguradora, S.A. (Brazil) V. Metropolitan Life Insurance Company (NY) 1. 334 Madison Avenue BTP-D Holdings, LLC (DE) 2. 334 Madison Avenue BTP-E Holdings, LLC (DE) 3. 334 Madison Avenue Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 99% of the voting control of Park Twenty Three Investments Company is held by 334 Madison Euro Investments, Inc. and 1% voting control is held by St. James Fleet Investments Two Limited. (1) Convent Station Euro Investments Four Company (United Kingdom)- 99% of the voting control of Convent Station Euro Investments Four Company is held by Park Twenty Three Investments Company and 1% voting control is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 4. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 5. One Madison Investments (Cayco) Limited (Cayman Islands)- 89.9% of the voting control of One Madison Investments (Cayco) Limited is held by Metropolitan Life Insurance Company and 10.1% voting control is held by Convent Station Euro Investments Four Company. 6. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares of CRB Co., Inc. and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 7. GA Holding Corp. (MA) 8. CRH Co., Inc. (MA) 3 9. L/C Development Corporation (CA) 10. Benefit Services Corporation (GA) 11. Thorngate, LLC (DE) 12. Alternative Fuel I, LLC (DE) 13. Transmountain Land & Livestock Company (MT) 14. MetPark Funding, Inc. (DE) 15. HPZ Assets LLC (DE) 16. MetDent, Inc. (DE) 17. Missouri Reinsurance (Barbados), Inc. (Barbados) 18. Metropolitan Tower Realty Company, Inc. (DE) 19. P.T. MetLife Sejahtera (Indonesia)-95.21% of P.T. MetLife Sejahtera is held by Metropolitan Life Insurance Company 20. MetLife (India) Private Ltd. (India) 21. Metropolitan Marine Way Investments Limited (Canada) 22. MetLife Private Equity Holdings, LLC (DE) 23. Sino-US MetLife Insurance Company, Ltd (China)- 50% of Sino-US MetLife Insurance Company is held by Metropolitan Life Insurance Company 24. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE). Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-BDR and 23rd Street Investments, Inc. is a 1% general partner. b) Mezzanine Investment Limited Partnership-LG (DE). 23rd Street Investments, Inc. is a 1% general partner of Mezzanine Investment Limited Partnership-LG. Metropolitan Life Insurance Company holds a 99% limited partnership interest in Mezzanine Investment Limited Partnership-LG. 25. Metropolitan Realty Management, Inc. (DE) 26. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 27. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 28. Bond Trust Account A (MA) 29. Metropolitan Asset Management Corporation (DE) a) MetLife Capital Credit L.P. (DE)- 90% of MetLife Capital Credit L.P. is held directly by Metropolitan Life Insurance Company and 10% General Partnership interest of MetLife Capital Credit L.P. is held by Metropolitan Asset Management Corporation. (1) MetLife Capital CFLI Holdings, LLC (DE) (a) MetLife Capital CFLI Leasing, LLC (DE) b) MetLife Capital Limited Partnership (DE)- 73.78% Limited Partnership interest is held directly by Metropolitan Life Insurance Company and 9.58% Limited Partnership and 16.64% General Partnership interests are held by Metropolitan Asset Management Corporation. c) MetLife Investments Asia Limited (Hong Kong)- One share of MetLife Investments Asia Limited is held by W&C Services, Inc., a nominee of Metropolitan Asset Management Corporation. d) MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and MetLife Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. e) MetLife Investments, S.A. (Argentina)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and MetLife Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. f) MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited and MetLife Investments, S.A. and 1% of MetLife Latin America Asesorias e Inversiones Limitada. 30. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) (1) Hereford Insurance Agency, Inc. (MA) c) Omega Reinsurance Corporation (AZ) 31. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) (1) Paragon Life Insurance Company (MO) (2) GenAmerica Management Corporation (MO) 5 (3) Reinsurance Group of America, Incorporated (MO) (a) Reinsurance Company of Missouri, Incorporated (MO) (i) RGA Reinsurance Company (MO) (A) Fairfield Management Group, Inc. (MO) (aa) Reinsurance Partners, Inc. (MO) (bb) Great Rivers Reinsurance Management, Inc. (MO) (cc) RGA (U.K.) Underwriting Agency Limited (United Kingdom) (ii) Triad Re, Ltd. (Barbados)-67% of Triad Re, Ltd. is held by Reinsurance Group of America, Incorporated and 100% of the preferred stock of Triad Re, Ltd. is also held by Reinsurance Group of America Incorporated. (iii) RGA Sigma Reinsurance SPC (Cayman Islands) (iv) RGA Americas Reinsurance Company, Ltd. (Barbados) (v) RGA Reinsurance Company (Barbados) Ltd. (Barbados) (A) RGA Financial Group, L.L.C. (DE)- 80% of RGA Financial Group, L.L.C. is held by RGA Reinsurance Company (Barbados) Ltd. and 20% of RGA Financial Group, LLC is held by RGA Reinsurance Company (vi) RGA Life Reinsurance Company of Canada (Canada) (vii) RGA International Corporation (Nova Scotia) (A) RGA Financial Products Limited (Canada) (viii)RGA Holdings Limited (U.K.) (United Kingdom) (A) RGA UK Services Limited (United Kingdom) (B) RGA Capital Limited U.K. (United Kingdom) (C) RGA Reinsurance (UK) Limited (United Kingdom) (ix) RGA South African Holdings (Pty) Ltd. (South Africa) (A) RGA Reinsurance Company of South Africa Limited (South Africa) (x) RGA Australian Holdings PTY Limited (Australia) (A) RGA Reinsurance Company of Australia Limited (Australia) (B) RGA Asia Pacific PTY, Limited (Australia) (xi) General American Argentina Seguros de Vida, S.A. (Argentina) (xii) Malaysia Life Reinsurance Group Berhad (Malaysia)- 30% interest of Malaysia Life Reinsurance Group Berhad is held by Reinsurance Group of America, Incorporated. 