497 1 d497.txt METFLEX PROSPECTUS FOR METFLEX, A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY ("POLICY") ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE") MAY 1, 2006 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 GROWTH JENNISON GROWTH BLACKROCK BOND INCOME LEHMAN BROTHERS(R) AGGREGATE BOND INDEX BLACKROCK DIVERSIFIED LOOMIS SAYLES SMALL CAP BLACKROCK INVESTMENT TRUST METLIFE MID CAP STOCK INDEX BLACKROCK LEGACY LARGE CAP GROWTH METLIFE STOCK INDEX BLACKROCK MONEY MARKET MFS TOTAL RETURN (CLASS B) BLACKROCK STRATEGIC VALUE MORGAN STANLEY EAFE(R) INDEX DAVIS VENTURE VALUE NEUBERGER BERMAN MID CAP VALUE FI INTERNATIONAL STOCK OPPENHEIMER GLOBAL EQUITY FI MID CAP OPPORTUNITIES RUSSELL 2000(R) INDEX FI VALUE LEADERS T. ROWE PRICE LARGE CAP GROWTH HARRIS OAKMARK LARGE CAP VALUE T. ROWE PRICE SMALL CAP GROWTH Met Investors Series Trust portfolios: -------------------------------------- JANUS AGGRESSIVE GROWTH--CLASS B LORD ABBETT MID-CAP VALUE--CLASS B LAZARD MID-CAP--CLASS B MET/AIM SMALL CAP GROWTH--CLASS B (FORMERLY MET/AIM MID CAP CORE EQUITY) MFS RESEARCH INTERNATIONAL--CLASS B LEGG MASON VALUE EQUITY--CLASS A NEUBERGER BERMAN REAL ESTATE--CLASS B LORD ABBETT BOND DEBENTURE--CLASS A T. ROWE PRICE MID-CAP GROWTH--CLASS B LORD ABBETT GROWTH AND INCOME--CLASS A THIRD AVENUE SMALL CAP VALUE--CLASS B LORD ABBETT GROWTH OPPORTUNITIES--CLASS B AIM Variable Insurance Funds portfolios: ---------------------------------------- AIM V.I. CORE EQUITY--SERIES I AIM V.I. GOVERNMENT SECURITIES--SERIES II AIM V.I. REAL ESTATE--SERIES I (AIM V.I. GLOBAL REAL ESTATE EFFECTIVE JULY 3, 2006) AllianceBernstein Variable Products Series Fund, Inc. portfolios (Class B): -------------------------------------------------------------------------- ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY ALLIANCEBERNSTEIN US GOVERNMENT/HIGH GRADE SECURITIES American Century Variable Portfolios, Inc. portfolios (Class I): ---------------------------------------------------------------- VP VISTA/SM/ Delaware VIP Trust portfolios (Service Class): --------------------------------------------- SMALL CAP VALUE Dreyfus Investment Portfolios portfolios (Service Shares): --------------------------------------------------------- EMERGING LEADERS MIDCAP STOCK Dreyfus Variable Investment Fund portfolios (Service Shares): ------------------------------------------------------------- INTERNATIONAL VALUE Fidelity Variable Insurance Products portfolios (Service Class): ---------------------------------------------------------------- VIP ASSET MANAGER(R): GROWTH VIP CONTRAFUND(R) VIP EQUITY-INCOME VIP INVESTMENT GRADE BOND Franklin Templeton Variable Insurance Products Trust portfolios: ---------------------------------------------------------------- TEMPLETON FOREIGN SECURITIES--CLASS 1 MUTUAL DISCOVERY SECURITIES--CLASS 2 Goldman Sachs Variable Insurance Trust portfolios (Institutional Shares): ------------------------------------------------------------------------ MID CAP VALUE STRUCTURED SMALL CAP EQUITY (FORMERLY CORE/SM/ SMALL CAP EQUITY) Janus Aspen Series portfolios: ---------------------------------- JANUS ASPEN BALANCED--SERVICE SHARES JANUS ASPEN FORTY--SERVICE SHARES JANUS ASPEN LARGE CAP GROWTH--INSTITUTIONAL SHARES MFS(R) Variable Insurance Trust portfolios (Service Class): ------------------------------------------------------------------------------- GLOBAL EQUITY HIGH INCOME NEW DISCOVERY VALUE Van Kampen Life Investment Trust portfolios (Class II): ------------------------------------------------------ GOVERNMENT 2 Wells Fargo Variable Trust portfolios: ------------------------------------------------ ADVANTAGE VT ASSET ALLOCATION ADVANTAGE VT EQUITY INCOME ADVANTAGE VT LARGE COMPANY CORE ADVANTAGE VT LARGE COMPANY GROWTH ADVANTAGE VT MONEY MARKET ADVANTAGE VT TOTAL RETURN 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 ------- ---------- 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..................................................... 18 The Fixed Account.......................................... 18 Separate Account UL........................................ 19 The Funds.................................................. 19 The Portfolio Share Classes that We Offer................ 26 Substitution of Portfolios............................... 26 Voting Rights............................................ 26 Issuing a Policy............................................ 26 Payment and Allocation of Premiums.......................... 27 Paying Premiums............................................ 27 Maximum and Minimum Premium Payments....................... 28 Allocating Net Premiums.................................... 28 Insurance Proceeds.......................................... 29 Death Benefit Options...................................... 29 Minimum Death Benefit...................................... 30 Specified Face Amount...................................... 31 Income Plans............................................... 32 Cash Value, Transfers and Withdrawals....................... 32 Cash Value................................................. 32 Cash Value Transfers....................................... 33 Surrender and Withdrawal Privileges........................ 36 Benefit at Final Date...................................... 37 Loan Privileges............................................. 37 Optional Rider Benefits..................................... 39 Term Benefit............................................... 39 Charges and Deductions...................................... 40 Important Information Applicable to all Policy Charges and Deductions............................................... 40 Charges Deducted From Premiums............................. 41 Charges Included in the Monthly Deduction.................. 42 Charges for Certain Optional Rider Benefits................ 43 Variations in Charges...................................... 43 Portfolio Company Charges.................................. 44 Other Charges.............................................. 44 Policy Termination and Reinstatement........................ 44 Federal Tax Matters......................................... 45 Rights We Reserve........................................... 48 Other Policy Provisions..................................... 49 Sales of Policies........................................... 51 Legal Proceedings........................................... 53 Restrictions on Financial Transactions...................... 54 Independent Registered Public Accounting Firm............... 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)/ 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./(5)/ --------------------------------------------------------------------------------------- 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: $16.00 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 $0.38 per $1,000 of Charge for unisex, term insurance term insurance issue age 45, amount amount nonsmoker, 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 policy /1, 5/ Highest: $16.00 per Highest: $35.00 per Highest and Lowest Charge $1,000 of term insurance $1,000 of term insurance Among All Possible amount amount Insureds Lowest: $0.03 per $1,000 Lowest: $0.09 per $1,000 Charge for unisex, issue of term insurance amount of term insurance amount age 45, nonsmoker, Guaranteed Issue $0.16 per $1,000 of term $0.38 per $1,000 of term underwriting class insurance amount insurance amount ----------------------------------------------------------------------------------------------------------- Cost of Term Insurance On each monthly for coverage under the anniversary of the Policy Highest: $12.00 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 Charge for unisex, issue $0.12 per $1,000 of term $0.38 per $1,000 of term age 45, nonsmoker, insurance amount insurance amount Guaranteed Issue underwriting class++ -----------------------------------------------------------------------------------------------------------
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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 unisex, issue $0.03 per $1,000 of total $0.04 per $1,000 of total age 45, nonsmoker, term insurance amount term insurance amount Guaranteed Issue 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 unisex, issue age 45, nonsmoker, $0.04 per $1,000 of $0.07 per $1,000 of Guaranteed Issue accidental death benefit accidental death benefit underwriting class 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: $16.48 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 unisex, issue age 45, nonsmoker, in the guaranteed issue underwriting class would be $.17 per $1,000 of term insurance amount (current amount deducted) and $.38 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, 2005.
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) 0.29% 8.27% ----------------------------------------------------------------
The table below describes the annual operating expenses for each Portfolio for the year ended December 31, 2005 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% .07% .00% .47% .00% .47% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Diversified .44% .06% .00% .50% .00% .50% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Investment Trust .49% .06% .00% .55% .00% .55% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- BlackRock Legacy Large Cap Growth .73% .07% .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% .04% .00% .76% .00% .76% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI International Stock .86% .20% .00% 1.06% .00% 1.06% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI Mid Cap Opportunities .68% .07% .00% .75% .00% .75% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- FI Value Leaders .66% .07% .00% .73% .00% .73% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Harris Oakmark Large Cap Value .72% .06% .00% .78% .00% .78% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Jennison Growth .64% .05% .00% .69% .00% .69% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Lehman Brothers Aggregate Bond Index/(b)/ .25% .06% .00% .31% .01% .30% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Loomis Sayles Small Cap/(b)/ .90% .08% .00% .98% .05% .93% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MetLife Mid Cap Stock Index/(b)/ .25% .09% .00% .34% .01% .33% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MetLife Stock Index/(b)/ .25% .04% .00% .29% .01% .28% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- MFS Total Return (Class B)/(c)/ .57% .16% .25% .98% .00% .98% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Morgan Stanley EAFE Index/(b)/ .30% .22% .00% .52% .01% .51% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Neuberger Berman Mid Cap Value .67% .09% .00% .76% .00% .76% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Oppenheimer Global Equity .60% .33% .00% .93% .00% .93% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- Russell 2000 Index/(b)/ .25% .11% .00% .36% .01% .35% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- T. Rowe Price Large Cap Growth/(b)/ .60% .12% .00% .72% .00% .72% ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- T. Rowe Price Small Cap Growth .51% .09% .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)/(d)/ .67% .05% .25% .97% .00% .97% ------------------------------------------------------------------------------ Lazard Mid-Cap (Class B)/(d)(e)/ .70% .09% .25% 1.04% .00% 1.04% ------------------------------------------------------------------------------ Legg Mason Value Equity (Class A)/(d)/ .70% 7.57% .00% 8.27% 7.47% .80% ------------------------------------------------------------------------------ Lord Abbett Bond Debenture (Class A) .51% .05% .00% .56% .00% .56% ------------------------------------------------------------------------------ Lord Abbett Growth and Income (Class A)/(e)/ .50% .04% .00% .54% .00% .54% ------------------------------------------------------------------------------ Lord Abbett Growth Opportunities (Class B)/(d)/ .70% .29% .25% 1.24% .05% 1.19% ------------------------------------------------------------------------------ Lord Abbett Mid- Cap Value (Class B)// .68% .08% .25% 1.01% .00% 1.01% ------------------------------------------------------------------------------ Met/AIM Small Cap Growth (Class B)/(d)(f)/ .90% .11% .25% 1.26% .00% 1.26% ------------------------------------------------------------------------------ MFS Research International (Class B)/(d)(f)/ .74% .23% .25% 1.22% .00% 1.22% ------------------------------------------------------------------------------ Neuberger Berman Real Estate (Class B)/(d)/ .67% .03% .25% .95% .00% .95% ------------------------------------------------------------------------------ T. Rowe Price Mid-Cap Growth (Class B)/(d)/ .75% .07% .25% 1.07% .00% 1.07% ------------------------------------------------------------------------------ Third Avenue Small Cap Value (Class B)/(d)/ .75% .05% .25% 1.05% .00% 1.05% ------------------------------------------------------------------------------ AIM VARIABLE INSURANCE FUNDS ------------------------------------------------------------------------------ AIM V.I. Core Equity (Series I)/(g)/ .60% .27% .00% .87% .00% .87% ------------------------------------------------------------------------------ AIM V.I. Government Securities (Series II)/(h)/ .47% .41% .25% 1.13% .04% 1.09% ------------------------------------------------------------------------------ AIM V.I. Real Estate (Series I)/(i)/ .90% .46% .00% 1.36% .06% 1.30% ------------------------------------------------------------------------------
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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 VARIABLE PRODUCTS SERIES FUND, INC. (CLASS B) ------------------------------------------------------------------------------ AllianceBernstein Global Technology .75% .17% .25% 1.17% .00% 1.17% ------------------------------------------------------------------------------ AllianceBernstein US Government/ High Grade Securities .45% .26% .25% .96% .00% .96% ------------------------------------------------------------------------------ AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (CLASS I) ------------------------------------------------------------------------------ VP Vista 1.00% .01% .00% 1.01% .00% 1.01% ------------------------------------------------------------------------------ DELAWARE VIP TRUST (SERVICE CLASS) ------------------------------------------------------------------------------ Small Cap Value/(j)/ .73% .12% .30% 1.15% .05% 1.10% ------------------------------------------------------------------------------ DREYFUS INVESTMENT PORTFOLIOS (SERVICE SHARES) ------------------------------------------------------------------------------ Emerging Leaders .90% .13% .25% 1.28% .00% 1.28% ------------------------------------------------------------------------------ MidCap Stock .75% .04% .25% 1.04% .00% 1.04% ------------------------------------------------------------------------------ DREYFUS VARIABLE INVESTMENT FUND (SERVICE SHARES) ------------------------------------------------------------------------------ International Value 1.00% .20% .25% 1.45% .00% 1.45% ------------------------------------------------------------------------------ FIDELITY VARIABLE INSURANCE PRODUCTS (SERVICE CLASS) ------------------------------------------------------------------------------ VIP Asset Manager: Growth .57% .17% .10% .84% .00% .84% ------------------------------------------------------------------------------ VIP Contrafund .57% .09% .10% .76% .00% .76% ------------------------------------------------------------------------------ VIP Equity- Income .47% .09% .10% .66% .00% .66% ------------------------------------------------------------------------------ VIP Investment Grade Bond .36% .12% .10% .58% .00% .58%
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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 ------------------------------------------------------------------------------- Templeton Foreign Securities (Class 1)/(k)/ .65% .17% .00% .82% .05% .77% ------------------------------------------------------------------------------- Mutual Discovery Securities (Class 2)/(l)/ .80% .23% .25% 1.28% .00% 1.28% ------------------------------------------------------------------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST (INSTITUTIONAL SHARES) ------------------------------------------------------------------------------- Mid Cap Value .80% .07% .00% .87% .00% .87% ------------------------------------------------------------------------------- Structured Small Cap Equity .75% .18% .00% .93% .00% .93% ------------------------------------------------------------------------------- JANUS ASPEN SERIES ------------------------------------------------------------------------------- Janus Aspen Balanced (Service Shares) .55% .02% .25% .82% .00% .82% ------------------------------------------------------------------------------- Janus Aspen Forty (Service Shares) .64% .03% .25% .92% .00% .92% ------------------------------------------------------------------------------- Janus Aspen Large Cap Growth (Institutional Shares) .64% .02% .00% .66% .00% .66% ------------------------------------------------------------------------------- MFS VARIABLE INSURANCE TRUST (SERVICE CLASS) ------------------------------------------------------------------------------- Global Equity/(m)/ 1.00% .48% .25% 1.73% .33% 1.40% ------------------------------------------------------------------------------- High Income/(m)/ .75% .15% .25% 1.15% .00% 1.15% ------------------------------------------------------------------------------- New Discovery .90% .16% .25% 1.31% .00% 1.31% ------------------------------------------------------------------------------- Value/(m)/ .75% .16% .25% 1.16% .01% 1.15% ------------------------------------------------------------------------------- VAN KAMPEN LIFE INVESTMENT TRUST (CLASS II) ------------------------------------------------------------------------------- Government .50% .14% .25% .89% .00% .89% ------------------------------------------------------------------------------- WELLS FARGO VARIABLE TRUST ------------------------------------------------------------------------------- Advantage VT Asset Allocation/(n)/ .55% .24% .25% 1.04% .04% 1.00% -------------------------------------------------------------------------------
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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)/ -------------------------------------------------------------------------- Advantage VT Equity Income/(n)/ .55% .25% .25% 1.05% .05% 1.00% -------------------------------------------------------------------------- Advantage VT Large Company Core/(n)/ .55% .33% .25% 1.13% .13% 1.00% -------------------------------------------------------------------------- Advantage VT Large Company Growth/(n)/ .55% .25% .25% 1.05% .05% 1.00% -------------------------------------------------------------------------- Advantage VT Money Market/(n)/ .30% .27% .25% .82% .07% .75% -------------------------------------------------------------------------- Advantage VT Total Return Bond/(n)/ .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, until April 30, 2007, 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) Management Fees have been restated to reflect a new management fee schedule that became effective on May 1, 2006. (d) 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, 2007, the following percentages: 1.15% for the Janus Aggressive Growth Portfolio, 1.05% for the Lazard Mid-Cap Portfolio, .80% for the Legg Mason Value Equity Portfolio, 1.15% for the Lord Abbett Growth Opportunities 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 1.20% 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. Due to certain brokerage commission recaptures not shown in the table, actual Net Total Annual Expenses for the Lord Abbett Growth Opportunities Portfolio were 1.15% for the year ended December 31, 2005. Expenses for the Legg Mason Value Equity Portfolio are annualized based on the Portfolio's November 1, 2005 start date. (e) Management Fees have been restated to reflect a new management fee schedule that became effective on December 19, 2005 for the Lazard Mid-Cap Portfolio and on January 1, 2006 for the Lord Abbett Growth and Income Portfolio. (f) 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: .04% for the Met/AIM Small Cap Growth Portfolio and .05% for the MFS Research International Portfolio. (g) The AIM V.I. Core Equity Fund's Total Annual Operating Expenses have been restated to reflect the reorganization of another Fund into the Fund, which occurred on or about May 1, 2006. 17 (h) The adviser to the AIM Variable Insurance Funds has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Net Total Annual Expenses (excluding (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement) of the AIM V.I. Government Securities Fund--Series II to .98%. The fee waiver has been restated to reflect this agreement, which is in effect through April 30, 2007. "Other Expenses" includes interest expense of .11%. (i) The adviser to the AIM Variable Insurance Funds has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit Net Total Annual Expenses (subject to the same exclusions as in Note (h) above) of the AIM V.I. Real Estate Fund--Series I to 1.30% of average daily net assets. The fee waiver has been restated to reflect this agreement. (j) Effective May 1, 2006 through April 30, 2007, 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. (k) The Fund's manager has agreed in advance to reduce its fees with respect to assets invested by the Fund in a Franklin Templeton Money Market Fund (the Sweep Money Fund). This reduction is required by the Fund's Board of Trustees and an exemptive order by the Securities and Exchange Commission. (l) While the maximum amount payable under the Fund's class rule 12b-1 plan is .35% per year of the Fund's class average daily net assets, the Fund's Board of Trustees has set the current rate at .25% per year through May 1, 2007. (m) MFS has contractually agreed to bear the series' 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. This contractual fee arrangement will continue until at least April 30, 2007, unless earlier terminated or revised with the consent of the Board of Trustees which oversees the series. (n) The adviser to the Wells Fargo Variable Trust Portfolios has committed through April 30, 2007 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 18 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 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 19 Investors Advisory) or sub-adviser of a Portfolio or its affiliates, may compensate us and/or certain of our 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 .50%. 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 of our affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or sub-adviser (or their affiliate) with increased access to persons involved in the distribution of the Policies. We, and certain of our affiliated insurance companies, are joint members of our affiliated investment advisers MetLife Advisers and Met Investors Advisory, which are organized as limited liability companies. Our membership 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--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, marketing and other support services that would otherwise be provided by the Portfolio, the Portfolio's investment adviser or its distributor. 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 to new premium payments or transfers of cash value 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 20 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. Maximum capital Growth appreciation. ------------------------------------------------------------------------------------- BlackRock Bond Income BlackRock Advisors, Inc. A competitive total return primarily from investing in fixed-income securities. ------------------------------------------------------------------------------------- BlackRock Diversified BlackRock Advisors, Inc. High total return while attempting to limit investment risk and preserve capital. ------------------------------------------------------------------------------------- BlackRock Investment Trust BlackRock Advisors, Inc. Long-term growth of capital and income. ------------------------------------------------------------------------------------- BlackRock Legacy Large BlackRock Advisors, Inc. Long-term growth of capital. Cap Growth ------------------------------------------------------------------------------------- BlackRock Money Market/1/ BlackRock Advisors, Inc. A high level of current income consistent with preservation of capital. ------------------------------------------------------------------------------------- BlackRock Strategic Value BlackRock Advisors, Inc. High total return, consisting principally of capital appreciation. ------------------------------------------------------------------------------------- Davis Venture Value Davis Selected Advisers, Growth of capital. L.P./2/ ------------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------------
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----------------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ----------------------------------------------------------------------------------- MetLife Stock Index Metropolitan Life Insurance To equal the performance of Company the Standard & Poor's 500 Composite Stock Price Index. ----------------------------------------------------------------------------------- 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. ----------------------------------------------------------------------------------- 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 ----------------------------------------------------------------------------------- Lazard Mid-Cap Lazard Asset Management, Long-term capital LLC/3/ appreciation. ----------------------------------------------------------------------------------- Legg Mason Value Equity Legg Mason Capital Long-term growth of capital. Management ----------------------------------------------------------------------------------- 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 Growth of capital and Income current 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, which are believed to be undervalued in the marketplace. ----------------------------------------------------------------------------------- Met/AIM Small Cap Growth A I M 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. -----------------------------------------------------------------------------------
22 A I M VARIABLE INSURANCE FUNDS ADVISER: A I M ADVISORS, INC. ------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------- AIM V.I. Core Equity N/A Growth of capital. ------------------------------------------------------------------------- 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 high total return. ------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES ADVISER: FUND, INC. ALLIANCEBERNSTEIN L.P. ------------------------------------------------------------------------- PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------- AllianceBernstein Global N/A Long-term growth of capital. Technology ------------------------------------------------------------------------- AllianceBernstein U.S. N/A High current income Government/High Grade consistent with preservation Securities of capital. ------------------------------------------------------------------------- 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 by investing in small companies. ------------------------------------------------------------------------- MidCap Stock N/A Investment results that 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 ------------------------------------------------------------------------- International Value N/A Long-term capital growth by investing in foreign stocks of value companies. -------------------------------------------------------------------------
23 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 investments. ------------------------------------------------------------------------------------ VIP Contrafund FMR Co., Inc. Long-term capital appreciation. ------------------------------------------------------------------------------------ VIP Equity-Income FMR Co., Inc. Reasonable income. 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 Investment Grade Bond Fidelity Investments Money As high a level of current Management, Inc. income as is consistent with preservation of capital. ------------------------------------------------------------------------------------ FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST ADVISER: SEE BELOW ------------------------------------------------------------------------------------ PORTFOLIO ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------ Mutual Discovery Securities Franklin Mutual Advisers, Capital appreciation. LLC ------------------------------------------------------------------------------------ Templeton Foreign Templeton Investment Long-term capital growth. Securities Counsel, LLC ------------------------------------------------------------------------------------ GOLDMAN SACHS VARIABLE INSURANCE TRUST ADVISER: GOLDMAN SACHS ASSET MANAGEMENT, L.P. ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------ Mid Cap Value N/A Long term capital appreciation. ------------------------------------------------------------------------------------ Structured Small Cap N/A Long term growth of capital. Equity ------------------------------------------------------------------------------------ JANUS ASPEN SERIES ADVISER: JANUS CAPITAL MANAGEMENT LLC ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------ 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. ------------------------------------------------------------------------------------ Janus Aspen Large Cap N/A Long-term growth of capital Growth in a manner consistent with the preservation of capital. ------------------------------------------------------------------------------------
24 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. ------------------------------------------------------------------------------------ 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 FUNDS MANAGEMENT, LLC ------------------------------------------------------------------------------------ PORTFOLIO SUB-ADVISER INVESTMENT OBJECTIVE ------------------------------------------------------------------------------------ Advantage VT Asset Wells Capital Management Long-term total return, Allocation Incorporated consistent with reasonable risk. ------------------------------------------------------------------------------------ Advantage VT Equity Wells Capital Management Long-term capital Income Incorporated appreciation and above- average dividend income. ------------------------------------------------------------------------------------ Advantage VT Large Matrix Asset Advisors, Inc. Total return comprised of Company Core long-term capital appreciation and current income. ------------------------------------------------------------------------------------ Advantage VT Large Peregrine Capital Long-term capital Company Growth Management, Inc. appreciation. ------------------------------------------------------------------------------------ Advantage VT Money Wells Capital Management Current income, while Market Incorporated preserving capital and liquidity. ------------------------------------------------------------------------------------ Advantage VT Total Return Wells Capital Management Total return consisting of Bond Incorporated income and capital appreciation. ------------------------------------------------------------------------------------
-------- /1/ 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. /2/ Davis Selected Advisers, L.P. may also delegate any of its responsibilities to Davis Selected Advisers-NY, Inc., a wholly-owned subsidiary. /3/ Prior to December 19, 2005, AIM Capital Management, Inc. was the sub-adviser to this Portfolio. 25 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 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 26 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 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. 27 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.") . 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. 28 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 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. 29 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 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. 30 . 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.) 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. 31 . 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. 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. 32 Thereafter, at the end of each Valuation Period the cash value in an investment division will equal: . The cash value in the investment division at the beginning of the Valuation Period; plus . All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus . All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus . The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus . The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund Portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the Portfolio during the period. CASH VALUE TRANSFERS [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 33 Structured 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. For example, we currently monitor transfer activity to determine if, for each category of international, small-cap, and high-yield Portfolios, in a 12-month period there were, (1) six or more transfers involving the given category; (2) cumulative gross transfers involving the given category that exceed the current cash value; and (3) two or more "round-trips" involving any Monitored Portfolio in the given category. A round-trip generally is defined as a transfer in followed by a transfer out within the next seven calendar days or a transfer out followed by a transfer in within the next seven calendar days, in either case subject to certain other criteria. 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 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 with an original signature. Transfers made under one of the systematic investment strategies described below are not treated as transfers when we evaluate trading patterns for market timing. 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 arbitrage trading, or the determination of the transfer limits. Our ability to detect and/or restrict 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 also be limited by provisions of the Policy. 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. 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. The Portfolios may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares, and we reserve the right to enforce these policies and procedures. For example, Portfolios may assess a redemption fee (which we reserve the right to collect) on shares held for a relatively short period. The prospectuses for the Portfolios describe any such policies and procedures, which may be more or 34 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 currently may not have the contractual obligation or the operational capacity to apply the frequent trading policies and procedures of the Portfolios. However, under rules recently adopted by the Securities and Exchange Commission, effective October 16, 2006 we will be required to (1) enter into a written agreement with each Portfolio or its principal underwriter that will obligate us to provide to the Portfolio promptly upon request certain information about the trading activity of individual Policy owners, and (2) execute instructions from the Portfolio to restrict or prohibit further purchases or transfers by specific Policy owners who violate the frequent trading policies established by the Portfolio. 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 Portfolios in their ability to apply their frequent trading policies and procedures. In addition, the other insurance companies and/or retirement plans may have different policies and procedures or may not have any such policies and procedures because of contractual limitations. For these reasons, 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. . 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 35 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. 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. 36 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. 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. 37 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 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). 38 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. /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. . 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. 39 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. 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 40 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. 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 41 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 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. 42 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 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 43 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 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). 44 . 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. . 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. 45 . 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. . 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. 46 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 2006, the maximum estate tax rate is 46% and the maximum rate for 2007-2009 is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and $3,000,000 in 2009. 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. 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. 47 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. Split dollar insurance plans that provide deferred compensation may be subject to recently enacted rules governing deferred compensation arrangements. Failure to adhere to these rules will result in adverse tax consequences. A tax adviser should be consulted with respect to such plans. 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. . 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 48 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. 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 49 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 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). 50 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 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 affiliated and unaffiliated broker-dealers. We pay commissions to representatives (or the broker-dealers through which they are registered) for the sale of our products. In the case of sales representatives registered through us, we pay commissions for the products the representative sells and services based on a "gross dealer concession" model. The gross dealer concession for the Policies varies based on the Policy year and on whether the amount of premiums paid in a Policy year is greater or less than the Policy's Target Premium. The Target Premium is shown in your Policy. In the first Policy year, the gross dealer concession is 28% of premiums paid up to the amount of the Target Premium, and 2.5% of premiums paid in excess of the Target Premium; in Policy years 2 through 4, the gross dealer concession is 8.25% of premiums paid up to the amount of the Target Premium and 2.5% of any excess; in Policy year 5 and later, the gross dealer concession is 2.5% of all premiums paid; and in Policy year 8 and 51 thereafter a gross dealer concession of 0.1% is paid on Policy's cash value. A sales representative may be entitled to all or a portion of the gross dealer concession for selling and servicing the Policy based on a formula that takes into consideration the amount of proprietary products that the sales representative sells and services. Proprietary products are products issued by us and our affiliates. Because sales of proprietary products are a factor in determining the percentage of gross dealer concession to which a sales representative is entitled, sales representatives have an incentive to favor the sale of the Policies over other similar products issued by non-affiliates. For Policies sold by representatives of affiliated and unaffiliated broker dealers, we pay commissions to the broker dealer with which the representative is registered. The commissions paid to the broker dealer are generally not expected to exceed, on a present value basis, the aggregate amount of compensation that is paid with respect to sales made through our sales representatives. The portion of the commissions that the broker dealer passes through to its sales representatives is determined in accordance with the broker-dealer's internal compensation program. Our affiliated broker dealers are New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. 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, financing arrangements, marketing support, medical and other insurance benefits, retirement benefits, non-qualified deferred compensation plans and other benefits. The amount of this additional cash compensation is based primarily on the amount of proprietary products sold. 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. Receipt of this additional cash compensation may provide sales representatives and their managers with an incentive to favor the sale of proprietary products over similar products issued by non-affiliates. 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. 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 marketing allowances, introduction fees, persistency payments, preferred status fees and industry conference fees. Marketing allowances are periodic 52 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. We may enter into similar arrangements with our affiliated broker dealers. 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 In the ordinary course of business, MetLife, similar to other life insurance companies, is involved in lawsuits (including class action lawsuits), arbitrations and other legal proceedings. Also, from time to time, state and federal regulators or other officials conduct formal and informal examinations or undertake other actions dealing with various aspects of the financial services and insurance industries. In some legal proceedings involving insurers, substantial damages have been sought and/or material settlement payments have been made. It is not possible to predict with certainty the ultimate outcome of any pending legal proceeding or regulatory action. However, MetLife does not 53 believe any such action or proceeding will have a material adverse effect upon the Separate Account or our ability to meet our obligations under the Policies. 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/ 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. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 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 100 F Street, NE, Washington, DC 20549. 811-06025 ANNUAL REPORT OF METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY DECEMBER 31, 2005 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, 2005, and the related statements of operations and changes in net assets for each of the periods in the three years then ended. These financial statements are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, 2005, 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, 2005, the results of their operations and the changes in their net assets for each of the periods in the three years then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, Florida March 29, 2006 F-1 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES AT DECEMBER 31, 2005
BLACKROCK BLACKROCK INVESTMENT TRUST DIVERSIFIED INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Investment Trust Portfolio (14,445,292 shares; cost $430,808,062)............. $ 401,579,124 $ -- BlackRock Diversified Portfolio (19,579,913 shares; cost $315,918,793)............. -- 319,739,984 BlackRock Aggressive Growth Portfolio (9,898,140 shares; cost $230,823,866).............. -- -- MetLife Stock Index Portfolio (18,234,739 shares; cost $556,916,894)............. -- -- FI International Stock Portfolio (4,222,190 shares; cost $46,661,949)............... -- -- FI Mid Cap Opportunities Portfolio (14,174,528 shares; cost $260,321,348)............. -- -- T. Rowe Price Small Cap Growth Portfolio (5,328,462 shares; cost $64,292,906)............... -- -- Oppenheimer Global Equity Portfolio (2,751,633 shares; cost $31,905,233)............... -- -- Harris Oakmark Large Cap Value Portfolio (4,155,093 shares; cost $47,559,215)............... -- -- Neuberger Berman Mid Cap Value Portfolio (3,013,279 shares; cost $49,254,131)............... -- -- T. Rowe Price Large Cap Growth Portfolio (3,058,976 shares; cost $34,402,430)............... -- -- Lehman Brothers Aggregate Bond Index Portfolio (7,452,051 shares; cost $80,131,372)............... -- -- Morgan Stanley EAFE Index Portfolio (3,276,867 shares; cost $30,437,074)............... -- -- Russell 2000 Index Portfolio (3,063,111 shares; cost $33,227,529)............... -- -- Jennison Growth Portfolio (1,056,515 shares; cost $10,873,213)............... -- -- BlackRock Strategic Value Portfolio (4,852,649 shares; cost $71,185,711)............... -- -- MetLife Mid Cap Stock Index Portfolio (3,224,137 shares; cost $36,005,175)............... -- -- Franklin Templeton Small Cap Growth Portfolio (489,746 shares; cost $4,218,036).................. -- -- BlackRock Large Cap Value Portfolio (409,008 shares; cost $4,643,650).................. -- -- Davis Venture Value Portfolio (1,423,271 shares; cost $34,893,963)............... -- -- Loomis Sayles Small Cap Portfolio (34,857 shares; cost $6,332,001)................... -- -- BlackRock Legacy Large Cap Growth Portfolio (465,855 shares; cost $8,865,115).................. -- -- MFS Investors Trust Portfolio (430,223 shares; cost $3,548,717).................. -- -- BlackRock Bond Income Portfolio (857,050 shares; cost $93,224,839)................. -- -- FI Value Leaders Portfolio (16,899 shares; cost $2,927,434)................... -- -- Harris Oakmark Focused Value Portfolio (185,737 shares; cost $38,504,714)................. -- -- ---------------- ---------------- Total Investments................................... 401,579,124 319,739,984 Cash and Accounts Receivable........................ -- 10,439 ---------------- ---------------- Total Assets........................................ 401,579,124 319,750,423 LIABILITIES Due to/From Metropolitan Life Insurance Company..... (21,844) -- ---------------- ---------------- NET ASSETS.......................................... $ 401,557,280 $ 319,750,423 ================ ================ Outstanding Units................................... 16,488,159 13,638,816 Unit Fair Values.................................... $12.13 to $37.35 $13.18 to $33.65
See Notes to Financial Statements. F-2
BLACKROCK METLIFE FI FI MID CAP T. ROWE PRICE OPPENHEIMER AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- 222,213,228 -- -- -- -- -- -- 605,393,327 -- -- -- -- -- -- 56,915,117 -- -- -- -- -- -- 247,629,002 -- -- -- -- -- -- 80,590,987 -- -- -- -- -- -- 41,604,692 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ---------------- --------------- --------------- ---------------- 222,213,228 605,393,327 56,915,117 247,629,002 80,590,987 41,604,692 6,742 176,014 -- 116,970 41,059 104 ---------------- ---------------- ---------------- --------------- --------------- ---------------- 222,219,970 605,569,341 56,915,117 247,745,972 80,632,046 41,604,796 -- -- (59,403) -- -- -- ---------------- ---------------- ---------------- --------------- --------------- ---------------- $ 222,219,970 $ 605,569,341 $ 56,855,714 $ 247,745,972 $ 80,632,046 $ 41,604,796 ================ ================ ================ =============== =============== ================ 11,502,614 32,156,989 3,294,341 14,520,500 5,103,342 2,314,718 $14.64 to $20.73 $11.08 to $33.24 $13.71 to $18.97 $7.12 to $20.08 $8.20 to $17.21 $17.48 to $19.47
F-3 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
HARRIS OAKMARK NEUBERGER BERMAN LARGE CAP VALUE MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Investment Trust Portfolio (14,445,292 shares; cost $430,808,062)............. $ -- $ -- BlackRock Diversified Portfolio (19,579,913 shares; cost $315,918,793)............. -- -- BlackRock Aggressive Growth Portfolio (9,898,140 shares; cost $230,823,866).............. -- -- MetLife Stock Index Portfolio (18,234,739 shares; cost $556,916,894)............. -- -- FI International Stock Portfolio (4,222,190 shares; cost $46,661,949)............... -- -- FI Mid Cap Opportunities Portfolio (14,174,528 shares; cost $260,321,348)............. -- -- T. Rowe Price Small Cap Growth Portfolio (5,328,462 shares; cost $64,292,906)............... -- -- Oppenheimer Global Equity Portfolio (2,751,633 shares; cost $31,905,233)............... -- -- Harris Oakmark Large Cap Value Portfolio (4,155,093 shares; cost $47,559,215)............... 54,390,170 -- Neuberger Berman Mid Cap Value Portfolio (3,013,279 shares; cost $49,254,131)............... -- 63,218,591 T. Rowe Price Large Cap Growth Portfolio (3,058,976 shares; cost $34,402,430)............... -- -- Lehman Brothers Aggregate Bond Index Portfolio (7,452,051 shares; cost $80,131,372)............... -- -- Morgan Stanley EAFE Index Portfolio (3,276,867 shares; cost $30,437,074)............... -- -- Russell 2000 Index Portfolio (3,063,111 shares; cost $33,227,529)............... -- -- Jennison Growth Portfolio (1,056,515 shares; cost $10,873,213)............... -- -- BlackRock Strategic Value Portfolio (4,852,649 shares; cost $71,185,711)............... -- -- MetLife Mid Cap Stock Index Portfolio (3,224,137 shares; cost $36,005,175)............... -- -- Franklin Templeton Small Cap Growth Portfolio (489,746 shares; cost $4,218,036).................. -- -- BlackRock Large Cap Value Portfolio (409,008 shares; cost $4,643,650).................. -- -- Davis Venture Value Portfolio (1,423,271 shares; cost $34,893,963)............... -- -- Loomis Sayles Small Cap Portfolio (34,857 shares; cost $6,332,001)................... -- -- BlackRock Legacy Large Cap Growth Portfolio (465,855 shares; cost $8,865,115).................. -- -- MFS Investors Trust Portfolio (430,223 shares; cost $3,548,717).................. -- -- BlackRock Bond Income Portfolio (857,050 shares; cost $93,224,839)................. -- -- FI Value Leaders Portfolio (16,899 shares; cost $2,927,434)................... -- -- Harris Oakmark Focused Value Portfolio (185,737 shares; cost $38,504,714)................. -- -- ---------------- ---------------- Total Investments................................... 54,390,170 63,218,591 Cash and Accounts Receivable........................ 55,264 -- ---------------- ---------------- Total Assets........................................ 54,445,434 63,218,591 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- (66,196) ---------------- ---------------- NET ASSETS.......................................... $ 54,445,434 $ 63,152,395 ================ ================ Outstanding Units................................... 4,085,993 2,912,765 Unit Fair Values.................................... $12.55 to $15.72 $18.79 to $26.61
