485BPOS 1 d485bpos.txt GROUP VUL POST-EFFECTIVE AMENDMENT NO. 16 As filed with the Securities and Exchange Commission on April 17, 2009 Registration No. 033-91226 811-06025 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 16 [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 42 [X] Metropolitan Life Separate Account UL (Exact Name of Registrant) Metropolitan Life Insurance Company (Name of Depositor) 200 Park Avenue New York, NY 10066 (Address of depositor's principal executive offices) ---------- James L. Lipscomb, Esq. Executive Vice President and General Counsel Metropolitan Life Insurance Company 1095 Avenue of the Americas New York, NY 10036 (Name and address of agent for service) Copy to: Stephen E. Roth, Esquire Mary E. Thornton, Esquire Sutherland Asbill & Brennan LLP 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004-2415 It is proposed that this filing will become effective (check appropriate box) [_] immediately upon filing pursuant to paragraph (b) [X] on May 1, 2009 pursuant to paragraph (b) [_] 60 days after filing pursuant to paragraph (a)(1) [_] on (date) pursuant to paragraph (a)(1) of Rule 485 [_] this post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities Being Registered: Interests in Metropolitan Life Separate Account UL, which funds certain Variable Universal Life Insurance Policies. PROSPECTUS FOR GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES ("GROUP POLICIES") ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY ("METLIFE") MAY 1, 2009 This Prospectus provides you with important information about MetLife's Group Variable Universal Life Policies and its Certificates. However, we will also issue a Group Policy to the employer and Certificates to the employees which are separate documents from the prospectus. There may be differences between the description of the Group Policy and the Certificate contained in this prospectus and the Group Policy issued to the employer and the Certificate issued to the employee due to differences in state law. Please consult the Group Policy and the Certificate for the provisions that apply in your state. The Group Policies are designed to provide: . Life insurance coverage for employees (and/or their spouses) of employers who purchase a Group Policy . Flexible premium payments, including the option of paying premiums through payroll deduction . A death benefit that varies because it includes the employee's cash value in addition to a fixed insurance amount . Ownership rights of employees set forth in a certificate ("Certificate") issued in connection with the Group Policy You allocate net premiums to and may transfer cash value among a fixed interest account ("Fixed Account") and the Metropolitan Life Separate Account UL investment divisions which invest in the following Portfolios: FIDELITY(R) VARIABLE INSURANCE PRODUCTS (INITIAL CLASS) Freedom 2010 Portfolio Freedom 2020 Portfolio Freedom 2030 Portfolio MET INVESTORS SERIES TRUST (CLASS A) BlackRock Large Cap Core Portfolio Lord Abbett Bond Debenture Portfolio METROPOLITAN SERIES FUND, INC. (CLASS A) Artio International Stock Portfolio FI Mid Cap Opportunities Portfolio (formerly Julius Baer International MetLife Stock Index Portfolio Stock Portfolio) MFS(R) Value Portfolio Barclays Capital Aggregate Bond Index Morgan Stanley EAFE(R) Index Portfolio Portfolio (formerly Lehman Oppenheimer Global Equity Portfolio Brothers(R) Aggregate Bond Index Russell 2000(R) Index Portfolio Portfolio) T. Rowe Price Small Cap Growth BlackRock Bond Income Portfolio Portfolio BlackRock Diversified Portfolio
In some cases, the employer may limit which of the above Portfolios are available. Separate prospectuses for Fidelity(R) Variable Insurance Products, Met Investors Series Trust and Metropolitan Series Fund, Inc. are available from us. Those prospectuses are attached at the end of this Prospectus, and they describe in greater detail an investment in the Portfolios listed above. Before purchasing a Certificate, read the information in this prospectus and in the prospectus for each Fund. Keep these prospectuses for future reference. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Group Policy and the Certificate give you more information on the operation of the Fixed Account. Neither the Securities and Exchange Commission ("SEC") nor any state securities authority has approved or disapproved these securities, nor have they determined if this Prospectus is accurate or complete. This prospectus does not constitute an offering in any jurisdiction where such offering may not lawfully be made. Any representation otherwise is a criminal offense. Interests in the Separate Account and the Fixed Account are not deposits or obligations of, or insured or guaranteed by, the U.S. Government, any bank or other depository institution including the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board or any other agency or entity or person. We do not authorize any representations about this offering other than as contained in this Prospectus or its supplements or in our authorized supplemental sales material. We do not guarantee how any of the Portfolios will perform. TABLE OF CONTENTS