6 (xiii)RGA Technology Partners, Inc. (MO) (xiv) RGA International Reinsurance Company (Ireland) 32. Corporate Real Estate Holdings, LLC (DE) 33. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control is held by Metropolitan Asset Management Corporation 34. Tower Resources Group, Inc. (DE) 35. Headland Development Corporation (CA) 36. Headland - Pacific Palisades, LLC (CA) 37. Headland Properties Associates (CA) 38. Krisman, Inc. (MO) 39. Special Multi-Asset Receivables Trust (DE) 40. White Oak Royalty Company (OK) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent entity, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Metropolitan Life Insurance Company indirectly owns 100% of the non-voting preferred stock of Nathan and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting common stock of this company is held by an individual who has agreed to vote such shares at the direction of N.L. HOLDING CORP. (DEL), a direct wholly owned subsidiary of MetLife, Inc. 3) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 4) New England Life Insurance Company ("NELICO"), owns 100% of the voting stock of Omega Reinsurance Corporation. NELICO does not have a financial interest in this subsidiary. 5) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc. is owned by an officer. New England Life Insurance Company controls the issuance of additional stock and has certain rights to purchase such officer's shares. 6) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 7 ITEM 29. INDEMNIFICATION MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000 subject to a $5,000,000 deductible. MetLife also maintains Directors' and Officers' Liability insurance coverage with limits of $400 million. The Directors and Officers of Metropolitan Life Insurance Company ("Metropolitan"), as well as certain other subsidiaries of MetLife, Inc., are covered under the Financial Institutions Bond as well as under the Directors' and Officers' Liability Policy. 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 is against public policy as expressed in the Act and is, 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 30. 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 27 above. (c) Compensation from the Registrant.
(1) (2) (3) (4) (5) Compensation on Events Occasioning Net Underwriting the Deduction of a Name of Principal Discounts and Deferred Sales Brokerage Other Underwriter Commissions Load Commissions Compensation - ----------------- ---------------- ------------------ ----------- ------------ Metropolitan Life Insurance Company $2,825,616 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 31. 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 200 Park Avenue New York, NY 10166 ITEM 32. MANAGEMENT SERVICES Not applicable ITEM 33. 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. There may include including 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. 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 all of the requirements for effectiveness of this amended Registration Statement under Rule 485(b) under the Securities Act 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 26th day of April, 2005. Metropolitan Life Separate Account UL By: Metropolitan Life Insurance Company By: /s/ Paul G. Cellupica -------------------------------------- Paul G. Cellupica, Esq. Chief Counsel, Securities Products & Regulation SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Metropolitan Life Insurance Company certifies that it meets all of the requirements for effectiveness of this amended Registration Statement under Rule 485(b) under the Securities Act 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 26th day of April, 2005. Metropolitan Life Insurance Company By: /s/ Paul G. Cellupica -------------------------------------- Paul G. Cellupica, Esq. Chief Counsel, Securities Products & Regulation 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 26, 2005. SIGNATURE TITLE --------- ----- * Chairman of the Board and Chief - -------------------------------------- Executive Officer Robert H. Benmosche * Senior Vice President and - -------------------------------------- Chief Accounting Officer Joseph J. Prochaska, Jr. * - -------------------------------------- Curtis H. Barnette Director * - -------------------------------------- Burton A. Dole, Jr. Director - -------------------------------------- Cheryl W. Grise Director * - -------------------------------------- James R. Houghton Director * - -------------------------------------- Harry P. Kamen Director * - -------------------------------------- Helene L. Kaplan Director * - -------------------------------------- John M. Keane Director - -------------------------------------- James M. Kilts Director * - -------------------------------------- Charles M. Leighton Director * - -------------------------------------- Sylvia M. Mathews Director * - -------------------------------------- Hugh B. Price Director * - -------------------------------------- Kenton J. Sicchitano Director * - -------------------------------------- William C. Steere, Jr. Director * Executive Vice President and - -------------------------------------- Chief Financial Officer William J. Wheeler /s/ Marie C. Swift - ------------------------------------- Marie C. Swift, Esq. Attorney- in - fact * Executed by Marie C. Swift, Esq. on behalf of those indicated pursuant to Powers of Attorney filed with the Registration Statement (File No. 333-110185) filed November 3, 2003 except for John M. Keane, William J. Wheeler and Joseph Prochaska, Jr.'s powers of attorney, which are 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 