See Notes to Financial Statements. F-4
T. ROWE PRICE LEHMAN BROTHERS MORGAN STANLEY RUSSELL JENNISON BLACKROCK LARGE CAP GROWTH AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX GROWTH STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- -------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 41,387,943 -- -- -- -- -- -- 80,556,673 -- -- -- -- -- -- 42,435,427 -- -- -- -- -- -- 42,638,506 -- -- -- -- -- -- 13,079,653 -- -- -- -- -- -- 90,065,160 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------- --------------- --------------- ---------------- --------------- ---------------- 41,387,943 80,556,673 42,435,427 42,638,506 13,079,653 90,065,160 11,568 -- 22,132 -- 4,592 57,751 --------------- --------------- --------------- ---------------- --------------- ---------------- 41,399,511 80,556,673 42,457,559 42,638,506 13,084,245 90,122,911 -- (9,260) -- (1,660) -- -- --------------- --------------- --------------- ---------------- --------------- ---------------- $ 41,399,511 $ 80,547,413 $ 42,457,559 $ 42,636,846 $ 13,084,245 $ 90,122,911 =============== =============== =============== ================ =============== ================ 3,468,063 5,619,973 3,464,106 2,619,287 1,297,642 4,485,936 $9.47 to $14.21 $13.32 to 14.53 $10.45 to 14.05 $13.00 to $17.96 $5.65 to $12.19 $18.58 to $20.28
F-5 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
METLIFE FRANKLIN TEMPLETON MID CAP STOCK INDEX SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Investment Trust Portfolio (14,445,292 shares; cost $430,808,062)............. $ -- $ -- BlackRock Diversified Portfolio (19,579,913 shares; cost $315,918,793)............. -- -- BlackRock Aggressive Growth Portfolio (9,898,140 shares; cost $230,823,866).............. -- -- MetLife Stock Index Portfolio (18,234,739 shares; cost $556,916,894)............. -- -- FI International Stock Portfolio (4,222,190 shares; cost $46,661,949)............... -- -- FI Mid Cap Opportunities Portfolio (14,174,528 shares; cost $260,321,348)............. -- -- T. Rowe Price Small Cap Growth Portfolio (5,328,462 shares; cost $64,292,906)............... -- -- Oppenheimer Global Equity Portfolio (2,751,633 shares; cost $31,905,233)............... -- -- Harris Oakmark Large Cap Value Portfolio (4,155,093 shares; cost $47,559,215)............... -- -- Neuberger Berman Mid Cap Value Portfolio (3,013,279 shares; cost $49,254,131)............... -- -- T. Rowe Price Large Cap Growth Portfolio (3,058,976 shares; cost $34,402,430)............... -- -- Lehman Brothers Aggregate Bond Index Portfolio (7,452,051 shares; cost $80,131,372)............... -- -- Morgan Stanley EAFE Index Portfolio (3,276,867 shares; cost $30,437,074)............... -- -- Russell 2000 Index Portfolio (3,063,111 shares; cost $33,227,529)............... -- -- Jennison Growth Portfolio (1,056,515 shares; cost $10,873,213)............... -- -- BlackRock Strategic Value Portfolio (4,852,649 shares; cost $71,185,711)............... -- -- MetLife Mid Cap Stock Index Portfolio (3,224,137 shares; cost $36,005,175)............... 46,524,294 -- Franklin Templeton Small Cap Growth Portfolio (489,746 shares; cost $4,218,036).................. -- 5,108,051 BlackRock Large Cap Value Portfolio (409,008 shares; cost $4,643,650).................. -- -- Davis Venture Value Portfolio (1,423,271 shares; cost $34,893,963)............... -- -- Loomis Sayles Small Cap Portfolio (34,857 shares; cost $6,332,001)................... -- -- BlackRock Legacy Large Cap Growth Portfolio (465,855 shares; cost $8,865,115).................. -- -- MFS Investors Trust Portfolio (430,223 shares; cost $3,548,717).................. -- -- BlackRock Bond Income Portfolio (857,050 shares; cost $93,224,839)................. -- -- FI Value Leaders Portfolio (16,899 shares; cost $2,927,434)................... -- -- Harris Oakmark Focused Value Portfolio (185,737 shares; cost $38,504,714)................. -- -- ---------------- --------------- Total Investments................................... 46,524,294 5,108,051 Cash and Accounts Receivable........................ -- -- ---------------- --------------- Total Assets........................................ 46,524,294 5,108,051 LIABILITIES Due to/From Metropolitan Life Insurance Company..... (1,017) -- ---------------- --------------- NET ASSETS.......................................... $ 46,523,277 $ 5,108,051 ================ =============== Outstanding Units................................... 2,985,941 474,966 Unit Fair Values.................................... $14.39 to $15.80 $8.20 to $10.83
See Notes to Financial Statements. F-6
BLACKROCK DAVIS LOOMIS BLACKROCK MFS INVESTORS BLACKROCK LARGE CAP VALUE VENTURE VALUE SAYLES SMALL CAP LEGACY LARGE CAP GROWTH TRUST BOND INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ----------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 5,137,144 -- -- -- -- -- -- 43,993,297 -- -- -- -- -- -- 8,114,417 -- -- -- -- -- -- 10,109,046 -- -- -- -- -- -- 4,207,586 -- -- -- -- -- -- 94,695,466 -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ----------------- --------------- -------------- ---------------- 5,137,144 43,993,297 8,114,417 10,109,046 4,207,586 94,695,466 -- -- -- -- 9,150 -- ---------------- ---------------- ----------------- --------------- -------------- ---------------- 5,137,144 43,993,297 8,114,417 10,109,046 4,216,736 94,695,466 -- (183) -- -- -- (2,337) ---------------- ---------------- ----------------- --------------- -------------- ---------------- $ 5,137,144 $ 43,993,114 $ 8,114,417 $ 10,109,046 $ 4,216,736 $ 94,693,129 ================ ================ ================= =============== ============== ================ 396,107 1,739,984 39,978 1,201,181 425,864 5,010,744 $12.63 to $13.05 $12.13 to $35.19 $11.54 to $255.61 $7.96 to $11.96 $9.51 to $9.95 $13.78 to $28.49
F-7 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2003
FI HARRIS OAKMARK VALUE LEADERS FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND") BlackRock Investment Trust Portfolio (14,445,292 shares; cost $430,808,062)............. $ -- $ -- BlackRock Diversified Portfolio (19,579,913 shares; cost $315,918,793)............. -- -- BlackRock Aggressive Growth Portfolio (9,898,140 shares; cost $230,823,866).............. -- -- MetLife Stock Index Portfolio (18,234,739 shares; cost $556,916,894)............. -- -- FI International Stock Portfolio (4,222,190 shares; cost $46,661,949)............... -- -- FI Mid Cap Opportunities Portfolio (14,174,528 shares; cost $260,321,348)............. -- -- T. Rowe Price Small Cap Growth Portfolio (5,328,462 shares; cost $64,292,906)............... -- -- Oppenheimer Global Equity Portfolio (2,751,633 shares; cost $31,905,233)............... -- -- Harris Oakmark Large Cap Value Portfolio (4,155,093 shares; cost $47,559,215)............... -- -- Neuberger Berman Mid Cap Value Portfolio (3,013,279 shares; cost $49,254,131)............... -- -- T. Rowe Price Large Cap Growth Portfolio (3,058,976 shares; cost $34,402,430)............... -- -- Lehman Brothers Aggregate Bond Index Portfolio (7,452,051 shares; cost $80,131,372)............... -- -- Morgan Stanley EAFE Index Portfolio (3,276,867 shares; cost $30,437,074)............... -- -- Russell 2000 Index Portfolio (3,063,111 shares; cost $33,227,529)............... -- -- Jennison Growth Portfolio (1,056,515 shares; cost $10,873,213)............... -- -- BlackRock Strategic Value Portfolio (4,852,649 shares; cost $71,185,711)............... -- -- MetLife Mid Cap Stock Index Portfolio (3,224,137 shares; cost $36,005,175)............... -- -- Franklin Templeton Small Cap Growth Portfolio (489,746 shares; cost $4,218,036).................. -- -- BlackRock Large Cap Value Portfolio (409,008 shares; cost $4,643,650).................. -- -- Davis Venture Value Portfolio (1,423,271 shares; cost $34,893,963)............... -- -- Loomis Sayles Small Cap Portfolio (34,857 shares; cost $6,332,001)................... -- -- BlackRock Legacy Large Cap Growth Portfolio (465,855 shares; cost $8,865,115).................. -- -- MFS Investors Trust Portfolio (430,223 shares; cost $3,548,717).................. -- -- BlackRock Bond Income Portfolio (857,050 shares; cost $93,224,839)................. -- -- FI Value Leaders Portfolio (16,899 shares; cost $2,927,434)................... 3,262,872 -- Harris Oakmark Focused Value Portfolio (185,737 shares; cost $38,504,714)................. -- 49,251,761 ---------------- ------------------ Total Investments................................... 3,262,872 49,251,761 Cash and Accounts Receivable........................ 2 -- ---------------- ------------------ Total Assets........................................ 3,262,874 49,251,761 LIABILITIES Due to/From Metropolitan Life Insurance Company..... -- -- ---------------- ------------------ NET ASSETS.......................................... $ 3,262,874 $ 49,251,761 ================ ================== Outstanding Units................................... 248,972 182,165 Unit Fair Values.................................... $10.54 to $13.29 $260.95 to $272.09
See Notes to Financial Statements. F-8 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
SALOMON BROTHERS SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------- ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ 12,708,706 $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- 12,014,309 BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... -- -- MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ -- -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- -- AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... -- -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ -- -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- -- Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ -- -- ---------------- ---------------- Total Investments...................................................... 12,708,706 12,014,309 Cash and Accounts Receivable........................................... -- -- ---------------- ---------------- Total Assets........................................................... 12,708,706 12,014,309 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ -- -- ---------------- ---------------- NET ASSETS............................................................. $ 12,708,706 $ 12,014,309 ================ ================ Outstanding Units...................................................... 843,296 879,572 Unit Fair Values....................................................... $14.56 to $15.19 $13.19 to $13.75
BLACKROCK MONEY MARKET INVESTMENT DIVISION ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... 28,041,518 MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ -- ---------------- Total Investments...................................................... 28,041,518 Cash and Accounts Receivable........................................... 162 ---------------- Total Assets........................................................... 28,041,680 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ (13,707) ---------------- NET ASSETS............................................................. $ 28,027,973 ================ Outstanding Units...................................................... 1,760,759 Unit Fair Values....................................................... $12.92 to $16.24
See Notes to Financial Statements. F-10
METLIFE METLIFE METLIFE CONSERVATIVE TO MODERATE TO METLIFE MFS CONSERVATIVE MODERATE METLIFE AGGRESSIVE AGGRESSIVE TOTAL RETURN ALLOCATION ALLOCATION MODERATE ALLOCATION ALLOCATION ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- 2,157,207 -- -- -- -- -- -- 118,225 -- -- -- -- -- -- 578,511 -- -- -- -- -- -- 1,449,435 -- -- -- -- -- -- 2,349,403 -- -- -- -- -- -- 452,673 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 2,157,207 118,225 578,511 1,449,435 2,349,403 452,673 3 -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- 2,157,210 118,225 578,511 1,449,435 2,349,403 452,673 -- -- -- -- -- -- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 2,157,210 $ 118,225 $ 578,511 $ 1,449,435 $ 2,349,403 $ 452,673 ================ ================ ================ ================ ================ ================ 190,106 53,570 65,370 165,720 249,839 49,908 $11.21 to $11.38 $10.35 to $10.41 $10.58 to $10.64 $10.80 to $10.87 $11.03 to $11.09 $11.20 to $11.27
JANUS ASPEN LARGE CAP JANUS ASPEN GROWTH BALANCED INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 4,938,311 -- -- 2,186 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ------ 4,938,311 2,186 -- -- ---------- ------ 4,938,311 2,186 (4,237) -- ---------- ------ $4,934,074 $2,186 ========== ====== 563,653 187 $ 8.75 $11.68
F-11 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
AIM AIM V.I. CORE STOCK V.I. GOVERNMENT SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION ------------------- -------------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ -- $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- -- BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... -- -- MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ 229,098 -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- 8,008 AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... -- -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ -- -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- -- Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ -- -- -------- ------ Total Investments...................................................... 229,098 8,008 Cash and Accounts Receivable........................................... 1,019 247 -------- ------ Total Assets........................................................... 230,117 8,255 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ -- -- -------- ------ NET ASSETS............................................................. $230,117 $8,255 ======== ====== Outstanding Units...................................................... 21,852 769 Unit Fair Values....................................................... $ 10.53 $10.73
AIM V.I. REAL ESTATE INVESTMENT DIVISION -------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... -- MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... 1,757,368 FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ -- ---------- Total Investments...................................................... 1,757,368 Cash and Accounts Receivable........................................... -- ---------- Total Assets........................................................... 1,757,368 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ (9,549) ---------- NET ASSETS............................................................. $1,747,819 ========== Outstanding Units...................................................... 63,997 Unit Fair Values....................................................... $ 27.61
See Notes to Financial Statements. F-12
FRANKLIN TEMPLETON FRANKLIN MUTUAL ALLIANCEBERNSTEIN ALLIANCEBERNSTEIN FIDELITY VIP FIDELITY VIP FOREIGN SECURITIES DISCOVERY SECURITIES GROWTH & INCOME GLOBAL TECHNOLOGY CONTRAFUND ASSET MANAGER GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- -------------------- ------------------- ------------------- ------------------- -------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 6,452,411 -- -- -- -- -- -- 121,664 -- -- -- -- -- -- 4,114,833 -- -- -- -- -- -- 42,308 -- -- -- -- -- -- 915,518 -- -- -- -- -- -- 711,828 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- -------- ---------- ------- -------- -------- 6,452,411 121,664 4,114,833 42,308 915,518 711,828 -- -- 4,307 -- 5,596 -- ---------- -------- ---------- ------- -------- -------- 6,452,411 121,664 4,119,140 42,308 921,114 711,828 (14,331) -- -- -- -- (3,427) ---------- -------- ---------- ------- -------- -------- $6,438,080 $121,664 $4,119,140 $42,308 $921,114 $708,401 ========== ======== ========== ======= ======== ======== 488,477 9,138 338,034 8,553 74,414 80,752 $ 13.17 $ 13.31 $ 12.19 $ 4.95 $ 12.38 $ 8.79
F-13 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
FIDELITY FIDELITY VIP VIP GROWTH INVESTMENT GRADE BOND INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ -- $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- -- BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... -- -- MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ -- -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- -- AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... -- -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ 532,466 -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- 33,484 Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ -- -- -------- ------- Total Investments...................................................... 532,466 33,484 Cash and Accounts Receivable........................................... 997 -- -------- ------- Total Assets........................................................... 533,463 33,484 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ -- -- -------- ------- NET ASSETS............................................................. $533,463 $33,484 ======== ======= Outstanding Units...................................................... 77,974 3,156 Unit Fair Values....................................................... $ 6.84 $ 10.64
FIDELITY VIP EQUITY-INCOME INVESTMENT DIVISION ------------------- ASSETS: INVESTMENTS AT FAIR VALUE: METROPOLITAN FUND-(CONTINUED) Salomon Brothers Strategic Bond Opportunities Portfolio (999,112 shares; cost $12,452,591).................................... $ -- Salomon Brothers U.S. Government Portfolio (983,168 shares; cost $12,070,629).................................... -- BlackRock Money Market Portfolio (280,415 shares; cost $28,041,514).................................... -- MFS Total Return Portfolio (14,569 shares; cost $2,121,146)...................................... -- MetLife Conservative Allocation Portfolio (11,401 shares; cost $117,671)........................................ -- MetLife Conservative to Moderate Allocation Portfolio (54,577 shares; cost $569,253)........................................ -- MetLife Moderate Allocation Portfolio (133,959 shares; cost $1,423,613)..................................... -- MetLife Moderate to Aggressive Allocation Portfolio (212,616 shares; cost $2,284,839)..................................... -- MetLife Aggressive Allocation Portfolio (40,417 shares; cost $441,948)........................................ -- JANUS ASPEN SERIES FUND ("JANUS FUND") Janus Aspen Large Cap Growth Portfolio (236,736 shares; cost $4,086,107)..................................... -- Janus Aspen Balanced Portfolio (82 shares; cost $2,182).............................................. -- AIM VARIABLE INSURANCE FUNDS ("AIM FUNDS") AIM V.I. Core Stock Portfolio (12,026 shares; cost $212,657)........................................ -- AIM V. I. Government Securities Portfolio (678 shares; cost $8,145)............................................. -- AIM V.I. Real Estate Portfolio (83,446 shares; cost $1,500,371)...................................... -- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCT SERIES ("FRANKLIN FUND") Franklin Templeton Foreign Securities Portfolio (407,349 shares; cost $5,108,135)..................................... -- Franklin Mutual Discovery Securities Portfolio (6,541 shares; cost $112,900)......................................... -- ALLIANCEBERNSTEIN VARIABLE PRODUCT SERIES FUNDS, INC. ("ALLIANCE FUND") AllianceBernstein Growth & Income Portfolio (166,930 shares; cost $3,365,517)..................................... -- AllianceBernstein Global Technology Portfolio (2,707 shares; cost $36,524).......................................... -- FIDELITY VARIABLE INSURANCE PRODUCTS ("FIDELITY FUNDS") Fidelity VIP Contrafund Portfolio (29,600 shares; cost $781,528)........................................ -- Fidelity VIP Asset Manager Growth Portfolio (55,266 shares; cost $684,734)........................................ -- Fidelity VIP Growth Portfolio (15,866 shares; cost $492,836)........................................ -- Fidelity VIP Investment Grade Bond Portfolio (2,641 shares; cost $33,842).......................................... -- Fidelity VIP Equity-Income Portfolio (997 shares; cost $24,698)............................................ 25,303 ------- Total Investments...................................................... 25,303 Cash and Accounts Receivable........................................... 105 ------- Total Assets........................................................... 25,408 LIABILITIES Due to/From Metropolitan Life Insurance Company........................ -- ------- NET ASSETS............................................................. $25,408 ======= Outstanding Units...................................................... 2,190 Unit Fair Values....................................................... $ 11.66
See Notes to Financial Statements. F-14 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
AMERICAN FUNDS AMERICAN FUNDS GROWTH GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- INVESTMENTS AT FAIR VALUE: AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUND") American Funds Growth Portfolio (1,226,369 shares; cost $55,481,669).............................. $ 72,331,242 $ -- American Funds Growth-Income Portfolio (1,227,564 shares; cost $39,716,414).............................. -- 46,794,725 American Funds Global Small Capitalization Portfolio (1,194,659 shares; cost $18,848,900).............................. -- -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid-Cap Growth Portfolio (1,157,486 shares; cost $7,648,975)............................... -- -- MFS Research International Portfolio (312,610 shares; cost $3,416,775)................................. -- -- PIMCO Total Return Portfolio (2,091,721 shares; cost $24,160,829).............................. -- -- RCM Global Technology Portfolio (1,335,556 shares; cost $5,967,822)............................... -- -- Lord Abbett Bond Debenture Portfolio (1,347,841 shares; cost $15,708,780).............................. -- -- Lazard Mid-Cap Portfolio (222,290 shares; cost $2,998,345)................................. -- -- Met/AIM Small Cap Growth Portfolio (116,196 shares; cost $1,424,496)................................. -- -- Harris Oakmark International Portfolio (614,532 shares; cost $8,788,752)................................. -- -- Janus Aggressive Growth Portfolio (841,976 shares; cost $5,472,418)................................. -- -- Lord Abbett Growth and Income Portfolio (1,477 shares; cost $40,501)...................................... -- -- Neuberger Berman Real Estate Portfolio (522,625 shares; cost $6,610,076)................................. -- -- Lord Abbett Mid-Cap Value Portfolio (1,450 shares; cost $32,209)...................................... -- -- Third Avenue Small Cap Value Portfolio (1,744 shares; cost $27,058)...................................... -- -- Oppenheimer Capital Appreciation Portfolio (13,385 shares; cost $113,595).................................... -- -- AMERICAN CENTURY VARIABLE PORTFOLIO, INC. ("AMERICAN CENTURY FUND") American Century Vista Portfolio (1,006 shares; cost $13,622)...................................... -- -- DELAWARE VIP TRUST ("DELAWARE FUND") Delaware Small Cap Value Portfolio (4,226 shares; cost $127,456)..................................... -- -- DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP FUND") Dreyfus Emerging Leaders Portfolio (478 shares; cost $11,044)........................................ -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (9,388 shares; cost $150,954)..................................... -- -- Dreyfus Appreciation Portfolio (462 shares; cost $16,290)........................................ -- -- ---------------- ---------------- Total Investments.................................................. 72,331,242 46,794,725 Cash and Accounts Receivable....................................... -- -- ---------------- ---------------- Total Assets....................................................... 72,331,242 46,794,725 LIABILITIES Due to/From Metropolitan Life Insurance Company.................... -- -- ---------------- ---------------- NET ASSETS......................................................... $ 72,331,242 $ 46,794,725 ================ ================ Outstanding Units.................................................. 898,134 1,035,047 Unit Fair Values................................................... $77.72 to $81.04 $43.64 to $45.51
AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION --------------------------- INVESTMENTS AT FAIR VALUE: AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUND") American Funds Growth Portfolio (1,226,369 shares; cost $55,481,669).............................. $ -- American Funds Growth-Income Portfolio (1,227,564 shares; cost $39,716,414).............................. -- American Funds Global Small Capitalization Portfolio (1,194,659 shares; cost $18,848,900).............................. 25,231,190 MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid-Cap Growth Portfolio (1,157,486 shares; cost $7,648,975)............................... -- MFS Research International Portfolio (312,610 shares; cost $3,416,775)................................. -- PIMCO Total Return Portfolio (2,091,721 shares; cost $24,160,829).............................. -- RCM Global Technology Portfolio (1,335,556 shares; cost $5,967,822)............................... -- Lord Abbett Bond Debenture Portfolio (1,347,841 shares; cost $15,708,780).............................. -- Lazard Mid-Cap Portfolio (222,290 shares; cost $2,998,345)................................. -- Met/AIM Small Cap Growth Portfolio (116,196 shares; cost $1,424,496)................................. -- Harris Oakmark International Portfolio (614,532 shares; cost $8,788,752)................................. -- Janus Aggressive Growth Portfolio (841,976 shares; cost $5,472,418)................................. -- Lord Abbett Growth and Income Portfolio (1,477 shares; cost $40,501)...................................... -- Neuberger Berman Real Estate Portfolio (522,625 shares; cost $6,610,076)................................. -- Lord Abbett Mid-Cap Value Portfolio (1,450 shares; cost $32,209)...................................... -- Third Avenue Small Cap Value Portfolio (1,744 shares; cost $27,058)...................................... -- Oppenheimer Capital Appreciation Portfolio (13,385 shares; cost $113,595).................................... -- AMERICAN CENTURY VARIABLE PORTFOLIO, INC. ("AMERICAN CENTURY FUND") American Century Vista Portfolio (1,006 shares; cost $13,622)...................................... -- DELAWARE VIP TRUST ("DELAWARE FUND") Delaware Small Cap Value Portfolio (4,226 shares; cost $127,456)..................................... -- DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP FUND") Dreyfus Emerging Leaders Portfolio (478 shares; cost $11,044)........................................ -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (9,388 shares; cost $150,954)..................................... -- Dreyfus Appreciation Portfolio (462 shares; cost $16,290)........................................ -- ---------------- Total Investments.................................................. 25,231,190 Cash and Accounts Receivable....................................... -- ---------------- Total Assets....................................................... 25,231,190 LIABILITIES Due to/From Metropolitan Life Insurance Company.................... -- ---------------- NET ASSETS......................................................... $ 25,231,190 ================ Outstanding Units.................................................. 1,088,603 Unit Fair Values................................................... $22.41 to $23.37
See Notes to Financial Statements. F-16
T. ROWE PRICE MFS RESEARCH PIMCO RCM GLOBAL LORD ABBETT LAZARD MID-CAP GROWTH INTERNATIONAL TOTAL RETURN TECHNOLOGY BOND DEBENTURE MID-CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- 9,827,055 -- -- -- -- -- -- 4,063,925 -- -- -- -- -- -- 24,263,960 -- -- -- -- -- -- 6,824,691 -- -- -- -- -- -- 16,551,482 -- -- -- -- -- -- 3,034,264 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------- ---------------- ---------------- -------------- ---------------- ---------------- 9,827,055 4,063,925 24,263,960 6,824,691 16,551,482 3,034,264 -- -- -- -- -- -- --------------- ---------------- ---------------- -------------- ---------------- ---------------- 9,827,055 4,063,925 24,263,960 6,824,691 16,551,482 3,034,264 (9,253) (5,853) -- -- (20,273) -- --------------- ---------------- ---------------- -------------- ---------------- ---------------- $ 9,817,802 $ 4,058,072 $ 24,263,960 $ 6,824,691 $ 16,531,209 $ 3,034,264 =============== ================ ================ ============== ================ ================ 1,132,034 294,107 1,849,249 1,334,943 1,085,144 226,296 $8.37 to $13.11 $12.09 to $13.89 $12.67 to $13.21 $4.94 to $5.15 $13.96 to $16.51 $11.78 to $13.48
F-17 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
MET/AIM HARRIS OAKMARK JANUS SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- INVESTMENTS AT FAIR VALUE: AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUND") American Funds Growth Portfolio (1,226,369 shares; cost $55,481,669).............................. $ -- $ -- $ -- American Funds Growth-Income Portfolio (1,227,564 shares; cost $39,716,414).............................. -- -- -- American Funds Global Small Capitalization Portfolio (1,194,659 shares; cost $18,848,900).............................. -- -- -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid-Cap Growth Portfolio (1,157,486 shares; cost $7,648,975)............................... -- -- -- MFS Research International Portfolio (312,610 shares; cost $3,416,775)................................. -- -- -- PIMCO Total Return Portfolio (2,091,721 shares; cost $24,160,829).............................. -- -- -- RCM Global Technology Portfolio (1,335,556 shares; cost $5,967,822)............................... -- -- -- Lord Abbett Bond Debenture Portfolio (1,347,841 shares; cost $15,708,780).............................. -- -- -- Lazard Mid-Cap Portfolio (222,290 shares; cost $2,998,345)................................. -- -- -- Met/AIM Small Cap Growth Portfolio (116,196 shares; cost $1,424,496)................................. 1,587,237 -- -- Harris Oakmark International Portfolio (614,532 shares; cost $8,788,752)................................. -- 9,973,856 -- Janus Aggressive Growth Portfolio (841,976 shares; cost $5,472,418)................................. -- -- 7,322,996 Lord Abbett Growth and Income Portfolio (1,477 shares; cost $40,501)...................................... -- -- -- Neuberger Berman Real Estate Portfolio (522,625 shares; cost $6,610,076)................................. -- -- -- Lord Abbett Mid-Cap Value Portfolio (1,450 shares; cost $32,209)...................................... -- -- -- Third Avenue Small Cap Value Portfolio (1,744 shares; cost $27,058)...................................... -- -- -- Oppenheimer Capital Appreciation Portfolio (13,385 shares; cost $113,595).................................... -- -- -- AMERICAN CENTURY VARIABLE PORTFOLIO, INC. ("AMERICAN CENTURY FUND") American Century Vista Portfolio (1,006 shares; cost $13,622)...................................... -- -- -- DELAWARE VIP TRUST ("DELAWARE FUND") Delaware Small Cap Value Portfolio (4,226 shares; cost $127,456)..................................... -- -- -- DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP FUND") Dreyfus Emerging Leaders Portfolio (478 shares; cost $11,044)........................................ -- -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (9,388 shares; cost $150,954)..................................... -- -- -- Dreyfus Appreciation Portfolio (462 shares; cost $16,290)........................................ -- -- -- ---------------- ---------------- -------------- Total Investments.................................................. 1,587,237 9,973,856 7,322,996 Cash and Accounts Receivable....................................... -- -- -- ---------------- ---------------- -------------- Total Assets....................................................... 1,587,237 9,973,856 7,322,996 LIABILITIES Due to/From Metropolitan Life Insurance Company.................... -- -- -- ---------------- ---------------- -------------- NET ASSETS......................................................... $ 1,587,237 $ 9,973,856 $ 7,322,996 ================ ================ ============== Outstanding Units.................................................. 129,221 636,793 844,525 Unit Fair Values................................................... $11.71 to $12.31 $15.26 to $15.77 $7.50 to $8.74
See Notes to Financial Statements. F-18
LORD ABBETT NEUBERGER BERMAN LORD ABBETT THIRD AVENUE OPPENHEIMER AMERICAN GROWTH AND INCOME REAL ESTATE MID-CAP VALUE SMALL CAP VALUE CAPITAL APPRECIATION CENTURY VISTA INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- $ -- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 40,760 -- -- -- -- -- -- 7,394,991 -- -- -- -- -- -- 32,304 -- -- -- -- -- -- 28,860 -- -- -- -- -- -- 116,310 -- -- -- -- -- -- 14,583 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ---------------- ------- ------- ---------------- ------- 40,760 7,394,991 32,304 28,860 116,310 14,583 687 -- -- -- -- -- ------- ---------------- ------- ------- ---------------- ------- 41,447 7,394,991 32,304 28,860 116,310 14,583 -- -- -- -- -- -- ------- ---------------- ------- ------- ---------------- ------- $41,447 $ 7,394,991 $32,304 $28,860 $ 116,310 $14,583 ======= ================ ======= ======= ================ ======= 4,368 503,432 2,543 2,073 10,588 1,252 $ 9.49 $14.52 to $14.74 $ 12.71 $ 13.92 $10.95 to $11.01 $ 11.65
DELAWARE SMALL CAP VALUE INVESTMENT DIVISION ------------------- $ -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 129,996 -- -- -- -------- 129,996 9,970 -------- 139,966 -- -------- $139,966 ======== 9,876 $ 14.17
F-19 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
DREYFUS DREYFUS DREYFUS EMERGING LEADERS INTERNATIONAL VALUE APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- INVESTMENTS AT FAIR VALUE: AMERICAN FUNDS INSURANCE SERIES ("AMERICAN FUND") American Funds Growth Portfolio (1,226,369 shares; cost $55,481,669).............................. $ -- $ -- $ -- American Funds Growth-Income Portfolio (1,227,564 shares; cost $39,716,414).............................. -- -- -- American Funds Global Small Capitalization Portfolio (1,194,659 shares; cost $18,848,900).............................. -- -- -- MET INVESTORS SERIES TRUST ("MET INVESTORS FUND") T. Rowe Price Mid-Cap Growth Portfolio (1,157,486 shares; cost $7,648,975)............................... -- -- -- MFS Research International Portfolio (312,610 shares; cost $3,416,775)................................. -- -- -- PIMCO Total Return Portfolio (2,091,721 shares; cost $24,160,829).............................. -- -- -- RCM Global Technology Portfolio (1,335,556 shares; cost $5,967,822)............................... -- -- -- Lord Abbett Bond Debenture Portfolio (1,347,841 shares; cost $15,708,780).............................. -- -- -- Lazard Mid-Cap Portfolio (222,290 shares; cost $2,998,345)................................. -- -- -- Met/AIM Small Cap Growth Portfolio (116,196 shares; cost $1,424,496)................................. -- -- -- Harris Oakmark International Portfolio (614,532 shares; cost $8,788,752)................................. -- -- -- Janus Aggressive Growth Portfolio (841,976 shares; cost $5,472,418)................................. -- -- -- Lord Abbett Growth and Income Portfolio (1,477 shares; cost $40,501)...................................... -- -- -- Neuberger Berman Real Estate Portfolio (522,625 shares; cost $6,610,076)................................. -- -- -- Lord Abbett Mid-Cap Value Portfolio (1,450 shares; cost $32,209)...................................... -- -- -- Third Avenue Small Cap Value Portfolio (1,744 shares; cost $27,058)...................................... -- -- -- Oppenheimer Capital Appreciation Portfolio (13,385 shares; cost $113,595).................................... -- -- -- AMERICAN CENTURY VARIABLE PORTFOLIO, INC. ("AMERICAN CENTURY FUND") American Century Vista Portfolio (1,006 shares; cost $13,622)...................................... -- -- -- DELAWARE VIP TRUST ("DELAWARE FUND") Delaware Small Cap Value Portfolio (4,226 shares; cost $127,456)..................................... -- -- -- DREYFUS INVESTMENT PORTFOLIOS ("DREYFUS IP FUND") Dreyfus Emerging Leaders Portfolio (478 shares; cost $11,044)........................................ 10,821 -- -- DREYFUS VARIABLE INVESTMENT FUND ("DREYFUS FUND") Dreyfus International Value Portfolio (9,388 shares; cost $150,954)..................................... -- 164,014 -- Dreyfus Appreciation Portfolio (462 shares; cost $16,290)........................................ -- -- 17,045 ------- -------- ------- Total Investments.................................................. 10,821 164,014 17,045 Cash and Accounts Receivable....................................... -- 24,463 -- ------- -------- ------- Total Assets....................................................... 10,821 188,477 17,045 LIABILITIES Due to/From Metropolitan Life Insurance Company.................... -- -- -- ------- -------- ------- NET ASSETS......................................................... $10,821 $188,477 $17,045 ======= ======== ======= Outstanding Units.................................................. 916 14,559 1,591 Unit Fair Values................................................... $ 11.81 $ 12.95 $ 10.71
See Notes to Financial Statements. F-20 [THIS PAGE INTENTIONALLY LEFT BLANK] METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ASSETS AND LIABILITIES -- (CONTINUED) AT DECEMBER 31, 2005
GOLDMAN SACHS GOLDMAN SACHS MID CAP VALUE CORE SMALL CAP EQUITY INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------- GOLDMAN SACHS VARIABLE INSURANCE TRUST ("GOLDMAN SACHS FUND") Goldman Sachs Mid Cap Value Portfolio (3,088 shares; cost $48,202)................................ $47,962 $ -- Goldman Sachs CORE Small Cap Equity Portfolio (3,601 shares; cost $55,810)................................ -- 50,166 MFS VARIABLE INSURANCE TRUST ("MFS FUND") MFS High Income Portfolio (7,044 shares; cost $68,737)................................ -- -- VAN KAMPEN LIFE INVESTMENT TRUST ("VAN KAMPEN FUND") Van Kampen Government Portfolio (1,448 shares; cost $13,512)................................ -- -- WELLS FARGO VARIABLE TRUST ("WELLS FARGO FUND") Wells Fargo Advantage Total Return Bond Portfolio (1,745 shares; cost $17,183)................................ -- -- Wells Fargo Advantage Large Company Growth Portfolio (908 shares; cost $7,697)................................... -- -- Wells Fargo Advantage Equity Income Portfolio (488 shares; cost $7,977)................................... -- -- ------- ------- Total Investments............................................ 47,962 50,166 Cash and Accounts Receivable................................. -- -- ------- ------- Total Assets................................................. 47,962 50,166 LIABILITIES Due to/From Metropolitan Life Insurance Company.............. (1,316) -- ------- ------- NET ASSETS................................................... $46,646 $50,166 ======= ======= Outstanding Units............................................ 3,769 4,239 Unit Fair Values............................................. $ 12.38 $ 11.83
See Notes to Financial Statements. F-22
MFS VAN KAMPEN WELLS FARGO WELLS FARGO WELLS FARGO HIGH INCOME GOVERNMENT ADVANTAGE TOTAL RETURN BOND ADVANTAGE LARGE COMPANY GROWTH ADVANTAGE EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------------- ------------------------------ ----------------------- $ -- $ -- $ -- $ -- $ -- -- -- -- -- -- 69,027 -- -- -- -- -- 13,636 -- -- -- -- -- 17,199 -- -- -- -- -- 8,511 -- -- -- -- -- 8,282 ------- ------- ------- ------ ------ 69,027 13,636 17,199 8,511 8,282 -- -- -- -- -- ------- ------- ------- ------ ------ 69,027 13,636 17,199 8,511 8,282 -- -- -- -- -- ------- ------- ------- ------ ------ $69,027 $13,636 $17,199 $8,511 $8,282 ======= ======= ======= ====== ====== 6,238 1,272 1,620 772 727 $ 11.07 $ 10.72 $ 10.62 $11.02 $11.38
F-23 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS
BLACKROCK INVESTMENT TRUST INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 4,375,931 $ 2,717,041 $ 2,669,960 Expenses: Mortality and expense charges................................ 3,470,220 3,262,909 2,738,164 ----------- ----------- ----------- Net investment income (loss)................................... 905,711 (545,868) (68,204) ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 834,521 (689,999) (6,958,914) Change in unrealized appreciation (depreciation) of investments 8,704,485 37,215,298 88,855,777 ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments...... 9,539,006 36,525,299 81,896,863 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $10,444,717 $35,979,431 $81,828,659 =========== =========== ===========
See Notes to Financial Statements. F-24
BLACKROCK DIVERSIFIED BLACKROCK AGGRESSIVE GROWTH METLIFE STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $4,998,633 $ 5,543,155 $ 9,831,564 $ -- $ -- $ -- $ 8,971,609 $ 4,172,573 $ 6,468,236 2,728,213 2,975,584 2,320,042 1,824,382 1,651,256 1,367,678 4,641,173 3,998,379 3,080,678 ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ 2,270,420 2,567,571 7,511,522 (1,824,382) (1,651,256) (1,367,678) 4,330,436 174,194 3,387,558 ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ 655,141 (558,940) (2,593,687) (2,231,885) (3,443,419) (8,202,841) 3,573,660 (2,432,174) (10,060,006) 3,822,631 19,749,208 42,182,763 23,892,825 27,472,766 62,199,697 14,173,789 49,514,290 101,361,307 ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ 4,477,772 19,190,268 39,589,076 21,660,940 24,029,347 53,996,856 17,747,449 47,082,116 91,301,301 ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ $6,748,192 $21,757,839 $47,100,598 $19,836,558 $22,378,091 $52,629,178 $22,077,885 $47,256,310 $ 94,688,859 ========== =========== =========== =========== =========== =========== =========== =========== ============
F-25 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
FI INTERNATIONAL STOCK INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 317,306 $ 606,588 $ 249,748 Expenses: Mortality and expense charges................................ 427,240 370,691 304,442 ---------- ---------- ----------- Net investment income (loss)................................... (109,934) 235,897 (54,694) ---------- ---------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 237,027 (367,092) (1,630,864) Change in unrealized appreciation (depreciation) of investments 8,151,109 7,284,341 10,924,390 ---------- ---------- ----------- Net realized and unrealized gains (losses) on investments...... 8,388,136 6,917,249 9,293,526 ---------- ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $8,278,202 $7,153,146 $ 9,238,832 ========== ========== ===========
See Notes to Financial Statements. F-26
FI MID CAP OPPORTUNITIES T. ROWE PRICE SMALL CAP GROWTH OPPENHEIMER GLOBAL EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ -- $ 1,090,068 $ -- $ -- $ -- $ -- $ 209,625 $ 478,904 $ 501,419 2,011,441 1,721,436 1,297,757 595,465 530,571 408,933 299,169 246,310 189,917 ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- (2,011,441) (631,368) (1,297,757) (595,465) (530,571) (408,933) (89,544) 232,594 311,502 ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- (1,015,121) (717,628) (1,145,184) 37,997 (69,548) (326,259) 270,279 (301,695) (1,005,776) 17,191,699 33,098,684 46,019,342 7,936,747 7,181,746 18,001,752 5,277,659 4,666,310 7,242,152 ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- 16,176,578 32,381,056 44,874,158 7,974,744 7,112,198 17,675,493 5,547,938 4,364,615 6,236,376 ----------- ----------- ----------- ---------- ---------- ----------- ---------- ---------- ----------- $14,165,137 $31,749,688 $43,576,401 $7,379,279 $6,581,627 $17,266,560 $5,458,394 $4,597,209 $ 6,547,878 =========== =========== =========== ========== ========== =========== ========== ========== ===========
F-27 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
HARRIS OAKMARK LARGE CAP VALUE INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 367,539 $ 216,340 $ -- Expenses: Mortality and expense charges................................ 429,104 366,329 252,368 ----------- ---------- ---------- Net investment income (loss)................................... (61,565) (149,989) (252,368) ----------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 398,007 613,781 38,696 Change in unrealized appreciation (depreciation) of investments (1,475,339) 4,130,792 6,986,213 ----------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... (1,077,332) 4,744,573 7,024,909 ----------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(1,138,897) $4,594,584 $6,772,541 =========== ========== ==========
See Notes to Financial Statements. F-28
NEUBERGER BERMAN MID CAP VALUE T. ROWE PRICE LARGE CAP GROWTH LEHMAN BROTHERS AGGREGATE BOND INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $4,678,085 $1,060,839 $ 78,805 $ 211,319 $ 72,281 $ 30,610 $ 2,790,273 $1,838,871 $ 2,863,939 468,169 312,426 197,793 316,838 289,243 210,672 528,874 414,705 357,739 ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------- 4,209,916 748,413 (118,988) (105,519) (216,962) (180,062) 2,261,399 1,424,166 2,506,200 ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------- 557,751 490,187 28,084 161,433 994,314 (489,389) 113,726 451,466 1,152,171 1,374,494 6,555,902 7,656,793 2,205,530 2,677,244 7,871,800 (1,403,001) 266,268 (2,185,014) ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------- 1,932,245 7,046,089 7,684,877 2,366,963 3,671,558 7,382,411 (1,289,275) 717,734 (1,032,843) ---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- ----------- $6,142,161 $7,794,502 $7,565,889 $2,261,444 $3,454,596 $7,202,349 $ 972,124 $2,141,900 $ 1,473,357 ========== ========== ========== ========== ========== ========== =========== ========== ===========
F-29 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
MORGAN STANLEY EAFE INDEX INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 597,805 $ 202,506 $ 280,223 Expenses: Mortality and expense charges................................ 312,106 230,962 158,241 ---------- ---------- ---------- Net investment income (loss)................................... 285,699 (28,456) 121,982 ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 590,734 1,189,725 (497,564) Change in unrealized appreciation (depreciation) of investments 3,753,078 3,997,066 6,516,826 ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... 4,343,812 5,186,791 6,019,262 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $4,629,511 $5,158,335 $6,141,244 ========== ========== ==========
See Notes to Financial Statements. F-30
RUSSELL 2000 INDEX MET/PUTNAM VOYAGER JENNISON GROWTH 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 PERIOD ENDED ENDED ENDED JANUARY 1, 2005 ENDED ENDED MAY 1, 2005 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, TO APRIL 30 DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 ------------ ------------ ------------ --------------- ------------ ------------ ------------------- $1,731,843 $ 141,315 $ 134,309 $ 50,596 $ 10,121 $ -- $ -- 320,327 255,946 163,522 28,757 79,068 58,697 67,101 ---------- ---------- ---------- --------- -------- ---------- ---------- 1,411,516 (114,631) (29,213) 21,839 (68,947) (58,697) (67,101) ---------- ---------- ---------- --------- -------- ---------- ---------- 811,342 973,061 (125,595) (11,582) (75,290) (624,452) 36,398 (613,275) 4,412,786 7,938,110 (845,475) 560,180 2,271,140 2,206,440 ---------- ---------- ---------- --------- -------- ---------- ---------- 198,067 5,385,847 7,812,515 (857,057) 484,890 1,646,688 2,242,838 ---------- ---------- ---------- --------- -------- ---------- ---------- $1,609,583 $5,271,216 $7,783,302 $(835,218) $415,943 $1,587,991 $2,175,737 ========== ========== ========== ========= ======== ========== ==========
F-31 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 5,489,850 $ -- $ -- Expenses: Mortality and expense charges................................ 714,689 563,943 336,756 ----------- ----------- ----------- Net investment income (loss)................................... 4,775,161 (563,943) (336,756) ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 647,742 827,418 196,537 Change in unrealized appreciation (depreciation) of investments (2,502,234) 9,427,091 17,391,943 ----------- ----------- ----------- Net realized and unrealized gains (losses) on investments...... (1,854,492) 10,254,509 17,588,480 ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,920,669 $ 9,690,566 $17,251,724 =========== =========== ===========
See Notes to Financial Statements. F-32
METLIFE MID CAP STOCK INDEX FRANKLIN TEMPLETON SMALL CAP GROWTH BLACKROCK LARGE 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 PERIOD ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $2,314,657 $ 237,989 $ 100,611 $154,763 $ -- $ -- $ 76,977 $ -- $ 8,880 340,784 259,163 164,774 39,601 31,464 16,641 34,801 18,736 4,290 ---------- ---------- ---------- -------- -------- -------- -------- -------- -------- 1,973,873 (21,174) (64,163) 115,162 (31,464) (16,641) 42,176 (18,736) 4,590 ---------- ---------- ---------- -------- -------- -------- -------- -------- -------- 682,809 992,035 12,063 129,715 40,690 (19,016) 81,656 105,597 41,938 1,900,535 3,817,899 6,538,587 (56,267) 404,946 796,643 110,740 229,787 156,144 ---------- ---------- ---------- -------- -------- -------- -------- -------- -------- 2,583,344 4,809,934 6,550,650 73,448 445,636 777,627 192,396 335,384 198,082 ---------- ---------- ---------- -------- -------- -------- -------- -------- -------- $4,557,217 $4,788,760 $6,486,487 $188,610 $414,172 $760,986 $234,572 $316,648 $202,672 ========== ========== ========== ======== ======== ======== ======== ======== ========
F-33 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
DAVIS VENTURE VALUE INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 244,019 $ 151,001 $ 69,175 Expenses: Mortality and expense charges................................ 290,656 210,672 144,858 ---------- ---------- ---------- Net investment income (loss)................................... (46,637) (59,671) (75,683) ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 226,016 508,082 (213,900) Change in unrealized appreciation (depreciation) of investments 3,304,528 2,678,225 5,610,390 ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... 3,530,544 3,186,307 5,396,490 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,483,907 $3,126,636 $5,320,807 ========== ========== ==========
See Notes to Financial Statements. F-34