PAGE IN THIS SUBJECT PROSPECTUS ------- ---------- Cover Pages Contacting Us................................................ 3 Summary of Benefits and Risks................................ 3 Certificate Benefits...................................... 3 Risks of a Certificate.................................... 4 Fee Tables................................................... 5 Transaction Fees.......................................... 6 Periodic Charges Other Than Portfolio Operating Expenses.. 6 Periodic Charges Applicable to Any Optional Riders That May be Added to Your Certificate........................ 7 Portfolio Operating Expenses.............................. 9 MetLife...................................................... 11 The Fixed Account......................................... 11 Separate Account UL.......................................... 11 The Funds................................................. 12 Certain Payments We Receive with Regard to the Portfolios. 12 Selection of Portfolios................................... 13 Management of Portfolios.................................. 13 The Portfolio Share Classes that We Offer................. 15 Issuing a Group Policy and a Certificate..................... 15 Payment and Allocation of Premiums........................... 16 Paying Premiums........................................... 16 Maximum and Minimum Premium Payments...................... 16 Allocating Net Premiums................................... 17 Insurance Proceeds........................................... 17 Death Benefit............................................. 18 Alternate Death Benefit................................... 18 Specified Face Amount..................................... 18 Income Plans.............................................. 19 Cash Value, Transfers and Withdrawals........................ 19 Cash Value................................................ 19 Cash Value Transfers...................................... 20 Surrender and Withdrawal Privileges....................... 23 Benefit at Final Date..................................... 24 Paid-Up Certificate Provision................................ 24 Loan Privileges.............................................. 24 Optional Benefits Added By Rider............................. 25 Charges and Deductions....................................... 26 Important Information Applicable to All Certificate Charges and Deductions.................................. 26 Charges Deducted from Premiums............................ 27 Charges Included in the Monthly Deduction................. 27 Charges Against the Separate Account...................... 29 Variations in Charges..................................... 29 Portfolio Company Charges................................. 29 Other Charges............................................. 29 Certificate Termination and Reinstatement.................... 30 Federal Tax Matters.......................................... 30 Rights We Reserve............................................ 35 Other Certificate Provisions................................. 35 Sales of Certificates........................................ 40 Legal Proceedings............................................ 42 Restrictions on Financial Transactions....................... 42 Financial Statements......................................... 42
2 CONTACTING US [SIDEBAR: YOU CAN CONTACT US AT OUR ADMINISTRATIVE OFFICE.] You can communicate all of your requests, instructions and notifications to us by contacting us in writing at our Administrative Office. We may require that certain requests, instructions and notifications be made on forms that we provide. These include: changing your beneficiary; taking a Certificate loan; changing the specified face amount; taking a partial withdrawal; surrendering the Certificate; making transfer requests (including elections with respect to the systematic investment strategies) or changing your premium allocations. Our Administrative Office is our office at 190 Carondelet Plaza, St. Louis, Missouri 63105. We may name additional or alternate Administrative Offices. If we do, we will notify you in writing. If you send your premium payments or transaction requests to an address other than the one we have designated for receipt of such premium payments or requests, we may return the premium payment to you, or there may be a delay in applying the premium payment or transaction to your Policy. SUMMARY OF BENEFITS AND RISKS This summary gives an overview of the Group Policy and Certificates and is qualified by the more detailed information in the balance of this Prospectus, the Group Policy and the Certificates. MetLife issues the Group Policy and Certificates. CERTIFICATE BENEFITS PREMIUM PAYMENT FLEXIBILITY. Generally, if elected by your employer, you may pay premiums through payroll deduction. If payroll deduction is not available, you may pay premiums to us on a monthly, quarterly or annual basis. You may, with certain restrictions, make premium payments in any amount and at any frequency. However, you may also be required to make an unscheduled premium payment so that the Certificate will remain in force. The Certificate will remain in force until its Final Date, as long as the cash surrender value is large enough to cover one monthly deduction, regardless of whether or not premium payments have been made. CASH VALUE. Your cash value in the Certificate reflects your premium payments, the charges we deduct, interest we credit if you have cash value in our fixed interest account, any investment experience you have in our Separate Account, as well as your loan and withdrawal activity. TRANSFERS AND SYSTEMATIC INVESTMENT STRATEGIES. You may transfer cash value among the funding options, subject to certain limits (see "Cash Value, Transfers and Withdrawals"). If elected by your employer, you may also choose among four systematic investment strategies: the Equity Generator/SM/, the Equalizer/SM/, the Allocator/SM/, and the Rebalancer/SM/. SPECIFIED FACE AMOUNT OF INSURANCE. Within certain limits, you may choose your specified face amount of insurance when the Certificate is issued. You may also increase the amount at certain times determined by your employer and subject to our underwriting requirements. In certain cases, we will automatically increase the specified face amount at each employee's salary increase on dates chosen by the employer. You may also decrease the specified face amount. DEATH BENEFIT. The death benefit is the specified face amount of the Certificate plus the Certificate cash value at the date of death of the covered person. 