Sylvia M. Mathews 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. Exhibit Index (k) Opinion and Consent of Marie C. Swift, Esquire (l) Actuarial Opinion (n)(i) Consent of Independent Registered Public Accounting Firm (n)(ii) Consent of Sutherland Asbill & Brennan LLP EX-99.K 2 dex99k.txt COUNSEL OPINION & CONSENT [LOGO] MetLife(R) Exhibit (k) April 26, 2005 Metropolitan Life Separate Account UL Metropolitan Life Insurance Company 200 Park Avenue New York, NY 10166 Ladies and Gentlemen: In my capacity as Associate General Counsel of Metropolitan Life Insurance Company (the "Company"), I am rendering the following opinion in connection with the filing with the Securities and Exchange Commission of an amendment to the registration statement on Form N-6 (File No. 033-57320) under the Securities Act of 1933. This Amendment to the Registration Statement is being filed with respect to variable universal life insurance policies issued by Metropolitan Life Separate Account UL (the "Account"). It is my professional opinion that: 1. The Account is a separate investment account of the Company and is validly existing pursuant to the laws of the State of New York. 2. MetFlex, when issued in accordance with the prospectus contained in the amendment to the Registration Statement and in compliance with applicable local law, are and will be legal and binding obligations of the Company in accordance with their terms; and 3. Assets attributable to reserves and other contract liabilities and held in the Account will not be chargeable with liabilities arising out of any other business the Company may conduct. In forming this opinion, I have made such examination of law and examined such records and other documents as in my judgment are necessary and appropriate. I hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement and to the use of my name under the caption "Legal Matters" in the Statement of Additional Information contained in the amendment to the Registration Statement. Very truly yours, /s/ Marie C. Swift ------------------------- Marie C. Swift, Esq. Associate General Counsel EX-99.L 3 dex99l.txt ACTUARY CONSENT Exhibit L April 26, 2005 Metropolitan Life Insurance Company 200 Park Avenue New York, NY 10166 Dear Sirs: This opinion is furnished in connection with the filing of Post-Effective Amendment No. 17 to Registration Statement No. 33-57320 on Form N-6 ("Registration Statement") which covers premiums received under Flexible Premium Variable Life Insurance Policies ("Policies") offered by Metropolitan Life Insurance Company ("MLIC") in each State where they have been approved by appropriate State insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed the Policy forms and I am familiar with the Registration Statement and Exhibits thereto. In my opinion, the illustrations of Policy death benefits, cash values, cash surrender values and accumulated premiums referenced as Exhibit (r) in the amended Registration Statement, based on the assumptions stated therein, are consistent with the provisions of the Policy forms. Also, in my opinion, the amounts assumed in the illustrations for current Policy charges (including the decrease in mortality and expense risk charge after 9 years) remain reasonable, based on MLIC's current expectations. The Policies have not been designed so as to make the relationship between premiums and benefits, as shown in these illustrations appear to be disproportionately more favorable to a prospective purchaser of the Policy for standard risk males age 45, than to prospective purchasers of Policies for a male at other ages or in other underwriting classes or for a female. Nor have the particular illustrations shown been selected for the purpose of making that relationship appear more favorable. The representative insured assumed for purposes of the Fee Tables in the prospectus has not been selected for the purpose of showing lower charges in those tables than would apply for a different assumed insured. 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/ Sebastian Janssen - -------------------------------- Sebastian Janssen, FSA, MAAA Vice-President and Actuary EX-99.N(I) 4 dex99ni.txt CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM Exhibit (n)(i) CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Post-Effective Amendment No. 17/Amendment No. 18 to Registration Statement No. 033-57320/ 811-06025 of Metropolitan Life Separate Account UL on Form N-6 of our report dated March 23, 2005, relating to Metropolitan Life Separate Account UL appearing in the Prospectus, which is a part of such Registration Statement, and our report dated March 31, 2005 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 certain non-traditional long duration contracts and separate accounts, and for embedded derivatives in certain insurance products as required by new accounting guidance which became effective on January 1, 2004 and October 1, 2003, respectively), 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. /s/ Deloitte & Touche LLP Certified Public Accountants Tampa, Florida April 25, 2005 EX-99.N(II) 5 dex99nii.txt CONSENT OF SUTHERLAND ASBILL & BRENNAN Exhibit (n)(ii) [Sutherland Asbill & Brennan LLP] CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP We consent to the reference to our firm in the statement of additional information included in Post-Effective Amendment No. 17 to the Registration Statement on Form N-6 for MetFlex, issued through the Metropolitan Life Separate Account UL (File No. 033-57320). In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. SUTHERLAND ASBILL & BRENNAN LLP By: /s/ Mary E. Thornton --------------------------- Mary E. Thornton, Esq. Washington, D.C. 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