LOOMIS SAYLES SMALL CAP BLACKROCK LEGACY LARGE CAP GROWTH MFS INVESTORS TRUST 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 83,073 $ -- $ -- $ 32,623 $ -- $ 2,523 $ 15,998 $ 9,640 $ 2,817 60,646 44,015 28,298 43,887 30,183 26,251 36,252 23,709 10,528 -------- -------- ---------- -------- -------- ---------- -------- -------- -------- 22,427 (44,015) (28,298) (11,264) (30,183) (23,728) (20,254) (14,069) (7,711) -------- -------- ---------- -------- -------- ---------- -------- -------- -------- 74,135 142,373 (88,636) 84,949 117,304 (63,998) 75,511 10,690 13,432 365,753 718,393 1,169,772 498,307 394,196 1,339,908 189,614 322,040 221,187 -------- -------- ---------- -------- -------- ---------- -------- -------- -------- 439,888 860,766 1,081,136 583,256 511,500 1,275,910 265,125 332,730 234,619 -------- -------- ---------- -------- -------- ---------- -------- -------- -------- $462,315 $816,751 $1,052,838 $571,992 $481,317 $1,252,182 $244,871 $318,661 $226,908 ======== ======== ========== ======== ======== ========== ======== ======== ========
F-35 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
BLACKROCK BOND INCOME INVESTMENT DIVISION -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 4,654,397 $ 5,389,446 $2,907,624 Expenses: Mortality and expense charges................................ 716,223 702,302 724,135 ----------- ----------- ---------- Net investment income (loss)................................... 3,938,174 4,687,144 2,183,489 ----------- ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 98,977 1,244,325 880,712 Change in unrealized appreciation (depreciation) of investments (2,577,646) (2,928,093) 1,572,001 ----------- ----------- ---------- Net realized and unrealized gains (losses) on investments...... (2,478,669) (1,683,768) 2,452,713 ----------- ----------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,459,505 $ 3,003,376 $4,636,202 =========== =========== ==========
See Notes to Financial Statements. F-36
FI VALUE LEADERS HARRIS OAKMARK FOCUSED VALUE SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- --------------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ -------------- $ 23,066 $ 9,363 $ 1,560 $ 450,345 $ 318,400 $ 24,204 $ 521,127 $185,168 $ 62,248 19,333 6,936 2,368 369,999 261,670 151,516 90,184 55,535 29,146 -------- -------- ------- ---------- ---------- ---------- --------- -------- -------- 3,733 2,427 (808) 80,346 56,730 (127,312) 430,943 129,633 33,102 -------- -------- ------- ---------- ---------- ---------- --------- -------- -------- 80,493 13,334 24,426 647,285 205,940 31,214 55,156 74,022 97,650 177,601 106,438 58,141 3,071,366 2,796,718 5,537,632 (261,648) 217,644 233,146 -------- -------- ------- ---------- ---------- ---------- --------- -------- -------- 258,094 119,772 82,567 3,718,651 3,002,658 5,568,846 (206,492) 291,666 330,796 -------- -------- ------- ---------- ---------- ---------- --------- -------- -------- $261,827 $122,199 $81,759 $3,798,997 $3,059,388 $5,441,534 $ 224,451 $421,299 $363,898 ======== ======== ======= ========== ========== ========== ========= ======== ========
F-37 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
SALOMON BROTHERS U.S. GOVERNMENT INVESTMENT DIVISION --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED MAY 1, 2002 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ -------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 338,463 $187,882 $ 91,740 Expenses: Mortality and expense charges................................ 88,576 66,814 49,123 --------- -------- -------- Net investment income (loss)................................... 249,887 121,068 42,617 --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... (2,681) 1,624 48,098 Change in unrealized appreciation (depreciation) of investments (152,454) 55,424 (40,677) --------- -------- -------- Net realized and unrealized gains (losses) on investments...... (155,135) 57,048 7,421 --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 94,752 $178,116 $ 50,038 ========= ======== ========
See Notes to Financial Statements. F-38
BLACKROCK MONEY MARKET MFS TOTAL RETURN METLIFE CONSERVATIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- -------------------------- ------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE PERIOD ENDED ENDED ENDED ENDED MAY 3, 2004 TO MAY 1, 2005 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2005 ------------ ------------ ------------ ------------ -------------- ------------------------------- $795,483 $291,356 $226,302 $39,188 $ -- $471 167,153 179,180 179,158 13,447 1,443 348 -------- -------- -------- ------- ------- ---- 628,330 112,176 47,144 25,741 (1,443) 123 -------- -------- -------- ------- ------- ---- -- -- (1) 18,142 429 271 -- -- 1 (3,131) 39,191 554 -------- -------- -------- ------- ------- ---- -- -- -- 15,011 39,620 825 -------- -------- -------- ------- ------- ---- $628,330 $112,176 $ 47,144 $40,752 $38,177 $948 ======== ======== ======== ======= ======= ====
F-39 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
METLIFE CONSERVATIVE TO METLIFE MODERATE ALLOCATION MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- FOR THE PERIOD FOR THE PERIOD MAY 1, 2005 TO MAY 1, 2005 TO DECEMBER 31, DECEMBER 31, 2005 2005 ------------------- ------------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 2,332 $ 6,120 Expenses: Mortality and expense charges................................ 1,984 3,787 ------- ------- Net investment income (loss)................................... 348 2,333 ------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 1,644 3,556 Change in unrealized appreciation (depreciation) of investments 9,258 25,822 ------- ------- Net realized and unrealized gains (losses) on investments...... 10,902 29,378 ------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $11,250 $31,711 ======= =======
See Notes to Financial Statements. F-40
METLIFE MODERATE TO AGGRESSIVE METLIFE ALLOCATION AGGRESSIVE ALLOCATION JANUS ASPEN LARGE CAP GROWTH JANUS ASPEN BALANCED INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- --------------------- ------------------------------------- --------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD MAY 1, 2005 TO MAY 1, 2005 TO ENDED ENDED ENDED ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2005 2005 2004 2003 2005 2004 ---------------------- --------------------- ------------ ------------ ------------ ------------ -------------- $ 9,222 $ 2,884 $ 15,028 $ 5,939 $ 2,873 $25 $ 4 6,087 1,181 21,214 17,727 13,156 1 -- ------- ------- -------- --------- ---------- --- --- 3,135 1,703 (6,186) (11,788) (10,283) 24 4 ------- ------- -------- --------- ---------- --- --- 4,752 1,894 (62,709) (193,886) (263,013) 1 -- 64,564 10,725 263,241 407,058 1,041,007 1 4 ------- ------- -------- --------- ---------- --- --- 69,316 12,619 200,532 213,172 777,994 2 4 ------- ------- -------- --------- ---------- --- --- $72,451 $14,322 $194,346 $ 201,384 $ 767,711 $26 $ 8 ======= ======= ======== ========= ========== === ===
F-41 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
AIM V.I. CORE STOCK INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 982 $2,041 $ 1,951 Expenses: Mortality and expense charges................................ 1,116 951 662 ------ ------ ------- Net investment income (loss)................................... (134) 1,090 1,289 ------ ------ ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 5,489 (458) (4,599) Change in unrealized appreciation (depreciation) of investments 3,571 9,085 30,971 ------ ------ ------- Net realized and unrealized gains (losses) on investments...... 9,060 8,627 26,372 ------ ------ ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $8,926 $9,717 $27,661 ====== ====== =======
See Notes to Financial Statements. F-42
AIM V.I. GOVERNMENT SECURITIES AIM V.I. REAL ESTATE FRANKLIN TEMPLETON FOREIGN SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- -------------------------------------- ------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED MAY 3, 2004 ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2003 2005 2004 2003 ------------ --------------- ------------ ------------ ------------ ------------ ------------ ------------ $ 239 $ 30 $ 82,883 $ 29,870 $ 2,672 $ 71,641 $ 52,419 $ 50,493 46 1 6,839 4,827 946 26,380 22,112 16,047 ----- ---- -------- -------- ------- -------- -------- -------- 193 29 76,044 25,043 1,726 45,261 30,307 34,446 ----- ---- -------- -------- ------- -------- -------- -------- 107 (2) 148,313 54,384 7,645 259,867 153,352 (71,786) (117) (20) 7,005 204,103 41,591 264,624 613,265 947,139 ----- ---- -------- -------- ------- -------- -------- -------- (10) (22) 155,318 258,487 49,236 524,491 766,617 875,353 ----- ---- -------- -------- ------- -------- -------- -------- $ 183 $ 7 $231,362 $283,530 $50,962 $569,752 $796,924 $909,799 ===== ==== ======== ======== ======= ======== ======== ========
F-43 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
FRANKLIN MUTUAL DISCOVERY SECURITIES INVESTMENT DIVISION ------------------------------------ FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2005 2004 ------------ -------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 814 $-- Expenses: Mortality and expense charges................................ 268 -- ------ --- Net investment income (loss)................................... 546 -- ------ --- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 132 -- Change in unrealized appreciation (depreciation) of investments 8,764 -- ------ --- Net realized and unrealized gains (losses) on investments...... 8,896 -- ------ --- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $9,442 $-- ====== ===
See Notes to Financial Statements. F-44
ALLIANCEBERNSTEIN GROWTH AND INCOME ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY FIDELITY VIP 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 39,765 $ 14,971 $ 11,419 $ -- $ -- $ -- $ 1,981 $ 1,770 $ 830 16,636 11,504 7,030 135 77 181 3,729 3,453 3,285 -------- -------- -------- ------ ------ ------- -------- -------- -------- 23,129 3,467 4,389 (135) (77) (181) (1,748) (1,683) (2,455) -------- -------- -------- ------ ------ ------- -------- -------- -------- 19,259 8,499 (27,592) 255 108 (931) 170,001 62,282 6,303 116,879 301,218 441,306 1,638 2,247 13,613 (22,158) 45,971 139,867 -------- -------- -------- ------ ------ ------- -------- -------- -------- 136,138 309,717 413,714 1,893 2,355 12,682 147,843 108,253 146,170 -------- -------- -------- ------ ------ ------- -------- -------- -------- $159,267 $313,184 $418,103 $1,758 $2,278 $12,501 $146,095 $106,570 $143,715 ======== ======== ======== ====== ====== ======= ======== ======== ========
F-45 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
FIDELITY VIP ASSET MANAGER GROWTH INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 18,249 $12,700 $ 8,346 Expenses: Mortality and expense charges................................ 3,454 3,079 1,598 -------- ------- ------- Net investment income (loss)................................... 14,795 9,621 6,748 -------- ------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 38,662 3,245 (4,335) Change in unrealized appreciation (depreciation) of investments (29,733) 19,246 59,143 -------- ------- ------- Net realized and unrealized gains (losses) on investments...... 8,929 22,491 54,808 -------- ------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,724 $32,112 $61,556 ======== ======= =======
See Notes to Financial Statements. F-46
FIDELITY VIP GROWTH FIDELITY VIP INVESTMENT GRADE FIDELITY VIP EQUITY-INCOME INVESTMENT DIVISION BOND INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ---------------------------- -------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2005 2004 ------------ ------------ ------------ ------------ -------------- ------------ -------------- $1,319. $ 354 $ 174 $ 883 $-- $ 618 $-- 2,353.. 1,484 1,005 80 4 259 5 -------- ------- ------- ----- --- ------- --- (1,034)... (1,130) (831) 803 (4) 359 (5) -------- ------- ------- ----- --- ------- --- 26,347.... (5,015) (2,588) (59) 8 (5,940) -- 3,218..... 17,311 63,146 (370) 12 605 -- -------- ------- ------- ----- --- ------- --- 29,565.... 12,296 60,558 (429) 20 (5,335) -- -------- ------- ------- ----- --- ------- --- $ 28,531 $11,166 $59,727 $ 374 $16 $(4,976) $(5) ======== ======= ======= ===== === ======= ===
F-47 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
AMERICAN FUNDS GROWTH INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 437,807 $ 70,060 $ 22,917 Expenses: Mortality and expense charges................................ 489,519 294,065 141,220 ---------- ---------- ---------- Net investment income (loss)................................... (51,712) (224,005) (118,303) ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 115,149 53,047 (100,817) Change in unrealized appreciation (depreciation) of investments 8,793,861 4,445,539 5,264,250 ---------- ---------- ---------- Net realized and unrealized gains (losses) on investments...... 8,909,010 4,498,586 5,163,433 ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $8,857,298 $4,274,581 $5,045,130 ========== ========== ==========
See Notes to Financial Statements. F-48
AMERICAN FUNDS GROWTH-INCOME AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION T. ROWE PRICE MID-CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ----------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 750,695 $ 276,574 $ 170,202 $ 167,221 $ -- $ 19,214 $ 206,008 $ -- $ -- 343,213 227,511 112,608 151,245 73,946 27,847 62,726 35,600 17,818 ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- 407,482 49,063 57,594 15,976 (73,946) (8,633) 143,282 (35,600) (17,818) ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- 116,683 60,134 (26,406) 669,665 169,126 (33,362) 102,486 (21,255) (46,026) 1,688,136 2,605,294 3,852,340 3,507,811 1,710,690 1,513,502 895,073 874,468 776,010 ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- 1,804,819 2,665,428 3,825,934 4,177,476 1,879,816 1,480,140 997,559 853,213 729,984 ---------- ---------- ---------- ---------- ---------- ---------- ---------- -------- -------- $2,212,301 $2,714,491 $3,883,528 $4,193,452 $1,805,870 $1,471,507 $1,140,841 $817,613 $712,166 ========== ========== ========== ========== ========== ========== ========== ======== ========
F-49 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $206,092 $ 5,870 $ 10,739 Expenses: Mortality and expense charges................................ 27,070 17,381 7,953 -------- -------- -------- Net investment income (loss)................................... 179,022 (11,511) 2,786 -------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 80,066 226,740 148,987 Change in unrealized appreciation (depreciation) of investments 280,569 176,752 191,049 -------- -------- -------- Net realized and unrealized gains (losses) on investments...... 360,635 403,492 340,036 -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $539,657 $391,981 $342,822 ======== ======== ========
See Notes to Financial Statements. F-50
PIMCO TOTAL RETURN RCM GLOBAL TECHNOLOGY LORD ABBETT BOND DEBENTURE 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $167,134 $1,210,628 $255,223 $ 46,291 $ 4,399 $ -- $ 744,214 $ 580,234 $ 237,030 180,282 130,372 79,517 50,588 45,242 21,608 121,860 106,961 84,212 -------- ---------- -------- -------- --------- ---------- --------- ---------- ---------- (13,148) 1,080,256 175,706 (4,297) (40,843) (21,608) 622,354 473,273 152,818 -------- ---------- -------- -------- --------- ---------- --------- ---------- ---------- 52,949 58,068 175,963 194,566 (35,847) (195,867) 255,890 291,351 193,651 311,680 (439,697) (25,434) 445,709 (200,859) 1,260,206 (722,955) 258,228 1,482,057 -------- ---------- -------- -------- --------- ---------- --------- ---------- ---------- 364,629 (381,629) 150,529 640,275 (236,706) 1,064,339 (467,065) 549,579 1,675,708 -------- ---------- -------- -------- --------- ---------- --------- ---------- ---------- $351,481 $ 698,627 $326,235 $635,978 $(277,549) $1,042,731 $ 155,289 $1,022,852 $1,828,526 ======== ========== ======== ======== ========= ========== ========= ========== ==========
F-51 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
LAZARD MID-CAP INVESTMENT DIVISION -------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 331,252 $ -- $ 8,411 Expenses: Mortality and expense charges................................ 22,544 12,732 4,773 --------- -------- -------- Net investment income (loss)................................... 308,708 (12,732) 3,638 --------- -------- -------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 96,120 127,885 6,414 Change in unrealized appreciation (depreciation) of investments (198,731) 100,268 140,733 --------- -------- -------- Net realized and unrealized gains (losses) on investments...... (102,611) 228,153 147,147 --------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 206,097 $215,421 $150,785 ========= ======== ========
See Notes to Financial Statements. F-52
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 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 32,434 $ -- $ -- $127,202 $ 1,007 $ 8,848 $ 7,588 $ -- $ -- 11,067 7,126 2,947 55,708 15,179 2,473 52,753 40,203 25,914 -------- ------- -------- -------- -------- -------- -------- -------- ---------- 21,367 (7,126) (2,947) 71,494 (14,172) 6,375 (45,165) (40,203) (25,914) -------- ------- -------- -------- -------- -------- -------- -------- ---------- 35,790 6,508 66,977 131,605 87,469 72,432 89,582 40,466 (314,628) 47,188 68,634 51,242 724,928 413,695 49,401 756,884 408,503 1,135,120 -------- ------- -------- -------- -------- -------- -------- -------- ---------- 82,978 75,142 118,219 856,533 501,164 121,833 846,466 448,969 820,492 -------- ------- -------- -------- -------- -------- -------- -------- ---------- $104,345 $68,016 $115,272 $928,027 $486,992 $128,208 $801,301 $408,766 $ 794,578 ======== ======= ======== ======== ======== ======== ======== ======== ==========
F-53 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
LORD ABBETT GROWTH AND INCOME INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ 1,239 $ 206 $ -- Expenses: Mortality and expense charges................................ 199 183 47 ------- ------ ------ Net investment income (loss)................................... 1,040 23 (47) ------- ------ ------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 5,959 37 20 Change in unrealized appreciation (depreciation) of investments (6,587) 3,095 3,750 ------- ------ ------ Net realized and unrealized gains (losses) on investments...... (628) 3,132 3,770 ------- ------ ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 412 $3,155 $3,723 ======= ====== ======
See Notes to Financial Statements. F-54
NEUBERGER BERMAN REAL ESTATE LORD ABBETT MID-CAP VALUE THIRD AVENUE SMALL CAP VALUE OPPENHEIMER CAPITAL APPRECIATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- -------------------------- -------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO MAY 1, 2005 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 2005 ------------ -------------- ------------ -------------- ------------ -------------- -------------------------------- $ 8,770 $ 73,660 $1,297 $ 6 $ 77 $ 95 $1,176 40,104 3,379 87 -- 51 1 275 -------- -------- ------ --- ------ ---- ------ (31,334) 70,281 1,210 6 26 94 901 -------- -------- ------ --- ------ ---- ------ 77,734 5,929 22 -- 111 21 442 660,111 124,804 85 10 1,856 (54) 2,715 -------- -------- ------ --- ------ ---- ------ 737,845 130,733 107 10 1,967 (33) 3,157 -------- -------- ------ --- ------ ---- ------ $706,511 $201,014 $1,317 $16 $1,993 $ 61 $4,058 ======== ======== ====== === ====== ==== ======
F-55 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
AMERICAN CENTURY VISTA INVESTMENT DIVISION --------------------------- FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2005 2004 ------------ -------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ -- $-- Expenses: Mortality and expense charges................................ 47 -- ---- --- Net investment income (loss)................................... (47) -- ---- --- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 6 -- Change in unrealized appreciation (depreciation) of investments 961 -- ---- --- Net realized and unrealized gains (losses) on investments...... 967 -- ---- --- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $920 $-- ==== ===
See Notes to Financial Statements. F-56
DELAWARE SMALL CAP VALUE DREYFUS EMERGING LEADERS DREYFUS INTERNATIONAL VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- -------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ------------ -------------- ------------ -------------- ------------ -------------- $ 8,364 $-- $ 562 $-- $ 3,710 $1,264 539 -- 47 -- 850 4 ------- --- ------ --- ------- ------ 7,825 -- 515 -- 2,860 1,260 ------- --- ------ --- ------- ------ 45 -- 251 -- (8,588) 47 2,540 -- 711 -- 13,060 (934) ------- --- ------ --- ------- ------ 2,585 -- 962 -- 4,472 (887) ------- --- ------ --- ------- ------ $10,410 $-- $1,477 $-- $ 7,332 $ 373 ======= === ====== === ======= ======
F-57 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
DREYFUS APPRECIATION INVESTMENT DIVISION --------------------------- FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2005 2004 ------------ -------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ -- $ 48 Expenses: Mortality and expense charges................................ 59 3 ---- ---- Net investment income (loss)................................... (59) 45 ---- ---- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... 114 -- Change in unrealized appreciation (depreciation) of investments 538 217 ---- ---- Net realized and unrealized gains (losses) on investments...... 652 217 ---- ---- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $593 $262 ==== ====
See Notes to Financial Statements. F-58
GOLDMAN SACHS GOLDMAN SACHS MFS MID CAP VALUE CORE SMALL CAP EQUITY HIGH INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- --------------------------- -------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ------------ -------------- ------------ -------------- ------------ -------------- $ 4,740 $1,224 $ 4,331 $-- $ 3,911 $ -- 222 6 20 -- 279 87 ------- ------ ------- --- ------- ------ 4,518 1,218 4,311 -- 3,632 (87) ------- ------ ------- --- ------- ------ (3,479) 1 1 -- 128 69 223 (464) (5,644) -- (2,862) 3,152 ------- ------ ------- --- ------- ------ (3,256) (463) (5,643) -- (2,734) 3,221 ------- ------ ------- --- ------- ------ $ 1,262 $ 755 $(1,332) $-- $ 898 $3,134 ======= ====== ======= === ======= ======
F-59 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED)
VAN KAMPEN GOVERNMENT INVESTMENT DIVISION --------------------------- FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2005 2004 ------------ -------------- INVESTMENT INCOME (LOSS) : Income: Dividends.................................................... $ -- $-- Expenses: Mortality and expense charges................................ 12 -- ---- --- Net investment income (loss)................................... (12) -- ---- --- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Net realized gains (losses) from security transactions......... (1) -- Change in unrealized appreciation (depreciation) of investments 124 -- ---- --- Net realized and unrealized gains (losses) on investments...... 123 -- ---- --- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $111 $-- ==== ===
See Notes to Financial Statements. F-60
WELLS FARGO ADVANTAGE TOTAL RETURN WELLS FARGO ADVANTAGE LARGE WELLS FARGO ADVANTAGE EQUITY INCOME BOND INVESTMENT DIVISION COMPANY GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------- --------------------------------- ---------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ------------ -------------- ------------ -------------- ------------ -------------- $263 $-- $ 15 $-- $113 $-- 33 -- 31 1 31 1 ---- --- ---- --- ---- --- 230 -- (16) (1) 82 (1) ---- --- ---- --- ---- --- 238 -- (5) 6 25 10 16 -- 797 16 301 3 ---- --- ---- --- ---- --- 254 -- 792 22 326 13 ---- --- ---- --- ---- --- $484 $-- $776 $21 $408 $12 ==== === ==== === ==== ===
F-61 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS
BLACKROCK INVESTMENT TRUST BLACKROCK 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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).......... $ 905,711 $ (545,868) $ (68,204) $ 2,270,420 $ 2,567,571 $ 7,511,522 Net realized gains (losses) from security transactions................ 834,521 (689,999) (6,958,914) 655,141 (558,940) (2,593,687) Change in unrealized appreciation (depreciation) of investments........ 8,704,485 37,215,298 88,855,777 3,822,631 19,749,208 42,182,763 ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations............ 10,444,717 35,979,431 81,828,659 6,748,192 21,757,839 47,100,598 ------------ ------------ ------------ ------------ ------------ ------------ From capital transactions: Net premiums.......................... 57,155,216 62,785,148 67,707,999 48,752,996 50,420,345 52,190,961 Redemptions........................... (19,141,006) (18,448,900) (15,137,546) (14,471,745) (13,235,955) (14,264,879) Net investment division transfers..... (10,123,918) (11,723,921) (7,863,696) (4,525,462) (1,916,785) (2,178,352) Other net transfers................... (36,594,242) (35,862,546) (36,428,084) (31,930,287) (30,882,102) (31,835,294) ------------ ------------ ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from capital transactions.. (8,703,950) (3,250,219) 8,278,673 (2,174,498) 4,385,503 3,912,436 ------------ ------------ ------------ ------------ ------------ ------------ NET CHANGE IN NET ASSETS................ 1,740,767 32,729,212 90,107,332 4,573,694 26,143,342 51,013,034 NET ASSETS - BEGINNING OF PERIOD................................. 399,816,513 367,087,301 276,979,969 315,176,729 289,033,387 238,020,353 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS - END OF PERIOD.............. $401,557,280 $399,816,513 $367,087,301 $319,750,423 $315,176,729 $289,033,387 ============ ============ ============ ============ ============ ============
See Notes to Financial Statements. F-62
BLACKROCK 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (1,824,382) $ (1,651,256) $ (1,367,678) $ 4,330,436 $ 174,194 $ 3,387,558 $ (109,934) $ 235,897 $ (54,694) (2,231,885) (3,443,419) (8,202,841) 3,573,660 (2,432,174) (10,060,006) 237,027 (367,092) (1,630,864) 23,892,825 27,472,766 62,199,697 14,173,789 49,514,290 101,361,307 8,151,109 7,284,341 10,924,390 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 19,836,558 22,378,091 52,629,178 22,077,885 47,256,310 94,688,859 8,278,202 7,153,146 9,238,832 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 29,002,147 31,507,761 34,182,901 113,017,163 111,296,549 108,236,751 7,207,636 7,277,661 7,903,805 (10,279,695) (10,380,355) (7,318,523) (21,367,099) (21,662,848) (14,265,812) (2,380,519) (2,707,112) (1,780,012) (6,037,385) (5,174,527) (5,104,646) (5,222,960) 2,484,658 (11,228,029) (102,719) (3,803,574) (552,252) (18,051,017) (17,849,981) (17,936,155) (51,111,426) (48,313,238) (46,545,385) (4,221,810) (3,829,486) (3,792,182) ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- (5,365,950) (1,897,102) 3,823,577 35,315,678 43,805,121 36,197,525 502,588 (3,062,511) 1,779,359 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- 14,470,608 20,480,989 56,452,755 57,393,563 91,061,431 130,886,384 8,780,790 4,090,635 11,018,191 207,749,362 187,268,373 130,815,618 548,175,778 457,114,347 326,227,963 48,074,924 43,984,289 32,966,098 ------------ ------------ ------------ ------------ ------------ ------------ ----------- ----------- ----------- $222,219,970 $207,749,362 $187,268,373 $605,569,341 $548,175,778 $457,114,347 $56,855,714 $48,074,924 $43,984,289 ============ ============ ============ ============ ============ ============ =========== =========== ===========
F-63 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FI MID CAP OPPORTUNITIES T. ROWE PRICE SMALL 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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).............. $ (2,011,441) $ (631,368) $ (1,297,757) $ (595,465) $ (530,571) $ (408,933) Net realized gains (losses) from security transactions............................. (1,015,121) (717,628) (1,145,184) 37,997 (69,548) (326,259) Change in unrealized appreciation (depreciation) of investments............ 17,191,699 33,098,684 46,019,342 7,936,747 7,181,746 18,001,752 ------------ ------------ ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ 14,165,137 31,749,688 43,576,401 7,379,279 6,581,627 17,266,560 ------------ ------------ ------------ ----------- ----------- ----------- From capital transactions: Net premiums.............................. 43,356,457 48,069,931 53,673,455 11,374,021 12,623,285 12,642,407 Redemptions............................... (9,351,459) (8,654,425) (5,340,392) (2,561,686) (3,606,677) (1,578,439) Net investment division transfers......... (7,897,866) (5,135,559) (5,185,372) (1,830,915) (1,032,512) (166,606) Other net transfers....................... (21,852,505) (20,781,515) (21,665,579) (5,762,687) (5,720,496) (5,656,171) ------------ ------------ ------------ ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions...... 4,254,627 13,498,432 21,482,112 1,218,733 2,263,600 5,241,191 ------------ ------------ ------------ ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................... 18,419,764 45,248,120 65,058,513 8,598,012 8,845,227 22,507,751 NET ASSETS - BEGINNING OF PERIOD..................................... 229,326,208 184,078,088 119,019,575 72,034,034 63,188,807 40,681,056 ------------ ------------ ------------ ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................. $247,745,972 $229,326,208 $184,078,088 $80,632,046 $72,034,034 $63,188,807 ============ ============ ============ =========== =========== ===========
See Notes to Financial Statements. F-64
OPPENHEIMER GLOBAL EQUITY HARRIS OAKMARK LARGE CAP VALUE NEUBERGER BERMAN 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (89,544) $ 232,594 $ 311,502 $ (61,565) $ (149,989) $ (252,368) $ 4,209,916 $ 748,413 $ (118,988) 270,279 (301,695) (1,005,776) 398,007 613,781 38,696 557,751 490,187 28,084 5,277,659 4,666,310 7,242,152 (1,475,339) 4,130,792 6,986,213 1,374,494 6,555,902 7,656,793 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,458,394 4,597,209 6,547,878 (1,138,897) 4,594,584 6,772,541 6,142,161 7,794,502 7,565,889 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 5,253,047 5,683,708 6,014,790 12,688,012 13,168,295 11,430,624 11,535,409 9,617,754 8,682,614 (1,357,666) (1,588,385) (1,735,572) (1,712,292) (2,460,777) (991,704) (1,926,942) (2,004,438) (629,059) 942,030 (734,504) (125,590) (1,524,510) 3,020,747 1,835,698 5,790,659 4,985,822 650,401 (2,873,486) (2,471,269) (2,481,721) (5,000,031) (4,693,326) (4,616,084) (5,604,153) (4,123,930) (3,610,116) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1,963,925 889,550 1,671,907 4,451,179 9,034,939 7,658,534 9,794,973 8,475,208 5,093,840 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 7,422,319 5,486,759 8,219,785 3,312,282 13,629,523 14,431,075 15,937,134 16,269,710 12,659,729 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 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- $41,604,796 $34,182,477 $28,695,718 $54,445,434 $51,133,152 $37,503,629 $63,152,395 $47,215,261 $30,945,551 =========== =========== =========== =========== =========== =========== =========== =========== ===========
F-65 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).............. $ (105,519) $ (216,962) $ (180,062) $ 2,261,399 $ 1,424,166 $ 2,506,200 Net realized gains (losses) from security transactions............................. 161,433 994,314 (489,389) 113,726 451,466 1,152,171 Change in unrealized appreciation (depreciation) of investments............ 2,205,530 2,677,244 7,871,800 (1,403,001) 266,268 (2,185,014) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations................ 2,261,444 3,454,596 7,202,349 972,124 2,141,900 1,473,357 ----------- ----------- ----------- ----------- ----------- ----------- From capital transactions: Net premiums.............................. 7,599,043 8,138,358 8,620,553 16,818,608 15,979,551 13,565,785 Redemptions............................... (1,367,041) (6,471,579) (982,056) (2,385,144) (4,291,570) (1,812,183) Net investment division transfers......... (276,979) 1,130,128 (78,277) 4,909,390 5,023,325 (6,698,353) Other net transfers....................... (3,405,337) (3,183,456) (3,337,120) (7,477,373) (6,137,705) (5,580,587) ----------- ----------- ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions...... 2,549,686 (386,549) 4,223,100 11,865,481 10,573,601 (525,338) ----------- ----------- ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.................... 4,811,130 3,068,047 11,425,449 12,837,605 12,715,501 948,019 NET ASSETS - BEGINNING OF PERIOD..................................... 36,588,381 33,520,334 22,094,885 67,709,808 54,994,307 54,046,288 ----------- ----------- ----------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.................. $41,399,511 $36,588,381 $33,520,334 $80,547,413 $67,709,808 $54,994,307 =========== =========== =========== =========== =========== ===========
See Notes to Financial Statements. F-66
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 PERIOD FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED JANUARY 1, 2005 ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, TO APRIL 30, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ --------------- ------------ ------------ $ 285,699 $ (28,456) $ 121,982 $ 1,411,516 $ (114,631) $ (29,213) $ 21,839 $ (68,947) $ (58,697) 590,734 1,189,725 (497,564) 811,342 973,061 (125,595) (11,582) (75,290) (624,452) 3,753,078 3,997,066 6,516,826 (613,275) 4,412,786 7,938,110 (845,475) 560,180 2,271,140 ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- 4,629,511 5,158,335 6,141,244 1,609,583 5,271,216 7,783,302 (835,218) 415,943 1,587,991 ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- 8,982,849 8,790,918 7,425,875 8,761,720 8,664,945 7,659,016 905,935 2,907,203 3,213,111 (1,234,980) (1,870,632) (362,211) (1,250,883) (1,577,160) (486,878) (71,083) (242,420) (93,468) 1,409,687 (311,398) 438,708 216,481 458,588 991,151 (10,092,131) (199,548) (151,453) (3,881,087) (3,505,821) (2,849,511) (3,785,816) (3,458,107) (3,048,846) (359,433) (1,080,005) (1,158,137) ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- 5,276,469 3,103,067 4,652,861 3,941,502 4,088,266 5,114,443 (9,616,712) 1,385,230 1,810,053 ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- 9,905,980 8,261,402 10,794,105 5,551,085 9,359,482 12,897,745 (10,451,930) 1,801,173 3,398,044 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 ----------- ----------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- $42,457,559 $32,551,579 $24,290,177 $42,636,846 $37,085,761 $27,726,279 $ -- $10,451,930 $ 8,650,757 =========== =========== =========== =========== =========== =========== ============ =========== ===========
F-67 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
JENNISON GROWTH BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------------------------- FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR MAY 1, 2005 ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2005 2004 2003 ------------------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).................................... $ (67,101) $ 4,775,161 $ (563,943) $ (336,756) Net realized gains (losses) from security transactions.......... 36,398 647,742 827,418 196,537 Change in unrealized appreciation (depreciation) of investments. 2,206,440 (2,502,234) 9,427,091 17,391,943 ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations. 2,175,737 2,920,669 9,690,566 17,251,724 ----------- ----------- ----------- ----------- From capital transactions: Net premiums.................................................... 1,741,473 18,598,115 19,308,810 16,618,731 Redemptions..................................................... (211,945) (3,019,612) (2,545,879) (920,139) Net investment division transfers............................... 10,052,349 (376,162) 4,975,092 1,566,557 Other net transfers............................................. (673,369) (8,341,738) (7,626,612) (7,037,769) ----------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions................................................... 10,908,508 6,860,603 14,111,411 10,227,380 ----------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS.......................................... 13,084,245 9,781,272 23,801,977 27,479,104 NET ASSETS - BEGINNING OF PERIOD.................................. -- 80,341,639 56,539,662 29,060,558 ----------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD........................................ $13,084,245 $90,122,911 $80,341,639 $56,539,662 =========== =========== =========== ===========
See Notes to Financial Statements. F-68
METLIFE MID CAP STOCK INDEX FRANKLIN TEMPLETON SMALL CAP GROWTH BLACKROCK LARGE 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 1,973,873 $ (21,174) $ (64,163) $ 115,162 $ (31,464) $ (16,641) $ 42,176 $ (18,736) $ 4,590 682,809 992,035 12,063 129,715 40,690 (19,016) 81,656 105,597 41,938 1,900,535 3,817,899 6,538,587 (56,267) 404,946 796,643 110,740 229,787 156,144 ----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- 4,557,217 4,788,760 6,486,487 188,610 414,172 760,986 234,572 316,648 202,672 ----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- 9,146,889 9,137,346 8,658,518 1,166,638 1,182,207 844,482 1,318,222 918,978 405,361 (1,237,944) (1,570,548) (315,294) (161,479) (73,602) (27,310) (128,839) (35,177) (5,862) 1,259,495 306,699 960,729 (104,904) 410,526 610,392 925,771 1,361,717 469,287 (4,087,764) (3,701,760) (3,433,510) (508,246) (444,118) (416,036) (533,475) (351,401) (149,915) ----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- 5,080,676 4,171,737 5,870,443 392,009 1,075,013 1,011,528 1,581,679 1,894,117 718,871 ----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- 9,637,893 8,960,497 12,356,930 580,619 1,489,185 1,772,514 1,816,251 2,210,765 921,543 36,885,384 27,924,887 15,567,957 4,527,432 3,038,247 1,265,733 3,320,893 1,110,128 188,585 ----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------- ---------- $46,523,277 $36,885,384 $27,924,887 $5,108,051 $4,527,432 $3,038,247 $5,137,144 $3,320,893 $1,110,128 =========== =========== =========== ========== ========== ========== ========== ========== ==========
F-69 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
DAVIS VENTURE VALUE LOOMIS SAYLES SMALL CAP 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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).............. $ (46,637) $ (59,671) $ (75,683) $ 22,427 $ (44,015) $ (28,298) Net realized gains (losses) from security transactions............................. 226,016 508,082 (213,900) 74,135 142,373 (88,636) Change in unrealized appreciation (depreciation) of investments............ 3,304,528 2,678,225 5,610,390 365,753 718,393 1,169,772 ----------- ----------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................ 3,483,907 3,126,636 5,320,807 462,315 816,751 1,052,838 ----------- ----------- ----------- ---------- ---------- ---------- From capital transactions: Net premiums.............................. 10,136,134 7,205,230 6,492,659 1,717,028 1,479,121 1,387,309 Redemptions............................... (1,290,077) (2,608,194) (286,620) (250,927) (139,707) (49,105) Net investment division transfers......... 4,047,247 2,046,419 2,147,532 500,932 391,267 159,941 Other net transfers....................... (3,758,434) (2,825,249) (2,675,075) (721,406) (563,896) (536,437) ----------- ----------- ----------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions...... 9,134,870 3,818,206 5,678,496 1,245,627 1,166,785 961,708 ----------- ----------- ----------- ---------- ---------- ---------- NET CHANGE IN NET ASSETS.................... 12,618,777 6,944,842 10,999,303 1,707,942 1,983,536 2,014,546 NET ASSETS - BEGINNING OF PERIOD..................................... 31,374,337 24,429,495 13,430,192 6,406,475 4,422,939 2,408,393 ----------- ----------- ----------- ---------- ---------- ---------- NET ASSETS - END OF PERIOD.................. $43,993,114 $31,374,337 $24,429,495 $8,114,417 $6,406,475 $4,422,939 =========== =========== =========== ========== ========== ==========
See Notes to Financial Statements. F-70
BLACKROCK LEGACY LARGE CAP GROWTH MFS INVESTORS TRUST BLACKROCK BOND INCOME 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (11,264) $ (30,183) $ (23,728) $ (20,254) $ (14,069) $ (7,711) $ 3,938,174 $ 4,687,144 $ 2,183,489 84,949 117,304 (63,998) 75,511 10,690 13,432 98,977 1,244,325 880,712 498,307 394,196 1,339,908 189,614 322,040 221,187 (2,577,646) (2,928,093) 1,572,001 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------- 571,992 481,317 1,252,182 244,871 318,661 226,908 1,459,505 3,003,376 4,636,202 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------- 3,105,072 1,206,954 1,035,783 1,132,702 898,597 701,861 17,949,210 16,181,503 16,159,717 (66,501) (7,273) -- (129,349) (45,911) (14,052) (4,284,048) (10,462,036) (4,549,369) 801,381 276,437 359 239 975,437 164,766 (1,273,740) (8,366,427) (3,340,166) (760,422) (433,343) (337,622) (418,718) (303,839) (229,330) (8,331,881) (7,901,923) (9,344,726) ----------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------- 3,079,530 1,042,775 698,520 584,874 1,524,284 623,245 4,059,541 (10,548,883) (1,074,544) ----------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------- 3,651,522 1,524,092 1,950,702 829,745 1,842,945 850,153 5,519,046 (7,545,507) 3,561,658 6,457,524 4,933,432 2,982,730 3,386,991 1,544,046 693,893 89,174,083 96,719,590 93,157,932 ----------- ---------- ---------- ---------- ---------- ---------- ----------- ------------ ----------- $10,109,046 $6,457,524 $4,933,432 $4,216,736 $3,386,991 $1,544,046 $94,693,129 $ 89,174,083 $96,719,590 =========== ========== ========== ========== ========== ========== =========== ============ ===========
F-71 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
HARRIS OAKMARK FI VALUE LEADERS 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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).......... $ 3,733 $ 2,427 $ (808) $ 80,346 $ 56,730 $ (127,312) Net realized gains (losses) from security transactions................ 80,493 13,334 24,426 647,285 205,940 31,214 Change in unrealized appreciation (depreciation) of investments........ 177,601 106,438 58,141 3,071,366 2,796,718 5,537,632 ---------- ---------- -------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from operations............ 261,827 122,199 81,759 3,798,997 3,059,388 5,441,534 ---------- ---------- -------- ----------- ----------- ----------- From capital transactions: Net premiums.......................... 766,467 394,566 167,405 10,775,287 9,971,788 8,198,287 Redemptions........................... (74,147) (3,529) (10,046) (1,470,016) (683,199) (450,269) Net investment division transfers..... 1,396,629 293,780 229,644 2,872,307 3,578,452 3,144,705 Other net transfers................... (278,459) (121,742) (56,377) (4,569,547) (3,947,334) (3,347,152) ---------- ---------- -------- ----------- ----------- ----------- Net increase (decrease) in net assets resulting from capital transactions.. 1,810,490 563,075 330,626 7,608,031 8,919,707 7,545,571 ---------- ---------- -------- ----------- ----------- ----------- NET CHANGE IN NET ASSETS................ 2,072,317 685,274 412,385 11,407,028 11,979,095 12,987,105 NET ASSETS - BEGINNING OF PERIOD................................. 1,190,557 505,283 92,898 37,844,733 25,865,638 12,878,533 ---------- ---------- -------- ----------- ----------- ----------- NET ASSETS - END OF PERIOD.............. $3,262,874 $1,190,557 $505,283 $49,251,761 $37,844,733 $25,865,638 ========== ========== ======== =========== =========== ===========
See Notes to Financial Statements. F-72
SALOMON BROTHERS SALOMON BROTHERS BLACKROCK STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 430,943 $ 129,633 $ 33,102 $ 249,887 $ 121,068 $ 42,617 $ 628,330 $ 112,176 $ 47,144 55,156 74,022 97,650 (2,681) 1,624 48,098 -- -- (1) (261,648) 217,644 233,146 (152,454) 55,424 (40,677) -- -- 1 ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 224,451 421,299 363,898 94,752 178,116 50,038 628,330 112,176 47,144 ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 3,710,450 2,921,606 1,996,763 3,487,915 3,283,565 3,454,837 3,943,073 6,959,659 4,560,820 (449,262) (184,201) (108,331) (369,706) (178,344) (137,457) (738,933) (6,466,006) (1,186,158) 1,981,025 1,525,465 1,486,748 764,728 190,342 916,767 (3,511,345) 2,796,932 (4,975,125) (1,500,505) (1,104,691) (749,672) (1,441,518) (1,300,443) (1,344,693) (1,455,275) (1,587,065) (1,910,867) ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 3,741,708 3,158,179 2,625,508 2,441,419 1,995,120 2,889,454 (1,762,480) 1,703,520 (3,511,330) ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- 3,966,159 3,579,478 2,989,406 2,536,171 2,173,236 2,939,492 (1,134,150) 1,815,696 (3,464,186) 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 ----------- ----------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- $12,708,706 $ 8,742,547 $5,163,069 $12,014,309 $ 9,478,138 $ 7,304,902 $28,027,973 $29,162,123 $27,346,427 =========== =========== ========== =========== =========== =========== =========== =========== ===========
F-73 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
MFS METLIFE TOTAL RETURN CONSERVATIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- ----------------------- FOR THE YEAR FOR THE PERIOD FOR THE PERIOD ENDED MAY 3, 2004 TO MAY 1, 2005 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 ------------ -------------- ----------------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)......................... $ 25,741 $ (1,443) $ 123 Net realized gains (losses) from security transactions........................................ 18,142 429 271 Change in unrealized appreciation (depreciation) of investments......................................... (3,131) 39,191 554 ---------- -------- -------- Net increase (decrease) in net assets resulting from operations.......................................... 40,752 38,177 948 ---------- -------- -------- From capital transactions: Net premiums......................................... 657,976 133,508 11,888 Redemptions.......................................... (12,602) (793) (5,583) Net investment division transfers.................... 970,499 628,279 113,429 Other net transfers.................................. (266,342) (32,244) (2,457) ---------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions................................ 1,349,531 728,750 117,277 ---------- -------- -------- NET CHANGE IN NET ASSETS............................... 1,390,283 766,927 118,225 NET ASSETS - BEGINNING OF PERIOD....................... 766,927 -- -- ---------- -------- -------- NET ASSETS - END OF PERIOD............................. $2,157,210 $766,927 $118,225 ========== ======== ========
METLIFE CONSERVATIVE TO MODERATE ALLOCATION INVESTMENT DIVISION ---------------------- FOR THE PERIOD MAY 1, 2005 TO DECEMBER 31, 2005 ---------------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)......................... $ 348 Net realized gains (losses) from security transactions........................................ 1,644 Change in unrealized appreciation (depreciation) of investments......................................... 9,258 -------- Net increase (decrease) in net assets resulting from operations.......................................... 11,250 -------- From capital transactions: Net premiums......................................... 49,524 Redemptions.......................................... (7,199) Net investment division transfers.................... 566,129 Other net transfers.................................. (41,193) -------- Net increase (decrease) in net assets resulting from capital transactions................................ 567,261 -------- NET CHANGE IN NET ASSETS............................... 578,511 NET ASSETS - BEGINNING OF PERIOD....................... -- -------- NET ASSETS - END OF PERIOD............................. $578,511 ========
See Notes to Financial Statements. F-74
METLIFE METLIFE MODERATE TO METLIFE JANUS ASPEN MODERATE ALLOCATION AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------- --------------------- ------------------------------------- FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR MAY 1, 2005 TO MAY 1, 2005 TO MAY 1, 2005 TO ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2005 2005 2005 2004 2003 ------------------- --------------------- --------------------- ------------ ------------ ------------ $ 2,333 $ 3,135 $ 1,703 $ (6,186) $ (11,788) $ (10,283) 3,556 4,752 1,894 (62,709) (193,886) (263,013) 25,822 64,564 10,725 263,241 407,058 1,041,007 ---------- ---------- -------- ---------- ---------- ---------- 31,711 72,451 14,322 194,346 201,384 767,711 ---------- ---------- -------- ---------- ---------- ---------- 246,532 350,076 77,484 743,854 846,747 839,829 (12,519) (5,994) (2,936) (42,168) (5,912) (88,894) 1,278,986 2,046,335 381,966 (38,037) (96,893) (5,665) (95,275) (113,465) (17,915) (200,556) (168,584) (176,510) ---------- ---------- -------- ---------- ---------- ---------- 1,417,724 2,276,952 438,351 463,093 575,358 568,760 ---------- ---------- -------- ---------- ---------- ---------- 1,449,435 2,349,403 452,673 657,439 776,742 1,336,471 -- -- -- 4,276,635 3,499,893 2,163,422 ---------- ---------- -------- ---------- ---------- ---------- $1,449,435 $2,349,403 $452,673 $4,934,074 $4,276,635 $3,499,893 ========== ========== ======== ========== ========== ==========
F-75 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
JANUS ASPEN BALANCED AIM V.I. CORE STOCK INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- ------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED MAY 3, 2004 TO ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2003 ------------ -------------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)......................... $ 24 $ 4 $ (134) $ 1,090 $ 1,289 Net realized gains (losses) from security transactions........................................ 1 -- 5,489 (458) (4,599) Change in unrealized appreciation (depreciation) of investments......................................... 1 4 3,571 9,085 30,971 ------ ---- -------- -------- -------- Net increase (decrease) in net assets resulting from operations.......................................... 26 8 8,926 9,717 27,661 ------ ---- -------- -------- -------- From capital transactions: Net premiums......................................... 234 234 49,677 51,947 44,937 Redemptions.......................................... -- -- (8,005) (1,369) (13,395) Net investment division transfers.................... 1,745 -- (55,334) -- 6,492 Other net transfers.................................. (56) (5) (5,066) (4,782) (6,352) ------ ---- -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions................................ 1,923 229 (18,728) 45,796 31,682 ------ ---- -------- -------- -------- NET CHANGE IN NET ASSETS............................... 1,949 237 (9,802) 55,513 59,343 NET ASSETS - BEGINNING OF PERIOD....................... 237 -- 239,919 184,406 125,063 ------ ---- -------- -------- -------- NET ASSETS - END OF PERIOD............................. $2,186 $237 $230,117 $239,919 $184,406 ====== ==== ======== ======== ========
See Notes to Financial Statements. F-76