3 INCOME PLANS. The insurance proceeds can be paid under a variety of income plans that are available under the Certificate. SURRENDERS, PARTIAL WITHDRAWALS AND LOANS. Within certain limits, you may take partial withdrawals and loans from the Certificate. You may also surrender the Certificate for its cash surrender value. PAID-UP CERTIFICATE BENEFIT. You can choose to terminate the death benefit (and any riders in effect) and use all or part of the cash surrender value as a single premium for a "paid-up" benefit within the terms set forth in the Certificate. ("Paid-up" means no further premiums are required.) TAX ADVANTAGES. If you meet certain requirements, you will not pay income taxes on withdrawals or surrenders or at the Final Date of the Certificate, until your cumulative withdrawn amounts exceed the cumulative premiums you have paid. The death benefit may be subject to Federal and state estate taxes, but your beneficiary will generally not be subject to income tax on the death benefit. As with any taxation matter, you should consult with and rely on the advice of your own tax advisor. OPTIONAL RIDER BENEFITS. You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. RISKS OF A CERTIFICATE This Prospectus discusses the risks associated with purchasing the Certificate. Other prospectuses (which are attached at the end of this Prospectus) discuss the risks associated with investment in the Fund described therein. Those prospectuses are being provided to you in addition to this Prospectus because each of the Separate Account UL investment divisions that are available to you under a Certificate invests solely in a corresponding "Portfolio" of a Fund. INVESTMENT RISK. MetLife does not guarantee the investment performance of the variable investment options and you should consider your risk tolerance before selecting any of these options. You will be subject to the risk that investment performance will be unfavorable and that your cash value will decrease. In addition, we deduct certain Certificate fees and charges from your Certificate's cash value, which can significantly reduce your Certificate's cash value. During times of poor investment performance, this deduction may have an even greater impact on your Certificate's cash value. It is possible to lose your full investment and your Certificate could terminate without value, unless you pay additional premiums. If you allocate cash value to the Fixed Account, then we credit such cash value with a declared rate of interest. You assume the risk that the rate may decrease, although it will never be lower than the guaranteed minimum annual effective rate stated in your Certificate. SURRENDER AND WITHDRAWAL RISKS. The Certificates are designed to provide lifetime insurance protection. They are not offered primarily as an investment, and are not suitable as a short-term savings vehicle. You should purchase a Certificate only if you have the financial ability to keep it in force for a substantial period of time. You should not purchase the Certificate if you intend to surrender all or part of the Certificate's cash value in the near future. 4 RISK OF CERTIFICATE TERMINATION. Your Certificate may terminate without value if you have paid an insufficient amount of premiums or if the investment experience of the investment divisions is poor. If your cash surrender value is not enough to pay the monthly deduction, your Policy will terminate without value unless you make a premium payment sufficient to cover two monthly deductions within the 61-day grace period. If your Certificate does terminate, your insurance coverage will terminate (although you will be given an opportunity to reinstate your coverage if you satisfy certain requirements). Lapse of a certificate on which there is an outstanding loan may have adverse tax consequences. CERTIFICATE CHARGE AND EXPENSE INCREASE. We have the right to increase certain Certificate charges. TAX LAW RISKS. We anticipate that the Certificate should generally be deemed a life insurance contract under Federal tax law. Assuming that a Certificate 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 Certificate's cash value until there is an actual distribution from the Certificate. Moreover, insurance proceeds payable under the Certificate 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 Certificate 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 Certificate (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 Certificate 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. However, during the first 15 Certificate years, in certain circumstances, a distribution may be subject to tax on a income-out-first basis if there is a gain in the Certificate (which is generally when your cash value exceeds the cumulative premiums you paid). Loans will generally not be treated as distributions. Finally, neither distributions nor loans from a Certificate that is not a modified endowment contract are subject to the 10% penalty tax. 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 Certificate. The charges set forth in the first three tables can vary, pursuant to terms of the Group Policy under which the Certificate is issued. In certain cases, we have the right to increase our charges for new Certificates, as well as for Certificates already outstanding. The maximum charges in such cases are shown in the far right-hand columns of each of the first three tables below. In addition to the following tables, certain charges that we don't currently impose (but which we have the right 5 to impose on your Certificate in the future) are described under "Charges and Deductions--Other Charges," further back in this Prospectus. TRANSACTION FEES This table describes the fees and expenses that you will pay at the time that you buy the Certificate, surrender the Certificate, or transfer cash value among the variable investment options or the Fixed Account. The Current Amount Deducted represents an amount that would be deducted from a hypothetical group that is representative of the groups to whom the Group Policy is offered. The amount may not reflect the actual amount currently deducted for any current Policy owner, since the current amount deducted varies from group to group based on the anticipated experience of the group.