AIM V.I. GOVERNMENT SECURITIES AIM V.I. REAL ESTATE FRANKLIN TEMPLETON FOREIGN SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------- ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED MAY 3, 2004 TO ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2003 2005 2004 2003 ------------ -------------- ------------ ------------ ------------ ------------ ------------ ------------ $ 193 $ 29 $ 76,044 $ 25,043 $ 1,726 $ 45,261 $ 30,307 $ 34,446 107 (2) 148,313 54,384 7,645 259,867 153,352 (71,786) (117) (20) 7,005 204,103 41,591 264,624 613,265 947,139 ------- ------ ---------- ---------- -------- ---------- ---------- ---------- 183 7 231,362 283,530 50,962 569,752 796,924 909,799 ------- ------ ---------- ---------- -------- ---------- ---------- ---------- 4,439 2,238 128,022 652,190 20,763 695,341 1,157,933 571,285 (6,644) -- (9,365) (86,973) (74,780) (189,719) (986,244) (219,304) 6,772 2,151 149,537 306,861 8,373 355,482 542,291 342,850 (805) (86) (59,793) (26,160) (5,943) (292,459) (264,753) (163,132) ------- ------ ---------- ---------- -------- ---------- ---------- ---------- 3,762 4,303 208,401 845,918 (51,587) 568,645 449,227 531,699 ------- ------ ---------- ---------- -------- ---------- ---------- ---------- 3,945 4,310 439,763 1,129,448 (625) 1,138,397 1,246,151 1,441,498 4,310 -- 1,308,056 178,608 179,233 5,299,683 4,053,532 2,612,034 ------- ------ ---------- ---------- -------- ---------- ---------- ---------- $ 8,255 $4,310 $1,747,819 $1,308,056 $178,608 $6,438,080 $5,299,683 $4,053,532 ======= ====== ========== ========== ======== ========== ========== ==========
F-77 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FRANKLIN MUTUAL DISCOVERY SECURITIES ALLIANCEBERNSTEIN GROWTH AND INCOME INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------ ------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED MAY 3, 2004 TO ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2003 ------------ -------------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)..................... $ 546 $-- $ 23,129 $ 3,467 $ 4,389 Net realized gains (losses) from security transactions.................................... 132 -- 19,259 8,499 (27,592) Change in unrealized appreciation (depreciation) of investments.................................. 8,764 -- 116,879 301,218 441,306 -------- --- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations................................. 9,442 -- 159,267 313,184 418,103 -------- --- ---------- ---------- ---------- From capital transactions: Net premiums..................................... 3,124 -- 901,644 891,420 581,532 Redemptions...................................... -- -- (8,724) (3,193) (87,076) Net investment division transfers................ 110,323 -- (26,505) 32,466 41,687 Other net transfers.............................. (1,225) -- (106,490) (97,014) (82,296) -------- --- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions....................... 112,222 -- 759,925 823,679 453,847 -------- --- ---------- ---------- ---------- NET CHANGE IN NET ASSETS........................... 121,664 -- 919,192 1,136,863 871,950 NET ASSETS - BEGINNING OF PERIOD................... -- -- 3,199,948 2,063,085 1,191,135 -------- --- ---------- ---------- ---------- NET ASSETS - END OF PERIOD......................... $121,664 $-- $4,119,140 $3,199,948 $2,063,085 ======== === ========== ========== ==========
See Notes to Financial Statements. F-78
ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY FIDELITY VIP CONTRAFUND FIDELITY VIP ASSET MANAGER GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE 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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ (135) $ (77) $ (181) $ (1,748) $ (1,683) $ (2,455) $ 14,795 $ 9,621 $ 6,748 255 108 (931) 170,001 62,282 6,303 38,662 3,245 (4,335) 1,638 2,247 13,613 (22,158) 45,971 139,867 (29,733) 19,246 59,143 ------- -------- ------- --------- --------- --------- --------- -------- -------- 1,758 2,278 12,501 146,095 106,570 143,715 23,724 32,112 61,556 ------- -------- ------- --------- --------- --------- --------- -------- -------- 6,941 5,469 15,245 159,311 134,841 53,210 202,315 261,139 194,197 -- (31,398) (316) (280,847) (325,384) (213,750) (28,961) (20,112) (1,698) 13,706 -- 727 112,842 34,413 657,697 (157,813) 38,214 74,992 (733) (1,308) (792) (35,179) (25,225) 3,584 (35,241) (39,605) (27,293) ------- -------- ------- --------- --------- --------- --------- -------- -------- 19,914 (27,237) 14,864 (43,873) (181,355) 500,741 (19,700) 239,636 240,198 ------- -------- ------- --------- --------- --------- --------- -------- -------- 21,672 (24,959) 27,365 102,222 (74,785) 644,456 4,024 271,748 301,754 20,636 45,595 18,230 818,892 893,677 249,221 704,377 432,629 130,875 ------- -------- ------- --------- --------- --------- --------- -------- -------- $42,308 $ 20,636 $45,595 $ 921,114 $ 818,892 $ 893,677 $ 708,401 $704,377 $432,629 ======= ======== ======= ========= ========= ========= ========= ======== ========
F-79 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
FIDELITY VIP GROWTH INVESTMENT DIVISION ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)................................. $ (1,034) $ (1,130) $ (831) Net realized gains (losses) from security transactions....... 26,347 (5,015) (2,588) Change in unrealized appreciation (depreciation) of investments................................................. 3,218 17,311 63,146 -------- -------- -------- Net increase (decrease) in net assets resulting from operations.................................................. 28,531 11,166 59,727 -------- -------- -------- From capital transactions: Net premiums................................................. 93,549 110,310 101,957 Redemptions.................................................. (42,768) (53,801) (738) Net investment division transfers............................ 91,078 12,180 6,224 Other net transfers.......................................... (8,288) (4,852) (4,423) -------- -------- -------- Net increase (decrease) in net assets resulting from capital transactions................................................ 133,571 63,837 103,020 -------- -------- -------- NET CHANGE IN NET ASSETS....................................... 162,102 75,003 162,747 NET ASSETS - BEGINNING OF PERIOD............................... 371,361 296,358 133,611 -------- -------- -------- NET ASSETS - END OF PERIOD..................................... $533,463 $371,361 $296,358 ======== ======== ========
FIDELITY VIP INVESTMENT GRADE BOND INVESTMENT DIVISION -------------------------- FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, 2005 2004 ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)................................. $ 803 $ (4) Net realized gains (losses) from security transactions....... (59) 8 Change in unrealized appreciation (depreciation) of investments................................................. (370) 12 ------- ------- Net increase (decrease) in net assets resulting from operations.................................................. 374 16 ------- ------- From capital transactions: Net premiums................................................. 8,457 2,238 Redemptions.................................................. -- -- Net investment division transfers............................ 12,839 10,966 Other net transfers.......................................... (1,307) (99) ------- ------- Net increase (decrease) in net assets resulting from capital transactions................................................ 19,989 13,105 ------- ------- NET CHANGE IN NET ASSETS....................................... 20,363 13,121 NET ASSETS - BEGINNING OF PERIOD............................... 13,121 -- ------- ------- NET ASSETS - END OF PERIOD..................................... $33,484 $13,121 ======= =======
See Notes to Financial Statements. F-80
FIDELITY VIP EQUITY-INCOME AMERICAN FUNDS GROWTH AMERICAN FUNDS GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- --------------------------------------- ------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED 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, 2005 2004 2005 2004 2003 2005 2004 2003 ------------ -------------- ------------ ------------ -------------- ------------ ------------ ------------ $ 359 $ (5) $ (51,712) $ (224,005) $ (118,303) $ 407,482 $ 49,063 $ 57,594 (5,940) -- 115,149 53,047 (100,817) 116,683 60,134 (26,406) 605 -- 8,793,861 4,445,539 5,264,250 1,688,136 2,605,294 3,852,340 --------- ------- ----------- ----------- ----------- ----------- ----------- ----------- (4,976) (5) 8,857,298 4,274,581 5,045,130 2,212,301 2,714,491 3,883,528 --------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 5,510 2,238 17,644,031 13,227,421 8,746,040 12,314,898 10,343,250 7,049,440 (138,122) -- (1,512,503) (620,701) (274,455) (1,299,645) (577,432) (184,181) 158,037 7,499 8,768,204 7,788,495 5,353,241 3,766,503 5,800,181 3,708,586 (5,151) 378 (6,997,560) (4,857,964) (3,102,038) (4,901,035) (3,947,698) (2,495,963) --------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 20,274 10,115 17,902,172 15,537,251 10,722,788 9,880,721 11,618,301 8,077,882 --------- ------- ----------- ----------- ----------- ----------- ----------- ----------- 15,298 10,110 26,759,470 19,811,832 15,767,918 12,093,022 14,332,792 11,961,410 10,110 -- 45,571,772 25,759,940 9,992,022 34,701,703 20,368,911 8,407,501 --------- ------- ----------- ----------- ----------- ----------- ----------- ----------- $ 25,408 $10,110 $72,331,242 $45,571,772 $25,759,940 $46,794,725 $34,701,703 $20,368,911 ========= ======= =========== =========== =========== =========== =========== ===========
F-81 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).......... $ 15,976 $ (73,946) $ (8,633) $ 143,282 $ (35,600) $ (17,818) Net realized gains (losses) from security transactions................ 669,665 169,126 (33,362) 102,486 (21,255) (46,026) Change in unrealized appreciation (depreciation) of investments........ 3,507,811 1,710,690 1,513,502 895,073 874,468 776,010 ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from operations............ 4,193,452 1,805,870 1,471,507 1,140,841 817,613 712,166 ----------- ----------- ---------- ---------- ---------- ---------- From capital transactions: Net premiums.......................... 5,167,339 3,240,987 1,663,445 2,046,729 1,669,261 1,283,521 Redemptions........................... (607,030) (154,532) (60,720) (236,915) (112,831) (26,453) Net investment division transfers..... 6,080,729 3,070,772 1,303,948 1,212,270 1,315,562 481,182 Other net transfers................... (2,131,167) (1,236,090) (610,233) (820,310) (589,688) (448,143) ----------- ----------- ---------- ---------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions.. 8,509,871 4,921,137 2,296,440 2,201,774 2,282,304 1,290,107 ----------- ----------- ---------- ---------- ---------- ---------- NET CHANGE IN NET ASSETS................ 12,703,323 6,727,007 3,767,947 3,342,615 3,099,917 2,003,273 NET ASSETS - BEGINNING OF PERIOD................................. 12,527,867 5,800,860 2,032,913 6,475,187 3,375,270 1,372,997 ----------- ----------- ---------- ---------- ---------- ---------- NET ASSETS - END OF PERIOD.............. $25,231,190 $12,527,867 $5,800,860 $9,817,802 $6,475,187 $3,375,270 =========== =========== ========== ========== ========== ==========
See Notes to Financial Statements. F-82
MFS RESEARCH INTERNATIONAL PIMCO TOTAL RETURN RCM GLOBAL TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- ------------------------------------- ------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 179,022 $ (11,511) $ 2,786 $ (13,148) $ 1,080,256 $ 175,706 $ (4,297) $ (40,843) $ (21,608) 80,066 226,740 148,987 52,949 58,068 175,963 194,566 (35,847) (195,867) 280,569 176,752 191,049 311,680 (439,697) (25,434) 445,709 (200,859) 1,260,206 ---------- ---------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- 539,657 391,981 342,822 351,481 698,627 326,235 635,978 (277,549) 1,042,731 ---------- ---------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- 893,225 654,113 514,658 6,481,179 5,789,117 5,176,301 1,643,816 1,896,573 1,268,741 (95,918) (49,447) (15,626) (704,398) (352,146) (300,049) (221,407) (90,002) (47,295) 262,049 530,150 140,125 1,715,784 2,455,515 3,254,351 (451,962) 570,609 1,385,317 (321,773) (243,185) (198,441) (2,599,945) (2,268,320) (1,973,454) (630,894) (731,284) (437,762) ---------- ---------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- 737,583 891,631 440,716 4,892,620 5,624,166 6,157,149 339,553 1,645,896 2,169,001 ---------- ---------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- 1,277,240 1,283,612 783,538 5,244,101 6,322,793 6,483,384 975,531 1,368,347 3,211,732 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 ---------- ---------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- $4,058,072 $2,780,832 $1,497,220 $24,263,960 $19,019,859 $12,697,066 $6,824,691 $5,849,160 $4,480,813 ========== ========== ========== =========== =========== =========== ========== ========== ==========
F-83 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
LORD ABBETT BOND DEBENTURE LAZARD MID-CAP 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, 2005 2004 2003 2005 2004 2003 ------------ ------------ ------------ ------------ ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).......... $ 622,354 $ 473,273 $ 152,818 $ 308,708 $ (12,732) $ 3,638 Net realized gains (losses) from security transactions................ 255,890 291,351 193,651 96,120 127,885 6,414 Change in unrealized appreciation (depreciation) of investments........ (722,955) 258,228 1,482,057 (198,731) 100,268 140,733 ----------- ----------- ----------- ---------- ---------- --------- Net increase (decrease) in net assets resulting from operations............ 155,289 1,022,852 1,828,526 206,097 215,421 150,785 ----------- ----------- ----------- ---------- ---------- --------- From capital transactions: Net premiums.......................... 3,151,962 2,983,780 2,591,207 900,458 685,733 376,221 Redemptions........................... (760,915) (964,051) (564,230) (48,378) (25,490) (9,516) Net investment division transfers..... 360,705 337,183 1,098,872 189,141 562,287 345,361 Other net transfers................... (1,517,556) (1,084,450) (1,180,205) (337,451) (302,486) (126,899) ----------- ----------- ----------- ---------- ---------- --------- Net increase (decrease) in net assets resulting from capital transactions.. 1,234,196 1,272,462 1,945,644 703,770 920,044 585,167 ----------- ----------- ----------- ---------- ---------- --------- NET CHANGE IN NET ASSETS................ 1,389,485 2,295,314 3,774,170 909,867 1,135,465 735,952 NET ASSETS - BEGINNING OF PERIOD................................. 15,141,724 12,846,410 9,072,240 2,124,397 988,932 252,980 ----------- ----------- ----------- ---------- ---------- --------- NET ASSETS - END OF PERIOD.............. $16,531,209 $15,141,724 $12,846,410 $3,034,264 $2,124,397 $ 988,932 =========== =========== =========== ========== ========== =========
See Notes to Financial Statements. F-84
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, 2005 2004 2003 2005 2004 2003 2005 2004 2003 ------------ ------------ -------------- ------------ ------------ -------------- ------------ ------------ -------------- $ 21,367 $ (7,126) $ (2,947) $ 71,494 $ (14,172) $ 6,375 $ (45,165) $ (40,203) $ (25,914) 35,790 6,508 66,977 131,605 87,469 72,432 89,582 40,466 (314,628) 47,188 68,634 51,242 724,928 413,695 49,401 756,884 408,503 1,135,120 ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- 104,345 68,016 115,272 928,027 486,992 128,208 801,301 408,766 794,578 ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- 446,774 398,392 201,753 2,085,109 717,538 111,653 1,636,045 1,751,040 1,735,338 (18,607) (10,096) (5,605) (175,181) (18,505) (357) (169,578) (82,547) (28,560) 77,613 177,443 286,464 3,959,003 2,229,550 446,278 62,227 96,192 112,849 (166,246) (133,848) (70,229) (786,311) (265,382) (22,736) (664,452) (602,774) (614,940) ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- 339,534 431,891 412,383 5,082,620 2,663,201 534,838 864,242 1,161,911 1,204,687 ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- 443,879 499,907 527,655 6,010,647 3,150,193 663,046 1,665,543 1,570,677 1,999,265 1,143,358 643,451 115,796 3,963,209 813,016 149,970 5,657,453 4,086,776 2,087,511 ---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- $1,587,237 $1,143,358 $643,451 $9,973,856 $3,963,209 $813,016 $7,322,996 $5,657,453 $4,086,776 ========== ========== ======== ========== ========== ======== ========== ========== ==========
F-85 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
LORD ABBETT GROWTH & INCOME NEUBERGER BERMAN REAL ESTATE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------- -------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED ENDED ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2003 2005 2004 ------------ ------------ ------------ ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss)......................... $ 1,040 $ 23 $ (47) $ (31,334) $ 70,281 Net realized gains (losses) from security transactions........................................ 5,959 37 20 77,734 5,929 Change in unrealized appreciation (depreciation) of investments......................................... (6,587) 3,095 3,750 660,111 124,804 -------- ------- ------- ---------- ---------- Net increase (decrease) in net assets resulting from operations.......................................... 412 3,155 3,723 706,511 201,014 -------- ------- ------- ---------- ---------- From capital transactions: Net premiums......................................... 6,483 15,555 4,885 2,008,005 228,551 Redemptions.......................................... (22,048) -- -- (83,109) (7,728) Net investment division transfers.................... 2,185 13,764 12,124 3,582,147 1,619,564 Other net transfers.................................. (269) 1,681 (203) (783,316) (76,648) -------- ------- ------- ---------- ---------- Net increase (decrease) in net assets resulting from capital transactions................................ (13,649) 31,000 16,806 4,723,727 1,763,739 -------- ------- ------- ---------- ---------- NET CHANGE IN NET ASSETS............................... (13,237) 34,155 20,529 5,430,238 1,964,753 NET ASSETS - BEGINNING OF PERIOD....................... 54,684 20,529 -- 1,964,753 -- -------- ------- ------- ---------- ---------- NET ASSETS - END OF PERIOD............................. $ 41,447 $54,684 $20,529 $7,394,991 $1,964,753 ======== ======= ======= ========== ==========
See Notes to Financial Statements. F-86
OPPENHEIMER CAPITAL APPRECIATION LORD ABBETT MID-CAP VALUE THIRD AVENUE SMALL CAP VALUE INVESTMENT AMERICAN CENTURY VISTA INVESTMENT DIVISION INVESTMENT DIVISION DIVISION INVESTMENT DIVISION -------------------------- -------------------------- -------------- --------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO MAY 1, 2005 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2005 2004 ------------ -------------- ------------ -------------- -------------- ------------ -------------- $ 1,210 $ 6 $ 26 $ 94 $ 901 $ (47) $-- 22 -- 111 21 442 6 -- 85 10 1,856 (54) 2,715 961 -- ------- ---- ------- ------ -------- ------- --- 1,317 16 1,993 61 4,058 920 -- ------- ---- ------- ------ -------- ------- --- 1,127 234 7,110 2,238 12,067 -- -- -- -- -- -- -- -- -- 30,132 -- 16,509 2,151 108,334 14,262 -- (518) (4) (1,159) (43) (8,149) (599) -- ------- ---- ------- ------ -------- ------- --- 30,741 230 22,460 4,346 112,252 13,663 -- ------- ---- ------- ------ -------- ------- --- 32,058 246 24,453 4,407 116,310 14,583 -- 246 -- 4,407 -- -- -- -- ------- ---- ------- ------ -------- ------- --- $32,304 $246 $28,860 $4,407 $116,310 $14,583 $-- ======= ==== ======= ====== ======== ======= ===
F-87 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
DELAWARE DREYFUS SMALL CAP VALUE EMERGING LEADERS INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- --------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 ------------ -------------- ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).................................... $ 7,825 $-- $ 515 $-- Net realized gains (losses) from security transactions.......... 45 -- 251 -- Change in unrealized appreciation (depreciation) of investments. 2,540 -- 711 -- -------- --- ------- --- Net increase (decrease) in net assets resulting from operations. 10,410 -- 1,477 -- -------- --- ------- --- From capital transactions: Net premiums.................................................... 6,852 -- -- -- Redemptions..................................................... (6,275) -- -- -- Net investment division transfers............................... 121,033 -- 11,018 -- Other net transfers............................................. 7,946 -- (1,674) -- -------- --- ------- --- Net increase (decrease) in net assets resulting from capital transactions................................................... 129,556 -- 9,344 -- -------- --- ------- --- NET CHANGE IN NET ASSETS.......................................... 139,966 -- 10,821 -- NET ASSETS - BEGINNING OF PERIOD.................................. -- -- -- -- -------- --- ------- --- NET ASSETS - END OF PERIOD........................................ $139,966 $-- $10,821 $-- ======== === ======= ===
See Notes to Financial Statements. F-88
DREYFUS DREYFUS GOLDMAN SACHS GOLDMAN SACHS INTERNATIONAL VALUE APPRECIATION MID CAP VALUE CORE SMALL CAP EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- -------------------------- -------------------------- --------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 2005 2004 ------------ -------------- ------------ -------------- ------------ -------------- ------------ -------------- $ 2,860 $ 1,260 $ (59) $ 45 $ 4,518 $ 1,218 $ 4,311 $-- (8,588) 47 114 -- (3,479) 1 1 -- 13,060 (934) 538 217 223 (464) (5,644) -- -------- ------- ------- ------ -------- ------- ------- --- 7,332 373 593 262 1,262 755 (1,332) -- -------- ------- ------- ------ -------- ------- ------- --- 19,214 2,238 341 341 3,107 -- -- -- (93,516) -- -- -- (73,952) -- -- -- 243,471 12,947 14,262 2,943 107,030 12,663 51,421 -- (3,564) (18) (1,488) (209) (3,077) (1,142) 77 -- -------- ------- ------- ------ -------- ------- ------- --- 165,605 15,167 13,115 3,075 33,108 11,521 51,498 -- -------- ------- ------- ------ -------- ------- ------- --- 172,937 15,540 13,708 3,337 34,370 12,276 50,166 -- 15,540 -- 3,337 -- 12,276 -- -- -- -------- ------- ------- ------ -------- ------- ------- --- $188,477 $15,540 $17,045 $3,337 $ 46,646 $12,276 $50,166 $-- ======== ======= ======= ====== ======== ======= ======= ===
F-89 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
MFS HIGH INCOME VAN KAMPEN GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION -------------------------- --------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 ------------ -------------- ------------ -------------- INCREASE (DECREASE) IN NET ASSETS From operations: Net investment income (loss).................................... $ 3,632 $ (87) $ (12) $-- Net realized gains (losses) from security transactions.......... 128 69 (1) -- Change in unrealized appreciation (depreciation) of investments. (2,862) 3,152 124 -- ------- ------- ------- --- Net increase (decrease) in net assets resulting from operations. 898 3,134 111 -- ------- ------- ------- --- From capital transactions: Net premiums.................................................... 2,055 -- 2,678 -- Redemptions..................................................... -- -- -- -- Net investment division transfers............................... 16,844 48,923 10,908 -- Other net transfers............................................. (1,736) (1,091) (61) -- ------- ------- ------- --- Net increase (decrease) in net assets resulting from capital transactions................................................... 17,163 47,832 13,525 -- ------- ------- ------- --- NET CHANGE IN NET ASSETS.......................................... 18,061 50,966 13,636 -- NET ASSETS - BEGINNING OF PERIOD.................................. 50,966 -- -- -- ------- ------- ------- --- NET ASSETS - END OF PERIOD........................................ $69,027 $50,966 $13,636 $-- ======= ======= ======= ===
See Notes to Financial Statements. F-90
WELLS FARGO ADVANTAGE WELLS FARGO ADVANTAGE TOTAL RETURN BOND LARGE COMPANY GROWTH WELLS FARGO ADVANTAGE EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------- -------------------------- ---------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE PERIOD ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO ENDED MAY 3, 2004 TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2005 2004 2005 2004 2005 2004 ------------ -------------- ------------ -------------- ------------ -------------- $ 230 $-- $ (16) $ (1) $ 82 $ (1) 238 -- (5) 6 25 10 16 -- 797 16 301 3 ------- --- ------ ------ ------- ------ 484 -- 776 21 408 12 ------- --- ------ ------ ------- ------ 3,570 -- 4,434 2,238 4,436 2,238 -- -- -- -- -- -- 13,581 -- (49) 2,151 110 2,151 (436) -- (985) (75) (1,013) (60) ------- --- ------ ------ ------- ------ 16,715 -- 3,400 4,314 3,533 4,329 ------- --- ------ ------ ------- ------ 17,199 -- 4,176 4,335 3,941 4,341 -- -- 4,335 -- 4,341 -- ------- --- ------ ------ ------- ------ $17,199 $-- $8,511 $4,335 $ 8,282 $4,341 ======= === ====== ====== ======= ======
F-91 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 1. BUSINESS Metropolitan Life Separate Account UL (the "Separate Account"), a separate account of Metropolitan Life Insurance Company ("Metropolitan Life"), was established by the Board of Directors of Metropolitan Life Insurance Company 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-nine 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 IP 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 attributable 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 investment divisions within the Separate Account: BlackRock Investment AllianceBernstein Global Trust Investment Division Technology Investment Division BlackRock Diversified AllianceBernstein U.S. Investment Division Government/High Grade BlackRock Aggressive Securities Growth Investment Division Investment Division (a)* MetLife Stock Index Fidelity VIP Contrafund Investment Division Investment Division FI International Stock Fidelity VIP Asset Investment Division Manager Growth Investment Division FI Mid Cap Opportunities Fidelity VIP Growth Investment Division Investment Division T. Rowe Price Small Cap Fidelity VIP Investment Growth Investment Division Grade Bond Investment Division (a) Oppenheimer Global Equity Fidelity VIP Investment Division Equity-Income Investment Division (a) Harris Oakmark Large Cap American Funds Growth Value Investment Division Investment Division Neuberger Berman Mid Cap American Funds Value Investment Division Growth-Income Investment Division T. Rowe Price Large Cap American Funds Global Growth Investment Division Small Capitalization Investment Division Lehman Brothers Aggregate Bond Index Investment T. Rowe Price Mid-Cap Division Growth Investment Division Morgan Stanley EAFE Index MFS Research Investment Division International Investment Division Russell 2000 Index PIMCO Total Return Investment Division Investment Division Met/Putnam Voyager RCM Global Technology Investment Division** Investment Division Jennison Growth Lord Abbett Bond Investment Division (b) Debenture Investment Division BlackRock Strategic Value Lazard Mid-Cap Investment Investment Division Division MetLife Mid Cap Stock Met/AIM Small Cap Growth Index Investment Division Investment Division Franklin Templeton Small Harris Oakmark Cap Growth Investment International Investment Division Division BlackRock Large Cap Value Janus Aggressive Growth Investment Division Investment Division Davis Venture Value Lord Abbett Growth & Investment Division Income Investment Division Loomis Sayles Small Cap Neuberger Berman Real Investment Division Estate Investment Division (a) BlackRock Legacy Large Lord Abbett Growth Cap Growth Investment Opportunities Investment Division Division (a)* MFS Investors Trust Lord Abbett Mid-Cap Value Investment Division Investment Division (a) BlackRock Bond Income Third Avenue Small Cap Investment Division Value Investment Division (a) FI Value Leaders Oppenheimer Capital Investment Division Appreciation Investment Division (b) Harris Oakmark Focused American Century Vista Value Investment Division Investment Division (a) AllianceBernstein Growth Salomon Brothers & Income Investment Strategic Bond Division Opportunities Investment Division F-92 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 1. BUSINESS -- (CONTINUED) Salomon Brothers U.S. Government Dreyfus MidCap Stock Investment Investment Division Division (a)* BlackRock Money Market Investment Dreyfus Emerging Leaders Investment Division Division (a) MFS Total Return Investment Dreyfus International Value Division (a) Investment Division (a) MetLife Conservative Allocation Dreyfus Appreciation Investment Investment Division (b) Division (a) MetLife Conservative to Moderate Goldman Sachs Mid Cap Value Allocation Investment Division (b) Investment Division (a) MetLife Moderate Allocation Goldman Sachs CORE Small Cap Equity Investment Division (b) Investment Division (a) MetLife Moderate to Aggressive MFS High Income Investment Allocation Investment Division (b) Division (a) MetLife Aggressive Allocation MFS Global Equity Investment Investment Division (b) Division (a)* Janus Aspen Large Cap Growth Investment Division MFS Value Investment Division (a)* Janus Aspen Balanced Investment MFS New Discovery Investment Division (a) Division (a)* Janus Aspen Forty Investment Van Kampen Government Investment Division (a)* Division (a) AIM V.I Core Stock Investment Division Wells Fargo Advantage Total Return Bond Investment Division (a) AIM V.I. Government Securities Wells Fargo Advantage Money Market Investment Division (a) Investment Division (a)* AIM V.I. Real Estate Investment Wells Fargo Advantage Asset Division Allocation Investment Division (a)* Franklin Templeton Foreign Securities Wells Fargo Advantage Large Company Investment Division Core Investment Division (a)* Franklin Templeton Growth Securities Wells Fargo Advantage Large Company Investment Division (a)* Growth Investment Division (a) Franklin Mutual Discovery Securities Wells Fargo Advantage Equity Income Investment Division (a) Investment Division (a) Delaware Small Cap Value Investment Division (a) -------- (a) Operations commenced on May 3, 2004, for thirty-two investment divisions added to the Separate Account on that date. (b) Operations commenced on May 1, 2005 for seven new investment divisions added to the Separate Account on that date. * These Investment Divisions had no assets at December 31, 2005. ** These Investment Divisions will no longer be an available option within the separate account. 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 attributable to the contracts. F-93 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) D. NET PREMIUMS Metropolitan Life deducts a sales load and a state premium tax charge from premiums before amounts are allocated to the Separate Account. In the case of certain policies, Metropolitan Life also deducts a Federal income tax charge before amounts are allocated to the Separate Account. The Federal income tax charge is imposed in connection with certain policies to recover a portion of the Federal income tax adjustment attributable to policy acquisition expenses. 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. PREMIUM PAYMENTS Premium payments by Metropolitan Life are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus. G. NET INVESTMENT DIVISION AND NET OTHER TRANSFERS Transfers among investment divisions and fixed fund of the general account are presented under the caption net investment division transfers. Cost of insurance charges, policy loan activity benefit payments, and miscellaneous gains and losses are presented under the caption net other transfers. 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-94 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, 2005 were as follows:
PURCHASES SALES --------- ------- (IN THOUSANDS) BlackRock Investment Trust Investment Division..................... $15,164 $22,925 BlackRock Diversified Investment Division.......................... 18,340 17,926 BlackRock Aggressive Growth Investment Division.................... 5,862 13,066 MetLife Stock Index Investment Division............................ 60,005 20,388 FI International Stock Investment Division......................... 3,838 3,433 FI Mid Cap Opportunities Investment Division....................... 12,058 9,820 T. Rowe Price Small Cap Growth Investment Division................. 4,748 4,164 Oppenheimer Global Equity Investment Division...................... 4,340 2,464 Harris Oakmark Large Cap Value Investment Division................. 8,255 3,858 Neuberger Berman Mid Cap Value Investment Division................. 15,878 1,877 T. Rowe Price Large Cap Growth Investment Division................. 5,287 2,855 Lehman Brothers Aggregate Bond Index Investment Division........... 17,497 3,364 Morgan Stanley EAFE Index Investment Division...................... 8,283 2,737 Russell 2000 Index Investment Division............................. 7,694 2,337 Met/Putnam Voyager Investment Division (a)......................... 551 10,144 Jennison Growth Investment Division (b)............................ 11,182 345 BlackRock Strategic Value Investment Division...................... 15,072 3,438 MetLife Mid Cap Stock Index Investment Division.................... 9,354 2,296 Franklin Templeton Small Cap Growth Investment Division............ 919 412 BlackRock Large Cap Value Investment Division...................... 2,001 377 Davis Venture Value Investment Division............................ 10,459 1,370 Loomis Sayles Small Cap Investment Division........................ 1,657 389 BlackRock Legacy Large Cap Growth Investment Division.............. 4,055 983 MFS Investors Trust Investment Division............................ 857 299 BlackRock Bond Income Investment Division.......................... 16,878 8,895 FI Value Leaders Investment Division............................... 2,159 344 Harris Oakmark Focused Value Investment Division................... 9,535 1,847 Salomon Brothers Strategic Bond Opportunities Investment Division.. 4,642 469 Salomon Brothers U.S. Government Investment Division............... 3,186 494 BlackRock Money Market Investment Division......................... 8,142 9,273 MFS Total Return Investment Division............................... 1,694 319 MetLife Conservative Allocation Investment Division (b)............ 688 570 MetLife Conservative to Moderate Allocation Investment Division (b) 639 71 MetLife Moderate Allocation Investment Division (b)................ 1,526 106 MetLife Moderate to Aggressive Allocation Investment Division (b).. 2,382 102 MetLife Aggressive Allocation Investment Division (b).............. 498 58 Janus Aspen Large Cap Growth Investment Division................... 785 324 Janus Aspen Balanced Investment Division........................... 2 1 AIM V.I. Core Stock Income Investment Division..................... 173 193 AIM V.I.Government Securities Investment Division.................. 17 13 AIM V.I. Real Estate Investment Division........................... 1,261 975 Franklin Templeton Foreign Securities Investment Division.......... 1,675 1,060 Franklin Mutual Discovery Securities Investment Division........... 119 7 AllianceBernstein Growth and Income Investment Division............ 941 159 AllianceBernstein Global Technology Investment Division............ 20 1 Fidelity VIP Contrafund Investment Division........................ 1,124 1,171 Fidelity VIP Asset Manager Growth Investment Division.............. 1,026 1,029 Fidelity VIP Growth Investment Division............................ 658 526 Fidelity VIP Investment Grade Bond Investment Division............. 22 1 Fidelity VIP Equity-Income Investment Division..................... 271 240 American Funds Growth Investment Division.......................... 18,342 481 American Funds Growth-Income Investment Division................... 11,026 735 American Funds Global Small Capitalization Investment Division..... 9,884 1,358 T. Rowe Price Mid-Cap Growth Investment Division................... 2,978 627
F-95 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. PURCHASES AND SALES OF INVESTMENTS -- (CONTINUED)
PURCHASES SALES --------- -------- (IN THOUSANDS) MFS Research International Investment Division................ $ 1,362 $ 444 PIMCO Total Return Investment Division........................ 5,779 898 RCM Global Technology Investment Division..................... 1,055 719 Lord Abbett Bond Debenture Investment Division................ 3,770 1,913 Lazard Mid-Cap Investment Division............................ 1,499 486 Met/AIM Small Cap Growth Investment Division.................. 575 215 Harris Oakmark International Investment Division.............. 5,876 722 Janus Aggressive Growth Investment Division................... 1,142 323 Lord Abbett Growth and Income Investment Division............. 46 50 Neuberger Berman Real Estate Investment Division.............. 5,075 383 Lord Abbett Mid-Cap Value Investment Division................. 33 1 Third Avenue Small Cap Value Investment Division.............. 24 1 Oppenheimer Capital Appreciation Investment Division (b)...... 130 17 American Century Vista Investment Division.................... 14 -- Delaware Small Cap Value Investment Division.................. 136 9 Dreyfus Emerging Leaders Investment Division.................. 68 74 Dreyfus International Value Investment Division............... 340 180 Dreyfus Appreciation Investment Division...................... 14 1 Goldman Sachs Mid Cap Value Investment Division............... 115 77 Goldman Sachs CORE Small Cap Equity Investment Division....... 56 -- MFS High Income Investment Division........................... 23 2 Van Kampen Government Investment Division..................... 14 -- Wells Fargo Advantage Total Return Bond Investment Division... 36 19 Wells Fargo Advantage Large Company Growth Investment Division 4 1 Wells Fargo Advantage Equity Income Investment Division....... 5 1 -------- -------- Total......................................................... $372,840 $169,252 ======== ========
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-96 [THIS PAGE INTENTIONALLY LEFT BLANK] 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, 2005, 2004, 2003, 2002 and 2001 were as follows:
BLACKROCK BLACKROCK BLACKROCK METLIFE INVESTMENT TRUST DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- Outstanding at December, 2004... 16,507,025 13,455,017 11,775,258 29,475,869 Activity during 2005: Issued........................ 3,207,492 2,906,692 1,944,636 8,538,465 Redeemed...................... (3,226,358) (2,722,893) (2,217,280) (5,857,345) ---------- ---------- ---------- ---------- Outstanding at December 31, 2005 16,488,159 13,638,816 11,502,614 32,156,989 ========== ========== ========== ========== Outstanding at December, 2003... 16,150,806 12,880,974 11,833,051 25,746,955 Activity during 2004: Issued........................ 3,924,235 3,355,335 2,392,708 9,695,680 Redeemed...................... (3,568,016) (2,781,292) (2,450,501) (5,966,766) ---------- ---------- ---------- ---------- Outstanding at December 31, 2004 16,507,025 13,455,017 11,775,258 29,475,869 ========== ========== ========== ========== Outstanding at December, 2002... 15,059,725 12,267,711 11,447,188 22,139,983 Activity during 2003: Issued........................ 5,136,368 3,873,184 3,342,849 10,343,323 Redeemed...................... (4,045,287) (3,259,921) (2,956,986) (6,736,351) ---------- ---------- ---------- ---------- Outstanding at December 31, 2003 16,150,806 12,880,974 11,833,051 25,746,955 ========== ========== ========== ========== Outstanding at December, 2001... 13,263,581 11,138,476 10,502,846 17,014,963 Activity during 2002: Issued........................ 5,072,114 3,677,180 3,343,155 9,909,472 Redeemed...................... (3,275,970) (2,547,945) (2,398,813) (4,784,452) ---------- ---------- ---------- ---------- Outstanding at December 31, 2002 15,059,725 12,267,711 11,447,188 22,139,983 ========== ========== ========== ========== Outstanding at December 31, 2000 11,053,851 9,234,112 9,253,699 11,688,875 Activity during 2001: Issued........................ 2,828,029 2,199,532 1,392,039 6,525,284 Redeemed...................... (618,299) (295,168) (142,892) (1,199,196) ---------- ---------- ---------- ---------- Outstanding at December 31, 2001 13,263,581 11,138,476 10,502,846 17,014,963 ========== ========== ========== ==========
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-98
FI FI MID CAP T. ROWE PRICE OPPENHEIMER HARRIS OAKMARK NEUBERGER BERMAN INTERNATIONAL STOCK OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY LARGE CAP VALUE MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 3,241,370 14,284,163 5,056,605 2,201,362 3,767,330 2,435,399 681,133 3,117,992 928,886 507,092 1,297,280 1,131,537 (628,162) (2,881,655) (882,149) (394,736) (978,617) (654,171) ---------- ---------- ---------- --------- --------- --------- 3,294,341 14,520,500 5,103,342 2,314,718 4,085,993 2,912,765 ========== ========== ========== ========= ========= ========= 3,484,064 13,347,672 4,901,924 2,140,330 3,060,299 1,946,013 836,252 3,915,991 1,398,854 581,796 1,553,632 1,037,887 (1,078,946) (2,979,500) (1,244,173) (520,764) (846,601) (548,501) ---------- ---------- ---------- --------- --------- --------- 3,241,370 14,284,163 5,056,605 2,201,362 3,767,330 2,435,399 ========== ========== ========== ========= ========= ========= 3,295,967 11,520,986 4,424,009 1,978,122 2,346,360 1,567,159 1,223,657 5,468,760 1,519,683 768,113 1,638,761 891,629 (1,035,560) (3,642,074) (1,041,768) (605,905) (924,821) (512,775) ---------- ---------- ---------- --------- --------- --------- 3,484,064 13,347,672 4,901,924 2,140,330 3,060,299 1,946,013 ========== ========== ========== ========= ========= ========= 3,106,074 8,480,928 3,525,259 2,000,284 1,241,734 1,076,200 1,175,721 5,867,396 1,743,406 687,358 1,697,444 906,176 (985,828) (2,827,338) (844,656) (709,520) (592,818) (415,217) ---------- ---------- ---------- --------- --------- --------- 3,295,967 11,520,986 4,424,009 1,978,122 2,346,360 1,567,159 ========== ========== ========== ========= ========= ========= 2,709,428 5,366,963 2,995,187 1,848,336 219,792 456,316 1,578,452 3,700,863 880,371 209,233 1,076,397 790,365 (1,181,806) (586,898) (350,299) (57,285) (54,455) (170,481) ---------- ---------- ---------- --------- --------- --------- 3,106,074 8,480,928 3,525,259 2,000,284 1,241,734 1,076,200 ========== ========== ========== ========= ========= =========
T. ROWE PRICE LARGE CAP GROWTH INVESTMENT DIVISION ------------------- 3,297,088 940,963 (769,988) ---------- 3,468,063 ========== 3,290,117 1,152,778 (1,145,807) ---------- 3,297,088 ========== 2,852,995 1,407,833 (970,711) ---------- 3,290,117 ========== 2,123,783 1,288,960 (559,748) ---------- 2,852,995 ========== 632,411 2,004,268 (512,895) ---------- 2,123,783 ==========
F-99 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, 2005, 2004, 2003, 2002 and 2001 were as follows:
LEHMAN BROTHERS MORGAN STANLEY RUSSELL 2000 MET/PUTNAM AGGREGATE BOND INDEX EAFE INDEX INDEX VOYAGER INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (A) -------------------- ------------------- ------------------- ----------------------- Outstanding at December, 2004... 4,812,639 3,014,776 2,380,540 2,202,130 Activity during 2005: Issued........................ 1,885,856 1,268,548 809,404 254,937 Redeemed...................... (1,078,522) (819,218) (570,657) (2,457,067) ---------- ---------- --------- ---------- Outstanding at December 31, 2005 5,619,973 3,464,106 2,619,287 -- ========== ========== ========= ========== Outstanding at December, 2003... 4,063,920 2,675,762 2,084,869 1,913,297 Activity during 2004: Issued........................ 2,029,620 1,731,659 1,029,824 769,919 Redeemed...................... (1,280,901) (1,392,645) (734,153) (481,086) ---------- ---------- --------- ---------- Outstanding at December 31, 2004 4,812,639 3,014,776 2,380,540 2,202,130 ========== ========== ========= ========== Outstanding at December, 2002... 4,147,462 2,043,759 1,614,358 1,462,795 Activity during 2003: Issued........................ 2,096,788 2,173,974 1,137,815 1,235,498 Redeemed...................... (2,180,330) (1,541,971) (667,304) (784,996) ---------- ---------- --------- ---------- Outstanding at December 31, 2003 4,063,920 2,675,762 2,084,869 1,913,297 ========== ========== ========= ========== Outstanding at December, 2001... 3,152,509 1,351,803 920,213 792,111 Activity during 2002: Issued........................ 1,775,342 1,484,630 1,015,335 1,074,526 Redeemed...................... (780,389) (792,674) (321,190) (403,842) ---------- ---------- --------- ---------- Outstanding at December 31, 2002 4,147,462 2,043,759 1,614,358 1,462,795 ========== ========== ========= ========== Outstanding at December 31, 2000 1,730,248 543,960 512,462 131,399 Activity during 2001: Issued........................ 2,266,805 1,864,843 1,180,953 704,179 Redeemed...................... (844,544) (1,057,000) (773,202) (43,467) ---------- ---------- --------- ---------- Outstanding at December 31, 2001 3,152,509 1,351,803 920,213 792,111 ========== ========== ========= ==========
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-100
JENNISON BLACKROCK METLIFE MID FRANKLIN TEMPLETON BLACKROCK DAVIS GROWTH STRATEGIC VALUE CAP STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE VENTURE VALUE INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- 4,164,014 2,658,110 440,124 271,012 1,365,956 1,299,954 1,327,411 949,998 163,769 238,963 643,359 (2,312) (1,005,489) (622,167) (128,927) (113,868) (269,331) --------- ---------- --------- -------- -------- --------- 1,297,642 4,485,936 2,985,941 474,966 396,107 1,739,984 ========= ========== ========= ======== ======== ========= -- 3,371,798 2,338,101 328,803 102,570 1,321,574 -- 1,705,456 1,211,510 240,018 263,903 446,367 -- (913,240) (891,501) (128,697) (95,461) (401,985) --------- ---------- --------- -------- -------- --------- -- 4,164,014 2,658,110 440,124 271,012 1,365,956 ========= ========== ========= ======== ======== ========= -- 2,598,639 1,762,240 198,385 23,496 900,662 -- 1,831,813 1,300,500 265,917 146,238 650,200 -- (1,058,654) (724,639) (135,499) (67,164) (229,288) --------- ---------- --------- -------- -------- --------- -- 3,371,798 2,338,101 328,803 102,570 1,321,574 ========= ========== ========= ======== ======== ========= -- 1,316,864 866,858 51,873 -- 297,193 -- 1,943,755 1,231,436 214,974 27,193 753,643 -- (661,980) (336,054) (69,162) (3,697) (150,174) --------- ---------- --------- -------- -------- --------- -- 2,598,639 1,762,240 197,685 23,496 900,662 ========= ========== ========= ======== ======== ========= -- 163,715 209,870 -- -- 38,970 -- 1,201,369 693,141 54,353 -- 267,331 -- (48,220) (36,153) (2,480) -- (9,108) --------- ---------- --------- -------- -------- --------- -- 1,316,864 866,858 51,873 -- 297,193 ========= ========== ========= ======== ======== =========
LOOMIS SAYLES SMALL CAP INVESTMENT DIVISION ------------------- 37,547 13,626 (11,195) ------- 39,978 ======= 30,184 16,531 (9,168) ------- 37,547 ======= 18,232 21,304 (9,352) ------- 30,184 ======= 10,705 12,460 (4,933) ------- 18,232 ======= 2,113 9,852 (1,260) ------- 10,705 =======
F-101 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
BLACKROCK MFS BLACKROCK FI LEGACY LARGE CAP GROWTH INVESTORS TRUST BOND INCOME VALUE LEADERS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- ------------------- Outstanding at December, 2004... 851,014 366,699 4,716,266 101,071 Activity during 2005: Issued........................ 506,273 159,329 1,284,065 221,903 Redeemed...................... (156,106) (100,164) (989,587) (74,002) --------- -------- ---------- ------- Outstanding at December 31, 2005 1,201,181 425,864 5,010,744 248,972 ========= ======== ========== ======= Outstanding at December, 2003... 721,385 185,957 5,516,605 48,986 Activity during 2004: Issued........................ 210,673 271,608 1,298,199 78,162 Redeemed...................... (81,044) (90,867) (2,098,538) (26,077) --------- -------- ---------- ------- Outstanding at December 31, 2004 851,014 366,699 4,716,266 101,071 ========= ======== ========== ======= Outstanding at December, 2002... 589,478 103,733 5,564,010 11,904 Activity during 2003: Issued........................ 200,025 272,147 1,493,801 75,250 Redeemed...................... (68,118) (189,922) (1,541,206) (38,168) --------- -------- ---------- ------- Outstanding at December 31, 2003 721,385 185,957 5,516,605 48,986 ========= ======== ========== ======= Outstanding at December, 2001... 6,142 42,646 4,202,226 2,905 Activity during 2002: Issued........................ 624,223 110,194 2,093,319 14,522 Redeemed...................... (40,887) (49,107) (731,534) (5,523) --------- -------- ---------- ------- Outstanding at December 31, 2002 589,478 103,733 5,564,010 11,904 ========= ======== ========== ======= Outstanding at December 31, 2000 -- -- 3,979,594 -- Activity during 2001: Issued........................ 6,142 46,829 1,197,151 2,905 Redeemed...................... -- (4,183) (974,519) -- --------- -------- ---------- ------- Outstanding at December 31, 2001 6,142 42,646 4,202,226 2,905 ========= ======== ========== =======
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-102
SALOMON BROTHERS HARRIS OAKMARK STRATEGIC BOND SALOMON BROTHERS BLACKROCK MFS METLIFE FOCUSED VALUE OPPORTUNITIES U.S. GOVERNMENT MONEY MARKET TOTAL RETURN CONSERVATIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION (B) ------------------- ------------------- ------------------- ------------------- ------------------- ----------------------- 153,755 595,935 705,185 1,880,485 69,547 -- 71,513 474,609 399,842 380,493 201,160 53,570 (43,103) (227,248) (225,455) (500,219) (80,601) -- ------- -------- -------- ---------- ------- ------ 182,165 843,296 879,572 1,760,759 190,106 53,570 ======= ======== ======== ========== ======= ====== 115,343 374,682 559,100 1,760,371 -- -- 73,501 412,201 424,585 965,141 78,798 -- (35,089) (190,947) (278,500) (845,027) (9,251) -- ------- -------- -------- ---------- ------- ------ 153,755 595,935 705,185 1,880,485 69,547 -- ======= ======== ======== ========== ======= ====== 76,067 177,044 340,014 1,980,526 -- -- 72,160 429,416 625,967 526,412 -- -- (32,884) (231,778) (406,881) (746,567) -- -- ------- -------- -------- ---------- ------- ------ 115,343 374,682 559,100 1,760,371 -- -- ======= ======== ======== ========== ======= ====== 22,681 41,474 71,098 2,156,130 -- -- 71,897 194,389 393,248 1,769,735 -- -- (18,511) (58,819) (124,332) (1,945,339) -- -- ------- -------- -------- ---------- ------- ------ 76,067 177,044 340,014 1,980,526 -- -- ======= ======== ======== ========== ======= ====== -- -- -- 1,478,851 -- -- 23,760 42,074 99,284 2,982,743 -- -- (1,079) (600) (28,186) (2,305,464) -- -- ------- -------- -------- ---------- ------- ------ 22,681 41,474 71,098 2,156,130 -- -- ======= ======== ======== ========== ======= ======
METLIFE CONSERVATIVE TO MODERATE ALLOCATION INVESTMENT DIVISION (B) ----------------------- -- 65,370 -- ------ 65,370 ====== -- -- -- ------ -- ====== -- -- -- ------ -- ====== -- -- -- ------ -- ====== -- -- -- ------ -- ======
F-103 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
METLIFE METLIFE METLIFE JANUS ASPEN MODERATE ALLOCATION MODERATE TO AGGRESSIVE AGGRESSIVE ALLOCATION LARGE CAP GROWTH INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) INVESTMENT DIVISION ----------------------- ----------------------- ----------------------- ------------------- Outstanding at December, 2004...... -- -- -- 509,009 Activity during 2005: Issued........................... 165,720 249,839 49,908 87,782 Redeemed......................... -- -- -- (33,138) ------- ------- ------ -------- Outstanding at December 31, 2005... 165,720 249,839 49,908 563,653 ======= ======= ====== ======== Outstanding at December, 2003...... -- -- -- 435,309 Activity during 2004: Issued........................... -- -- -- 109,707 Redeemed......................... -- -- -- (36,007) ------- ------- ------ -------- Outstanding at December 31, 2004... -- -- -- 509,009 ======= ======= ====== ======== Outstanding at December, 2002...... -- -- -- 354,373 Activity during 2003: Issued........................... -- -- -- 122,611 Redeemed......................... -- -- -- (41,675) ------- ------- ------ -------- Outstanding at December 31, 2003... -- -- -- 435,309 ======= ======= ====== ======== Outstanding at December, 2001...... -- -- -- 235,634 Activity during 2002: Issued........................... -- -- -- 149,284 Redeemed......................... -- -- -- (30,545) ------- ------- ------ -------- Outstanding at December 31, 2002... -- -- -- 354,373 ======= ======= ====== ======== Outstanding at December 31, 2000... -- -- -- 472,795 Activity during 2001: Issued........................... -- -- -- 83,668 Redeemed......................... -- -- -- (320,829) ------- ------- ------ -------- Outstanding at December 31, 2001. -- -- -- 235,634 ======= ======= ====== ========
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-104
JANUS ASPEN AIM V.I. AIM V.I. AIM V.I. FRANKLIN TEMPLETON FRANKLIN MUTUAL BALANCED CORE STOCK GOVERNMENT SECURITIES REAL ESTATE FOREIGN SECURITIES DISCOVERY SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------- ------------------- ------------------- -------------------- 22 23,651 420 54,709 444,204 -- 171 4,977 1,092 25,913 97,898 9,276 (6) (6,776) (743) (16,625) (53,625) (138) --- ------ ----- ------- -------- ----- 187 21,852 769 63,997 488,477 9,138 === ====== ===== ======= ======== ===== -- 18,859 -- 10,108 403,047 -- 23 5,644 428 54,984 183,668 -- (1) (852) (8) (10,383) (142,511) -- --- ------ ----- ------- -------- ----- 22 23,651 420 54,709 444,204 -- === ====== ===== ======= ======== ===== -- 15,365 -- 14,055 344,105 -- -- 5,885 -- 1,901 117,960 -- -- (2,391) -- (5,848) (59,018) -- --- ------ ----- ------- -------- ----- -- 18,859 -- 10,108 403,047 -- === ====== ===== ======= ======== ===== -- 12,483 -- 7,465 188,768 -- -- 4,795 -- 60,533 183,240 -- -- (1,913) -- (53,943) (27,903) -- --- ------ ----- ------- -------- ----- -- 15,365 -- 14,055 344,105 -- === ====== ===== ======= ======== ===== -- 2,456 -- 9,542 98,800 -- -- 11,546 -- 595 118,324 -- -- (1,519) -- (2,672) (28,356) -- --- ------ ----- ------- -------- ----- -- 12,483 -- 7,465 188,768 -- === ====== ===== ======= ======== =====
ALLIANCEBERNSTEIN GROWTH AND INCOME INVESTMENT DIVISION ------------------- 274,728 77,584 (14,278) ------- 338,034 ======= 197,000 90,253 (12,524) ------- 274,728 ======= 150,344 67,017 (20,361) ------- 197,000 ======= 64,535 95,064 (9,255) ------- 150,344 ======= 5,619 60,373 (1,457) ------- 64,535 =======
F-105 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
ALLIANCEBERNSTEIN FIDELITY VIP FIDELITY VIP FIDELITY VIP GLOBAL TECHNOLOGY CONTRAFUND ASSET MANAGER GROWTH GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- Outstanding at December, 2004... 4,324 77,301 83,331 57,359 Activity during 2005: Issued........................ 4,400 24,890 24,061 50,495 Redeemed...................... (171) (27,777) (26,640) (29,880) ------- ------- ------- ------- Outstanding at December 31, 2005 8,553 74,414 80,752 77,974 ======= ======= ======= ======= Outstanding at December, 2003... 10,005 97,404 53,872 47,360 Activity during 2004: Issued........................ 1,377 19,035 37,333 20,007 Redeemed...................... (7,058) (39,138) (7,874) (10,008) ------- ------- ------- ------- Outstanding at December 31, 2004 4,324 77,301 83,331 57,359 ======= ======= ======= ======= Outstanding at December, 2002... 5,945 34,844 19,894 28,321 Activity during 2003: Issued........................ 4,561 90,132 38,810 20,181 Redeemed...................... (501) (27,572) (4,832) (1,142) ------- ------- ------- ------- Outstanding at December 31, 2003 10,005 97,404 53,872 47,360 ======= ======= ======= ======= Outstanding at December, 2001... 2,312 3,000 12,946 12,892 Activity during 2002: Issued........................ 3,633 32,421 15,169 18,447 Redeemed...................... -- (577) (8,221) (3,018) ------- ------- ------- ------- Outstanding at December 31, 2002 5,945 34,844 19,894 28,321 ======= ======= ======= ======= Outstanding at December 31, 2000 -- -- -- -- Activity during 2001: Issued........................ 26,384 3,068 13,596 16,938 Redeemed...................... (24,072) (68) (650) (4,046) ------- ------- ------- ------- Outstanding at December 31, 2001 2,312 3,000 12,946 12,892 ======= ======= ======= =======
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-106
FIDELITY VIP FIDELITY VIP AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS T. ROWE PRICE INVESTMENT GRADE BOND EQUITY-INCOME GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION MID-CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------- ------------------- ------------------- ------------------- --------------------------- ------------------- 1,268 928 656,749 811,401 676,191 856,351 2,025 19,013 429,219 460,047 728,909 562,461 (137) (17,751) (187,834) (236,401) (316,497) (286,778) ----- ------- -------- --------- --------- --------- 3,156 2,190 898,134 1,035,047 1,088,603 1,132,034 ===== ======= ======== ========= ========= ========= -- -- 417,055 524,999 377,860 526,964 1,268 928 378,500 469,450 517,429 519,499 -- -- (138,806) (183,048) (219,098) (190,112) ----- ------- -------- --------- --------- --------- 1,268 928 656,749 811,401 676,191 856,351 ===== ======= ======== ========= ========= ========= -- -- 221,157 286,757 202,753 293,610 -- -- 312,863 387,399 374,722 387,383 -- -- (116,965) (149,157) (199,615) (154,029) ----- ------- -------- --------- --------- --------- -- -- 417,055 524,999 377,860 526,964 ===== ======= ======== ========= ========= ========= -- -- 52,867 68,422 49,334 67,548 -- -- 216,988 285,959 225,504 327,750 -- -- (48,698) (67,623) (72,085) (101,688) ----- ------- -------- --------- --------- --------- -- -- 221,157 286,757 202,753 293,610 ===== ======= ======== ========= ========= ========= -- -- -- -- -- -- -- -- 66,595 76,008 55,145 70,583 -- -- (13,728) (7,587) (5,811) (3,035) ----- ------- -------- --------- --------- --------- -- -- 52,867 68,422 49,334 67,548 ===== ======= ======== ========= ========= =========
MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION ------------------- 234,898 152,985 (93,776) -------- 294,107 ======== 151,293 415,775 (332,169) -------- 234,898 ======== 95,230 397,254 (341,191) -------- 151,293 ======== 27,998 238,633 (171,401) -------- 95,230 ======== -- 112,621 (84,623) -------- 27,998 ========
F-107 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
PIMCO RCM LORD ABBETT LAZARD TOTAL RETURN GLOBAL TECHNOLOGY BOND DEBENTURE MID CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- Outstanding at December, 2004... 1,483,392 1,273,073 1,015,708 171,772 Activity during 2005: Issued........................ 818,646 518,666 328,926 136,196 Redeemed...................... (452,789) (456,796) (259,490) (81,672) --------- --------- --------- ------- Outstanding at December 31, 2005 1,849,249 1,334,943 1,085,144 226,296 ========= ========= ========= ======= Outstanding at December, 2003... 1,041,644 932,206 963,357 91,521 Activity during 2004: Issued........................ 865,523 888,971 444,003 171,923 Redeemed...................... (423,775) (548,104) (391,651) (91,672) --------- --------- --------- ------- Outstanding at December 31, 2004 1,483,392 1,273,073 1,015,708 171,772 ========= ========= ========= ======= Outstanding at December, 2002... 533,674 415,928 812,767 29,655 Activity during 2003: Issued........................ 1,055,297 896,499 477,823 95,790 Redeemed...................... (547,327) (380,221) (327,234) (33,924) --------- --------- --------- ------- Outstanding at December 31, 2003 1,041,644 932,206 963,357 91,521 ========= ========= ========= ======= Outstanding at December, 2001... 103,173 121,238 810,764 -- Activity during 2002: Issued........................ 622,404 436,505 216,200 32,741 Redeemed...................... (191,903) (141,815) (214,197) (3,086) --------- --------- --------- ------- Outstanding at December 31, 2002 533,674 415,928 812,767 29,655 ========= ========= ========= ======= Outstanding at December 31, 2000 -- -- 602,510 -- Activity during 2001: Issued........................ 123,449 127,903 291,500 -- Redeemed...................... (20,276) (6,665) (83,247) -- --------- --------- --------- ------- Outstanding at December 31, 2001 103,173 121,238 810,764 -- ========= ========= ========= =======
-------- (a) For the Period January 1, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-108
MET/AIM HARRIS OAKMARK JANUS LORD ABBETT NEUBERGER BERMAN LORD ABBETT SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH GROWTH AND INCOME REAL ESTATE MID-CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 101,110 289,245 741,720 5,975 151,740 21 72,111 536,478 290,526 943 536,011 2,575 (44,000) (188,930) (187,721) (2,550) (184,319) (53) ------- -------- --------- ------ -------- ----- 129,221 636,793 844,525 4,368 503,432 2,543 ======= ======== ========= ====== ======== ===== 60,439 71,528 582,357 2,532 -- -- 79,501 431,218 350,164 3,572 172,116 21 (38,830) (213,501) (190,802) (128) (20,376) (1) ------- -------- --------- ------ -------- ----- 101,110 289,245 741,720 5,975 151,740 21 ======= ======== ========= ====== ======== ===== 15,245 17,743 389,441 -- -- -- 98,694 179,732 1,093,048 2,572 -- -- (53,500) (125,947) (900,132) (40) -- -- ------- -------- --------- ------ -------- ----- 60,439 71,528 582,357 2,532 -- -- ======= ======== ========= ====== ======== ===== -- -- 135,682 -- -- -- 16,778 22,058 413,804 -- -- -- (1,533) (4,315) (160,044) -- -- -- ------- -------- --------- ------ -------- ----- 15,245 17,743 389,441 -- -- -- ======= ======== ========= ====== ======== ===== -- -- -- -- -- -- -- -- 162,214 -- -- -- -- -- (26,533) -- -- -- ------- -------- --------- ------ -------- ----- -- -- 135,682 -- -- -- ======= ======== ========= ====== ======== =====
THIRD AVENUE SMALL CAP VALUE INVESTMENT DIVISION ------------------- 366 1,821 (114) ----- 2,073 ===== -- 373 (7) ----- 366 ===== -- -- -- ----- -- ===== -- -- -- ----- -- ===== -- -- -- ----- -- =====
F-109 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
OPPENHEIMER CAPITAL AMERICAN CENTURY DELAWARE DREYFUS EMERGING APPRECIATION VISTA SMALL CAP VALUE LEADERS INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- ------------------- Outstanding at December, 2004... -- -- -- -- Activity during 2005: Issued........................ 13,476 1,295 10,566 940 Redeemed...................... (2,888) (43) (690) (24) ------ ----- ------ --- Outstanding at December 31, 2005 10,588 1,252 9,876 916 ====== ===== ====== === Outstanding at December, 2003... -- -- -- -- Activity during 2004: Issued........................ -- -- -- -- Redeemed...................... -- -- -- -- ------ ----- ------ --- Outstanding at December 31, 2004 -- -- -- -- ====== ===== ====== === 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-110
DREYFUS DREYFUS GOLDMAN SACHS GOLDMAN SACHS MFS VAN KAMPEN INTERNATIONAL VALUE APPRECIATION MID CAP VALUE CORE SMALL CAP EQUITY HIGH INCOME GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- ------------------- ------------------- 1,371 324 1,123 -- 4,700 -- 25,402 1,387 9,745 4,244 1,719 1,280 (12,214) (120) (7,099) (5) (181) (8) ------- ----- ------ ----- ----- ----- 14,559 1,591 3,769 4,239 6,238 1,272 ======= ===== ====== ===== ===== ===== -- -- -- -- -- -- 1,371 336 1,123 -- 4,700 -- -- (12) -- -- -- -- ------- ----- ------ ----- ----- ----- 1,371 324 1,123 -- 4,700 -- ======= ===== ====== ===== ===== ===== -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ----- ------ ----- ----- ----- -- -- -- -- -- -- ======= ===== ====== ===== ===== ===== -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ----- ------ ----- ----- ----- -- -- -- -- -- -- ======= ===== ====== ===== ===== ===== -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ------- ----- ------ ----- ----- ----- -- -- -- -- -- -- ======= ===== ====== ===== ===== =====
WELLS FARGO ADVANTAGE TOTAL RETURN BOND INVESTMENT DIVISION --------------------- -- 1,631 (11) ----- 1,620 ===== -- -- -- ----- -- ===== -- -- -- ----- -- ===== -- -- -- ----- -- ===== -- -- -- ----- -- =====
F-111 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, 2005, 2004, 2003, 2002 and 2001 are as follows:
WELLS FARGO ADVANTAGE WELLS FARGO ADVANTAGE LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION --------------------- --------------------- Outstanding at December, 2004... 416 402 Activity during 2005: Issued........................ 464 422 Redeemed...................... (108) (97) ---- --- Outstanding at December 31, 2005 772 727 ==== === Outstanding at December, 2003... -- -- Activity during 2004: Issued........................ 424 410 Redeemed...................... (8) (8) ---- --- Outstanding at December 31, 2004 416 402 ==== === 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-112 [THIS PAGE INTENTIONALLY LEFT BLANK] 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
BLACKROCK BLACKROCK BLACKROCK INVESTMENT TRUST DIVERSIFIED AGGRESSIVE GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2005 Units................................................. 16,488,159 13,638,816 11,502,614 Unit Fair Value, Lowest to Highest (1)................ $12.13 to $37.35 $13.18 to $33.65 $14.64 to $20.73 Net Assets (In Thousands)............................. $401,557 $319,750 $222,220 Investment Income Ratio to Net Assets (2)............. 1.09% 1.57% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.45% to 0.90% 0.40% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 2.67% to 3.59% 2.13% to 3.05% 9.72% to 10.70% 2004 Units................................................. 16,507,025 13,455,017 11,775,258 Unit Fair Value, Lowest to Highest (1)................ $11.71 to $36.38 $12.79 to $32.95 $13.23 to $18.89 Net Assets (In Thousands)............................. $399,817 $315,177 $207,749 Investment Income Ratio to Net Assets (2)............. 0.71% 1.83% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.45% to 0.90% 0.40% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 9.87% to 10.86% 7.54% to 8.51% 11.97% to 12.98% 2003 Units................................................. 16,150,806 12,880,974 11,833,051 Unit Fair Value, Lowest to Highest (1)................ $10.57 to $33.12 $11.79 to $30.64 $11.71 to $16.87 Net Assets (In Thousands)............................. $367,087 $289,033 $187,268 Investment Income Ratio to Net Assets (2)............. 0.83% 3.73% 0.00% 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)................... 29.08% to 30.24% 19.48% to 20.56% 39.53% to 40.79% 2002 Units................................................. 15,059,725 12,267,711 11,447,188 Unit Fair Value, Lowest to Highest (1)................ $8.11 to $25.66 $9.78 to $25.64 $8.32 to $12.09 Net Assets (In Thousands)............................. $276,980 $238,020 $130,816 Investment Income Ratio to Net Assets (2)............. 0.54% 2.27% 0.00% 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)................... -27% to -26% -15% to -14% -29% 2001 Units................................................. 13,263,581 11,138,476 10,502,846 Unit Fair Value, Lowest to Highest (1)................ $10.98 to $35.04 $11.35 to $30.04 $11.67 to $17.12 Net Assets (In Thousands)............................. $356,701 $265,724 $171,692 Investment Income Ratio to Net Assets (2)............. 13.53% 9.67% 24.84% 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)................... -18% to -17% -7% to -6% -24%
METLIFE STOCK INDEX INVESTMENT DIVISION ------------------- 2005 Units................................................. 32,156,989 Unit Fair Value, Lowest to Highest (1)................ $11.08 to $33.24 Net Assets (In Thousands)............................. $605,569 Investment Income Ratio to Net Assets (2)............. 1.56% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 3.71% to 4.64% 2004 Units................................................. 29,475,869 Unit Fair Value, Lowest to Highest (1)................ $10.59 to $32.05 Net Assets (In Thousands)............................. $548,176 Investment Income Ratio to Net Assets (2)............. 0.83% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 9.55% to 10.53% 2003 Units................................................. 25,746,955 Unit Fair Value, Lowest to Highest (1)................ $9.58 to $29.26 Net Assets (In Thousands)............................. $457,114 Investment Income Ratio to Net Assets (2)............. 1.65% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.45% to 0.90% Total Return, Lowest to Highest (4)................... 27.06% to 28.20% 2002 Units................................................. 22,139,983 Unit Fair Value, Lowest to Highest (1)................ $7.48 to $23.03 Net Assets (In Thousands)............................. $326,228 Investment Income Ratio to Net Assets (2)............. 1.61% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.45% to 0.90% Total Return, Lowest to Highest (4)................... -23% to -22% 2001 Units................................................. 17,014,963 Unit Fair Value, Lowest to Highest (1)................ $9.62 to $29.91 Net Assets (In Thousands)............................. $346,931 Investment Income Ratio to Net Assets (2)............. 1.17% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.45% to 0.90% Total Return, Lowest to Highest (4)................... -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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-114
FI FI T. ROWE PRICE OPPENHEIMER HARRIS OAKMARK NEUBERGER BERMAN INTERNATIONAL STOCK MID CAP OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY LARGE CAP VALUE MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------- ------------------- ------------------- ------------------- ------------------- 3,294,341 14,520,500 5,103,342 2,314,718 4,085,993 2,912,765 $13.71 to $18.97 $7.12 to $20.08 $8.20 to $17.21 $17.48 to $19.47 $12.55 to $15.72 $18.79 to $26.61 $56,856 $247,746 $80,632 $41,605 $54,445 $63,152 0.60% 0.00% 0.00% 0.55% 0.70% 8.48% 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% 0.40% to 0.90% 16.95% to 18.00% 5.97% to 6.92% 10.02% to 11.01% 15.19% to 16.22% -2.26% to -1.38% 11.27% to 12.27% 3,241,370 14,284,163 5,056,605 2,201,362 3,767,330 2,435,399 $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 $48,075 $229,326 $72,034 $34,182 $51,133 $47,215 1.32% 0.53% 0.00% 1.52% 0.49% 2.71% 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% 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% 21.81% to 22.91% 3,484,064 13,347,672 4,901,924 2,140,330 3,060,299 1,946,013 $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 $13.86 to $19.29 $43,984 $184,078 $63,189 $28,696 $37,504 $30,946 0.65% 0.00% 0.00% 2.04% 0.00% 0.32% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% 26.90% to 28.04% 33.38% to 35.10% 37.24% to 40.87% 29.29% to 30.45% 24.38% to 25.49% 35.30% to 36.52% 3,295,967 11,520,986 4,424,009 1,978,122 2,346,360 1,567,159 $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 $10.24 to $14.13 $32,966 $119,020 $40,681 $20,476 $23,073 $18,286 0.89% 0.00% 0.51% 1.68% 3.31% 0.31% 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% 0.45% to 0.90% -18% to -17% -30% to -29% -29% to -27% -17% to -16% -15% to -14% -10% 3,106,074 8,480,928 3,525,259 2,000,284 1,241,734 1,076,200 $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 $11.44 to $15.63 $38,281 $125,185 $44,763 $21,106 $14,336 $14,115 3.67% 0.00% 0.05% to 8.16% 11.32% 0.15% 1.94% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.45% to 0.90% 0.60% to 0.90% -21% to -20% -37% to -33% -10% to 2% -16% to -15% 17% to 20% -3% to 0%
T. ROWE PRICE LARGE CAP GROWTH INVESTMENT DIVISION ------------------- 3,468,063 $9.47 to $14.21 $41,400 0.54% 0.40% to 0.90% 5.64% to 6.59% 3,297,088 $8.97 to $13.33 $36,588 0.21% 0.40% to 0.90% 8.94% to 9.93% 3,290,117 $8.23 to $12.13 $33,520 0.11% 0.60% to 0.90% 29.64% to 30.81% 2,852,995 $6.35 to $9.27 $22,095 0.26% 0.45% to 0.90% -24% to 23% 2,123,783 $8.35 to $12.08 $21,111 0.06% 0.60% to 0.90% -11% to -6%
F-115 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 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 -------------------- ------------------- ------------------- 2005 Units................................................. 5,619,973 3,464,106 2,619,287 Unit Fair Value, Lowest to Highest (1)................ $13.32 to 14.53 $10.45 to 14.05 $13.00 to $17.96 Net Assets (In Thousands)............................. $80,547 $42,458 $42,637 Investment Income Ratio to Net Assets (2)............. 3.76% 1.59% 4.34% 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)................... 1.16% to 2.06% 12.24% to 13.24% 3.57% to 4.50% 2004 Units................................................. 4,812,639 3,014,776 2,380,540 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................................................. 4,063,920 2,675,762 2,084,869 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................................................. 4,147,462 2,043,759 1,614,358 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................................................. 3,152,509 1,351,803 920,213 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 (A) ----------------------- 2005 Units................................................. -- Unit Fair Value, Lowest to Highest (1)................ $-- Net Assets (In Thousands)............................. $-- Investment Income Ratio to Net Assets (2)............. 0.97% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.90% Total Return, Lowest to Highest (4)................... 11.65% to 12.65% 2004 Units................................................. 2,202,130 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................................................. 1,913,297 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................................................. 1,462,795 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................................................. 792,111 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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-116
JENNISON BLACKROCK METLIFE MID FRANKLIN TEMPLETON BLACKROCK DAVIS GROWTH STRATEGIC VALUE CAP STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE VENTURE VALUE INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 1,297,642 4,485,936 2,985,941 474,966 396,107 1,739,984 $5.65 to $12.19 $18.58 to $20.28 $14.39 to $15.80 $8.20 to $10.83 $12.63 to $13.05 $12.13 to $35.19 $13,084 $90,123 $46,523 $5,108 $5,137 $43,993 0.00% 6.44% 5.55% 3.21% 1.82% 0.65% 0.40% to 0.90% 0.40% to 0.90% 0.48% to 0.90% 0.90% 0.90% 0.40% to 0.90% 20.77% to 21.49% 3.23% to 4.15% 11.28% to 12.27% 3.72% to 10.71% 5.04% to 5.98% 9.32% to 10.30% -- 4,164,014 2,658,110 440,124 271,012 1,365,956 $-- $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% -- 3,371,798 2,338,101 328,803 102,570 1,321,574 $-- $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% -- 2,598,639 1,762,240 197,685 23,496 900,662 $-- $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% -- 1,316,864 866,858 51,873 -- 297,193 $-- $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 SMALL CAP INVESTMENT DIVISION ------------------- 39,978 $11.54 to $255.61 $8,114 1.14% 0.40% to 0.90% 6.00% to 6.96% 37,547 $10.79 to $238.98 $6,406 0.00% 0.40% to 0.90% 15.31% to 16.35% 30,184 $9.27 to $205.39 $4,423 0.00% 0.60% to 0.90% 35.25% to 36.47% 18,232 $6.80 to $150.51 $2,408 0.11% 0.50% to 0.90% -22% 10,705 $8.66 to $191.87 $1,926 7.28% 0.60% to 0.90% -9% to -4%
F-117 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
BLACKROCK MFS BLACKROCK LEGACY LARGE CAP GROWTH INVESTORS TRUST BOND INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- 2005 Units................................................. 1,201,181 425,864 5,010,744 Unit Fair Value, Lowest to Highest (1)................ $7.96 to $11.96 $9.51 to $9.95 $13.78 to $28.49 Net Assets (In Thousands)............................. $10,109 $4,217 $94,693 Investment Income Ratio to Net Assets (2)............. 0.39% 0.76% 5.06% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.90% 0.48% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 6.05% to 7.00% 6.32% to 7.27% 1.50% to 2.41% 2004 Units................................................. 851,014 366,699 4,716,266 Unit Fair Value, Lowest to Highest (1)................ $7.44 to $11.17 $8.87 to $9.28 $13.46 to $28.07 Net Assets (In Thousands)............................. $6,458 $3,387 $89,174 Investment Income Ratio to Net Assets (2)............. 0.00% 0.39% 5.80% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.90% 0.48% to 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 8.81% to 11.74% 10.37% to 11.37% 3.50% to 4.43% 2003 Units................................................. 721,385 185,957 5,516,605 Unit Fair Value, Lowest to Highest (1)................ $6.84 $7.96 to $8.33 $12.89 to $27.12 Net Assets (In Thousands)............................. $4,933 $1,544 $96,720 Investment Income Ratio to Net Assets (2)............. 0.06% 0.25% 3.06% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (4)................... 35.15% 20.76% to 21.85% 4.91% to 5.85% 2002 Units................................................. 589,478 103,733 5,564,010 Unit Fair Value, Lowest to Highest (1)................ $5.06 $6.54 to $6.84 $12.18 to $25.85 Net Assets (In Thousands)............................. $2,983 $694 $93,158 Investment Income Ratio to Net Assets (2)............. 0.00% 0.72% 5.72% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% to 0.90% 0.60% to 0.90% Total Return, Lowest to Highest (4)................... -33% -21% to -20% 7% to 8% 2001 Units................................................. 6,142 42,646 4,202,226 Unit Fair Value, Lowest to Highest (1)................ $7.57 $8.19 to $8.57 $11.23 to $24.08 Net Assets (In Thousands)............................. $45 $322 $79,483 Investment Income Ratio to Net Assets (2)............. 0.00% 0.00% 5.64% to 7.28% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% to 0.90% .45% to 0.90% Total Return, Lowest to Highest (4)................... -16% -14% to -3% 7% to 8%
FI VALUE LEADERS INVESTMENT DIVISION ------------------- 2005 Units................................................. 248,972 Unit Fair Value, Lowest to Highest (1)................ $10.54 to $13.29 Net Assets (In Thousands)............................. $3,263 Investment Income Ratio to Net Assets (2)............. 1.04% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 9.71% to 10.69% 2004 Units................................................. 101,071 Unit Fair Value, Lowest to Highest (1)................ $9.52 to $12.01 Net Assets (In Thousands)............................. $1,191 Investment Income Ratio to Net Assets (2)............. 1.10% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 12.71% to 13.73% 2003 Units................................................. 48,986 Unit Fair Value, Lowest to Highest (1)................ $8.37 to $10.56 Net Assets (In Thousands)............................. $505 Investment Income Ratio to Net Assets (2)............. 0.52% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% to .90% Total Return, Lowest to Highest (4)................... 25.79% to 26.92% 2002 Units................................................. 11,904 Unit Fair Value, Lowest to Highest (1)................ $6.59 to $8.32 Net Assets (In Thousands)............................. $93 Investment Income Ratio to Net Assets (2)............. 0.89% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% to .90% Total Return, Lowest to Highest (4)................... -19% to -17% 2001 Units................................................. 2,905 Unit Fair Value, Lowest to Highest (1)................ $8.19 Net Assets (In Thousands)............................. $25 Investment Income Ratio to Net Assets (2)............. 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... -11%
-------- (1) Metropolitan Life sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy owners cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-118
HARRIS OAKMARK SALOMON BROTHERS SALOMON BROTHERS BLACKROCK MFS FOCUSED VALUE STRATEGIC BOND OPPORTUNITIES U.S. GOVERNMENT MONEY MARKET TOTAL RETURN INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ---------------------------- ------------------- ------------------- ------------------- 182,165 843,296 879,572 1,760,759 190,106 $260.95 to $272.09 $14.56 to $15.19 $13.19 to $13.75 $12.92 to $16.24 $11.21 to $11.38 $49,252 $12,709 $12,014 $28,028 $2,157 1.03% 4.86% 3.15% 2.78% 2.68% 0.90% 0.90% 0.90% 0.40% to 0.90% 0.40% to 0.90% 9.00% to 9.98% 1.92% to 2.83% 0.82% to 1.72% 1.97% to 2.89% 2.20% to 3.12% 153,755 595,935 705,185 1,880,485 69,547 $239.40 to $247.40 $14.29 to $14.77 $13.08 to $13.52 $15.36 to $15.93 $10.97 to $11.04 $37,845 $8,743 $9,478 $29,162 $767 1.00% 2.66% 2.24% 1.03% 0.00% 0.90% 0.90% 0.90% 0.40% to 0.90% 0.40% to 0.90% 8.95% to 9.93% 5.66% to 6.61% 2.09% to 3.01% 0.08% to 0.99% 9.73% to 10.39% 115,343 374,682 559,100 1,760,371 -- $219.73 to $225.05 $13.52 to $13.85 $12.82 to $13.13 $15.21 to $15.92 $-- $25,866 $5,163 $7,305 $27,346 $-- 0.12% 1.70% 1.57% 0.78% -- 0.90% 0.90% 0.90% 0.60% to 0.90% -- 31.47% to 32.66% 11.62% to 12.62% 0.77% to 1.68% -0.09% to 0.81% -- 76,067 177,044 340,014 1,980,526 -- $167.13 to $169.65 $12.12 to $12.30 $12.72 to $12.91 $13.09 to $15.93 $-- $12,879 $2,174 $4,365 $30,811 $-- 0.18% 6.33% 3.47% 1.57% -- 0.90% 0.90% 0.90% 0.45% to 0.90% -- -10% to -9% 9% to 10% 7% to 8% 0% to 1% -- 22,681 41,474 71,098 2,156,130 -- $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% --
METLIFE METLIFE CONSERVATIVE CONSERVATIVE ALLOCATION TO MODERATE ALLOCATION INVESTMENT DIVISION (B) INVESTMENT DIVISION (B) ----------------------- ----------------------- 53,570 65,370 $10.35 to $10.41 $10.58 to $10.64 $118 $ 579 0.80% 0.81% 0.90% 0.90% 3.51% to 4.13% 5.80% to 6.43% -- -- $-- $-- $-- $-- -- -- -- -- -- -- -- -- $-- $-- $-- $-- -- -- -- -- -- -- -- -- $-- $-- $-- $-- -- -- -- -- -- -- -- -- $-- $-- $-- $-- -- -- -- -- -- --
F-119 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
METLIFE METLIFE MODERATE TO AGGRESSIVE METLIFE MODERATE ALLOCATION ALLOCATION AGGRESSIVE ALLOCATION INVESTMENT DIVIDION (B) INVESTMENT DIVIDION (B) INVESTMENT DIVIDION (B) ----------------------- ----------------------- ----------------------- 2005 Units................................................. 165,720 249,839 49,908 Unit Fair Value, Lowest to Highest (1)................ $10.80 to $10.87 $11.03 to $11.09 $11.20 to $11.27 Net Assets (In Thousands)............................. $1,449 $ 2,349 $453 Investment Income Ratio to Net Assets (2)............. 0.84% 0.79% 1.27% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% 0.90% Total Return, Lowest to Highest (4)................... 8.02% to 8.66% 10.28% to 10.94% 12.05% to 12.72% 2004 Units................................................. -- -- -- 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)................... -- -- -- 2003 Units................................................. -- -- -- 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................................................. -- -- -- 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................................................. -- -- -- 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)................... -- -- --
JANUS ASPEN LARGE CAP GROWTH INVESTMENT DIVISION ------------------- 2005 Units................................................. 563,653 Unit Fair Value, Lowest to Highest (1)................ $8.75 Net Assets (In Thousands)............................. $4,934 Investment Income Ratio to Net Assets (2)............. 0.33% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.60% Total Return, Lowest to Highest (4)................... 4.29% 2004 Units................................................. 509,009 Unit Fair Value, Lowest to Highest (1)................ $8.39 Net Assets (In Thousands)............................. $4,277 Investment Income Ratio to Net Assets (2)............. 0.15% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.60% Total Return, Lowest to Highest (4)................... 4.52% 2003 Units................................................. 435,309 Unit Fair Value, Lowest to Highest (1)................ $8.03 Net Assets (In Thousands)............................. $3,500 Investment Income Ratio to Net Assets (2)............. 0.10% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... 31.73% 2002 Units................................................. 354,373 Unit Fair Value, Lowest to Highest (1)................ $6.10 Net Assets (In Thousands)............................. $2,163 Investment Income Ratio to Net Assets (2)............. 0.03% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... -27% 2001 Units................................................. 235,634 Unit Fair Value, Lowest to Highest (1)................ $8.30 Net Assets (In Thousands)............................. $1,959 Investment Income Ratio to Net Assets (2)............. 6.04% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... -19%
-------- (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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-120
JANUS ASPEN AIM V.I. AIM V.I. AIM V.I. FRANKLIN TEMPLETON FRANKLIN MUTUAL BALANCED CORE STOCK GOVERNMENT SECURITIES REAL ESTATE FOREIGN SECURITIES DISCOVERY SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- --------------------- ------------------- ------------------- -------------------- 187 21,852 769 63,997 488,477 9,138 $11.68 $10.53 $10.73 $27.61 $13.17 $13.31 $2 $230 $8 $1,748 $6,438 $122 2.06% 0.42% 3.80% 5.42% 1.22% 1.34% 0.60% 0.48% 0.40% 0.40% to 0.60% 0.48% to 0.60% 0.40% to 0.48% 7.66% 3.79% 4.57% 15.46% 10.48% 15.97% 22 23,651 420 54,709 444,204 -- $10.85 $10.15 $10.26 $23.91 $11.92 $-- .237 $240 $4 $1,308 $5,300 $-- 3.38% 0.96% 1.39% 4.02% 1.12% -- 0.60% 0.48% 0.40% 0.40% to 0.60% 0.48% to 0.60% -- 8.52% 4.24% 2.60% 34.40% 18.87% -- -- 18,859 -- 10,108 403,047 -- $-- $9.73 $-- $17.79 $10.03 $-- $-- $184 $-- $179 $4,054 $-- -- 1.26% -- 1.49% 1.52% -- -- 0.60% -- 0.60% 0.60% -- -- 22.60% -- 38.82% 32.55% -- -- 15,365 -- 14,055 344,105 -- $-- $7.94 $-- $12.82 $7.57 $-- $-- $125 $-- $179 $2,612 $-- -- 1.74% -- 1.40% 2.03% -- -- 0.60% -- 0.60% 0.60% -- -- -19% -- -6% -18% -- -- 12,483 -- 7,465 188,768 -- $-- $9.81 $-- $12.05 $9.27 $-- $-- $122 $-- $89 $1,767 $-- -- 2.61% -- 1.16% 14.19% -- -- 0.60% -- 0.60% 0.60% -- -- -7% -- 1% -16% --
ALLIANCEBERNSTIEN GROWTH AND INCOME INVESTMENT DIVISION ------------------- 338,034 $12.19 $4,119 1.09% 0.40% to 0.60% 4.62% 274,728 $11.65 $3,200 0.57% 0.48% to 0.60% 11.22% 197,000 $10.47 $2,063 0.70% 0.60% 32.18% 150,344 $7.92 $1,191 3.31% 0.60% -22% 64,535 $10.19 $656 0.91% 0.60% 2%
F-121 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
ALLIANCEBERNSTIEN FIDELITY VIP FIDELITY VIP GLOBAL TECHNOLOGY CONTRAFUND ASSET MANAGER GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- 2005 Units................................................. 8,553 74,414 80,752 Unit Fair Value, Lowest to Highest (1)................ $4.95 $12.38 $8.79 Net Assets (In Thousands)............................. $42 $921 $708 Investment Income Ratio to Net Assets (2)............. 0.00% 0.23% 2.58% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.60% 0.40% to 0.60% 0.48% Total Return, Lowest to Highest (4)................... 3.65% 16.85% 3.79% 2004 Units................................................. 4,324 77,301 83,331 Unit Fair Value, Lowest to Highest (1)................ $4.77 $10.59 $8.47 Net Assets (In Thousands)............................. $21 $819 $704 Investment Income Ratio to Net Assets (2)............. 0.00% 0.21% 2.23% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.48% to 0.60% 0.40% to 0.60% 0.48% Total Return, Lowest to Highest (4)................... 5.09% 15.34% 5.85% 2003 Units................................................. 10,005 97,404 53,872 Unit Fair Value, Lowest to Highest (1)................ $4.54 $9.18 $8.00 Net Assets (In Thousands)............................. $46 $894 $433 Investment Income Ratio to Net Assets (2)............. 0.00% .15% 2.96% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% 0.60% Total Return, Lowest to Highest (4)................... 43.79% 28.35% 23.15% 2002 Units................................................. 5,945 34,844 19,894 Unit Fair Value, Lowest to Highest (1)................ $3.16 $7.16 $6.50 Net Assets (In Thousands)............................. $18 $249 $131 Investment Income Ratio to Net Assets (2)............. 5.08% 0.14% 3.23% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% 0.60% Total Return, Lowest to Highest (4)................... -42% -10% -18% 2001 Units................................................. 2,312 3,000 12,946 Unit Fair Value, Lowest to Highest (1)................ $5.43 $7.96 $7.89 Net Assets (In Thousands)............................. $13 $24 $95 Investment Income Ratio to Net Assets (2)............. 6.23% 0.00% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% 0.60% 0.60% Total Return, Lowest to Highest (4)................... -35% -12% -10%
FIDELITY VIP GROWTH INVESTMENT DIVISION ------------------- 2005 Units................................................. 77,974 Unit Fair Value, Lowest to Highest (1)................ $6.84 Net Assets (In Thousands)............................. $533 Investment Income Ratio to Net Assets (2)............. 0.29% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.60% Total Return, Lowest to Highest (4)................... 5.67% 2004 Units................................................. 57,359 Unit Fair Value, Lowest to Highest (1)................ $6.47 Net Assets (In Thousands)............................. $371 Investment Income Ratio to Net Assets (2)............. 0.11% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.40% to 0.60% Total Return, Lowest to Highest (4)................... 3.26% 2003 Units................................................. 47,360 Unit Fair Value, Lowest to Highest (1)................ $6.27 Net Assets (In Thousands)............................. $296 Investment Income Ratio to Net Assets (2)............. 0.08% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... 32.78% 2002 Units................................................. 28,321 Unit Fair Value, Lowest to Highest (1)................ $4.72 Net Assets (In Thousands)............................. $134 Investment Income Ratio to Net Assets (2)............. 0.12% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... -30% 2001 Units................................................. 12,892 Unit Fair Value, Lowest to Highest (1)................ $6.77 Net Assets (In Thousands)............................. $87 Investment Income Ratio to Net Assets (2)............. 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... -20%
-------- (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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-122
FIDELITY VIP FIDELITY VIP AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS T. ROWE PRICE INVESTMENT GRADE BOND EQUITY-INCOME GROWTH GROWTH-INCOME GLOBAL SMALL CAPITALIZATION MID-CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION --------------------- ------------------- ------------------- ------------------- --------------------------- ------------------- 3,156 2,190 898,134 1,035,047 1,088,603 1,132,034 $10.64 $11.66 $77.72 to $81.04 $43.64 to $45.51 $22.41 to $23.37 $8.37 to $13.11 $33 $25 $72,331 $46,795 $25,231 $9,818 3.79% 3.48% 0.74% 1.84% 0.89% 2.53% 0.40% to 0.48% 0.40% to 0.48% 0.90% 0.90% 0.90% 0.60% to 0.90% 2.08% 5.76% 15.16% to 16.19% 4.89% to 5.83% 24.24% to 25.35% 13.85% to 14.87% 1,268 928 656,749 811,401 676,191 856,351 $10.43 $11.02 $67.49 to $69.75 $41.61 to $43.00 $18.04 to $18.64 $7.35 to $11.44 $13 $10 $45,572 $34,702 $12,528 $6,475 0.00% 0.00% 0.20% 1.00% 0.00% 0.00% .40% .40% 0.90% 0.90% 0.90% 0.60% to 0.90% 4.27% 10.25% 11.49% to 12.50% 9.39% to 10.37% 19.80% to 20.88% 14.40% to 18.15% -- -- 417,055 524,999 377,860 526,964 $-- $-- $60.53 to $62.00 $38.04 to $38.96 $15.06 to $15.42 $6.28 to $6.43 $-- $-- $25,760 $20,369 $5,801 $3,375 -- -- 0.13% 1.18% 0.49% 0.00% -- -- 0.90% 0.90% 0.90% 0.90% -- -- 35.59% to 36.81% 31.25% to 32.43% 52.16% to 53.53% 35.90% to 37.12% -- -- 221,157 286,757 202,753 293,610 $-- $-- $44.64 to $45.32 $28.98 to $29.42 $9.90 to $10.05 $4.62 to $4.69 $-- $-- $9,992 $8,408 $2,033 $1,373 -- -- 0.05% 1.74% 0.81% 0.82% -- -- 0.90% 0.90% 0.90% 0.90% -- -- -25% to -24% -19% to -18% -20% to -19% -44% -- -- 52,867 68,422 49,334 67,548 $-- $-- $59.63 to $59.99 $35.81 to $36.03 $12.34 to $12.41 $8.32 to $8.37 $-- $-- $3,176 $2,453 $619 $564 -- -- 4.25% 0.82% 1.15% 0.00% -- -- 0.90% 0.90% 0.90% 0.90% -- -- -15% to -14% -3% -9% to -8% -16% to -15%
MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION ------------------- 294,107 $12.09 to $13.89 $4,058 6.03% 0.90% 6.38% to 16.77% 234,898 $11.51 to $11.90 $2,781 0.27% 0.90% 18.65% to 19.72% 151,293 $9.70 to $9.94 $1,497 0.97% 0.90% 31.01% to 32.19% 95,230 $7.41 to $7.52 $714 0.25% 0.90% -12% 27,998 $8.44 to $8.50 $238 0.07% 0.90% -13% to -12%
F-123 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
PIMCO RCM GLOBAL LORD ABBETT TOTAL RETURN TECHNOLOGY BOND DEBENTURE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- 2005 Units................................................. 1,849,249 1,334,943 1,085,144 Unit Fair Value, Lowest to Highest (1)................ $12.67 to $13.21 $4.94 to $5.15 $13.96 to $16.51 Net Assets (In Thousands)............................. $24,264 $6,825 $16,531 Investment Income Ratio to Net Assets (2)............. 0.77% 0.73% 4.70% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% .40% to .90% Total Return, Lowest to Highest (4)................... 1.55% to 2.46% 10.36% to 11.35% 0.90% to 1.81% 2004 Units................................................. 1,483,392 1,273,073 1,015,708 Unit Fair Value, Lowest to Highest (1)................ $12.48 to $12.90 $4.47 to 4.62 $10.84 to $16.22 Net Assets (In Thousands)............................. $19,020 $5,849 $15,193 Investment Income Ratio to Net Assets (2)............. 7.63% 0.09% 4.15% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% 0.40% to 0.90% Total Return, Lowest to Highest (4)................... 4.31% to 5.25% -5.13% to -4.28% 7.46% to 9.61% 2003 Units................................................. 1,041,644 932,206 963,357 Unit Fair Value, Lowest to Highest (1)................ $11.96 to $12.25 $4.72 to $4.83 $9.21 to $14.95 Net Assets (In Thousands)............................. $12,697 $4,481 $12,846 Investment Income Ratio to Net Assets (2)............. 2.70% 0.00% 1.85% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)................... 3.59% to 4.52% 56.44% to 57.84% 17.17% to 25.04% 2002 Units................................................. 533,674 415,928 812,767 Unit Fair Value, Lowest to Highest (1)................ $11.55 to $11.72 $3.01 to $3.06 $7.37 to $12.51 Net Assets (In Thousands)............................. $6,214 $1,269 $9,072 Investment Income Ratio to Net Assets (2)............. 0.00% 0.00% 11.50% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% -2% to 0.90% Total Return, Lowest to Highest (4)................... 9% to 10% -51% -1% to 1% 2001 Units................................................. 103,173 121,238 810,764 Unit Fair Value, Lowest to Highest (1)................ $10.64 to $10.70 $6.15 to $6.19 $7.46 to $12.35 Net Assets (In Thousands)............................. $1,103 $749 $9,119 Investment Income Ratio to Net Assets (2)............. 2.37% 0.00% 11.73% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.90% 0.45% to 0.90% Total Return, Lowest to Highest (4)................... 6% -25% -2% to -1%
LAZARD MID-CAP INVESTMENT DIVISION ------------------- 2005 Units................................................. 226,296 Unit Fair Value, Lowest to Highest (1)................ $11.78 to $13.48 Net Assets (In Thousands)............................. $3,034 Investment Income Ratio to Net Assets (2)............. 12.84% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% Total Return, Lowest to Highest (4)................... 7.44% to 8.40% 2004 Units................................................. 171,772 Unit Fair Value, Lowest to Highest (1)................ $12.14 to $12.43 Net Assets (In Thousands)............................. $2,124 Investment Income Ratio to Net Assets (2)............. 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% Total Return, Lowest to Highest (4)................... 13.57% to 14.60% 2003 Units................................................. 91,521 Unit Fair Value, Lowest to Highest (1)................ $10.69 to $10.85 Net Assets (In Thousands)............................. $989 Investment Income Ratio to Net Assets (2)............. 1.35% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% Total Return, Lowest to Highest (4)................... 25.29% to 26.42% 2002 Units................................................. 29,655 Unit Fair Value, Lowest to Highest (1)................ $8.53 to $8.58 Net Assets (In Thousands)............................. $253 Investment Income Ratio to Net Assets (2)............. 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% Total Return, Lowest to Highest (4)................... -15% to -14% 2001 Units................................................. -- 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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-124
MET/AIM HARRIS OAKMARK JANUS LORD ABBETT NEUBERGER BERMAN LORD ABBETT SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH GROWTH AND INCOME REAL ESTATE MID-CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 129,221 636,793 844,525 4,368 503,432 2,543 $11.71 to $12.31 $15.26 to $15.77 $7.50 to $8.74 $9.49 $14.52 to $14.74 $12.71 $1,587 $9,974 $7,323 $41 $7,395 $32 2.38% 1.83% 0.12% 0.27% 0.19% 7.97% 0.90% 0.90% 0.48% to 0.90% .48% to .60% 0.40& to 0.90% .48% to .60% 7.63% to 10.16% 13.47% to 14.48% 12.83% to 13.84% 3.68% 12.60% to 13.61% 8.05% 101,110 289,245 741,720 5,975 151,740 21 $11.06 to $11.33 $13.45 to $13.77 $6.60 to $7.68 $9.15 $12.90 to $12.97 $11.76 $1,143 $3,963 $5,657 $54,684 $1,965 .246 0.00% 0.04% 0.00% 0.55% 7.50% 4.88% 0.90% 0.90% 0.48% to 0.90% 0.40% to 0.60% 0.40& to 0.90% 0.60% 5.78% to 6.73% 19.73% to 20.80% 7.85% to 8.82% 12.92% 28.97% to 29.74% 17.59% 60,439 71,528 582,357 2,532 -- -- $10.46 to $10.62 $11.23 to $11.40 $6.10 to $7.06 $8.10 $-- $-- $643 $814 $4,087 $20,529 $-- $-- 0.00% 1.84% 0.00% 0.00% -- -- 0.90% 0.90% 0.60& to 0.90% 0.60% -- -- 37.84% to 39.08% 34.16% to 35.37% 23.37% to 29.93% 29.15% -- -- 15,245 17,743 389,441 -- -- -- $7.59 to $7.63 $8.37 to $8.42 $4.94 to $5.43 $-- $-- $-- $116 $150 $2,088 $-- $-- $-- 0.00% 0.00% 0.00% -- -- -- 0.90% 0.90% 0.60& to 0.90% -- -- -- -24% -16% -31% -- -- -- -- -- 135,682 -- -- -- $-- $-- $7.15 to $7.82 $-- $-- $-- $-- $-- $1,051 $-- $-- $-- -- -- 0.00% -- -- -- -- -- 0.60& to 0.90% -- -- -- -- -- -23% to -14% -- -- --
THIRD AVENUE SMALLCAP VALUE INVESTMENT DIVISION ------------------- 2,073 $13.92 $29 0.46% .40% to .60% 15.48% 366 $12.06 $4 4.31% 0.40% 20.58% -- $-- $-- -- -- -- -- $-- $-- -- -- -- -- $-- $-- -- -- --
F-125 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
OPPENHEIMER CAPITAL AMERICAN DELAWARE APPRECIATION CENTURY VISTA SMALL CAP VALUE INVESTMENT DIVISION (B) INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- ------------------- ------------------- 2005 Units................................................. 10,588 1,252 9,876 Unit Fair Value, Lowest to Highest (1)................ $10.95 to $11.01 $11.65 $14.17 Net Assets (In Thousands)............................. $116 $15 $140 Investment Income Ratio to Net Assets (2)............. 2.02% 0.00% 11.95% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.90% 0.40% 0.48% Total Return, Lowest to Highest (4)................... 9.21% to 9.86% 8.13% 17.85% 2004 Units................................................. -- -- -- 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)................... -- -- -- 2003 Units................................................. -- -- -- 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................................................. -- -- -- 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................................................. -- -- -- 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)................... -- -- --
DREYFUS EMERGING LEADERS INVESTMENT DIVISION ------------------- 2005 Units................................................. 916 Unit Fair Value, Lowest to Highest (1)................ $11.81 Net Assets (In Thousands)............................. $11 Investment Income Ratio to Net Assets (2)............. 10.39% Expenses as a percent of Average Net Assets, Lowest to Highest (3).......................................... 0.60% Total Return, Lowest to Highest (4)................... 4.75% 2004 Units................................................. -- 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)................... -- 2003 Units................................................. -- 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................................................. -- 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................................................. -- 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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-126
DREYFUS DREYFUS GOLDMAN SACHS GOLDMAN SACHS MFS VAN KAMPEN INTERNATIONAL VALUE APPRECIATION MID CAP VALUE CORE SMALL CAP EQUITY HIGH INCOME GOVERNMENT INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- --------------------- ------------------- ------------------- 14,559 1,591 3,769 4,239 6,238 1,272 $12.95 $10.71 $12.38 $11.83 $11.07 $10.72 $188 $17 $47 $50 $69 14 3.64% 0.00% 16.09% 17.27% 11.32% 0.00% -- 0.40% to 0.48% 0.40% to 0.60% 0.40% to 0.48% 0.48% 0.40% to 0.48% 0.40% 11.69% 4.12% 12.83% 6.07% 2.05% 3.28% 1,371 324 1,123 -- 4,700 -- $11.60 $10.29 $10.97 $-- $10.84 $-- $16 $3 $12 $-- $51 $-- 16.27% 2.88% 19.94% -- 0.00% -- 0.40% 0.60% 0.40% to 0.48% -- 0.48% -- 15.99% 2.91% 9.71% -- 8.43% -- -- -- -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- $-- $-- $-- $-- $-- $-- $-- $-- $-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
WELLS FARGO ADVANTAGE TOTAL RETURN BOND INVESTMENT DIVISION --------------------- 1,620 $10.62 17 3.06% 0.40% 1.90% -- $-- $-- -- -- -- -- $-- $-- -- -- -- $-- -- -- -- -- -- $-- -- -- -- --
F-127 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 Policies and the expenses as a percentage of average net assets, excluding expenses for the underlying portfolios, for the year ended December 31, 2005, 2004, 2003 and 2002 and 2001 respectively, or lesser time period if applicable.