WHEN CHARGE IS CURRENT AMOUNT MAXIMUM AMOUNT CHARGE DEDUCTED DEDUCTED WE CAN DEDUCT ----------------------------------------------------------------------------------- Charge for average On payment of An amount equal to No specific expected state and premium the estimate of taxes maximum local taxes we will actually pay attributable to for your group, premiums/1/ currently up to 2.55% of each premium payment. ----------------------------------------------------------------------------------- Charge for expected On payment of 0.35% of each Same as current federal taxes premium premium payment amount attributable to premiums/1/ ----------------------------------------------------------------------------------- Surrender, On surrender, None Up to $25 per withdrawal and loan withdrawal or loan surrender, transaction fees/2/ withdrawal or loan
-------- /1/ Rather than deducting this charge from each premium payment you make, we have the option of deducting an equivalent amount as part of the monthly deduction. In that case, the amount of the deduction will be based on the amount of premium payments received under all Certificates issued in connection with the Group Policy. We will waive the state premium tax charge for Internal Revenue Code Section 1035 exchanges from any other policy to a Certificate. We will also waive the state premium tax charge, as well as the charge for expected federal taxes attributable to premiums for 1035 exchanges, from another MetLife policy to a Certificate. /2/ Generally, we will not make any transaction charge for the surrender of a Certificate because of the termination of an employer's participation in the Group Policy. See your Certificate for more details. PERIODIC CHARGES OTHER THAN PORTFOLIO OPERATING EXPENSES These tables describe other fees and expenses that you will pay periodically during the time that you own the Certificate not including the fees and expenses of the Portfolios. The amounts shown for a 45 year old covered person assume that person is a member of a hypothetical group that has been derived from all groups to whom the Group Policy is offered. These amounts may not reflect the amounts for any actual Certificate owner, since the amounts vary from group to group based on the anticipated experience of the group. The actual charge at that age for your group may be higher or lower than the rate shown. 6 PERIODIC CHARGES APPLICABLE TO ALL CERTIFICATES
WHEN CHARGE IS CURRENT AMOUNT MAXIMUM AMOUNT CHARGE DEDUCTED DEDUCTED WE CAN DEDUCT ------------------------------------------------------------------------------------------------------------- Cost of term insurance* On each monthly anniversary of the Highest: $30.45 per Highest: $53.24 per Highest and lowest charge Certificate $1,000 of net amount $1,000 of Net among all possible covered at risk Amount at Risk persons Lowest: $.02 per Lowest: $.06 per $1,000 of net amount $1,000 of Net Charge for a hypothetical at risk Amount at Risk 45 year old $.10 per $1,000 of net $.43 per $1,000 of net amount at risk amount at risk ------------------------------------------------------------------------------------------------------------- Mortality and expense risk Daily against the Effective annual rate Effective annual rate charge** cash value in the of .45% of the cash of .90% Separate Account value in the Separate Account ------------------------------------------------------------------------------------------------------------- Administration charge*** On each monthly $0 to $3 per $5 per Certificate anniversary of the Certificate Certificate ------------------------------------------------------------------------------------------------------------- Loan interest spread**** Annually (or on loan Annual rate of 0.25% Annual rate of 2% of termination, if of the loan amount the loan amount earlier)
PERIODIC CHARGES APPLICABLE TO ANY OPTIONAL RIDERS THAT MAY BE ADDED TO YOUR CERTIFICATE*****