WELLS FARGO ADVANTAGE WELLS FARGO ADVANTAGE LARGE COMPANY GROWTH EQUITY INCOME INVESTMENT DIVISION INVESTMENT DIVISION --------------------- --------------------- 2005 Units............................................................. 772 727 Unit Fair Value, Lowest to Highest (1)............................ $11.02 $11.38 Net Assets (In Thousands)......................................... $9 $8 Investment Income Ratio to Net Assets (2)......................... 0.23% 1.79% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.40% 0.40% Total Return, Lowest to Highest (4)............................... 5.70% 5.38% 2004 Units............................................................. 416 402 Unit Fair Value, Lowest to Highest (1)............................ $10.42 $10.80 Net Assets (In Thousands)......................................... $4 $4 Investment Income Ratio to Net Assets (2)......................... 0.00% 0.00% Expenses as a percent of Average Net Assets, Lowest to Highest (3) 0.40% 0.40% Total Return, Lowest to Highest (4)............................... 4.23% 8.03% 2003 Units............................................................. -- -- 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............................................................. -- -- 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............................................................. -- -- 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 cash value. 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 cash value 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 policy 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 policy owner cash value 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, 2005 to April 30, 2005 (b) For the Period May 1, 2005 to December 31, 2005 F-128 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 7. CHANGE OF PORTFOLIO NAME, PORTFOLIO MERGERS, AND SHARE SUBSTITUTIONS Effective December 19, 2005, Lazard Asset Management LLC became the sub-investment manager for the Met/AIM Mid Cap Core Portfolio, which changed its name to Lazard Mid-Cap Portfolio. Effective February 1, 2005, American Century International Investment Division and American Century Value Investment Division were closed. Effective May 1, 2005, Neuberger Berman Partners Mid Cap Value Portfolio of the Metropolitan Fund changed its name to Neuberger Berman Mid Cap Value Portfolio. Effective May 1, 2005, Janus Aspen Capital Appreciation Portfolio and Janus Aspen Growth Portfolio of the Janus Fund changed their names to Janus Aspen Forty Portfolio and Janus Aspen Large Cap Growth Portfolio, respectively. Effective May 1, 2005, AllianceBernstein Technology Portfolio changed its name to AllianceBernstein Global Technology Portfolio. Effective May 1, 2005, Oppenheimer Funds, Inc. became sub-investment manager for the Scudder Global Equity Portfolio, which changed its name to the Oppenheimer Global Equity Portfolio. Effective May 1, 2005, Invesco VIF Core Portfolio of the AIM Funds changed its name to the AIM V.I. Core Stock Portfolio. Effective May 1, 2005, Met/Putnam Voyager Portfolio of the Metropolitan Fund merged into the Jennison Growth Portfolio of the Metropolitan Fund. Effective May 1, 2005, the Wells Fargo Fund changed the names of all its portfolios as follows: OLD PORTFOLIO NAME NEW PORTFOLIO NAME ------------------ ------------------ Wells Fargo Total Return Portfolio Wells Fargo Advantage Total Return Bond Portfolio Wells Fargo Money Market Portfolio Wells Fargo Advantage Money Market Portfolio Wells Fargo Asset Allocation Portfolio Wells Fargo Advantage Asset Allocation Portfolio Wells Fargo Growth Portfolio Wells Fargo Advantage Large Company Core Portfolio Wells Fargo Large Company Growth Wells Fargo Advantage Large Company Portfolio Growth Portfolio Wells Fargo Equity Income Portfolio Wells Fargo Advantage Equity Income Portfolio Effective January 31, 2005, BlackRock Advisors, Inc. replaced State Street Research & Management Company as subadvisor to all portfolios previously managed by State Street Research & Management Company and changed the names of the portfolios as follows: OLD PORTFOLIO NAME NEW PORTFOLIO NAME ------------------ ------------------ State Street Research Investment Trust BlackRock Investment Portfolio Trust Portfolio State Street Research BlackRock Diversified Diversified Portfolio Portfolio State Street Research Aggressive Growth BlackRock Aggressive Portfolio Growth Portfolio State Street Research BlackRock Large Cap Value Large Cap Value Portfolio Portfolio State Street Research BlackRock Bond Income Bond Income Portfolio Portfolio State Street Research BlackRock Money Market Money Market Portfolio Portfolio State Street Research Large Cap Growth BlackRock Legacy Large Portfolio Cap Growth Portfolio State Street Research BlackRock Strategic Value Aurora Portfolio Portfolio Effective January 15, 2005, RCM Capital Management LLC became sub-investment manager for the PIMCO PEA Innovation Portfolio, which changed its name to RCM Global Technology Portfolio. F-129 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED) 7. CHANGE OF PORTFOLIO NAME, PORTFOLIO MERGERS, AND SHARE SUBSTITUTIONS -- (CONTINUED) 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 Wells Fargo Large Cap Growth Portfolio and T. Rowe Price Small Cap Growth Portfolio of the Metropolitan Fund, respectively and subsequently changed their names to Wells Fargo 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 December 16, 2003, Putnam International Stock Portfolio of the Metropolitan Fund changed its name to FI International Stock Portfolio. 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 April 28, 2003, Janus Growth Portfolio of the Metropolitan Fund merged into the Janus Aggressive Growth Portfolio of the Met Investors Fund. 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. Wells Fargo Concentrated International Portfolio changed sub-advisers from Wells Fargo & Management Company to Harris Associates L.P. and changed its name to Harris Oakmark International Portfolio. F-130 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, 2006 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the prospectus dated May 1, 2006 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 Independent Registered Public Accounting Firm.............. 4 Financial Statements....................................... 4
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. is a leading provider of insurance and other financial services to millions of individual and group customers throughout the United States. Through its subsidiaries and affiliates, MetLife, Inc. offers life insurance, annuities, automobile and homeowner's insurance and retail banking services to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. Outside the U.S., the MetLife companies have direct insurance operations in Asia Pacific, Latin America and Europe. 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 two 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 six 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 We paid commissions of $2,617,461, $2,825,616, and $1,887,800 in 2003, 2004, and 2005 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. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 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 address of Deloitte & Touche LLP is 201 East Kennedy Boulevard, Suite 1200, Tampa, Florida 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-4 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Registered Public Accounting Firm..... F-1 Financial Statements at December 31, 2005 and 2004 and for the years ended December 31, 2005, 2004 and 2003: Consolidated Balance Sheets............................... F-2 Consolidated Statements of Income......................... F-3 Consolidated Statements of Stockholder's Equity........... F-4 Consolidated Statements of Cash Flows..................... F-5 Notes to Consolidated Financial Statements................ F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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, 2005 and 2004, 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, 2005. 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 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 consolidated 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 financial position of Metropolitan Life Insurance Company and subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, 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 New York, New York April 17, 2006 F-1 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2005 AND 2004 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2005 2004 -------- -------- ASSETS Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $141,929 and $141,496, respectively)... $147,897 $150,229 Trading securities, at fair value (cost: $373 and $0, respectively)........................................... 373 -- Equity securities available-for-sale, at fair value (cost: $1,989 and $1,646, respectively)........................ 2,217 1,903 Mortgage and consumer loans............................... 33,094 31,571 Policy loans.............................................. 8,412 8,256 Real estate and real estate joint ventures held-for-investment..................................... 4,087 2,643 Real estate held-for-sale................................. -- 678 Other limited partnership interests....................... 3,256 2,891 Short-term investments.................................... 883 1,194 Other invested assets..................................... 5,839 4,908 -------- -------- Total investments....................................... 206,058 204,273 Cash and cash equivalents................................... 1,787 2,370 Accrued investment income................................... 2,030 2,006 Premiums and other receivables.............................. 6,678 5,497 Deferred policy acquisition costs and value of business acquired.................................................. 11,438 11,062 Assets of subsidiaries held-for-sale........................ -- 410 Other assets................................................ 6,183 5,863 Separate account assets..................................... 73,152 68,507 -------- -------- Total assets............................................ $307,326 $299,988 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Liabilities: Future policy benefits.................................... $ 94,372 $ 91,598 Policyholder account balances............................. 72,793 68,357 Other policyholder funds.................................. 6,918 6,730 Policyholder dividends payable............................ 915 885 Policyholder dividend obligation.......................... 1,607 2,243 Short-term debt........................................... 453 1,445 Long-term debt............................................ 2,961 2,050 Shares subject to mandatory redemption.................... 278 278 Liabilities of subsidiaries held-for-sale................. -- 268 Current income taxes payable.............................. 444 709 Deferred income taxes payable............................. 2,729 2,671 Payables for collateral under securities loaned and other transactions............................................ 21,009 25,230 Other liabilities......................................... 11,228 10,025 Separate account liabilities.............................. 73,152 68,507 -------- -------- Total liabilities....................................... 288,859 280,996 -------- -------- Stockholder's Equity: Common stock, par value $0.01 per share; 1,000,000,000 shares authorized; 494,466,664 shares issued and outstanding at December 31, 2005 and 2004................. 5 5 Additional paid-in capital.................................. 13,808 13,827 Retained earnings........................................... 2,749 2,696 Accumulated other comprehensive income...................... 1,905 2,464 -------- -------- Total stockholder's equity................................ 18,467 18,992 -------- -------- Total liabilities and stockholder's equity................ $307,326 $299,988 ======== ========
See accompanying notes to consolidated financial statements. F-2 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN MILLIONS)
2005 2004 2003 ------- ------- ------- REVENUES Premiums.................................................... $19,256 $17,437 $18,099 Universal life and investment-type product policy fees...... 1,948 2,009 1,920 Net investment income....................................... 11,750 10,818 10,267 Other revenues.............................................. 820 862 980 Net investment gains (losses)............................... 179 282 (526) ------- ------- ------- Total revenues............................................ 33,953 31,408 30,740 ------- ------- ------- EXPENSES Policyholder benefits and claims............................ 20,445 18,736 18,590 Interest credited to policyholder account balances.......... 2,596 2,357 2,379 Policyholder dividends...................................... 1,647 1,636 1,699 Other expenses.............................................. 5,717 5,583 5,771 ------- ------- ------- Total expenses............................................ 30,405 28,312 28,439 ------- ------- ------- Income from continuing operations before provision for income taxes.............................................. 3,548 3,096 2,301 Provision for income taxes.................................. 1,105 876 643 ------- ------- ------- Income from continuing operations........................... 2,443 2,220 1,658 Income from discontinued operations, net of income taxes.... 810 71 369 ------- ------- ------- Income before cumulative effect of a change in accounting... 3,253 2,291 2,027 Cumulative effect of a change in accounting, net of income taxes..................................................... -- (52) (26) ------- ------- ------- Net income.................................................. $ 3,253 $ 2,239 $ 2,001 ======= ======= =======
See accompanying notes to consolidated financial statements. F-3 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) PARENT'S ------------------------------------- INTEREST IN NET PREFERRED UNREALIZED FOREIGN MINIMUM STOCK ADDITIONAL INVESTMENT CURRENCY PENSION OF A COMMON PAID-IN RETAINED GAINS TRANSLATION LIABILITY SUBSIDIARY STOCK CAPITAL EARNINGS (LOSSES) ADJUSTMENT ADJUSTMENT TOTAL ----------- ------ ---------- -------- ---------- ----------- ---------- ------- Balance at January 1, 2003....... $ -- $5 $13,474 $ 708 $1,991 $(67) $ (46) $16,065 Issuance of preferred stock by subsidiary to the Holding Company......................... 93 93 Issuance of shares -- by subsidiary...................... 24 24 Issuance of stock options -- by subsidiary...................... 2 2 Sale of subsidiaries to the Holding Company or affiliate.... 261 261 Capital contribution from the Holding Company................. 2 2 Return of capital to the Holding Company......................... (33) (33) Dividends on common stock........ (1,448) (1,448) Comprehensive income (loss): Net income...................... 2,001 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 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..... 93 5 13,730 1,261 2,405 107 (128) 17,473 Contribution of preferred stock by Holding Company to subsidiary and retirement thereof.......... (93) (93) Issuance of shares -- by subsidiary...................... 4 4 Issuance of stock options -- by subsidiary...................... 2 2 Capital contribution from the Holding Company................. 94 94 Return of capital to the Holding Company......................... (3) (3) Dividends on preferred stock..... (7) (7) Dividends on common stock........ (797) (797) Comprehensive income (loss): Net income...................... 2,239 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 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..... -- 5 13,827 2,696 2,408 186 (130) 18,992 Treasury stock transactions, net -- by subsidiary............ (15) (15) Issuance of stock options -- by subsidiary...................... (4) (4) Dividends on common stock........ (3,200) (3,200) Comprehensive income (loss): Net income...................... 3,253 3,253 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income taxes............. 184 184 Unrealized investment gains (losses), net of related offsets and income taxes.... (783) (783) Foreign currency translation adjustments................. (49) (49) Minimum pension liability adjustment.................. 89 89 ------- Other comprehensive income (loss)...................... (559) ------- Comprehensive income (loss)..... 2,694 ---- -- ------- ------- ------ ---- ----- ------- Balance at December 31, 2005..... $ -- $5 $13,808 $ 2,749 $1,809 $137 $ (41) $18,467 ==== == ======= ======= ====== ==== ===== =======
See accompanying notes to consolidated financial statements. F-4 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN MILLIONS)
2005 2004 2003 --------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 3,253 $ 2,239 $ 2,001 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.................... 299 344 394 Amortization of premiums and accretion of discounts associated with investments, net........................ (203) (15) (162) (Gains) losses from sales of investments and businesses, net..................................................... (1,379) (289) 96 Equity of earnings of real estate joint ventures and other limited partnership interests........................... (399) (167) 19 Interest credited to policyholder account balances........ 2,596 2,357 2,379 Universal life and investment-type product policy fees.... (1,948) (2,009) (1,920) Change in accrued investment income....................... (24) (67) (93) Change in premiums and other receivables.................. (734) 460 (81) Change in deferred policy acquisition costs, net.......... (504) (752) (904) Change in insurance-related liabilities................... 3,794 3,829 3,989 Change in trading securities.............................. (375) -- -- Change in income taxes payable............................ 147 (101) 250 Change in other assets.................................... (236) (390) (455) Change in other liabilities............................... 1,878 1,288 637 Other, net................................................ 24 29 (61) --------- -------- -------- Net cash provided by operating activities................... 6,189 6,756 6,089 --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturities.......................................... 118,459 78,494 69,292 Equity securities......................................... 777 1,587 576 Mortgage and consumer loans............................... 7,890 3,961 3,221 Real estate and real estate joint ventures................ 1,922 436 1,087 Other limited partnership interests....................... 953 800 330 Purchases of: Fixed maturities.......................................... (119,375) (83,243) (90,077) Equity securities......................................... (1,057) (2,107) (149) Mortgage and consumer loans............................... (9,473) (8,639) (4,354) Real estate and real estate joint ventures................ (1,323) (737) (278) Other limited partnership interests....................... (1,012) (893) (643) Net change in short-term investments........................ 409 215 (183) Proceeds from sales of businesses, net of cash disposed of $43, $7 and $(13), respectively........................... 260 18 1,995 Net change in policy loans.................................. (156) (77) (154) Net change in other invested assets......................... (598) (379) (1,108) Net change in property, equipment and leasehold improvements.............................................. (114) 17 (45) Other, net.................................................. (76) -- (2) --------- -------- -------- Net cash used in investing activities....................... (2,514) (10,547) (20,492) --------- -------- --------
F-5 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003 (IN MILLIONS)
2005 2004 2003 --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits................................................ 30,008 28,344 29,132 Withdrawals............................................. (26,732) (22,801) (22,339) Net change in payables for collateral under securities loaned and other transactions........................... (4,221) 1,166 7,744 Net change in short-term debt............................. (992) (2,072) 2,624 Long-term debt issued..................................... 1,216 28 137 Long-term debt repaid..................................... (395) (38) (714) Capital contribution from the Parent Company.............. -- -- 148 Proceeds from offering of common stock by subsidiary, net..................................................... -- -- 398 Dividends on preferred stock.............................. -- (7) -- Dividends on common stock................................. (3,200) (797) (1,448) Other, net................................................ -- 3 8 --------- -------- -------- Net cash (used in) provided by financing activities......... (4,316) 3,826 15,690 --------- -------- -------- Change in cash and cash equivalents......................... (641) 35 1,287 Cash and cash equivalents, beginning of year................ 2,428 2,393 1,106 --------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 1,787 $ 2,428 $ 2,393 ========= ======== ======== Cash and cash equivalents, subsidiaries held-for-sale, beginning of year......................................... $ 58 $ 57 $ 66 ========= ======== ======== CASH AND CASH EQUIVALENTS, SUBSIDIARIES HELD-FOR-SALE, END OF YEAR................................................... $ -- $ 58 $ 57 ========= ======== ======== Cash and cash equivalents, from continuing operations, beginning of year......................................... $ 2,370 $ 2,336 $ 1,040 ========= ======== ======== CASH AND CASH EQUIVALENTS, FROM CONTINUING OPERATIONS, END OF YEAR................................................... $ 1,787 $ 2,370 $ 2,336 ========= ======== ======== Supplemental disclosures of cash flow information: Net cash paid during the year for: Interest................................................ $ 203 $ 140 $ 307 ========= ======== ======== Income taxes............................................ $ 1,385 $ 950 $ 789 ========= ======== ======== Non-cash transactions during the year: Business Dispositions: Assets disposed....................................... $ 366 $ 42 $ 5,493 Less: liabilities disposed............................ 269 17 3,511 --------- -------- -------- Net assets disposed................................... $ 97 $ 25 $ 1,982 Plus: equity securities received...................... 43 -- -- Less: cash disposed................................... 43 7 (13) --------- -------- -------- Business disposition, net of cash disposed............ $ 97 $ 18 $ 1,995 ========= ======== ======== Contribution of equity securities to MetLife Foundation............................................ $ 1 $ 50 $ -- ========= ======== ======== Purchase money mortgage on real estate sale............. $ -- $ 2 $ 196 ========= ======== ======== Real estate acquired in satisfaction of debt............ $ 1 $ 7 $ 14 ========= ======== ======== Transfer from funds withheld at interest to fixed maturities............................................ $ -- $ 606 $ -- ========= ======== ========
See Note 5 for non-cash reinsurance transaction See accompanying notes to consolidated financial statements. F-6 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES. (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company ("Metropolitan Life") and its subsidiaries (collectively the "Company") is a leading provider of insurance and other financial services to millions of individual and institutional customers throughout the United States. 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. Outside the United States, the Company has direct insurance operations in Canada and Asia. 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 2005 and 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. 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, both in 2004, are included in the accompanying consolidated financial statements until the respective dates of sale. The Company completed the sales of its wholly owned subsidiaries SSRM Holdings, Inc. ("SSRM") and P.T. Sejahtera ("MetLife Indonesia") to third parties on January 31, 2005, and September 29, 2005, respectively. The Company has reclassified the assets, liabilities and operations of SSRM and MetLife Indonesia into discontinued operations for all years presented in the consolidated financial statements. See Notes 15 and 16. 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 $1,388 million and $1,325 million at December 31, 2005 and 2004, respectively. Certain amounts in the prior years' consolidated financial statements have been reclassified to conform with the 2005 presentation. Such reclassifications include $1,166 million and $7,744 million relating to the net change in payables for collateral under securities loaned and other transactions reclassified from cash flows from investing activities to cash flows from financing activities on the consolidated statements of cash flows for the years ended December 31, 2004 and 2003, respectively. F-7 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 measurement of goodwill and related impairment, if any; (vii) the liability for future policyholder benefits; (viii) accounting for reinsurance transactions; (ix) the liability for litigation and regulatory matters; and (x) accounting for 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 these estimates. Investments The Company's principal investments are in fixed maturities, mortgage and consumer loans, other limited partnerships, and real estate and real estate joint ventures, 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. F-8 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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 under 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 and Value of Business Acquired 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 DAC 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. VOBA, included in DAC reflects the estimated fair value of in-force contracts in a life insurance company acquisition and represents the portion of the purchase price that is allocated to the value of the right to receive future cash flows from the insurance and annuity contracts in force at the acquisition date. VOBA is based on actuarially determined projections, by each block of business, of future policy and contract charges, premiums, mortality and morbidity, separate account performance, surrenders, operating expenses, investment returns and other factors. Actual experience on the purchased business may vary from these projections. 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 amortization of DAC. 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. Utilizing these assumptions, liabilities are established on a block of business basis. Differences between actual experience and the assumptions used in pricing these policies and in the establishment of F-9 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) liabilities result in variances in profit and could result in losses. The effects of changes in such estimated liabilities 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 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 litigation-related 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 require 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. F-10 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SIGNIFICANT ACCOUNTING POLICIES Investments The Company's fixed maturity and equity securities are classified as available-for-sale and are reported at their estimated fair value. Unrealized investment gains and losses on securities are recorded as a separate component of other comprehensive income or loss, net of policyholder related amounts and deferred income taxes. The cost of fixed maturity and equity securities is adjusted for impairments in value deemed to be other-than-temporary in the period in which the 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 and consumer loans are stated at amortized cost, net of valuation allowances. Loans are considered to be impaired when it is probable that, based upon current information and events, the Company will be unable to collect all amounts due under the contractual terms of the loan agreement. Valuation allowances are established for the excess carrying value of the 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, for example, mortgage loans based on similar 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 F-11 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Policy loans are stated at unpaid principal balances. Short-term investments are stated at amortized cost, which approximates fair value. Other invested assets consist principally of leveraged leases and funds withheld at interest. The leveraged leases are recorded net of non-recourse debt. The Company participates in lease transactions which are diversified by industry, asset type and geographic area. The Company regularly reviews residual values and impairs residuals to expected values as needed. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. For agreements written on a modified coinsurance basis and certain agreements written on a coinsurance basis, assets supporting the reinsured policies and equal to the net statutory reserves are withheld and continue to be legally owned by the ceding companies. Other invested assets also includes derivative revaluation gains and 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. Interest on funds withheld is reported in net investment income in the consolidated financial statements. The Company participates in structured investment transactions, primarily asset securitizations and structured notes. These transactions enhance the Company's total return on its 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 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 Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin ("ARB") No. 51 ("FIN 46"), and its December 2003 revision ("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). 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 F-12 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) yield method, as appropriate. Impairments of these beneficial interests are included in net investment gains (losses). Trading Securities During 2005, the Company established a trading securities portfolio to support investment strategies that involve the active and frequent purchase and sale of securities. Trading securities are recorded at fair value with subsequent changes in fair value recognized in net investment income. 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 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 Derivatives Use Plans approved by the applicable state insurance departments. Freestanding derivatives are carried on the Company's consolidated balance sheets 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 is not designated as an accounting hedge or its use in managing risk 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). 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 designated 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 assessed as being highly effective in offsetting the designated risk of the hedged item. Hedge effectiveness is formally assessed at inception and periodically throughout the life of the designated hedging relationship. Under a fair value hedge, changes in the fair value of the hedging derivative, including amounts measured as ineffective, and changes in the fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the consolidated statement of income within interest income or interest expense to match the location of the hedged item. Under a cash flow hedge, changes in the fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of shareholder's equity, and the deferred gains or losses on the derivative are reclassified into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The fair values of the hedging derivatives are exclusive of any accruals that are separately reported in the F-13 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) consolidated statement of income within interest income or interest expense to match the location of the hedged item. In a hedge of a net investment in a foreign operation, changes in the fair value of the hedging derivative that are measured as effective are reported within other comprehensive income (loss) consistent with the translation adjustment for the hedged net investment in the foreign operation. Changes in the fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). 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, is sold, terminated, or exercised; (iii) it is no longer probable that the hedged 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 sheets 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 the hedged risk, and the cumulative adjustment to its carrying value is amortized into income over the remaining life of the hedged item. Provided the hedged forecasted transaction is still probable of occurrence, the changes in fair value of derivatives recorded in other comprehensive income (loss) related to discontinued cash flow hedges are released into the consolidated statement of income when the Company's earnings are affected by the variability in cash flows of the hedged item. When hedge accounting is discontinued because it is no longer probable that the forecasted transactions will 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 sheets 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 sheets, 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 sheets, 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 that contain terms which are deemed to be embedded derivatives. The Company assesses each identified embedded derivative to determine whether it is required to be bifurcated under SFAS 133. If the instrument would not be accounted for in its entirety at fair value and it is determined that the terms of the embedded derivative 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 bifurcated from the host contract and accounted for as a freestanding derivative. Such embedded derivatives are carried on the consolidated balance sheets 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). F-14 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase 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, as appropriate. 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 seven years for all other property and equipment. The cost basis of the property, equipment and leasehold improvements was $1,069 million and $1,054 million at December 31, 2005 and 2004, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $445 million and $438 million at December 31, 2005 and 2004, respectively. Related depreciation and amortization expense was $94 million, $93 million and $99 million for the years ended December 31, 2005, 2004 and 2003, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as internal and external costs incurred to develop internal-use computer software during the application development stage, are capitalized. Such costs are amortized generally over a four-year period using the straight-line method. The cost basis of computer software was $877 million and $749 million at December 31, 2005 and 2004, respectively. Accumulated amortization of capitalized software was $584 million and $490 million at December 31, 2005 and 2004, respectively. Related amortization expense was $97 million, $126 million and $143 million for the years ended December 31, 2005, 2004 and 2003, respectively. Deferred Policy Acquisition Costs and Value of Business Acquired 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 consist principally of commissions and agency and policy issue expenses. VOBA represents the present value of estimated future profits to be generated from existing insurance contracts in-force at the date of acquisition. DAC is amortized with interest over the expected life of the contract for participating traditional life, universal life and investment-type products. Generally, DAC and VOBA are 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 and VOBA. 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 and VOBA. 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 and VOBA are 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 F-15 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Sales Inducements The Company has two different types of sales inducements which are included in other assets: (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 using a dollar cost averaging method than would have been received based on the normal general account interest rate credited. The Company defers sales inducements and amortizes them over the life of the policy using the same methodology and assumptions used to amortize DAC. Goodwill Goodwill is the excess of cost over the fair value of net assets acquired. The Company tests goodwill for impairment at least annually or more frequently if events or circumstances, such as adverse changes in the business climate, indicate that there may be justification for conducting an interim test. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the "reporting unit" level. A reporting unit is the operating segment, or a business that is one level below the operating segment if discrete financial information is prepared and regularly reviewed by management at that level. For purposes of goodwill impairment testing, goodwill within Corporate & Other is allocated to reporting units within the Company's business segments. If the carrying value of a reporting unit's goodwill exceeds its fair value, the excess is recognized as an impairment and recorded as a charge against net income. The fair values of the reporting units are determined using a market multiple or discounted cash flow model. The critical estimates necessary in determining fair value are projected earnings, comparative market multiples and the discount rate. Changes in goodwill are as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2005 2004 2003 ------ ------ ------- (IN MILLIONS) Balance, beginning of year.................................. $217 $218 $ 405 Acquisitions................................................ 1 1 3 Dispositions and other...................................... (18) (2) (190) ---- ---- ----- Balance, end of year........................................ $200 $217 $ 218 ==== ==== =====
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 7%, and mortality rates guaranteed in calculating the cash surrender values described in such contracts); and (ii) the liability for terminal dividends, and (iii) premium deficiency reserves, which are established when the liabilities for future policy benefits plus the 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 F-16 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) premiums and (ii) premium deficiency reserve. 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 5% to 7%. Participating business represented approximately 10% and 12% of the Company's life insurance in-force, and 86% and 87% of the number of life insurance policies in-force, at December 31, 2005 and 2004, respectively. Participating policies represented approximately 35% and 34%, 37% and 37%, and 40% and 41% of gross and net life insurance premiums for the years ended December 31, 2005, 2004 and 2003, respectively. The percentages indicated are calculated excluding the business of the Reinsurance segment. 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 11%. Future policy benefit liabilities for non-medical health insurance are calculated using the net level premium method and assumptions as to future morbidity, withdrawals and interest, which provide a margin for adverse deviation. Interest rates used in establishing such liabilities range from 3% to 7%. Future policy benefit liabilities for disabled lives are estimated using the present value of benefits method and experience assumptions as to claim terminations, expenses and interest. Interest rates used in establishing such liabilities range from 3% to 8%. Policyholder account balances 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 (i) policy account values, which consist of an accumulation of gross premium payments; and (ii) credited interest, ranging from 1% to 14%, less expenses, mortality charges, and withdrawals. The Company issues fixed and floating rate obligations under its guaranteed interest contract ("GIC") program which are denominated in either U.S. dollars or foreign currencies. During the years ended December 31, 2005, 2004 and 2003, the Company issued $4,018 million, $3,958 million and $4,349 million, respectively, in such obligations. During the years ended December 31, 2005, 2004 and 2003, there were repayments of $1,052 million, $150 million and $47 million respectively, of GICs under this program. Accordingly, the GICs outstanding, which are included in policyholder account balances in the accompanying consolidated balance sheets, were $12,149 million and $9,017 million at December 31, 2005 and 2004, respectively. Interest credited on the contracts for the years ended December 31, 2005, 2004 and 2003 was $384 million, $142 million and $58 million, respectively. The Company establishes future policy benefit liabilities for minimum death and income benefit guarantees relating to certain annuity contracts and secondary and paid up guarantees relating to certain life policies as follows: - 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. F-17 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - Guaranteed income benefit liabilities are determined by estimating the expected value of the income 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 assumptions used for calculating such guaranteed income 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. The Company offers certain variable annuity products with guaranteed minimum benefit riders as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB"s) guarantee a policyholder return of the purchase payment plus a bonus amount via partial withdrawals, even if the account value is reduced to zero, provided that the policyholder's cumulative withdrawals in a contract year do not exceed a certain limit. The initial guaranteed withdrawal amount is equal to the initial benefit base as defined in the contract. When an additional purchase payment is made, the guaranteed withdrawal amount is set equal to the greater of (i) the guaranteed withdrawal amount before the purchase payment or (ii) the benefit base after the purchase payment. The benefit base increases by additional purchase payments plus a bonus amount and decreases by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may also change as a result of an optional reset as defined in the contract. The benefit base can be reset to the account balance on the date of the reset if greater than the benefit base before the reset. The GMWB is an embedded derivative, which is measured at fair value separately from the host variable annuity product. - Guaranteed minimum accumulation benefit riders ("GMAB"s) provide the contract holder with a minimum accumulation of their purchase payments deposited within a specific time period, adjusted proportionately for withdrawals, after a specified period of time determined at the time of issuance of the variable annuity contract. The GMAB is also an embedded derivative, which is measured at fair value separately from the host variable annuity product. - The fair value of the GMWBs and GMABs is calculated based on actuarial and capital market assumptions related to the projected cash flows, including benefits and related contract charges, over the lives of the contracts, incorporating expectations concerning policyholder behavior. In measuring the fair value of GMWBs and GMABs, the Company attributes a portion of the fees collected from the policyholder equal to the present value of expected future guaranteed minimum withdrawal and accumulation benefits. GMWBs and GMABs are reported in policyholder account balances and the changes in fair value are reported in net investment gains (losses). Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. F-18 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other Policyholder Funds Other policyholder funds includes policy and contract claims and unearned policy and contract fees. 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-type 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 recorded in universal life and investment-type product policy fees 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. 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 Metropolitan Life and its insurance subsidiaries' boards of directors. The aggregate amount of policyholder dividends is related to actual interest, mortality, morbidity and expense experience for the year, as well as management's judgment as to the appropriate level of statutory surplus to be retained by Metropolitan Life and its insurance subsidiaries. Federal Income Taxes The Company joins with the Holding Company and its includable affiliates in filing a consolidated U.S. 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 (from) the Holding Company to the extent that their income (losses and other credits) contributes to (reduce) the consolidated federal income 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 future tax consequences of temporary differences between financial reporting and tax bases of assets and liabilities are measured at the balance sheet dates and are recorded as deferred income tax assets and liabilities. Valuation allowances are established when management assesses, based on available information, that it is more likely than not that deferred income tax assets will not be realized. F-19 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Reinsurance The Company has reinsured certain of its life insurance contracts with other insurance companies under various agreements. For reinsurance contracts that transfer sufficient underwriting risk, reinsurance premiums, commissions, expense reimbursements, benefits and liabilities related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts due from reinsurers, for both short- and long-duration arrangements, 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 contact 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 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 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 substantially all of the stock option expense to the Company. F-20 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock-based compensation grants prior to January 1, 2003 are accounted for using the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion 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 as gains (losses) in the period in which they occur. 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 February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments ("SFAS 155"). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities ("SFAS 140"). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155 (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and (iv) eliminates the prohibition on a qualifying special- purpose entity ("QSPE") from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. SFAS 155 will be applied prospectively and is effective for all financial instruments acquired or issued for fiscal years beginning after September 15, 2006. SFAS 155 is not expected to have a material impact on the Company's consolidated financial statements. The FASB has issued additional guidance relating to derivative financial instruments as follows: - In June 2005, the FASB cleared SFAS 133 Implementation Issue No. B38, Embedded Derivatives: Evaluation of Net Settlement with Respect to the Settlement of a Debt Instrument through Exercise of an Embedded Put Option or Call Option ("Issue B38") and SFAS 133 Implementation Issue No. B39, Embedded Derivatives: Application of Paragraph 13(b) to Call Options That Are Exercisable Only by the Debtor ("Issue B39"). Issue B38 clarified that the potential settlement of a debtor's obligation to a creditor occurring upon exercise of a put or call option meets the net settlement criteria of SFAS No. 133. Issue B39 clarified that an embedded call option, in which the underlying is an interest rate or interest rate index, that can accelerate the settlement of a debt host financial instrument F-21 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) should not be bifurcated and fair valued if the right to accelerate the settlement can be exercised only by the debtor (issuer/borrower) and the investor will recover substantially all of its initial net investment. Issues B38 and B39, which must be adopted as of the first day of the first fiscal quarter beginning after December 15, 2005, did not have a material impact on the Company's consolidated financial statements. - Effective October 1, 2003, the Company adopted SFAS 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. As a result of the adoption of Issue B36, the Company recorded a cumulative effect of a change in accounting of $26 million, net of income taxes, for the year ended December 31, 2003. - 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. Effective November 9, 2005, the Company prospectively adopted the guidance in FASB Staff Position ("FSP") FAS 140-2, Clarification of the Application of Paragraphs 40(b) and 40(c) of FAS 140 ("FSP 140-2"). FSP 140-2 clarified certain criteria relating to derivatives and beneficial interests when considering whether an entity qualifies as a QSPE. Under FSP 140-2, the criteria must only be met at the date the QSPE issues beneficial interests or when a derivative financial instrument needs to be replaced upon the occurrence of a specified event outside the control of the transferor. FSP 140-2 did not have a material impact on the Company's consolidated financial statements. In September 2005, the American Institute of Certified Public Accountants ("AICPA") issued SOP 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in SFAS No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and For Realized Gains and Losses from the Sale of Investments. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Under SOP 05-1, modifications that result in a substantially unchanged contract will be accounted for as a continuation of the replaced contract. A replacement contract that is substantially changed will be accounted for as an extinguishment of the replaced contract resulting in a release of unamortized deferred acquisition costs, unearned revenue and deferred sales inducements associated with the replaced contract. The guidance in SOP 05-1 will be applied prospectively and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact of SOP 05-1 and does F-22 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) not expect that the pronouncement will have a material impact on the Company's consolidated financial statements. In September 2005, the Emerging Issues Task Force ("EITF") reached consensus on Issue No. 05-7, Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues ("EITF 05-7"). EITF 05-7 provides guidance on whether a modification of conversion options embedded in debt results in an extinguishment of that debt. In certain situations, companies may change the terms of an embedded conversion option as part of a debt modification. The EITF concluded that the change in the fair value of an embedded conversion option upon modification should be included in the analysis of EITF Issue No. 96-19, Debtor's Accounting for a Modification or Exchange of Debt Instruments, to determine whether a modification or extinguishment has occurred and that a change in the fair value of a conversion option should be recognized upon the modification as a discount (or premium) associated with the debt, and an increase (or decrease) in additional paid-in capital. EITF 05-7 will be applied prospectively and is effective for all debt modifications occurring in periods beginning after December 15, 2005. EITF 05-7 did not have a material impact on the Company's consolidated financial statements. In September 2005, the EITF reached consensus on Issue No. 05-8, Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature ("EITF 05-8"). EITF 05-8 concludes that (i) the issuance of convertible debt with a beneficial conversion feature results in a basis difference that should be accounted for as a temporary difference and (ii) the establishment of the deferred tax liability for the basis difference should result in an adjustment to additional paid in capital. EITF 05-8 will be applied retrospectively for all instruments with a beneficial conversion feature accounted for in accordance with EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and is effective for periods beginning after December 15, 2005. EITF 05-8 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted SFAS No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29 ("SFAS 153"). SFAS 153 amended prior guidance to eliminate the exception for nonmonetary exchanges of similar productive assets and replaced 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 were required to be applied prospectively for fiscal periods beginning after June 15, 2005. The adoption of SFAS 153 did not have a material impact on the Company's consolidated financial statements. Effective July 1, 2005, the Company adopted EITF Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6"). EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. As required by EITF 05-6, the Company adopted this guidance on a prospective basis which had no material impact on the Company's consolidated financial statements. In June 2005, the FASB completed its review of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments ("EITF 03-1"). EITF 03-1 provides 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. EITF 03-1 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 ("SFAS 115"), that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. The FASB decided not to provide additional guidance on the meaning of other-than-temporary impairment but has issued F-23 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FSP 115-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments ("FSP 115-1"), which nullifies the accounting guidance on the determination of whether an investment is other-than-temporarily impaired as set forth in EITF 03-1. As required by FSP 115-1, the Company adopted this guidance on a prospective basis, which had no material impact on the Company's consolidated financial statements, and has provided the required disclosures. In June 2005, the EITF reached consensus on Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights ("EITF 04-5"). EITF 04-5 provides a framework for determining whether a general partner controls and should consolidate a limited partnership or a similar entity in light of certain rights held by the limited partners. The consensus also provides additional guidance on substantive rights. EITF 04-5 was effective after June 29, 2005 for all newly formed partnerships and for any pre-existing limited partnerships that modified their partnership agreements after that date. EITF 04-5 must be adopted by January 1, 2006 for all other limited partnerships through a cumulative effect of a change in accounting principle recorded in opening equity or it may be applied retrospectively by adjusting prior period financial statements. The adoption of this provision of EITF 04-5 did not have a material impact on the Company's consolidated financial statements. In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"). The statement requires retrospective application to prior periods' financial statements for a voluntary change in accounting principle unless it is deemed impracticable. It also requires that a change in the method of depreciation, amortization, or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate rather than a change in accounting principle. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did not have a material impact on the Company's consolidated financial statements. In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payment ("SFAS 123(r)"), which revised SFAS 123 and supersedes APB 25. 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 measured at fair value and recognized over the period during which an employee is required to provide service in exchange for an award. The SEC issued a final ruling in April 2005 allowing a public company that is not a small business issuer to implement SFAS 123(r) at the beginning of the next fiscal year after June 15, 2005. Thus, the revised pronouncement must be adopted by the Company by January 1, 2006. As permitted under SFAS 148, Accounting for Stock-Based Compensation -- Transition and Disclosure -- an amendment of FASB Statement No. 123, 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). In addition, the pro forma impact of accounting for these options at fair value continued to be accounted for under the intrinsic value method until the last of those options vested in 2005. As all stock options currently accounted for under the intrinsic value method vested prior to the effective date, implementation of SFAS 123(r) will not have a significant impact on the Company's consolidated financial statements. See Note 12. Effective July 1, 2004, the Company prospectively adopted FSP No. 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 ("FSP 106-2"). FSP 106-2 provides accounting guidance to employers that sponsor postretirement health care plans that provide 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 F-24 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) postretirement plans are actuarially equivalent to the benefits offered under Medicare Part D. 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 was reduced by $213 million at July 1, 2004. See Note 11. Effective July 1, 2004, the Company adopted EITF 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 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 April 1, 2004, the Company adopted EITF Issue No. 03-6, Participating Securities and the Two -- Class Method under FASB Statement No. 128 ("EITF 03-6"). EITF 03-6 provides guidance on determining whether a security should be considered a participating security for purposes of computing earnings per common share and how earnings should be allocated to the participating security. EITF 03-6 did not have an impact on the Company's earnings per common share calculations or amounts. Effective January 1, 2004, the Company adopted SOP 03-1, as interpreted by a Technical Practice Aid ("TPA"), issued by the AICPA. 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 No. 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 changes 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. 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 F-25 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) effects of changes in accounting. Due to the adoption of SOP 03-1, the Company recorded a cumulative effect of a change in accounting of $52 million, net of income taxes of $27 million, for the year ended December 31, 2004. 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) did not have a significant impact on its consolidated financial statements since it only revised disclosure requirements. During 2003, the Company adopted FIN 46 and FIN 46(r). Certain of the Company's investments in real estate joint ventures and other limited partnership interests meet the definition of a variable interest entity ("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 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"). As required by SFAS 146, the Company adopted this guidance on a prospective basis which had no material impact on the Company's consolidated financial statements. 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 F-26 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 2. INVESTMENTS FIXED MATURITIES BY SECTOR AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables set forth the cost or amortized cost, gross unrealized gain and loss, and estimated fair value of the Company's fixed maturities by sector and equity securities, the percentage of the total fixed maturities holdings that each sector represents and the percentage of the total equity securities at:
DECEMBER 31, 2005 -------------------------------------------------- COST OR GROSS UNREALIZED AMORTIZED ----------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------- ------- ---------- ----- (IN MILLIONS) U.S. corporate securities...................... $ 47,966 $2,506 $ 358 $ 50,114 33.9% Residential mortgage-backed securities......... 30,213 315 292 30,236 20.4 Foreign corporate securities................... 22,873 1,625 257 24,241 16.4 U.S. Treasury/agency securities................ 17,858 1,333 18 19,173 13.0 Commercial mortgage-backed securities.......... 10,793 194 102 10,885 7.4 Asset-backed securities........................ 6,412 74 29 6,457 4.4 Foreign government securities.................. 4,734 999 10 5,723 3.9 State and political subdivision securities..... 738 21 10 749 0.5 Other fixed maturity securities................ 203 10 33 180 0.1 -------- ------ ------ -------- ----- Total bonds.................................. 141,790 7,077 1,109 147,758 100.0 Redeemable preferred stocks.................... 139 1 1 139 -- -------- ------ ------ -------- ----- Total fixed maturities....................... $141,929 $7,078 $1,110 $147,897 100.0% ======== ====== ====== ======== ===== Common stocks.................................. $ 1,616 $ 229 $ 25 $ 1,820 82.1% Nonredeemable preferred stocks................. 373 27 3 397 17.9 -------- ------ ------ -------- ----- Total equity securities...................... $ 1,989 $ 256 $ 28 $ 2,217 100.0% ======== ====== ====== ======== =====
F-27 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2004 -------------------------------------------------- COST OR GROSS UNREALIZED AMORTIZED ----------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- -------- ------ ---------- ----- (IN MILLIONS) U.S. corporate securities........................ $ 51,398 $3,561 $144 $ 54,815 36.5% Residential mortgage-backed securities........... 28,155 573 52 28,676 19.1 Foreign corporate securities..................... 21,545 2,381 65 23,861 15.9 U.S. Treasury/agency securities.................. 14,938 1,271 19 16,190 10.8 Commercial mortgage-backed securities............ 10,395 408 30 10,773 7.2 Asset-backed securities.......................... 9,282 115 29 9,368 6.2 Foreign government securities.................... 4,650 766 12 5,404 3.6 State and political subdivision securities....... 340 16 1 355 0.2 Other fixed maturity securities.................. 519 46 33 532 0.3 -------- ------ ---- -------- ----- Total bonds.................................... 141,222 9,137 385 149,974 99.8 Redeemable preferred stocks...................... 274 -- 19 255 0.2 -------- ------ ---- -------- ----- Total fixed maturities......................... $141,496 $9,137 $404 $150,229 100.0% ======== ====== ==== ======== ===== Common stocks.................................... $ 1,329 $ 238 $ 5 $ 1,562 82.1% Nonredeemable preferred stocks................... 317 24 -- 341 17.9 -------- ------ ---- -------- ----- Total equity securities........................ $ 1,646 $ 262 $ 5 $ 1,903 100.0% ======== ====== ==== ======== =====
The Company held foreign currency derivatives with notional amounts of $4,946 million and $4,642 million to hedge the exchange rate risk associated with foreign bonds and loans at December 31, 2005 and 2004, 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 $10,160 million and $11,199 million at December 31, 2005 and 2004, respectively. These securities had a net unrealized gain of $388 million and $876 million at December 31, 2005 and 2004, respectively. Non-income producing fixed maturities at fair value were $10 million and $84 million at December 31, 2005 and 2004, respectively. Unrealized gains (losses) associated with non-income producing fixed maturities were $1 million and $(11) million at December 31, 2005 and 2004, respectively. F-28 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The cost or amortized cost and estimated fair value of bonds at December 31, 2005 and 2004, by contractual maturity date (excluding scheduled sinking funds), are shown below:
DECEMBER 31, ----------------------------------------------- 2005 2004 ---------------------- ---------------------- COST OR COST OR AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less.................... $ 4,271 $ 4,320 $ 5,490 $ 5,577 Due after one year through five years...... 20,419 20,899 24,322 25,487 Due after five years through ten years..... 29,365 30,335 28,842 31,041 Due after ten years........................ 40,317 44,626 34,736 39,052 -------- -------- -------- -------- Subtotal................................. 94,372 100,180 93,390 101,157 Mortgage-backed, commercial mortgage-backed and other asset-backed securities........ 47,418 47,578 47,832 48,817 -------- -------- -------- -------- Subtotal................................. 141,790 147,758 141,222 149,974 Redeemable preferred stock................. 139 139 274 255 -------- -------- -------- -------- Total fixed maturities................... $141,929 $147,897 $141,496 $150,229 ======== ======== ======== ========
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, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Proceeds................................................ $97,347 $53,639 $48,390 Gross investment gains.................................. $ 623 $ 792 $ 446 Gross investment losses................................. $ (956) $ (468) $ (452)
Gross investment losses above exclude writedowns recorded during 2005, 2004 and 2003 for other-than-temporarily impaired available-for-sale fixed maturities and equity securities of $64 million, $93 million and $328 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. F-29 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSSES FOR FIXED MATURITIES AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables show 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, 2005 and 2004:
DECEMBER 31, 2005 ------------------------------------------------------------------------ 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 --------- ---------- --------- ---------- --------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities............ $12,171 $275 $2,295 $ 83 $14,466 $ 358 Residential mortgage-backed securities......................... 18,839 267 884 25 19,723 292 Foreign corporate securities......... 6,947 199 1,621 58 8,568 257 U.S. Treasury/agency securities...... 2,856 16 107 2 2,963 18 Commercial mortgage-backed securities......................... 5,323 89 401 13 5,724 102 Asset-backed securities.............. 2,289 21 239 8 2,528 29 Foreign government securities........ 429 9 161 1 590 10 State and political subdivision securities......................... 327 10 -- -- 327 10 Other fixed maturity securities...... -- 29 38 4 38 33 ------- ---- ------ ---- ------- ------ Total bonds........................ 49,181 915 5,746 194 54,927 1,109 Redeemable preferred stocks.......... 48 1 -- -- 48 1 ------- ---- ------ ---- ------- ------ Total fixed maturities............. $49,229 $916 $5,746 $194 $54,975 $1,110 ======= ==== ====== ==== ======= ====== Equity securities.................... $ 409 $ 24 $ 57 $ 4 $ 466 $ 28 ======= ==== ====== ==== ======= ====== Total number of securities in an unrealized loss position........... 3,607 675 4,282 ======= ====== =======
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 --------- ---------- --------- ---------- --------- ---------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities............ $ 8,122 $ 97 $1,081 $ 47 $ 9,203 $144 Residential mortgage-backed securities......................... 7,257 49 215 3 7,472 52 Foreign corporate securities......... 3,234 52 413 13 3,647 65 U.S. Treasury/agency securities...... 4,399 19 1 -- 4,400 19 Commercial mortgage-backed securities......................... 3,137 27 136 3 3,273 30 Asset-backed securities.............. 3,424 22 203 7 3,627 29 Foreign government securities........ 490 8 39 4 529 12 State and political subdivision securities......................... 37 -- 14 1 51 1 Other fixed maturity securities...... 37 33 12 -- 49 33 ------- ---- ------ ---- ------- ---- Total bonds........................ 30,137 307 2,114 78 32,251 385 Redeemable preferred stocks.......... 255 19 -- -- 255 19 ------- ---- ------ ---- ------- ---- Total fixed maturities............. $30,392 $326 $2,114 $ 78 $32,506 $404 ======= ==== ====== ==== ======= ==== Equity securities.................... $ 78 $ 5 $ 4 $ -- $ 82 $ 5 ======= ==== ====== ==== ======= ==== Total number of securities in an unrealized loss position........... 2,896 248 3,144 ======= ====== =======
F-30 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSSES FOR FIXED MATURITIES AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized losses and number of securities for fixed maturities and equity securities at December 31, 2005 and 2004, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more for:
DECEMBER 31, 2005 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSSES SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months............ $43,966 $68 $ 732 $18 2,827 89 Six months or greater but less than nine months.............. 2,666 4 82 2 268 7 Nine months or greater but less than twelve months............ 3,874 -- 106 -- 415 1 Twelve months or greater........ 5,980 21 193 5 668 7 ------- --- ------ --- ----- --- Total......................... $56,486 $93 $1,113 $25 4,178 104 ======= === ====== === ===== ===
DECEMBER 31, 2004 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSSES SECURITIES ------------------ ------------------ ------------------ LESS THAN 20% OR LESS THAN 20% OR LESS THAN 20% OR 20% MORE 20% MORE 20% MORE --------- ------ --------- ------ --------- ------ (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) Less than six months............ $22,449 $51 $194 $12 2,020 117 Six months or greater but less than nine months.............. 7,039 8 94 1 593 5 Nine months or greater but less than twelve months............ 1,235 19 26 4 156 5 Twelve months or greater........ 2,176 20 63 15 241 7 ------- --- ---- --- ----- --- Total......................... $32,899 $98 $377 $32 3,010 134 ======= === ==== === ===== ===
As of December 31, 2005, $1,113 million of unrealized losses related to securities with an unrealized loss position less than 20% of cost or amortized cost, which represented 2% of the cost or amortized cost of such securities. As of December 31, 2004, $377 million of unrealized losses related to securities with an unrealized loss position less than 20% of cost or amortized cost, which represented 1% of the cost or amortized cost of such securities. As of December 31, 2005, $25 million of unrealized losses related to securities with an unrealized loss position greater than 20% of cost or amortized cost, which represented 27% of the cost or amortized cost of such securities. Of such unrealized losses of $25 million, $18 million have been in an unrealized loss position for a period of less than six months. As of December 31, 2004, $32 million of unrealized losses related to securities with an unrealized loss position greater than 20% of cost or amortized cost, which represented 33% of the cost or amortized cost of such securities. Of such unrealized losses of $32 million, $12 million have been in an unrealized loss position for a period of less than six months. As described more fully in Note 1, the Company performs a regular evaluation, on a security-by-security basis, of its investment holdings in accordance with its impairment policy in order to evaluate whether such securities are other-than-temporarily impaired. The increase in the unrealized losses during 2005 is principally F-31 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) driven by an increase in interest rates during the year. Based upon the Company's evaluation of the securities in accordance with its impairment policy, the cause of the decline being principally attributable to the general rise in rates during the year, and the Company's intent and ability to hold the fixed income and equity securities with unrealized losses for a period of time sufficient for them to recover; the Company has concluded that the aforementioned securities are not other-than-temporarily impaired. SECURITIES LENDING PROGRAM The Company participates in a securities lending program whereby blocks of securities, which are included in fixed maturities, 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 $19,479 million and $23,325 million and an estimated fair value of $20,417 million and $24,625 million were on loan under the program at December 31, 2005 and 2004, respectively. Securities loaned under such transactions may be sold or repledged by the transferee. The Company was liable for cash collateral under its control of $20,975 million and $25,230 million at December 31, 2005 and 2004, respectively. Securities loaned transactions are accounted for as financing arrangements on the Company's consolidated balance sheets and consolidated statements of cash flows and the income and expenses associated with the program are reported in net investment income as investment income and investment expenses, respectively. Security collateral of $33 million and $17 million, respectively, at December 31, 2005 and 2004 on deposit from customers in connection with the securities lending transactions 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 $1,473 million and $1,315 million at December 31, 2005 and 2004, respectively, consisting primarily of fixed maturity securities. Company securities held in trust to satisfy collateral requirements had an amortized cost of $1,492 million and $1,880 million at December 31, 2005 and 2004, respectively, consisting primarily of fixed maturity securities. MORTGAGE AND CONSUMER LOANS Mortgage and consumer loans were categorized as follows:
DECEMBER 31, ------------------------------------- 2005 2004 ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------- ------- (IN MILLIONS) Commercial mortgage loans........................ $26,574 80% $25,432 80% Agricultural mortgage loans...................... 6,242 19 5,654 18 Consumer loans................................... 427 1 639 2 ------- --- ------- --- Total.......................................... 33,243 100% 31,725 100% === === Less: Valuation allowances....................... 149 154 ------- ------- Mortgage and consumer loans.................... $33,094 $31,571 ======= =======
Mortgage loans are collateralized by properties primarily located in the United States. At December 31, 2005, approximately 20%, 9% and 7% of the properties were located in California, New York and Illinois, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. F-32 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Of the mortgage loans held at December 31, 2005 and 2004, $781 million and $1,480 million, respectively, of the loans granted, were in connection with Metropolitan Insurance and Annuity Company's ("MIAC"), a related party, purchase of real estate from the Company in 2001 and 2003. MIAC was merged into MTL, also a related party, in 2004. In 2005, MTL sold its 200 Park Avenue real estate property located in New York City, to a third party for $1.72 billion. Concurrent with the sale, MTL repaid the related $690 million mortgage, including accrued interest, it owed to the Company. Based on the terms of the loan agreement, the Company also received a $120 million prepayment fee from MTL, which was recognized as investment income when received. In addition, the Company has also loaned money to certain real estate joint ventures which are recorded as mortgage loans. The carrying values of such mortgages were $379 million and $641 million at December 31, 2005 and 2004, respectively. Changes in loan valuation allowances for mortgage and consumer loans were as follows:
YEARS ENDED DECEMBER 31, ------------------ 2005 2004 2003 ---- ---- ---- (IN MILLIONS) Balance, beginning of year.................................. $154 $126 $122 Additions................................................... 43 56 50 Deductions.................................................. (48) (28) (46) ---- ---- ---- Balance, end of year........................................ $149 $154 $126 ==== ==== ====
A portion of the Company's mortgage and consumer loans was impaired and consisted of the following:
DECEMBER 31, ------------- 2005 2004 ----- ----- (IN MILLIONS) Impaired mortgage loans with valuation allowances........... $11 $178 Impaired mortgage loans without valuation allowances........ 86 115 --- ---- Total..................................................... 97 293 Less: Valuation allowances on impaired loans................ 2 40 --- ---- Impaired loans............................................ $95 $253 === ====
The average investment in impaired loans was $152 million, $376 million and $615 million for the years ended December 31, 2005, 2004 and 2003, respectively. Interest income on impaired loans was $6 million, $25 million and $55 million for the years ended December 31, 2005, 2004 and 2003, respectively. The investment in restructured loans was $37 million and $121 million at December 31, 2005 and 2004, respectively. Interest income of $2 million, $9 million and $19 million was recognized on restructured loans for the years ended December 31, 2005, 2004 and 2003, respectively. Gross interest income that would have been recorded in accordance with the original terms of such loans amounted to $3 million, $11 million and $24 million for the years ended December 31, 2005, 2004 and 2003, respectively. Mortgage and consumer loans with scheduled payments of 60 days (90 days for agricultural mortgages) or more past due or in foreclosure had an amortized cost of $30 million and $35 million at December 31, 2005 and 2004, respectively. F-33 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE AND REAL ESTATE JOINT VENTURES Real estate and real estate joint ventures consisted of the following:
DECEMBER 31, --------------- 2005 2004 ------ ------ (IN MILLIONS) Real estate and real estate joint ventures held-for-investment....................................... $4,205 $2,761 Impairments................................................. (118) (118) ------ ------ Total..................................................... 4,087 2,643 ------ ------ Real estate held-for-sale................................... -- 694 Impairments................................................. -- (16) ------ ------ Total..................................................... -- 678 ------ ------ Real estate and real estate joint ventures............. $4,087 $3,321 ====== ======
Accumulated depreciation on real estate was $993 million and $1,222 million at December 31, 2005 and 2004, respectively. Related depreciation expense was $103 million, $116 million and $124 million for the years ended December 31, 2005, 2004 and 2003, respectively. These amounts include $9 million, $37 million and $51 million of depreciation expense related to discontinued operations for the years ended December 31, 2005, 2004 and 2003, respectively. Real estate and real estate joint ventures were categorized as follows:
DECEMBER 31, ----------------------------------- 2005 2004 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Office............................................. $2,529 62% $1,800 55% Retail............................................. 612 15 556 17 Apartments......................................... 447 11 514 15 Land............................................... 40 1 47 1 Agriculture........................................ 2 -- 1 -- Other.............................................. 457 11 403 12 ------ --- ------ --- Total............................................ $4,087 100% $3,321 100% ====== === ====== ===
The Company's real estate holdings are primarily located in the United States. At December 31, 2005, approximately 26%, 17% and 15% of the Company's real estate holdings were located in California, Texas and New York, respectively. F-34 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Changes in the real estate and real estate joint ventures held-for-sale valuation allowance were as follows:
YEARS ENDED DECEMBER 31, ------------------ 2005 2004 2003 ---- ---- ---- (IN MILLIONS) Balance, beginning of year.................................. $ 4 $ 12 $ 11 Additions................................................... 5 13 17 Deductions.................................................. (9) (21) (16) --- ---- ---- Balance, end of year........................................ $-- $ 4 $ 12 === ==== ====
Investment income related to impaired real estate and real estate joint ventures held-for-investment was $7 million, $15 million and $34 million for the years ended December 31, 2005, 2004 and 2003, respectively. There was no investment income (expense) related to impaired real estate and real estate joint ventures held-for-sale for the year ended December 31, 2005. Investment income (expense) related to impaired real estate and real estate joint ventures held-for-sale was ($1) million and $1 million for the years ended December 31, 2004 and 2003, respectively. The carrying value of non-income producing real estate and real estate joint ventures was $30 million and $38 million at December 31, 2005 and 2004, respectively. The Company owned no real estate acquired in satisfaction of debt at December 31, 2005. The Company owned real estate acquired in satisfaction of debt of $1 million at December 31, 2004. LEVERAGED LEASES Leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, --------------- 2005 2004 ------ ------ (IN MILLIONS) Investment.................................................. $ 991 $1,059 Estimated residual values................................... 735 480 ------ ------ Total..................................................... 1,726 1,539 Unearned income............................................. (645) (424) ------ ------ Leveraged leases.......................................... $1,081 $1,115 ====== ======
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 $605 million and $757 million at December 31, 2005 and 2004, respectively. FUNDS WITHHELD AT INTEREST Included in other invested assets at December 31, 2005 and 2004, were funds withheld at interest of $3,479 million and $2,788 million, respectively. F-35 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT INCOME The components of net investment income were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Fixed maturities........................................ $ 8,600 $ 8,085 $ 7,765 Equity securities....................................... 42 65 27 Mortgage and consumer loans............................. 2,246 1,957 1,932 Real estate and real estate joint ventures.............. 592 484 425 Policy loans............................................ 497 492 510 Other limited partnership interests..................... 676 324 80 Cash, cash equivalents and short-term investments....... 113 64 83 Other................................................... 381 179 175 ------- ------- ------- Total................................................. 13,147 11,650 10,997 Less: Investment expenses............................... 1,397 832 730 ------- ------- ------- Net investment income................................. $11,750 $10,818 $10,267 ======= ======= =======
NET INVESTMENT GAINS (LOSSES) Net investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) Fixed maturities............................................ $(518) $ 81 $(373) Equity securities........................................... 121 150 39 Mortgage and consumer loans................................. 31 54 (51) Real estate and real estate joint ventures.................. 7 5 20 Other limited partnership interests......................... 43 53 (84) Derivatives................................................. 415 (232) (91) Other....................................................... 80 171 14 ----- ----- ----- Total net investment gains (losses)....................... $ 179 $ 282 $(526) ===== ===== =====
F-36 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income, were as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Fixed maturities........................................ $ 5,972 $ 8,571 $ 8,094 Equity securities....................................... 225 270 353 Derivatives............................................. (207) (494) (395) Minority Interest....................................... (171) (103) (61) Other................................................... (82) 34 6 ------- ------- ------- Total................................................. 5,737 8,278 7,997 ------- ------- ------- Amounts related to: Future policy benefit loss recognition................ (1,259) (1,953) (1,453) DAC and VOBA.......................................... (148) (407) (495) Participating contracts............................... -- -- (117) Policyholder dividend obligation...................... (1,492) (2,119) (2,130) ------- ------- ------- Total................................................. (2,899) (4,479) (4,195) ------- ------- ------- Deferred income taxes................................... (1,029) (1,391) (1,397) ------- ------- ------- Total................................................. (3,928) (5,870) (5,592) ------- ------- ------- Net unrealized investment gains (losses)........... $ 1,809 $ 2,408 $ 2,405 ======= ======= =======
The changes in net unrealized investment gains (losses) were as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2005 2004 2003 ------- ------ ------ (IN MILLIONS) Balance, beginning of year................................ $ 2,408 $2,405 $1,991 Unrealized investment gains (losses) during the year...... (2,556) 281 994 Unrealized investment gains (losses) of subsidiaries at date of sale............................................ 15 -- 269 Unrealized investment gains (losses) relating to: Future policy benefit gains (losses) recognition........ 694 (500) (211) DAC and VOBA............................................ 259 88 (129) Participating contracts................................. -- 117 12 Policyholder dividend obligation........................ 627 11 (248) Deferred income taxes..................................... 362 6 (273) ------- ------ ------ Balance, end of year...................................... $ 1,809 $2,408 $2,405 ------- ------ ------ Net change in unrealized investment gains (losses)........ $ (599) $ 3 $ 414 ======= ====== ======
F-37 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) TRADING SECURITIES Net investment income for the year ended December 31, 2005 includes $3 million of losses on securities classified as trading. The $3 million primarily relates to net losses recognized on trading securities sold during the year ended December 31, 2005. For the year ended December 31, 2005, changes in fair value on trading securities held at December 31, 2005 were less than $1 million. The Company did not hold any trading securities during the years ended December 31, 2004 and 2003. STRUCTURED INVESTMENT TRANSACTIONS 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 $362 million and $636 million at December 31, 2005 and 2004, respectively. The related net investment income recognized was $28 million, $44 million and $78 million for the years ended December 31, 2005, 2004 and 2003, respectively. VARIABLE INTEREST ENTITIES 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, 2005; and (ii) it holds significant variable interests but it is not the primary beneficiary and which have not been consolidated:
DECEMBER 31, 2005 ----------------------------------------------------------- PRIMARY BENEFICIARY NOT PRIMARY BENEFICIARY ---------------------------- ---------------------------- TOTAL MAXIMUM EXPOSURE TOTAL MAXIMUM EXPOSURE ASSETS(1) TO LOSS(2) ASSETS(1) TO LOSS(2) --------- ---------------- --------- ---------------- (IN MILLIONS) Asset-backed securitizations and collateralized debt obligations..................... $ -- $ -- $ 3,728 $ 394 Real estate joint ventures(3)..... 304 114 150 -- Other limited partnerships(4)..... 48 35 15,030 1,966 Other investments(5).............. -- -- 3,522 177 ---- ---- ------- ------ Total........................... $352 $149 $22,430 $2,537 ==== ==== ======= ======
--------------- (1) The assets of the asset-backed securitizations and collateralized debt obligations are reflected at fair value at December 31, 2005. The assets of the real estate joint ventures, other limited partnerships and other 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 participation or 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 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. F-38 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (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 investments include securities that are not asset-backed securitizations or collateralized debt obligations. 3. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE INSTRUMENTS The following table provides a summary of the notional amounts and current market or fair value of derivative financial instruments held at:
DECEMBER 31, 2005 DECEMBER 31, 2004 ------------------------------- ------------------------------- CURRENT MARKET OR CURRENT MARKET OR FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps............ $12,857 $294 $ 12 $12,215 $276 $ 19 Interest rate floors........... 6,515 80 -- 2,065 24 -- Interest rate caps............. 24,970 224 -- 7,045 12 -- Financial futures.............. 63 1 -- 417 -- 5 Foreign currency swaps......... 9,256 74 852 7,457 149 1,274 Foreign currency forwards...... 2,333 26 41 888 -- 57 Options........................ 221 2 2 263 8 7 Financial forwards............. 2,446 13 1 326 -- -- Credit default swaps........... 4,789 11 9 1,879 10 5 Synthetic GICs................. 5,477 -- -- 5,869 -- -- Other.......................... 250 9 -- 450 1 1 ------- ---- ---- ------- ---- ------ Total........................ $69,177 $734 $917 $38,874 $480 $1,368 ======= ==== ==== ======= ==== ======
The above table does not include notional values for equity financial forwards. At December 31, 2005 and 2004, the Company owned 132,000 and no equity financial forwards, respectively. Equity financial forwards market values are included in financial forwards in the preceding table. F-39 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table provides a summary of the notional amounts of derivative financial instruments by maturity at December 31, 2005:
REMAINING LIFE -------------------------------------------------------- AFTER AFTER ONE YEAR FIVE YEARS ONE YEAR THROUGH THROUGH AFTER OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL -------- ---------- ---------- --------- ------- (IN MILLIONS) Interest rate swaps................ $ 3,679 $ 3,607 $ 2,429 $3,142 $12,857 Interest rate floors............... -- 325 6,190 -- 6,515 Interest rate caps................. 12,900 12,070 -- -- 24,970 Financial futures.................. 63 -- -- -- 63 Foreign currency swaps............. 216 3,812 4,350 878 9,256 Foreign currency forwards.......... 2,333 -- -- -- 2,333 Options............................ 220 -- 1 -- 221 Financial forwards................. 446 -- -- 2,000 2,446 Credit default swaps............... 580 3,960 249 -- 4,789 Synthetic GICs..................... 4,751 726 -- -- 5,477 Other.............................. 250 -- -- -- 250 ------- ------- ------- ------ ------- Total............................ $25,438 $24,500 $13,219 $6,020 $69,177 ======= ======= ======= ====== =======
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. The Company also enters into basis swaps to better match the cash flows from assets and related liabilities. In a basis swap, both legs of the swap are floating with each based on a different index. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. A single net payment is usually made by one counterparty at each due date. Basis swaps are included in interest rate swaps in the preceding table. 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 against interest rate exposure arising from mismatches between assets and liabilities (duration mismatches), as well as to protect its minimum rate guarantee liabilities against declines in interest rates below a specified level, respectively. In exchange-traded interest rate (Treasury and swap) transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate 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 exchange. Exchange-traded interest rate (Treasury and swap) 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 or swap curve performance. F-40 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The value of interest rate futures is substantially impacted in interest rates and they can be used to modify or hedge existing interest rate risk. Foreign currency derivatives, including foreign currency swaps, foreign currency forwards and currency option contracts, 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 and swaps to hedge the foreign currency risk associated with certain of its net investments in foreign operations. 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. 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. The Company enters into currency option contracts that give it the right, but not the obligation, to sell the foreign currency amount in exchange for a functional currency amount within a limited time at a contracted price. The contracts may also be net settled in cash, based on differentials in the foreign exchange rate and the strike price. Currency option contracts are included in options in the preceding table. 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. Swaptions are included in options in the preceding table. The Company enters into financial forwards to buy and sell securities. The price is agreed upon at the time of the contract and payment for such a contract is made at a specified future date. Equity variance swaps are used by the Company primarily to hedge minimum guarantees embedded in certain variable annuity products offered by the Company. In an equity variance swap, the Company agrees with another party to exchange amounts in the future, based on changes in equity volatility over a defined period. Equity variance swaps are included in financial forwards in the preceding table. Swap spread locks are used by the Company to hedge invested assets on an economic basis against the risk of changes in credit spreads. Swap spread locks are forward starting swaps where the Company agrees to pay a coupon based on a predetermined reference swap spread in exchange for receiving a coupon based on a floating rate. The Company has the option to cash settle with the counterparty in lieu of maintaining the swap after the effective date. Swap spread locks are included in financial forwards in the preceding table. Certain credit default swaps are used by the Company to hedge against credit-related changes in the value of its investments and to diversify its credit risk exposure in certain portfolios. 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. 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. F-41 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2005 DECEMBER 31, 2004 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value..................... $ 4,419 $ 50 $104 $ 4,850 $173 $ 233 Cash flow...................... 6,233 29 437 8,057 40 664 Foreign operations............. 834 2 37 535 -- 47 Non-qualifying................. 57,691 653 339 25,432 267 424 ------- ---- ---- ------- ---- ------ Total........................ $69,177 $734 $917 $38,874 $480 $1,368 ======= ==== ==== ======= ==== ======
The following table provides the settlement payments recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------------- 2005 2004 2003 ------ ------- ------ (IN MILLIONS) Qualifying hedges: Net investment income..................................... $ 42 $(144) $(61) Interest credited to policyholder account balances........ 17 45 -- Non-qualifying hedges: Net investment gains (losses)............................. 86 51 84 ---- ----- ---- Total.................................................. $145 $ (48) $ 23 ==== ===== ====
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) interest rate futures to hedge against changes in value of fixed rate securities. F-42 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) 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, -------------------------- 2005 2004 2003 ------- ------ ------- (IN MILLIONS) Changes in the fair value of derivatives.................... $(118) $ 64 $(184) Changes in the fair value of the items hedged............... 116 (49) 158 ----- ---- ----- Net ineffectiveness of fair value hedging activities........ $ (2) $ 15 $ (26) ===== ==== =====
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) interest rate futures to hedge against changes in value of securities to be acquired; (v) interest rate futures to hedge against changes in interest rates on liabilities to be issued; and (vi) financial forwards to buy and sell securities. For the years ended December 31, 2005, 2004 and 2003, the Company recognized net investment gains (losses) of ($21) million, ($31) million, and ($67) million, respectively, which represented the ineffective portion of all cash flow hedges. All components of each derivative's gain or loss were included in the assessment of hedge ineffectiveness. In certain instances, 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. The net amounts reclassified into net investment gains (losses) for the years ended December 31, 2005, 2004 and 2003 related to such discontinued cash flow hedges were losses of $42 million, $29 million and $0 million, respectively. 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:
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) Other comprehensive income (loss) balance at the beginning of the year............................................... $(447) $(385) $ (24) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges.............. 196 (98) (367) Amounts reclassified to net investment gains (losses)....... 44 41 12 Amounts reclassified to net investment income............... 2 2 2 Amortization of transition adjustment....................... (2) (7) (8) ----- ----- ----- Other comprehensive income (loss) balance at the end of the year...................................................... $(207) $(447) $(385) ===== ===== =====
F-43 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2005, approximately $7 million of the deferred net loss on derivatives accumulated in other comprehensive income (loss) is expected to be reclassified to earnings during the year ending December 31, 2006. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses forward exchange contracts, foreign currency swaps and options to hedge portions of its net investment in foreign operations against adverse movements in exchange rates. The Company measures ineffectiveness on the forward exchange contracts based upon the change in forward rates. There was no ineffectiveness recorded in 2005, 2004 or 2003. The Company's consolidated statements of stockholder's equity for the years ended December 31, 2005, 2004 and 2003 include losses of $27 million, $47 million and $10 million, respectively, related to foreign currency contracts used to hedge its net investments in foreign operations. At December 31, 2005 and 2004, the cumulative foreign currency translation loss recorded in Accumulated other comprehensive income ("AOCI") related to these hedges was approximately $84 million and $57 million, respectively. When substantially all of the net investments in foreign operations are sold or liquidated, the amounts in AOCI are reclassified to the consolidated statements of income, while a pro rata portion will be reclassified upon partial sale of the net investments in foreign operations. 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 interest rate futures to minimize its exposure to interest rate volatility; (ii) foreign currency forwards, swaps and option contracts 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) credit default swaps to diversify its credit risk exposure in certain portfolios; (vi) interest rate futures and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (vii) swap spread locks to hedge invested assets against the risk of changes in credit spreads; (viii) financial forwards to buy and sell securities; (ix) synthetic GICs to synthetically create traditional GICs; (x) RSATs and TRRs to synthetically create investments; and (xi) basis swaps to better match the cash flows from assets and related liabilities. For the years ended December 31, 2005, 2004 and 2003, the Company recognized as net investment gains (losses) changes in fair value of $401 million, ($107) million and ($110) million, respectively, related to derivatives that do not qualify for 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, guaranteed minimum withdrawal, accumulation, and interest benefit contracts, and modified coinsurance contracts. The fair value of the Company's embedded derivative assets was $50 million and $43 million at December 31, 2005 and 2004, respectively. The fair value of the Company's embedded derivative liabilities was $10 million and $26 million at December 31, 2005 and 2004, respectively. The amounts recorded in net investment gains (losses) during the years ended December 31, 2005, 2004 and 2003 were gains of $29 million, $34 million and $19 million, respectively. F-44 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. As noted above, the Company manages its credit risk related to over-the-counter derivatives by entering into transactions with creditworthy counterparties, maintaining collateral arrangements and through the use of master agreements that provide for a single net payment to be made by one counterparty to another at each due date and upon termination. Because exchange traded futures 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 instruments. The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. As of December 31, 2005, the Company was obligated to return cash collateral under its control of $34 million, but held no non-cash collateral. This unrestricted cash collateral is included in cash and cash equivalents and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. The Company did not have any cash or other collateral related to derivative instruments at December 31, 2004. As of December 31, 2005 and 2004, the Company had not pledged any collateral related to derivative instruments. F-45 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4. INSURANCE DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA for the years ended December 31, 2005, 2004 and 2003 is as follows:
DEFERRED POLICY VALUE OF ACQUISITION BUSINESS COSTS ACQUIRED TOTAL ----------- -------- ------- (IN MILLIONS) Balance at January 1, 2003.............................. $ 8,790 $871 $ 9,661 Capitalizations....................................... 1,982 -- 1,982 Acquisitions.......................................... 218 -- 218 ------- ---- ------- Total............................................ 10,990 871 11,861 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)...................... 10 (5) 5 Unrealized investment gains (losses)............... 138 (9) 129 Other expenses..................................... 1,332 49 1,381 ------- ---- ------- Total amortization............................... 1,480 35 1,515 ------- ---- ------- Less: Dispositions and other.......................... (120) -- (120) ------- ---- ------- Balance at December 31, 2003............................ 9,390 836 10,226 Capitalizations....................................... 1,817 -- 1,817 ------- ---- ------- Total............................................ 11,207 836 12,043 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)...................... 5 1 6 Unrealized investment gains (losses)............... (12) (76) (88) Other expenses..................................... 1,058 81 1,139 ------- ---- ------- Total amortization............................... 1,051 6 1,057 ------- ---- ------- Less: Dispositions and other.......................... 99 (23) 76 ------- ---- ------- Balance at December 31, 2004............................ 10,255 807 11,062 Capitalizations....................................... 1,619 -- 1,619 ------- ---- ------- Total............................................ 11,874 807 12,681 ------- ---- ------- Less: Amortization related to: Net investment gains (losses)...................... 13 2 15 Unrealized investment gains (losses)............... (244) (15) (259) Other expenses..................................... 1,304 66 1,370 ------- ---- ------- Total amortization............................... 1,073 53 1,126 ------- ---- ------- Less: Dispositions and other.......................... (120) 3 (117) ------- ---- ------- Balance at December 31, 2005............................ $10,681 $757 $11,438 ======= ==== =======
F-46 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The estimated future amortization expense for the next five years allocated to other expenses for VOBA is $65 million in 2006, $63 million in 2007, $61 million in 2008, $61 million in 2009 and $37 million in 2010. Amortization of DAC and VOBA 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 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, which are reported within other assets in the consolidated balance sheets, are as follows:
YEARS ENDED DECEMBER 31, ------------- 2005 2004 ----- ----- (IN MILLIONS) Balance at January 1........................................ $75 $52 Capitalization............................................ 29 29 Amortization.............................................. (9) (6) --- --- Balance at December 31...................................... $95 $75 === ===
F-47 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, which are reported within future policyholder benefits in the consolidated balance sheets:
YEARS ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Balance at January 1.................................... $ 3,847 $ 3,560 $ 4,821 Less: Reinsurance recoverables........................ (287) (284) (496) ------- ------- ------- Net balance at January 1................................ 3,560 3,276 4,325 ------- ------- ------- Incurred related to: Current year.......................................... 2,791 2,491 3,816 Prior years........................................... (41) (9) 28 ------- ------- ------- 2,750 2,482 3,844 ------- ------- ------- Paid related to: Current year.......................................... (1,667) (1,519) (2,153) Prior years........................................... (742) (679) (1,290) ------- ------- ------- (2,409) (2,198) (3,443) ------- ------- ------- Dispositions............................................ -- -- (1,450) Net Balance at December 31.............................. 3,901 3,560 3,276 Add: Reinsurance recoverables......................... 290 287 284 ------- ------- ------- Balance at December 31.................................. $ 4,191 $ 3,847 $ 3,560 ======= ======= =======
As a result of changes in estimates of insured events in the prior years, the claims and claim adjustment expenses decreased $41 million in 2005 due to a refinement in the estimation methodology for non-medical health long-term care claim reserves, improved loss ratio reserves for non-medical health claim reserves and improved claim management. In 2004, the claims and claim adjustment expense decreased by $9 million due to improved loss ratios in non-medical health claim reserves and improved claims management. In 2003, prior to the sale of Met P&C, the claims and claim adjustment expense increased by $28 million as a result of the re-evaluation of loss trends related to the automobile line of business. 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 ("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. F-48 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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: ANNUITY CONTRACTS
DECEMBER 31, --------------------------------------------------------------- 2005 2004 ------------------------------ ------------------------------ IN THE AT IN THE AT EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION -------------- ------------- -------------- ------------- (IN MILLIONS) RETURN OF NET DEPOSITS Account value.......................... $ 2,527 N/A $ 2,039 N/A Net amount at risk..................... $ 1(1) N/A $ 11(1) N/A Average attained age of contractholders..................... 58 years N/A 58 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Account value.......................... $ 31,646 $ 3,847 $ 29,834 $ 2,659 Net amount at risk..................... $ 521(1) $ 17(2) $ 735(1) $ 7(2) Average attained age of contractholders..................... 60 years 57 years 61 years 56 years TWO TIER ANNUITIES General account value.................. N/A $ 299 N/A $ 301 Net amount at risk..................... N/A $ 36(3) N/A $ 36(3) Average attained age of contractholders..................... N/A 58 years N/A 58 years
UNIVERSAL AND VARIABLE LIFE CONTRACTS
DECEMBER 31, ---------------------------------------------------- 2005 2004 ------------------------ ------------------------ SECONDARY PAID UP SECONDARY PAID UP GUARANTEES GUARANTEES GUARANTEES GUARANTEES ---------- ---------- ---------- ---------- (IN MILLIONS) Account value (general and separate account).................................... $ 5,413 $ 1,680 $ 4,715 $ 1,659 Net amount at risk............................ $ 98,907(1) $ 15,633(1) $ 94,163(1) $ 16,830(1) Average attained age of policyholders......... 45 years 52 years 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). F-49 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. Liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts are as follows:
ANNUITY CONTRACTS UNIVERSAL AND VARIABLE ------------------------------ LIFE CONTRACTS GUARANTEED ----------------------- GUARANTEED ANNUITIZATION SECONDARY PAID UP DEATH BENEFITS BENEFITS GUARANTEES GUARANTEES TOTAL -------------- ------------- ---------- ---------- ----- (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 Incurred guaranteed benefits... 4 -- 2 5 11 Paid guaranteed benefits....... (2) -- (1) -- (3) --- --- --- --- ---- Balance at December 31, 2005... $ 8 $ 7 $ 7 $12 $ 34 === === === === ====
Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows at:
DECEMBER 31, ----------------- 2005 2004 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity.................................................... $21,143 $18,873 Bond...................................................... 2,606 2,270 Balanced.................................................. 1,074 886 Money Market.............................................. 206 212 Specialty................................................. 229 79 ------- ------- TOTAL.................................................. $25,258 $22,320 ======= =======
SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $57,406 million and $53,382 million at December 31, 2005 and 2004, 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 $15,746 million and $15,125 million at December 31, 2005 and 2004, 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 4.5% and 4.7% at December 31, 2005 and 2004, 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 $1,058 million, $998 million and $899 million for the years ended December 31, 2005, 2004 and 2003, respectively. F-50 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2005, fixed maturities, equity securities, and cash and cash equivalents reported on the consolidated balance sheets include $0 million, $30 million and $1 million, respectively, of the Company's proportional interest in separate accounts. At December 31, 2004, fixed maturities, equity securities, and cash and cash equivalents reported on the consolidated balance sheets include $27 million, $20 million and $1 million, respectively, of the Company's proportional interest in separate accounts. For both the years ended December 31, 2005 and 2004, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. 5. REINSURANCE The Company's life insurance operations participate in reinsurance activities in order to limit losses, minimize exposure to large risks, and provide additional capacity for future growth. The Company has historically reinsured the mortality risk on new life insurance policies primarily on an excess of retention basis or a quota share basis. Until 2005, the Company reinsured up to 90% of the mortality risk for all new individual life insurance policies that it wrote through its various franchises. This practice was initiated by the different franchises for different products starting at various points in time between 1992 and 2000. During 2005, the Company changed its retention practices for individual life insurance. Amounts reinsured in prior years remain reinsured under the original reinsurance; however, under the new retention guidelines, the Company reinsures up to 90% of the mortality risk in excess of $1 million for most new life insurance policies that it writes through its various franchises and for certain individual life policies the retention limits remained unchanged. On a case by case basis, the Company may retain up to $25 million per life on single life policies and $30 million per life on survivorship policies and reinsure 100% of amounts in excess of the Company's retention limits. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time. In addition, the Company reinsures a significant portion of the mortality risk on its universal life policies issued since 1983. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specific characteristics. 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 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 had also protected itself through the purchase of combination risk coverage. This reinsurance coverage pooled risks from several lines of business and included individual and group life claims in excess of $2 million per policy. This combination risk coverage was commuted during 2005, resulting in a $2 million reduction in premiums and annuity considerations. The Company reinsures its business through a diversified group of reinsurers. No single unaffiliated reinsurer has a material obligation to the Company nor is the Company's business substantially dependent upon any reinsurance contracts. The Company is contingently liable with respect to ceded reinsurance should any reinsurer be unable to meet its obligations under these agreements. 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. F-51 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Direct premiums earned.................................. $16,466 $15,347 $16,794 Reinsurance assumed..................................... 5,046 4,330 3,565 Reinsurance ceded....................................... (2,256) (2,240) (2,260) ------- ------- ------- Net premiums earned..................................... $19,256 $17,437 $18,099 ======= ======= ======= Reinsurance recoveries netted against policyholder benefits and claims................................... $ 1,495 $ 1,626 $ 2,032 ======= ======= =======
Written premiums are not materially different than earned premiums presented in the preceding table. For the years ended December 31, 2005, 2004, and 2003, ceded and assumed include affiliated transactions of $529 million, $457 million and $436 million, respectively. Reinsurance recoverables, included in premiums and other receivables, were $3,796 million and $3,735 million at December 31, 2005 and 2004, respectively, including $1,261 million and $1,302 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 $263 million and $100 million at December 31, 2005 and 2004, respectively. Included in premiums and other receivables are reinsurance due from Exeter Reassurance Company, Ltd., Texas Life Insurance Company, First MetLife Investors Insurance Company, MetLife Investors USA Insurance Company ("MLI USA"), The Travelers Insurance Company, and MetLife Investors Insurance Company related parties of $1,422 million and $269 million at December 31, 2005 and 2004. Included in future policy benefits, other policyholder funds, policyholder account balances, and other liabilities are reinsurance liabilities assumed from COVA Corporation, Metropolitan Tower Life Insurance Company, MetLife Investors Group, Inc., First MetLife Investors Insurance Company, MetLife Investors Insurance Company, Exeter Reassurance Company, Ltd. and Traveler's Insurance Company related parties of $1,228 million, $268 million, $389 million and $3,064 million at December 31, 2005. Included in future policy benefits, other policyholder funds, policyholder account balances, and other liabilities are reinsurance liabilities assumed from COVA Corporation, Metropolitan Tower Life Insurance Company, MetLife Investors Group, Inc., First MetLife Investors Insurance Company, MetLife Investors Insurance Company, Exeter Reassurance Company, Ltd. and Metropolitan Life and Annuity Company related parties of $863 million, $415 million, $256 million and $2,215 million at December 31, 2004. Effective January 1, 2005, a subsidiary of the Company, General American Life Insurance Company ("General American") entered into a reinsurance agreement to cede an in force block of business to MLI USA, an affiliate. This agreement covered certain term and universal life policies issued by General American on and after January 1, 2000 through December 31, 2004. This agreement also covers certain term and universal life policies issued on or after January 1, 2005. Under this agreement, General American transferred $797 million of liabilities and $411 million in assets to MLI USA related to the policies in-force as of December 31, 2004. As a result of the transfer of assets, General American recognized a realized gain of $19 million, net of income taxes. General American also received and deferred 100% of a $386 million ceding commission resulting in no gain or loss on the transfer of the in-force business as of January 1, 2005. For the policies issued on or after January 1, 2005, General American ceded premiums and related fees of $192 million and ceded benefits and related costs of F-52 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $143 million for the year ended December 31, 2005. Reinsurance recoverables, included in premiums and other receivables, related to this reinsurance agreement as of December 31, 2005 were $932 million. For the years ended December 31, 2005 and 2004, premiums, policyholder benefits and claims, and commission expenses include assumed related party transactions of $37 million, $106 million, and $137 million and $38 million, $50 million, and $5 million, respectively. 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 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 F-53 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. For the years ended December 31, 2005 and 2004, premiums, policyholder benefits and claims, and commission expenses include ceded related party transactions of $141 million, $48 million, and $550 million and $130 million, $25 million and $20 million. Closed block liabilities and assets designated to the closed block are as follows:
DECEMBER 31, ----------------- 2005 2004 ------- ------- (IN MILLIONS) CLOSED BLOCK LIABILITIES Future policy benefits...................................... $42,759 $42,348 Other policyholder funds.................................... 257 258 Policyholder dividends payable.............................. 693 690 Policyholder dividend obligation............................ 1,607 2,243 Payables for collateral under securities loaned and other transactions.............................................. 4,289 4,287 Other liabilities........................................... 200 199 ------- ------- Total closed block liabilities......................... 49,805 50,025 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturities available-for-sale, at fair value (amortized cost: $27,892 and $27,757, respectively).... 29,270 29,766 Trading securities, at fair value (cost: $3 and $0, respectively).......................................... 3 -- Equity securities available-for-sale, at fair value (cost: $1,180 and $898, respectively)......................... 1,341 979 Mortgage loans on real estate............................. 7,790 8,165 Policy loans.............................................. 4,148 4,067 Short-term investments.................................... 41 101 Other invested assets..................................... 477 221 ------- ------- Total investments...................................... 43,070 43,299 Cash and cash equivalents................................... 512 325 Accrued investment income................................... 506 511 Deferred income taxes....................................... 902 1,002 Premiums and other receivables.............................. 270 103 ------- ------- Total assets designated to the closed block............ 45,260 45,240 ------- ------- Excess of closed block liabilities over assets designated to the closed block.......................................... 4,545 4,785 ------- -------
F-54 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, ----------------- 2005 2004 ------- ------- (IN MILLIONS) Amounts included in accumulated other comprehensive income (loss): Net unrealized investment gains, net of deferred income tax of $554 and $752, respectively..................... 985 1,338 Unrealized derivative gains (losses), net of deferred income tax benefit of ($17) and ($31), respectively.... (31) (55) Allocated to policyholder dividend obligation, net of deferred income tax benefit of ($538) and ($763), respectively........................................... (954) (1,356) ------- ------- Total amounts included in accumulated other comprehensive income (loss)........................... -- (73) ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities.................................... $ 4,545 $ 4,712 ======= =======
Information regarding the policyholder dividend obligation is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) Balance at beginning of year............................... $2,243 $2,130 $1,882 Impact on revenues, net of expenses and income taxes....... (9) 124 -- Change in unrealized investment and derivative gains (losses)................................................. (627) (11) 248 ------ ------ ------ Balance at end of year..................................... $1,607 $2,243 $2,130 ====== ====== ======
Closed block revenues and expenses were as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) REVENUES Premiums................................................... $3,062 $3,156 $3,365 Net investment income and other revenues................... 2,382 2,504 2,554 Net investment gains (losses).............................. 10 (19) (128) ------ ------ ------ Total revenues........................................... 5,454 5,641 5,791 ------ ------ ------ EXPENSES Policyholder benefits and claims........................... 3,478 3,480 3,660 Policyholder dividends..................................... 1,465 1,458 1,509 Change in policyholder dividend obligation................. (9) 124 -- Other expenses............................................. 263 275 297 ------ ------ ------ Total expenses........................................... 5,197 5,337 5,466 ------ ------ ------ Revenues, net of expenses before income taxes.............. 257 304 325 Income taxes............................................... 90 109 118 ------ ------ ------ Revenues, net of expenses and income taxes................. $ 167 $ 195 $ 207 ====== ====== ======
F-55 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The change in maximum future earnings of the closed block is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) Balance at end of year..................................... $4,545 $4,712 $4,907 Balance at beginning of year............................... 4,712 4,907 5,114 ------ ------ ------ Change during year......................................... $ (167) $ (195) $ (207) ====== ====== ======
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. 7. DEBT At December 31, 2005 and 2004, debt outstanding is as follows:
INTEREST RATES ---------------------- DECEMBER 31, WEIGHTED --------------- RANGE AVERAGE MATURITY 2005 2004 ----------- -------- --------- ------ ------ (IN MILLIONS) Surplus notes -- affiliated...... 5.00% 5.00% 2007 $ 800 $ -- Surplus notes.................... 7.63%-7.88% 7.76% 2015-2025 696 946 Capital notes -- affiliated...... 7.13% 7.13% 2032-2033 500 500 Junior subordinated debentures... 6.75% 6.75% 2065 399 -- Senior notes..................... 6.75%-7.25% 6.92% 2006-2011 300 300 Fixed rate notes................. 4.20%-6.32% 4.96% 2006-2010 102 106 Other notes with varying interest rates.......................... 4.45%-5.89% 5.45% 2006-2012 93 133 Capital lease obligations........ 71 65 ------ ------ Total long-term debt............. 2,961 2,050 Total short-term debt............ 453 1,445 ------ ------ $3,414 $3,495 ====== ======
LONG-TERM DEBT On December 8, 2005, RGA issued junior subordinated debentures with a face amount of $400 million. Interest is payable semi-annually at a fixed interest rate of 6.75% until December 15, 2015. Subsequent to December 15, 2015, interest on these debentures will accrue at an annual rate of 3-month LIBOR plus a margin equal to 266.5 basis points, payable quarterly until maturity in 2065. On December 22, 2005, the Company issued an $800 million, 5% surplus note to the Holding Company which matures on December 31, 2007. The Company repaid a $250 million, 7% surplus note which matured on November 1, 2005. The aggregate maturities of long-term debt as of December 31, 2005 for the next five years are $183 million in 2006, $837 million in 2007, $13 million in 2008, $8 million in 2009, $98 million in 2010 and $1,822 million thereafter. F-56 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Collateralized debt, which consists of capital lease obligations, ranks highest in priority; followed by unsecured senior debt which consist of senior notes, fixed rate notes, other notes with varying interest rates; followed by subordinated debt which consists of junior subordinated debentures; followed by surplus and capital notes. Payments of interest and principal on the Company's surplus notes may be made only with the prior approval of the insurance department of the state of domicile. SHORT-TERM DEBT At December 31, 2005 and 2004, the Company's short-term debt consisted of commercial paper with a weighted average interest rate of 3.3% and 2.3%, respectively. The debt was outstanding for an average of 47 days and 27 days at December 31, 2005 and 2004, respectively. CREDIT FACILITIES AND LETTERS OF CREDIT The Company maintains committed and unsecured credit facilities aggregating $3.65 billion as of December 31, 2005. When drawn upon, these facilities bear interest at varying rates in accordance with the respective agreements. The facilities can be used for general corporate purposes and $3.0 billion of the facilities also serve as back-up lines of credit for the Company's commercial paper programs. The following table provides details on these facilities as of December 31, 2005:
COMPANY METLIFE, INC. LETTERS OF LETTERS OF CREDIT CREDIT UNUSED BORROWER(S) EXPIRATION CAPACITY ISSUANCES ISSUANCES DRAWDOWN COMMITMENTS ----------- ---------- -------- ---------- ------------- -------- ----------- (IN MILLIONS) MetLife, Inc., MetLife Funding, Inc. and Metropolitan Life Insurance Company........ April 2009 $1,500 $218 $156 $ -- $1,126 MetLife, Inc. and MetLife Funding, Inc............. April 2010 1,500 -- -- -- 1,500 Reinsurance Group of America, Incorporated.... January 2006 26 -- -- 26 -- Reinsurance Group of America, Incorporated.... May 2007 26 -- -- 26 -- Reinsurance Group of America, Incorporated.... September 2010 600 320 -- 50 230 ------ ---- ---- ---- ------ Total.................... $3,652 $538 $156 $102 $2,856 ====== ==== ==== ==== ======
At December 31, 2005 and 2004 the Company had outstanding $717 million and $584 million, respectively, in letters of credit from various banks, of which $538 million and $135 million, respectively were part of committed facilities. The Company's letters of credit outstanding at December 31, 2005 and 2004 all automatically renew for one year periods. Since commitments associated with letters of credit and financing arrangements may expire unused, these amounts do not necessarily reflect the Company's actual future cash funding requirements. OTHER Interest expense related to the Company's indebtedness included in other expenses was $189 million, $201 million and $265 million for the years ended December 31, 2005, 2004 and 2003, respectively. F-57 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2005 and 2004. Interest expense on these instruments is included in other expenses and was $11 million for each of the years ended December 31, 2005, 2004 and 2003. 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, net of unamortized discounts of $66 million, at both December 31, 2005 and 2004. 9. INCOME TAXES The provision for income taxes from continuing operations was as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2005 2004 2003 -------- ------ ------ (IN MILLIONS) Current: Federal................................................... $ 576 $820 $321 State and local........................................... 64 45 19 Foreign................................................... 21 5 2 ------ ---- ---- 661 870 342 ------ ---- ---- Deferred: Federal................................................... 433 13 274 State and local........................................... 11 (7) 27 Foreign................................................... -- -- -- ------ ---- ---- 444 6 301 ------ ---- ---- Provision for income taxes.................................. $1,105 $876 $643 ====== ==== ====
F-58 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) 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, -------------------------- 2005 2004 2003 ------- ------- ------ (IN MILLIONS) Tax provision at U.S. statutory rate........................ $1,242 $1,084 $ 805 Tax effect of: Tax exempt investment income.............................. (84) (69) (101) State and local income taxes.............................. 33 17 42 Prior year taxes.......................................... (20) (104) (25) Foreign operations net of foreign income taxes............ (25) (25) (17) Other, net................................................ (41) (27) (61) ------ ------ ----- Provision for income taxes.................................. $1,105 $ 876 $ 643 ====== ====== =====
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 2004 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 and the Company expects it to be completed in 2006. 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. F-59 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income taxes represent the tax effect of the differences between the book and tax basis of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following:
DECEMBER 31, ----------------- 2005 2004 ------- ------- (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables.................. $ 2,477 $ 2,998 Net operating losses...................................... 574 216 Capital loss carryforwards................................ 59 108 Tax credit carryover...................................... 100 -- Litigation related........................................ 62 84 Other..................................................... 42 124 ------- ------- 3,314 3,530 Less: Valuation allowance................................. 9 16 ------- ------- 3,305 3,514 ------- ------- Deferred income tax liabilities: Investments............................................... 1,802 1,554 Deferred policy acquisition costs......................... 3,134 3,095 Net unrealized investment gains........................... 1,029 1,391 Other..................................................... 69 145 ------- ------- 6,034 6,185 ------- ------- Net deferred income tax liability........................... $(2,729) $(2,671) ======= =======
Domestic net operating loss carryforwards amount to $1,614 million at December 31, 2005 and will expire beginning in 2016. Foreign net operating loss carryforwards amount to $27 million at December 31, 2005 and were generated in various foreign countries with expiration periods of five years to infinity. Capital loss carryforwards amount to $168 million at December 31, 2005 and will expire beginning in 2006. Tax credit carryforwards amount to $100 million at December 31, 2005 and will expire beginning in 2006. 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. In 2005, the Company's $7 million reduction in the deferred income tax valuation allowance resulted from the sale of the subsidiary to which the foreign net operating loss carryforwards and valuation allowance resulted. 10. CONTINGENCIES, COMMITMENTS, AND GUARANTEES CONTINGENCIES 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. F-60 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 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. Liabilities have been established for a number of the matters noted below. 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, 2005. Sales Practices Claims Over the past several years, Metropolitan Life, New England Mutual Life Insurance Company ("New England Mutual") and General American have faced numerous claims, including class action lawsuits, alleging improper marketing and sales of individual life insurance policies or annuities. These lawsuits generally are 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, MIAC or MTL between January 1, 1982 and December 31, 1997. 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. 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. 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, including lawsuits or other proceedings relating to the sale of mutual funds and other products, have been brought. As of December 31, 2005, there are approximately 338 sales practices litigation matters pending against Metropolitan Life; approximately 45 sales practices litigation matters pending against New England Mutual, New F-61 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) England Life Insurance Company ("NELICO"), and New England Securities Corporation (collectively, "New England") and approximately 34 sales practices litigation matters pending against General American. Metropolitan Life, New England, and General American continue to defend themselves vigorously against these litigation matters. 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, mutual funds and other products 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 and General American's sales of individual life insurance policies or annuities or other products. 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. Since 2002, 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 F-62 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 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. Metropolitan Life previously reported that it had received approximately 23,500 asbestos-related claims in 2004. In the context of reviewing in the third quarter of 2005 certain pleadings received in 2004, it was determined that there was a small undercount of Metropolitan Life's asbestos-related claims in 2004. Accordingly, Metropolitan Life now reports that it received approximately 23,900 asbestos-related claims in 2004. 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, ------------------------------ 2005 2004 2003 -------- -------- -------- (DOLLARS IN MILLIONS) Asbestos personal injury claims at year end (approximate)...................................... 100,250 108,000 111,700 Number of new claims during the year (approximate)... 18,500 23,900 58,750 Settlement payments during the year(1)............... $ 74.3 $ 85.5 $ 84.2
--------------- (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, management does not believe any such charges are likely to have a material adverse effect on the Company's consolidated financial position. F-63 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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, 2005. 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 with respect to the prior year was made under the excess insurance policies in 2003, 2004 and 2005 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 $15.1 million with respect to 2004 claims and estimated as of December 31, 2005, to be approximately $45.4 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, 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. In 2003, a trial court within the commercial part of the New York State court granted the defendants' motions to dismiss two purported class actions. In 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. Plaintiffs' motion to certify a litigation class is 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 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 sought to vacate the Superintendent's Opinion and Decision and enjoin him from granting final F-64 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) approval of the plan. On November 10, 2005, the trial court granted respondents' motions to dismiss this proceeding. Petitioners have filed a notice of appeal. In a 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 in 2004. In this action, plaintiffs assert violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 in connection with the plan, claiming that the Policyholder Information Booklets failed to disclose certain material facts and contained certain material misstatements. 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. In 2004, the court reaffirmed its earlier decision denying defendants' motion for summary judgment as premature. On July 19, 2005, this federal trial court certified a class action against Metropolitan Life and the Holding Company. Metropolitan Life and the Holding Company have filed a petition seeking permission for an interlocutory appeal from this order. On or about March 29, 2006, the United States Court of Appeals for the Second Circuit denied the petition. 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 their amended complaint, plaintiffs challenged the treatment of the cost of the sales practices settlement in the demutualization of Metropolitan Life and asserted claims of breach of fiduciary duty, common law fraud, and unjust enrichment. In an order dated July 13, 2005, the court granted the defendants' motion to dismiss the action and the plaintiffs have filed a notice of appeal. Other A putative class action lawsuit which commenced in October 2000 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. In September 2005, Metropolitan Life's motion for summary judgment was granted. Plaintiffs have moved for reconsideration. On February 21, 2006, the SEC and New England Securities Corporation ("NES"), a subsidiary of NELICO, resolved a formal investigation of NES that arose in response to NES informing the SEC that certain systems and controls relating to one NES advisory program were not operating effectively. NES previously provided restitution to the affected clients and the settlement includes additional client payments to be made by NES in the total amount of approximately $2,615,000. No penalties were imposed. F-65 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Prior to filing MetLife, Inc's June 30, 2003 Form 10-Q, MetLife, Inc. announced a $31 million after-tax charge related to New England Financial. MetLife notified the SEC about the nature of this charge prior to its announcement. The SEC opened a formal investigation of the matter and, in December 2004, NELICO received a Wells Notice in connection with the SEC investigation. The staff of the SEC has notified NELICO that no enforcement action has been recommended against NELICO. In May 2003, the American Dental Association and three individual providers sued the Holding Company and/or its subsidiaries 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 matter. The district court has granted in part and denied in part the defendant's motion to dismiss. The Holding Company and/or its subsidiaries has filed another motion to dismiss. The court has issued a tag-along order, related to a medical managed care trial, which will stay the lawsuit indefinitely. In a lawsuit commenced in June 1998, a New York state court granted in 2004 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. Plaintiffs sought compensatory damages. In January 2006, the appellate court reversed the class certification order. On November 23, 2005, the trial court issued a Memorandum Decision granting Metropolitan Life's motion for summary judgment. Plaintiffs have filed a notice of appeal of the trial's court's decision. 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 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. On April 10, 2006, the SEC and Metropolitan Life resolved a formal investigation of Metropolitan Life relating to certain sales by a former Company sales representative to the Sheriff's Department of Fulton County, Georgia. Metropolitan Life previously provided partial restitution to the Fulton County Sheriff's office, and the settlement includes a payment to the SEC of a $250,000 fine. The Holding Company and/or affiliates has 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 affiliates, whether the Holding Company and/or affiliates has provided or is aware of the provision of "fictitious" or "inflated" quotes, and information regarding tying arrangements with respect to reinsurance. Based upon an internal review, the Attorney General for the State of New York was advised that the Holding F-66 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company and/or affiliates was not aware of any instance in which the Holding Company and/or affiliates had provided a "fictitious" or "inflated" quote. The Holding Company and/or affiliates also has received subpoenas, including sets of interrogatories, from the Office of the Attorney General of the State of Connecticut seeking information and documents including contingent commission payments to brokers and the Holding Company and/or affiliates' awareness of any "sham" bids for business. The Holding Company and/or affiliates also has 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 were submitted to potential customers in Massachusetts, the identity of agents, brokers, and producers to whom were submitted such bids or quotes, and communications with a certain broker. The Holding Company and/or affiliates has received two subpoenas from the District Attorney of the County of San Diego, California. The subpoenas seek numerous documents including incentive agreements entered into with brokers. The Florida Department of Financial Services and the Florida Office of Insurance Regulation also have served subpoenas on the Holding Company and/or affiliates asking for answers to interrogatories and document requests concerning topics that include compensation paid to intermediaries. The Office of the Attorney General for the State of Florida has also served a subpoena on the Holding Company and/or affiliates seeking, among other things, copies of materials produced in response to the subpoenas discussed above. The Holding Company and/or affiliates has received a subpoena from the Office of the U.S. Attorney for the Southern District of California asking for documents regarding the insurance broker, Universal Life Resources. The Insurance Commissioner of Oklahoma has served a subpoena, including a set of interrogatories, on the Holding Company and/or affiliates seeking, among other things, documents and information concerning the compensation of insurance producers for insurance covering Oklahoma entities and persons. The Ohio Department of Insurance has requested documents regarding a broker and certain Ohio public entity groups. The Holding Company and/or affiliates continues to cooperate fully with these inquiries and is responding to the subpoenas and other requests. The Holding Company and/or affiliates are continuing to conduct an internal review of its commission payment practices. Approximately sixteen broker-related lawsuits in which the Holding Company and/or affiliates was named as a defendant were filed. Voluntary dismissals and consolidations have reduced the number of pending actions to four. In one of these, the California Insurance Commissioner is suing in California state court Metropolitan Life, Paragon Life Insurance Company and other companies alleging that the defendants violated certain provisions of the California Insurance Code. Another of these actions is pending in a multi-district proceeding established in the federal district court in the District of New Jersey. In this proceeding, plaintiffs have filed an amended class action complaint consolidating the claims from separate actions that had been filed in or transferred to the District of New Jersey. The consolidated amended complaint alleges that the Holding Company, Metropolitan Life, several other insurance companies and several insurance brokers violated RICO, ERISA, and antitrust laws and committed other misconduct in the context of providing insurance to employee benefit plans and to persons who participate in such employee benefit plans. Plaintiffs seek to represent classes of employers that established employee benefit plans and persons who participated in such employee benefit plans. A motion for class certification has been filed. Plaintiffs in several other actions have voluntarily dismissed their claims. The Holding Company and/or affiliates 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 other inquiries may begin. It is reasonably possible that the Holding Company and/or affiliates will receive additional subpoenas, interrogatories, requests and lawsuits. The Holding Company and/or affiliates will fully cooperate with all regulatory inquiries and intends to vigorously defend all lawsuits. The Holding Company has received a subpoena from the Connecticut Attorney General requesting information regarding its participation in any finite reinsurance transactions. The Holding Company and/or F-67 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) affiliates has also received information requests relating to finite insurance or reinsurance from other regulatory and governmental authorities. The Holding Company and/or affiliates believe it has appropriately accounted for its transactions of this type and intends to cooperate fully with these information requests. The Company believes that a number of other industry participants have received similar requests from various regulatory and governmental authorities. It is reasonably possible that Holding Company and/or affiliates may receive additional requests. The Holding Company and any such affiliates will fully cooperate with all such requests. The NASD staff notified NES that it has made a preliminary determination to file charges of violations of the NASD's and the SEC's rules. The pending investigation was initiated after NES and certain affiliates reported to the NASD that a limited number of mutual fund transactions processed by firm representatives and at the firms' consolidated trading desk, during the period April through December 2003, had been received from customers after 4:00 p.m., Eastern time, and received the same day's net asset value. The potential charges of violations of the NASD's and the SEC's rules relate to the processing of transactions received after 4:00 p.m., the firms' maintenance of books and records, supervisory procedures and responses to the NASD's information requests. Under the NASD's procedures, the firm has submitted a response to the NASD staff. The NASD staff has not made a formal recommendation regarding whether any action alleging violations of the rules should be filed. NES continues to cooperate fully with the NASD. In February 2006, the Company learned that the SEC commenced a formal investigation of NES in connection with the suitability of its sales of various universal life insurance policies. The Company believes that others in the insurance industry are the subject of similar investigations by the SEC. NES is cooperating fully with the SEC. 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, including purported or certified class actions, and various claims and assessments against the Company, in addition to those discussed above and those otherwise provided for in the Company's consolidated financial statements, have arisen in the course of the Company's business, including, but not limited to, in connection with its activities as an insurer, employer, investor, investment advisor and taxpayer. Further, state insurance regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning the Company's compliance with applicable insurance and other laws and regulations. Summary It is not feasible to predict or determine the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, except as noted above in connection with specific matters. In some of the matters referred to above, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Although in light of these considerations it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company's consolidated financial position, based on information currently known by the Company's management, in its opinion, the outcomes of such pending investigations and legal proceedings are not likely to have such an effect. However, given the large and/or indeterminate amounts sought in certain of these matters and the inherent unpredictability of litigation, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's consolidated net income or cash flows in particular quarterly or annual periods. F-68 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require life insurers doing business within the jurisdiction to participate in guaranty associations, which are organized to pay contractual benefits owed pursuant to insurance policies issued by impaired, insolvent or failed life insurers. These associations levy assessments, up to prescribed limits, on all member insurers in a particular state on the basis of the proportionate share of the premiums written by member insurers in the lines of business in which the impaired, insolvent or failed insurer engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. Assessments levied against the Company were $1 million for the year ended December 31, 2005. There were no assessments levied against the Company for the years ended December 31, 2004 and 2003. The Company maintained a liability of $48 million, and a related asset for premium tax offsets of $34 million, at December 31, 2005 for undiscounted future assessments in respect of currently impaired, insolvent or failed insurers. IMPACT OF HURRICANES On August 29, 2005, Hurricane Katrina made landfall in the states of Louisiana, Mississippi and Alabama causing catastrophic damage to these coastal regions. As of December 31, 2005, the Institutional segment recorded net losses of $14 million, net of income taxes and reinsurance recoverables related to the catastrophe. Additional hurricane-related losses may be recorded in future periods as claims are received from insureds. Based on information currently known by management, it does not believe that additional claim losses resulting from the hurricane will have a material adverse impact on the Company's consolidated financial statements. COMMITMENTS LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants is contingent upon the level of the tenants' sales revenues. Additionally, the Company, as lessee, has entered into various lease and sublease agreements for office space, data processing and other equipment. Future minimum rental and sublease income, and minimum gross rental payments relating to these lease agreements were as follows:
RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- (IN MILLIONS) 2006...................................................... $418 $18 $174 2007...................................................... $376 $14 $152 2008...................................................... $309 $11 $122 2009...................................................... $251 $ 5 $101 2010...................................................... $199 $ 4 $ 86 Thereafter................................................ $595 $10 $485
COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS The Company makes commitments to fund partnership investments in the normal course of business. The amounts of these unfunded commitments were $1,956 million and $1,320 million at December 31, 2005 F-69 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) and 2004, respectively. The Company anticipates that these amounts will be invested in partnerships over the next five years. MORTGAGE LOAN COMMITMENTS The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $2,603 million and $1,161 million at December 31, 2005 and 2004, respectively. OTHER COMMITMENTS On December 12, 2005, RGA repurchased 1.6 million shares of its outstanding common stock at an aggregate price of approximately $76 million under an accelerated share repurchase agreement with a major bank. The bank borrowed the stock sold to RGA from third parties and is purchasing the shares in the open market over the subsequent few months to return to the lenders. RGA will either pay or receive an amount based on the actual amount paid by the bank to purchase the shares. These repurchases resulted in an increase in the Company's ownership percentage of RGA to approximately 53% at December 31, 2005 from approximately 52% at December 31, 2004. In February 2006, the final purchase price was determined resulting in a cash settlement substantially equal to the aggregate cost. RGA recorded the initial repurchase of shares as treasury stock and recorded the amount received as an adjustment to the cost of the treasury stock. 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 $1.7 billion, with a cumulative maximum of $3.1 billion, 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. In the first quarter of 2005, the Company recorded a liability of $4 million with respect to indemnities provided in connection with a certain disposition. The approximate term for this liability is 18 months. The maximum potential amount of future payments the Company could be required to pay under these indemnities is approximately $500 million. Due to the uncertainty in assessing changes to the liability over the term, the liability on the Company's consolidated balance sheets will remain until either expiration or settlement of the guarantee unless evidence clearly indicates that the estimates should be revised. The Company's recorded liabilities at December 31, 2005 for indemnities, guarantees and commitments were F-70 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $4 million. The Company had no liability at December 31, 2004 for indemnities, guarantees and commitments. In connection with RSATs, the Company writes credit default swap obligations requiring payment of principal due in exchange for the reference credit obligation, depending on the nature or occurrence of specified credit events for the referenced entities. In the event of a specified credit event, the Company's maximum amount at risk, assuming the value of the referenced credits becomes worthless, is $444 million at December 31, 2005. The credit default swaps expire at various times during the next six years. 11. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company has both qualified and non-qualified defined benefit pension plans that together cover eligible employees and sales representatives of the Company. The Company is both the sponsor and administrator of the Metropolitan Life Retirement Plan for United States Employees and the Metropolitan Life Auxiliary Plan, (collectively "the Plans"). The Plans cover eligible employees and retirees of the sponsor and its participating affiliates. Participating affiliates have no legal obligation for benefits under the Plans; however, participating affiliates are allocated a proportionate share of net expense related to the Plans. The Company's proportionate share of net expense related to the Plans was $134 million or 95%. Other defined benefit pension plans are sponsored and administered by subsidiaries of the Company and the related expense is immaterial to the Company. Retirement benefits under the plans 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 medical and life insurance benefits for retired employees through insurance contracts. The Company is both the sponsor and administrator of the Postretirement Health and Life Plan, ("the Postretirement Plan"). The Postretirement Plan covers eligible employees and retirees of the sponsor and its participating affiliates who were hired prior to 2003 (or, in certain cases, rehired during or after 2003). Participating affiliates have no legal obligation for benefits under the Postretirement Plan; however, participating affiliates are allocated a proportionate share of net expense related to the Postretirement Plan. The Company's proportionate share of net expense related to the Postretirement Plan was $60 million or 87% for the year ended December 31, 2005. Other postretirement plans are sponsored and administered by subsidiaries of the Company and the related expense is immaterial to the Company. Substantially all of the employees of the Company and its participating affiliates 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 its participating affiliates. A December 31 measurement date is used for all of the defined benefit pension and other postretirement benefit plans. F-71 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS
DECEMBER 31, ---------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------- -------------------- 2005 2004 2005 2004 ------- ------- --------- -------- (IN MILLIONS) Change in projected benefit obligation: Projected benefit obligation at beginning of year............................................ $5,481 $5,233 $ 1,962 $2,078 Service cost.................................... 141 128 36 31 Interest cost................................... 315 308 120 118 Plan participants' contributions................ -- -- 28 25 Acquisitions and divestitures................... -- (3) 1 -- Actuarial losses (gains)........................ 90 143 168 (139) Change in benefits.............................. -- -- 3 2 Benefits paid................................... (310) (328) (158) (153) ------ ------ ------- ------ Projected benefit obligation at end of year....... 5,717 5,481 2,160 1,962 ------ ------ ------- ------ Change in plan assets: Contract value of plan assets at beginning of year............................................ 5,351 4,690 1,059 1,001 Actual return on plan assets.................... 397 410 61 95 Acquisitions and divestitures................... -- (3) -- -- Employer contribution........................... 3 524 1 1 Benefits paid................................... (280) (270) (30) (38) ------ ------ ------- ------ Fair value of plan assets at end of year.......... 5,471 5,351 1,091 1,059 ------ ------ ------- ------ Underfunded....................................... (246) (130) (1,069) (903) Unrecognized net asset at transition.............. -- -- -- -- Unrecognized net actuarial losses................. 1,526 1,506 376 198 Unrecognized prior service cost................... 52 68 (123) (164) ------ ------ ------- ------ Prepaid (accrued) benefit cost.................... $1,332 $1,444 $ (816) $ (869) ====== ====== ======= ====== Qualified plan prepaid pension cost............... $1,689 $1,777 $ -- $ -- Non-qualified plan accrued pension cost........... (435) (477) (816) (869) Intangible assets................................. 12 14 -- -- Accumulated other comprehensive loss.............. 66 130 -- -- ------ ------ ------- ------ Prepaid (accrued) benefit cost.................... $1,332 $1,444 $ (816) $ (869) ====== ====== ======= ======
The prepaid (accrued) benefit cost for pension benefits presented in the above table consists of prepaid benefit costs of $1,691 million and $1,778 million as of December 31, 2005 and 2004, respectively, and accrued benefit costs of $359 million and $334 million as of December 31, 2005 and 2004, respectively. F-72 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans were as follows:
NON-QUALIFIED QUALIFIED PLAN PLAN TOTAL --------------- ------------- --------------- 2005 2004 2005 2004 2005 2004 ------ ------ ----- ----- ------ ------ (IN MILLIONS) Aggregate fair value of plan assets (principally Company contracts)....................... $5,471 $5,351 $ -- $ -- $5,471 $5,351 Aggregate projected benefit obligation....................... 5,209 4,957 508 524 5,717 5,481 ------ ------ ----- ----- ------ ------ Over (under) funded................ $ 262 $ 394 $(508) $(524) $ (246) $ (130) ====== ====== ===== ===== ====== ======
The accumulated benefit obligation for all defined benefit pension plans was $5,308 million and $5,111 million at December 31, 2005 and 2004, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets:
2005 2004 ----- ----- (IN MILLIONS) Projected benefit obligation................................ $530 $542 Accumulated benefit obligation.............................. $442 $476 Fair value of plan assets................................... $ 16 $ 14
Information for pension and other postretirement plans with a projected benefit obligation in excess of plan assets:
DECEMBER 31, ----------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- --------------- 2005 2004 2005 2004 ---- ---- ------ ------ (IN MILLIONS) Projected benefit obligation.......................... $530 $542 $2,160 $1,962 Fair value of plan assets............................. $ 16 $ 14 $1,091 $1,059
The components of net periodic benefit cost were as follows:
OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS --------------------- --------------------- 2005 2004 2003 2005 2004 2003 ----- ----- ----- ----- ----- ----- (IN MILLIONS) Service cost............................ $ 141 $ 128 $ 122 $ 36 $ 31 $ 38 Interest cost........................... 315 308 311 120 118 122 Expected return on plan assets.......... (443) (425) (331) (78) (77) (71) Amortization of prior actuarial losses................................ 116 102 86 14 7 8 Amortization of prior service cost...... 16 16 16 (18) (19) (20) Curtailment cost........................ -- -- 10 -- -- 3 ----- ----- ----- ---- ---- ---- Net periodic benefit cost............... $ 145 $ 129 $ 214 $ 74 $ 60 $ 80 ===== ===== ===== ==== ==== ====
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 "Prescription Drug Act"). The other postretirement benefit plan accumulated benefit obligation were remeasured effective July 1, 2004 F-73 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in order to determine the effect of the expected subsidies on net periodic other postretirement benefit cost. As a result, the accumulated other postretirement benefit obligation was reduced by $213 million at July 1, 2004 and net periodic other postretirement benefit cost from July 1, 2004 through December 31, 2004 was reduced by $17 million. The reduction of net periodic benefit cost was due to reductions in service cost of $3 million, interest cost of $6 million, and amortization of prior actuarial loss of $8 million. The reduction in the accumulated postretirement benefit obligation related to the Prescription Drug Act was $298 million and $230 million as of December 31, 2005 and 2004, respectively. For the year ended December 31, 2005, the reduction of net periodic postretirement benefit cost was $45 million, which was due to reductions in service cost of $6 million, interest cost of $16 million and amortization of prior actuarial loss of $23 million. An additional $23 million reduction in the December 31, 2005 accumulated other postretirement benefit obligation is the result of an actuarial loss recognized during the year resulting from updated assumptions including a January 1, 2005 participant census and new claims cost experience and the effect of a December 31, 2005 change in the discount rate. ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ----------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ----------------- --------------- 2005 2004 2005 2004 ------- ------- ------ ------ Weighted average discount rate..................... 5.80% 5.86% 5.79% 5.86% 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 POSTRETIREMENT BENEFITS --------------------- ------------------------------ 2005 2004 2003 2005 2004 2003 ----- ----- ----- -------- -------- -------- Weighted average discount rate.......................... 5.85% 6.10% 6.75% 5.83% 6.74% 6.74% Weighted average expected rate of return on plan assets...... 8.49% 8.49% 8.50% 7.50% 7.91% 7.77% Rate of compensation increase... 4%-8% 4%-8% 4%-8% 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, measured on a yield to worst basis, 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 2006 is currently anticipated to be 8.25% for pension benefits and other postretirement medical benefits and 6.25% for other postretirement life benefits. F-74 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The assumed health care cost trend rates used in measuring the accumulated other postretirement benefit obligation were as follows:
DECEMBER 31, ------------------------------------------------- 2005 2004 ------------------------ ---------------------- Pre-Medicare eligible claims....... 9.5% down to 5% in 2014 8% down to 5% in 2010 Medicare eligible claims........... 11.5% down to 5% in 2018 10% down to 5% in 2014
Assumed health care cost trend rates may have a significant effect on the amounts reported for health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
ONE PERCENT ONE PERCENT INCREASE DECREASE ----------- ----------- (IN MILLIONS) Effect on total of service and interest cost components..... $ 15 $ (12) Effect of accumulated postretirement benefit obligation..... $182 $(153)
PLAN ASSETS The weighted average allocation of pension plan and other postretirement benefit plan assets is as follows:
DECEMBER 31, ---------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- -------------- 2005 2004 2005 2004 ---- ---- ----- ----- ASSET CATEGORY Equity securities.......................................... 47% 50% 42% 41% Fixed maturities........................................... 37% 36% 53% 57% Other (Real Estate and Alternative Investments)............ 16% 14% 5% 2% --- --- --- --- Total.................................................... 100% 100% 100% 100% === === === ===
The weighted average target allocation of pension plan and other postretirement benefit plan assets for 2006 is as follows:
OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- -------------------- ASSET CATEGORY Equity securities.................................... 30%-65% 30%-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. The account values of the group annuity and life insurance contracts issued by the Company were $6,471 million and $6,335 million as of December 31, 2005 and 2004, respectively. Total revenue from these contracts recognized in the consolidated statements of income was $28 million, $28 million and $90 million for the years ended December 31, 2005, 2004 and 2003, respectively, and includes policy charges, net investment income from investments backing the contracts and administrative fees. Total investment income, including F-75 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) realized and unrealized gains and losses, credited to the account balances were $460 million, $519 million and $776 million for the years ended December 31, 2005, 2004 and 2003, respectively. The terms of these contracts are consistent in all material respects with what the Company offers to unaffiliated parties which are similarly situated. CASH FLOWS The Company expects to contribute $186 million to its pension plans and $126 million to its other postretirement benefit plans during 2006. Gross benefit payments for the next ten years, which reflect expected future service as appropriate, are expected to be as follows:
OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- -------------------- (IN MILLIONS) 2006................................................. $ 318 $126 2007................................................. $ 323 $132 2008................................................. $ 334 $137 2009................................................. $ 348 $142 2010................................................. $ 352 $148 2011-2015............................................ $1,968 $820
Gross subsidy payments expected to be received for the next ten years under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 are as follows:
OTHER POSTRETIREMENT BENEFITS -------------------- (IN MILLIONS) 2006........................................................ $11 2007........................................................ $12 2008........................................................ $13 2009........................................................ $13 2010........................................................ $14 2011-2015................................................... $83
SAVINGS AND INVESTMENT PLANS The Company sponsors savings and investment plans for substantially all employees under which a portion of employee contributions are matched. The Company contributed $62 million, $55 million and $49 million for the years ended December 31, 2005, 2004 and 2003, 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. F-76 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 stockholder dividends 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; or (ii) its statutory net gain from operations for the immediately preceding calendar year (excluding realized capital gains). Metropolitan Life will be permitted to pay a cash dividend to the Holding Company in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the New York Superintendent of Insurance (the "Superintendent") and the Superintendent does not disapprove the distribution within 30 days of its filing. 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 shareholders. 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. During the years ended December 31, 2005, 2004 and 2003, Metropolitan Life paid to the Holding Company $880 million, $797 million and $698 million, respectively, in ordinary dividends, the maximum amount which could be paid to the Holding Company without prior regulatory approval, and an additional $2,320 million, $0 million and $750 million, respectively, in special dividends, as approved by the Superintendent. The maximum amount of the dividend which Metropolitan Life may pay to the Holding Company in 2006 without prior regulatory approval is $863 million. Stockholder dividends or other distributions proposed to be paid by NELICO to its parent, Metropolitan Life, must be approved by the Massachusetts Commissioner of Insurance (the "Commissioner") if such dividends or distributions, together with other dividends or distributions made within the preceding calendar year, exceed the greater of (i) 10% of NELICO's statutory surplus as of the immediately preceding calendar year or (ii) NELICO's statutory net gain from operations for the immediately preceding calendar year. In addition, dividends cannot be paid from a source other than statutory unassigned funds surplus without prior approval of the Commissioner. Since NELICO's statutory unassigned funds surplus is less than zero, NELICO cannot pay any dividends without prior approval of the Commissioner. NELICO paid no common stockholder dividends for the years ended December 31, 2005, 2004 and 2003. For the years ended December 31, 2005, 2004, and 2003, Metropolitan Life received dividends from subsidiaries of $77 million, $14 million and $32 million, respectively. STOCK COMPENSATION PLANS The MetLife, Inc. 2000 Stock Incentive Plan, as amended (the "Stock Incentive Plan"), authorized the granting of awards in the form of non-qualified or incentive stock options qualifying under Section 422A of the Internal Revenue Code. Under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan, as amended (the "2005 Stock Plan"), awards granted may be in the form of non-qualified stock options or incentive stock options qualifying under Section 422A of the Internal Revenue Code, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Shares or Performance Share Units, Cash-Based Awards, and Stock-Based Awards (each as defined in the 2005 Stock Plan). The Stock Incentive Plan, 2005 Stock Plan and the Long-Term Performance Compensation Plan ("LTPCP"), as described below, are hereinafter collectively referred to as the "Incentive Plans." F-77 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate number of Holding Company shares reserved for issuance under the 2005 Stock Plan is 68,000,000 plus those shares available but not utilized under the Stock Incentive Plan and those shares utilized under the Stock Incentive Plan that are recovered due to forfeiture of stock options. At the commencement of the 2005 Stock Plan, additional shares carried forward from the Stock Incentive Plan and available for issuance under the 2005 Stock Plan were 11,917,472. Each share issued under the 2005 Stock Plan in connection with a stock option or Stock Appreciation Right reduces the number of shares remaining for issuance under that plan by one, and each share issued under the 2005 Stock Plan in connection with awards other than stock options or Stock Appreciation Rights reduces the number of shares remaining for issuance under that plan by 1.179 shares. All stock 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 a maximum term of ten years. Certain stock options granted under the Stock Incentive Plan and the 2005 Stock Plan become exercisable over a three year period commencing with the date of grant, while other stock options become exercisable three years after the date of grant. MetLife, Inc. allocated 92%, 91%, and 100% of stock option expense to the Company in each of the years ended December 31, 2005, 2004 and 2003, respectively. Options outstanding attributable to the expense allocated to Company were as follows:
YEARS ENDED DECEMBER 31, ------------------------------------ 2005 2004 2003 ---------- ---------- ---------- Outstanding Options.............................. 22,249,654 21,428,975 20,213,034 Exercisable Options.............................. 14,014,006 12,576,753 4,484,271
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, stock 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, ------------------------ 2005 2004 2003 ------ ------ ------ (IN MILLIONS) Net income................................................. $3,253 $2,239 $2,001 Add: Stock option-based employee compensation expense included in reported net income, net of income taxes..... 30 24 11 Deduct: Total stock option-based employee compensation determined under fair value based method for all awards, net of income taxes...................................... (32) (42) (40) ------ ------ ------ Pro forma net income(1).................................... $3,251 $2,221 $1,972 ====== ====== ======
--------------- (1) The pro forma earnings disclosures are not necessarily representative of the effects on net income in future years. Prior to January 1, 2005, the Black-Scholes model was used to determine the fair value of options granted as recognized in the financial statements or as reported in the pro forma disclosure above. The fair value of stock options issued on or after January 1, 2005 was estimated on the date of grant using a binomial lattice model. The Company made this change because lattice models produce more accurate option values due to F-78 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the ability to incorporate assumptions about employee exercise behavior resulting from changes in the price of the underlying shares. In addition, lattice models allow for changes in critical assumptions over the life of the option in comparison to closed-form models like Black-Scholes, which require single-value assumptions at the time of grant. The expected volatility used in the binomial lattice model is based on an analysis of historical prices of the Holding Company's stock and options on the Holding Company's shares traded on the open market. The Company used a weighted-average of the implied volatility for traded call options with the longest remaining maturity nearest to the money as of each valuation date and the historical volatility, calculated using monthly share prices. The Company chose a monthly measurement interval for historical volatility as it believes this better depicts the nature of employee option exercise decisions being based on longer-term trends in the price of the Holding Company's shares rather than on daily price movements. The risk-free rate is based on observed interest rates for instruments with maturities similar to the expected term of the employee stock options. The Black-Scholes model requires a single spot rate, therefore the weighted-average of these rates for all grants in the year indicated is presented in the table below. The binomial lattice model allows for the use of different rates for different years. The table below presents the range of imputed forward rates for US Treasury Strips that was input over the contractual term of the options. Dividend yield is determined based on historical dividend distributions compared to the price of the underlying shares as of the valuation date, adjusted for any expected future changes in the dividend rate. For options valued using the binomial lattice model during the year ended December 31, 2005, the dividend yield as of the measurement date was held constant throughout the life of the option. Use of the Black-Scholes model requires an input of the expected life of the options, or the average number of years before options will be exercised or expired. The Company's management estimated expected life using the historical average years to exercise or cancellation and average remaining years outstanding for vested options. Alternatively, the binomial model used by the Company incorporates the contractual term of the options and then considers expected exercise behavior and a post-vesting termination rate, or the rate at which vested options are exercised or expire prematurely due to termination of employment, to derive an expected life. Exercise behavior in the Company's binomial lattice model is expressed using an exercise multiple, which reflects the ratio of exercise price to the strike price of options granted at which employees are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The following weighted-average assumptions, with the exception of risk-free rates used in 2005 which are expressed as a range, were used in the applicable option-pricing model to determine the fair value of stock options issued for the:
YEARS ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ----------- ----- ----- Dividend yield.......................................... 1.20% 0.70% 0.79% Risk-free rate of return................................ 3.33%-4.70% 3.69% 3.62% Volatility.............................................. 23.23% 34.85% 38.56% Expected life (years)................................... 6 6 6 Exercise multiple....................................... 1.48 N/A N/A Post-vesting termination rate........................... 5.19% N/A N/A Contractual term (years)................................ 10 N/A N/A
F-79 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, ------------------------ 2005 2004 2003 ------ ------ ------ Weighted average fair value of options granted............. $10.09 $13.25 $10.41 ====== ====== ======
Certain levels of Company management also received awards of long-term stock-based compensation. Under the LTPCP, awards are payable in their entirety at the end of a three-year performance period. Each participant was assigned a target compensation amount at the inception of the performance period with the final compensation amount determined based on the total shareholder return on the Holding Company's stock over the three-year performance period, subject to limited further adjustment approved by the Holding Company's Board of Directors. Final awards may be paid in whole or in part with shares of the Holding Company's stock, as approved by the Holding Company's Board of Directors. Beginning in 2005, no further LTPCP target compensation amounts were set. Instead, certain members of management were awarded Performance Shares under the 2005 Stock Plan. Participants are awarded an initial target number of Performance Shares with the final number of Performance Shares payable being determined by the product of the initial target multiplied by a factor of 0.0 to 2.0. The factor applied is based on measurements of the Holding Company's performance with respect to (i) change in annual net operating earnings per share; and (ii) proportionate total shareholder return, as defined, with reference to the three-year performance period relative to other companies in the Standard and Poor's Insurance Index with reference to the same three-year period. Performance Share awards will normally vest in their entirety at the end of the three-year performance period (subject to certain contingencies) and will be payable entirely in shares of the Holding Company's stock. On April 15, 2005, 995,150 Performance Shares were awarded to members of Company management, for which the total fair value on the date of grant was approximately $38 million. For the years ended December 31, 2005, 2004 and 2003, compensation expense related to the LTPCP and Performance Shares was $65 million, $45 million, and $42 million, respectively. For the years ended December 31, 2005, 2004 and 2003, the aggregate stock-based compensation expense related to the Incentive Plans was $112 million, $82 million and $60 million, respectively, including stock-based compensation for non-employees of $235 thousand, $468 thousand and $550 thousand, respectively. STATUTORY EQUITY AND INCOME Each insurance company's state of domicile imposes minimum risk-based capital requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of total adjusted capital, as defined by the NAIC, to authorized control level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. Metropolitan Life and each of its U.S. insurance subsidiaries exceeded the minimum risk-based capital requirements for all periods presented herein. The 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 Metropolitan Life and its insurance subsidiaries. F-80 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 $2,155 million, $2,648 million and $2,169 million for the years ended December 31, 2005, 2004 and 2003, respectively. Statutory capital and surplus, as filed with the New York State Department of Insurance, was $8,639 million and $8,804 million at December 31, 2005 and 2004, respectively. OTHER COMPREHENSIVE INCOME The following table sets forth the reclassification adjustments required for the years ended December 31, 2005, 2004 and 2003 in other comprehensive income (loss) that are included as part of net income for the current year that have been reported as a part of other comprehensive income (loss) in the current or prior year:
YEARS ENDED DECEMBER 31, -------------------------- 2005 2004 2003 -------- ------ ------ (IN MILLIONS) Holding gains on investments arising during the year....... $(2,222) $ 520 $ 814 Income tax effect of holding gains......................... 837 (182) (335) Reclassification adjustments: Recognized holding (gains) losses included in current year income........................................... (148) (236) 332 Amortization of premiums and accretion of discounts associated with investments........................... (186) (3) (152) Income tax effect........................................ 126 86 (72) Allocation of holding losses on investments relating to other policyholder amounts............................... 1,580 (284) (576) Income tax effect of allocation of holding losses to other policyholder amounts..................................... (596) 102 228 Unrealized investment gains of subsidiary at date of sale..................................................... 15 -- 269 Deferred income taxes on unrealized investment gains of subsidiary at date of sale............................... (5) -- (94) ------- ----- ----- Net unrealized investment gains (losses)................... (599) 3 414 ------- ----- ----- Foreign currency translation adjustments arising during the year..................................................... (54) 79 174 Reclassification adjustment for sale of investment in foreign operation........................................ 5 -- -- ------- ----- ----- Foreign currency translation adjustment.................... (49) 79 174 Minimum pension liability adjustment....................... 89 (2) (82) ------- ----- ----- Other comprehensive income (losses)........................ $ (559) $ 80 $ 506 ======= ===== =====
F-81 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. OTHER EXPENSES Other expenses were comprised of the following:
YEARS ENDED DECEMBER 31, --------------------------- 2005 2004 2003 ------- ------- ------- (IN MILLIONS) Compensation............................................ $ 2,235 $ 2,205 $ 2,305 Commissions............................................. 1,278 1,729 1,694 Interest and debt issue costs........................... 245 183 313 Amortization of DAC and VOBA............................ 1,385 1,145 1,386 Capitalization of DAC................................... (1,619) (1,817) (1,982) Rent, net of sublease income............................ 227 216 226 Minority interest....................................... 181 168 119 Other................................................... 1,785 1,754 1,710 ------- ------- ------- Total other expenses.................................. $ 5,717 $ 5,583 $ 5,771 ======= ======= =======
14. BUSINESS SEGMENT INFORMATION The Company provides insurance and financial services to customers in the United States, Canada and Asia. At December 31, 2005 and 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. The Company's international operations, consisting of the Company's Canadian branch and a joint venture in China, are reported in Corporate & Other for the years ended December 31, 2005 and 2004. For the year ended December 31, 2003, the Company's international operations were reported in a separate International segment. MetLife Indonesia was reported in Corporate & Other through the date of sale, September 29, 2005. See Note 16. On July 1, 2005, the Holding Company completed the acquisition of The Travelers Insurance Company ("TIC"), excluding certain assets, most significantly, Primerica, from Citigroup Inc. ("Citigroup"), and substantially all of Citigroup's international insurance business (collectively, "Travelers"). In connection with the Travelers acquisition by the Holding Company, management realigned certain products and services within its segments to better conform to the way it manages and assesses the business. Accordingly, all prior period segment results have been adjusted to reflect such product reclassifications. Also, in connection with the Travelers acquisition by the Holding Company, management has utilized its economic capital model to evaluate the deployment of capital based upon the unique and specific nature of the risks inherent in the Company's existing and newly acquired businesses and has adjusted such allocations based upon this model. 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. As a part of the economic capital process a portion of net investment income is credited to the segments based on the level of allocated equity. 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 F-82 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) protection and asset accumulation products, including life insurance, annuities and mutual funds. Through the Company's majority-owned subsidiary, RGA, Reinsurance provides 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. Auto & Home provides personal lines property and casualty insurance, including private passenger automobile, homeowners and personal excess liability insurance in 2003. International provided life insurance, accident and health insurance, annuities and retirement & savings products to both individuals and groups in 2003. Corporate & Other contains the excess capital not allocated to the business segments, various start-up and run-off entities, the Company's ancillary international operations in 2005 and 2004, as well as interest expense related to the majority of the Company's outstanding debt and expenses associated with 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 asset management business, including amounts reported as discontinued operations, is included in the results of operations for Corporate & Other. See Note 16 for disclosures regarding discontinued operations, including real estate. F-83 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Set forth in the tables below is certain financial information with respect to the Company's segments, as well as Corporate & Other, for the years ended December 31, 2005, 2004 and 2003. 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 effectively manage its capital. The Company evaluates the performance of each operating segment based upon net income excluding net investment gains (losses), net of income taxes, adjustments related to net investment gains (losses), net of income taxes, the impact from the cumulative effect of changes in accounting, net of income taxes and discontinued operations, other than discontinued real estate, 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.
CORPORATE & YEAR ENDED DECEMBER 31, 2005 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER(1) TOTAL ---------------------------- ------------- ---------- ----------- ----------- -------- (IN MILLIONS) Premiums............................. $ 11,271 $ 4,113 $ 3,869 $ 3 $ 19,256 Universal life and investment-type product policy fees................ 753 1,193 -- 2 1,948 Net investment income................ 5,249 5,558 606 337 11,750 Other revenues....................... 642 92 58 28 820 Net investment gains (losses)........ 76 83 22 (2) 179 Policyholder benefits and claims..... 12,448 4,823 3,206 (32) 20,445 Interest credited to policyholder account balances................... 1,347 1,029 220 -- 2,596 Policyholder dividends............... 1 1,644 -- 2 1,647 Other expenses....................... 2,199 2,173 991 354 5,717 Income from continuing operations before provision for income taxes.............................. 1,996 1,370 138 44 3,548 Income from discontinued operations, net of income taxes................ 162 295 -- 353 810 Cumulative effect of a change in accounting, net of income taxes.... -- -- -- -- -- Net income........................... 1,491 1,176 92 494 3,253 Total assets......................... 139,680 141,201 16,049 10,396 307,326 DAC and VOBA......................... 1,098 7,513 2,815 12 11,438 Separate account assets.............. 42,063 31,075 14 -- 73,152 Policyholder liabilities............. 78,011 86,565 11,751 278 176,605 Separate account liabilities......... 42,063 31,075 14 -- 73,152
F-84 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE & YEAR ENDED DECEMBER 31, 2004 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER(1) TOTAL ---------------------------- ------------- ---------- ----------- ----------- -------- (IN MILLIONS) Premiums........................................... $ 10,037 $ 4,046 $ 3,348 $ 6 $ 17,437 Universal life and investment-type product policy fees............................................. 710 1,299 -- -- 2,009 Net investment income.............................. 4,580 5,352 538 348 10,818 Other revenues..................................... 654 131 56 21 862 Net investment gains (losses)...................... 162 85 59 (24) 282 Policyholder benefits and claims................... 11,172 4,836 2,694 34 18,736 Interest credited to policyholder account balances......................................... 1,014 1,131 212 -- 2,357 Policyholder dividends............................. -- 1,634 1 1 1,636 Other expenses..................................... 1,972 2,348 957 306 5,583 Income from continuing operations before provision for income taxes................................. 1,985 964 137 10 3,096 Income from discontinued operations, net of income taxes............................................ 19 22 -- 30 71 Cumulative effect of a change in accounting, net of income taxes..................................... (59) 9 -- (2) (52) Net income......................................... 1,267 682 91 199 2,239 Total assets....................................... 132,832 137,756 13,850 15,550 299,988 DAC and VOBA....................................... 997 7,485 2,567 13 11,062 Separate account assets............................ 40,462 28,045 14 (14) 68,507 Policyholder liabilities........................... 72,934 86,175 10,464 240 169,813 Separate account liabilities....................... 40,462 28,045 14 (14) 68,507
CORPORATE & AUTO & YEAR ENDED DECEMBER 31, 2003 INSTITUTIONAL INDIVIDUAL REINSURANCE OTHER INTERNATIONAL(1) HOME(2) TOTAL ---------------------------- ------------- ---------- ----------- ----------- ---------------- ------- ------- (IN MILLIONS) Premiums.......................... $ 9,063 $4,221 $2,648 $ (6) $ 5 $2,168 $18,099 Universal life and investment-type product policy fees............. 658 1,262 -- -- -- -- 1,920 Net investment income............. 4,144 5,421 431 104 48 119 10,267 Other revenues.................... 618 240 47 38 14 23 980 Net investment gains (losses)..... (289) (303) 62 16 (8) (4) (526) Policyholder benefits and claims.......................... 10,022 4,844 2,109 (4) 15 1,604 18,590 Interest credited to policyholder account balances................ 973 1,222 184 -- -- -- 2,379 Policyholder dividends............ (1) 1,698 -- (1) 3 -- 1,699 Other expenses.................... 1,853 2,425 764 140 17 572 5,771 Income from continuing operations before provision for income taxes........................... 1,347 652 131 17 24 130 2,301 Income from discontinued operations, net of income taxes........................... 49 51 -- 274 (5) -- 369 Cumulative effect of a change in accounting, net of income taxes........................... (26) -- -- -- -- -- (26) Net income........................ 886 482 86 424 12 111 2,001
F-85 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) --------------- (1) Ancillary international results are reported in Corporate & Other for the years ended December 31, 2005 and 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. Revenues derived from any customer did not exceed 10% of consolidated revenues. Revenues from U.S. operations were $32,351 million, $30,102 million and $29,740 million for the years ended December 31, 2005, 2004 and 2003, respectively, which represented 95%, 96% and 97%, respectively, of consolidated revenues. 15. ACQUISITIONS AND DISPOSITIONS See Note 16 for information on the dispositions of MetLife Indonesia and SSRM. 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 revenues of the entities sold included in the consolidated statements of income was $156 million for the year ended December 31, 2003. In October 2003, the Company also 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 revenues of the entity sold included in the consolidated statements of income was $2,343 million for the year ended December 31, 2003. See Note 1. 16. DISCONTINUED OPERATIONS REAL ESTATE The Company actively manages its real estate portfolio with the objective of maximizing earnings through selective acquisitions and dispositions. Income related to real estate classified as held-for-sale or sold is presented in discontinued operations. These assets are carried at the lower of depreciated cost or fair value less expected disposition costs. F-86 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the components of income from discontinued real estate operations:
YEARS ENDED DECEMBER 31, ------------------------- 2005 2004 2003 ------- ------ ------ (IN MILLIONS) Investment income........................................... $ 87 $ 179 $ 308 Investment expense.......................................... (47) (114) (170) Net investment gains........................................ 961 27 420 ------ ----- ----- Total revenues............................................ 1,001 92 558 Interest expense............................................ -- -- 1 Provision for income taxes.................................. 359 31 204 ------ ----- ----- Income from discontinued operations, net of income taxes.... $ 642 $ 61 $ 353 ====== ===== =====
There was no carrying value of real estate related to discontinued operations at December 31, 2005. The carrying value of real estate related to discontinued operations was $678 million at December 31, 2004. The following table shows the discontinued real estate operations by segment:
YEARS ENDED DECEMBER 31, ------------------ 2005 2004 2003 ---- ---- ---- (IN MILLIONS) Net investment income Institutional............................................. $ 11 $21 $ 31 Individual................................................ 17 26 39 Corporate & Other......................................... 12 18 68 ---- --- ---- Total net investment income............................ $ 40 $65 $138 ==== === ==== Net investment gains (losses) Institutional............................................. $242 $ 9 $ 45 Individual................................................ 443 4 43 Corporate & Other......................................... 276 14 332 ---- --- ---- Total net investment gains (losses).................... $961 $27 $420 ==== === ==== Interest Expense Individual................................................ $ -- $-- $ 1 ---- --- ---- Total interest expense................................. $ -- $-- $ 1 ==== === ====
In the second quarter of 2005, the Company sold its One Madison Avenue property in Manhattan, New York for $918 million, resulting in a gain, net of income taxes, of $431 million. The gain is included in income from discontinued operations in the accompanying consolidated statements of income. In the fourth quarter of 2003, the Company sold its Eleven Madison Avenue property in Manhattan, New York for $675 million resulting in a gain, net of income taxes, of $166 million. The gain is included in income from discontinued operations in the accompanying consolidated statements of income. F-87 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OPERATIONS On September 29, 2005, the Company completed the sale of MetLife Indonesia to a third party resulting in a gain upon disposal of $10 million, net of income taxes. As a result of this sale, the Company recognized income from discontinued operations of $5 million, net of income taxes, for the year ended December 31, 2005. The Company reclassified the assets, liabilities and operations of MetLife Indonesia into discontinued operations for all periods presented. The following tables present the amounts related to the operations and financial position of MetLife Indonesia that has been combined with the discontinued real estate operations in the consolidated income statements:
YEARS ENDED DECEMBER 31, ------------------ 2005 2004 2003 ---- ---- ---- (IN MILLIONS) Revenues from discontinued operations....................... $ 5 $ 5 $ 4 Expenses from discontinued operations....................... 10 14 9 --- ---- --- Income from discontinued operations before provision for income taxes.............................................. (5) (9) (5) Provision for income taxes.................................. -- -- -- --- ---- --- Loss from discontinued operations, net of income taxes.... (5) (9) (5) Net investment gain, net of income taxes.................... 10 -- -- --- ---- --- Income (loss) from discontinued operations, net of income taxes.................................................. $ 5 $ (9) $(5) === ==== ===
DECEMBER 31, 2004 ------------- (IN MILLIONS) Fixed maturities............................................ $17 Short-term investments...................................... 1 Cash and cash equivalents................................... 3 Deferred policy acquisition costs........................... 9 Premiums and other receivables.............................. 1 --- Total assets held-for-sale................................ $31 === Future policy benefits...................................... $ 5 Policyholder account balances............................... 12 Other policyholder funds.................................... 7 Other liabilities........................................... 4 --- Total liabilities held-for-sale........................... $28 ===
On January 31, 2005, the Company completed the sale of SSRM to a third party for $328 million in cash and stock. As a result of the sale of SSRM, the Company recognized income from discontinued operations of approximately $157 million, net of income taxes, comprised of a realized gain of $165 million, net of income taxes, and an operating expense related to a lease abandonment of $8 million, net of income taxes. Under the terms of the sale agreement, MetLife 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, F-88 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) depending on retention of certain Company-related business. Also under the terms of such agreement, the Company had the opportunity to receive additional consideration for the retention of certain customers for a specific period in 2005. In the fourth quarter of 2005, upon finalization of the computation, the Company received a payment of $12 million, net of income taxes, due to the retention of these specific customer accounts. The Company reclassified the assets, liabilities and operations of SSRM into discontinued operations for all periods presented. 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, 2005 also includes expenses of approximately $6 million, net of income taxes, related to the sale of SSRM. The operations of SSRM include affiliated revenues of $5 million, $59 million and $54 million for the years ended December 31, 2005, 2004 and 2003, respectively, related to asset management services provided by SSRM to the Company that have not been eliminated from discontinued operations as these transactions continue after the sale of SSRM. The following tables present the amounts related to operations and financial position of SSRM that have been combined with the discontinued real estate operations in the consolidated income statements:
YEARS ENDED DECEMBER 31, ------------------ 2005 2004 2003 ---- ---- ---- (IN MILLIONS) Revenues from discontinued operations....................... $ 19 $328 $231 Expenses from discontinued operations....................... 38 296 197 ---- ---- ---- Income from discontinued operations before provision for income taxes.............................................. (19) 32 34 Provision for income taxes.................................. (5) 13 13 ---- ---- ---- Income (loss) from discontinued operations, net of income taxes.................................................. (14) 19 21 Net investment gain, net of income taxes.................... 177 -- -- ---- ---- ---- Income from discontinued operations, net of income taxes.................................................. $163 $ 19 $ 21 ==== ==== ====
F-89 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2004 ------------- (IN MILLIONS) Equity securities........................................... $ 49 Real estate and real estate joint ventures.................. 96 Short-term investments...................................... 33 Other invested assets....................................... 20 Cash and cash equivalents................................... 55 Premiums and other receivables.............................. 38 Other assets................................................ 88 ---- Total assets held-for-sale................................ $379 ==== Short-term debt............................................. $ 19 Current income taxes payable................................ 1 Deferred income taxes payable............................... 1 Other liabilities........................................... 219 ---- Total liabilities held-for-sale........................... $240 ====
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. F-90 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amounts related to the Company's financial instruments were as follows:
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2005 Assets: Fixed maturities..................................... $147,897 $147,897 Trading securities................................... $ 373 $ 373 Equity securities.................................... $ 2,217 $ 2,217 Mortgage and consumer loans.......................... $ 33,094 $ 33,710 Policy loans......................................... $ 8,412 $ 8,412 Short-term investments............................... $ 883 $ 883 Cash and cash equivalents............................ $ 1,787 $ 1,787 Mortgage loan commitments............................ $2,603 $ -- $ (3) Commitments to fund partnership investments.......... $1,956 $ -- $ -- Liabilities: Policyholder account balances........................ $ 62,943 $ 61,849 Short-term debt...................................... $ 453 $ 453 Long-term debt....................................... $ 2,961 $ 3,246 Shares subject to mandatory redemption............... $ 278 $ 362 Payables for collateral under securities loaned and other transactions................................ $ 21,009 $ 21,009
NOTIONAL CARRYING ESTIMATED AMOUNT VALUE FAIR VALUE -------- -------- ---------- (IN MILLIONS) DECEMBER 31, 2004 Assets: Fixed maturities..................................... $150,229 $150,229 Equity securities.................................... $ 1,903 $ 1,903 Mortgage and consumer loans.......................... $ 31,571 $ 33,006 Policy loans......................................... $ 8,256 $ 8,256 Short-term investments............................... $ 1,194 $ 1,194 Cash and cash equivalents............................ $ 2,370 $ 2,370 Mortgage loan commitments............................ $1,161 $ -- $ 4 Commitments to fund partnership investments.......... $1,320 $ -- $ -- Liabilities: Policyholder account balances........................ $ 59,150 $ 58,180 Short-term debt...................................... $ 1,445 $ 1,445 Long-term debt....................................... $ 2,050 $ 2,293 Shares subject to mandatory redemption............... $ 278 $ 361 Payables for collateral under securities loaned and other transactions................................ $ 25,230 $ 25,230
F-91 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: FIXED MATURITIES, TRADING SECURITIES AND EQUITY SECURITIES The fair value of fixed maturities, trading securities 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 CONSUMER LOANS, MORTGAGE LOAN COMMITMENTS AND COMMITMENTS TO FUND PARTNERSHIP INVESTMENTS Fair values for mortgage and consumer 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 which have final contractual maturities are 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. The fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender. SHORT-TERM AND LONG-TERM DEBT, PAYABLES FOR COLLATERAL UNDER SECURITIES LOANED AND OTHER TRANSACTIONS AND SHARES SUBJECT TO MANDATORY REDEMPTION The fair values of short-term and long-term debt, 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. The carrying values of payables for collateral under securities loaned and other transactions approximate fair value. DERIVATIVE FINANCIAL INSTRUMENTS The fair value of derivative instruments is 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 F-92 METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES (A Wholly-Owned Subsidiary of Metlife, Inc.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) needed, to support the activities of the Company. Charges for these services were approximately $1,934 million, $1,711 million and $1,677 million in 2005, 2004 and 2003, respectively. As of December 31, 2005 and 2004, the Company held $103 million and $144 million, respectively, of assets in the Metropolitan Money Market Pool of affiliated companies. These amounts are recorded as short-term investments on the consolidated balance sheets of the Company. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. The Company transferred assets with a cost or amortized cost and fair market value of $686 million and $720 million, and $367 million and $382 million, for the years ended December 31, 2005 and 2004, respectively. The realized capital gains (losses) recognized on these transfers were $34 million, $15 million and less than $1 million for the years ended December 31, 2005, 2004 and 2003, respectively. The Company purchased assets from affiliates with a fair market value of $691 million and $563 million for the years ended December 31, 2005 and 2004, respectively. See Notes 2 and 5 for additional related party transactions. 19. SUBSEQUENT EVENTS During the first quarter of 2006, Metropolitan Life's Board of Directors approved a plan to merge an indirect insurance subsidiary, Paragon Life Insurance Company ("Paragon"), into Metropolitan Life effective May 1, 2006, subject to regulatory approvals. Metropolitan Life is to acquire Paragon from General American for its appraised value. F-93