WHEN CHARGE IS CURRENT AMOUNT MAXIMUM AMOUNT OPTIONAL FEATURE DEDUCTED DEDUCTED WE CAN DEDUCT ---------------------------------------------------------------------------------------------- Disability waiver of monthly On each monthly Since your employer No separate deduction benefit anniversary of the decides for the whole maximum Certificate group whether to elect this benefit, the cost is included in the basic cost of insurance rates for the group. ---------------------------------------------------------------------------------------------- Accelerated benefits option On each monthly Since your employer No separate anniversary of the decides for the whole maximum Certificate group whether to elect this benefit, the cost is included in the basic cost of insurance rates for the group. ---------------------------------------------------------------------------------------------- Accidental death benefit On each monthly No maximum anniversary of the Highest: $.04 per applies to this Highest and Lowest charge among Certificate $1,000 of rider benefit all possible Certificates benefit amount Lowest: $.01 per $1,000 of rider Charge for a hypothetical benefit amount 45 year old $.03 per $1,000 of rider benefit amount ----------------------------------------------------------------------------------------------
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WHEN CHARGE IS CURRENT AMOUNT MAXIMUM AMOUNT OPTIONAL FEATURE DEDUCTED DEDUCTED WE CAN DEDUCT ------------------------------------------------------------------------------------------- Accidental Death or Dismemberment On each monthly No maximum Benefit anniversary of the Highest: $.05 per applies to this Certificate $1,000 of rider benefit Highest and Lowest Charge Among benefit amount All Possible Certificates Lowest: $.02 per $1,000 of rider benefit amount Charge for a hypothetical 45 year old $.04 per $1,000 of rider benefit amount ------------------------------------------------------------------------------------------- Dependent life benefits (spouse On each monthly No maximum coverage only) anniversary of the applies to this Certificate benefit Highest and lowest charge among Highest: $30.34 per all possible certificates $1,000 of rider benefit amount Lowest: $.03 per $1,000 of rider benefit amount Charge for a hypothetical $.10 per $1,000 of 45 year old rider benefit amount ------------------------------------------------------------------------------------------- Dependent life benefits (children On each monthly No maximum coverage only) anniversary of the applies to this Certificate benefit Highest and lowest charge among Highest: $.18 per all possible certificates $1,000 of rider benefit amount Lowest: $.07 per $1,000 of rider benefit amount Charge for a hypothetical 45 year $.13 per $1,000 of old rider benefit amount
* The cost of insurance charge varies based on anticipated variations in our costs or risks associated with the group or individuals in the group that the charge was intended to cover. The cost of insurance charge may not be representative of the charge that any particular Certificate owner would pay. See "Charges and Deductions--Cost of Insurance" for a more detailed discussion of factors affecting this charge. You can obtain more information about the cost of insurance or other charges that would apply by contacting your insurance sales representative. If you would like, we will provide you with an illustration of the impact of these and other charges under the Certificate based on various assumptions. ** We may determine differences in this charge for different employer groups based on differences in the levels of mortality and expense risks. See "Charges and Deductions--Certificate Charges--Charge Against the Separate Account" below for a fuller description of how this charge may vary. We are currently waiving the following amount of the Mortality and Expense Risk charge: 0.08% for the Investment Division investing in the BlackRock Large-Cap Core Portfolio. *** This charge for a Certificate may vary based on differences in the levels of administrative services performed by us and by the employer for the specific group under which the Certificate is issued. **** We charge interest on Certificate loans but credit you with interest on the amount of the cash value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. ***** The rider charges may vary based on individual characteristics, or anticipated variations in our costs or risks associated with the group or individuals in the group under which the Certificate is issued. The charge may not be representative of the charge that any particular Certificate owner would pay. You can obtain more information about this and other charges that would apply by contacting your insurance sales representative. 8 PORTFOLIO OPERATING EXPENSES Each of the Funds pays an investment management fee. Each of the Funds also incurs other direct expenses (see the applicable Fund Prospectus attached at the end of this Prospectus and the Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. The Funds offer various classes of shares, each of which has a different level of expenses. However, we offer only Class A shares of the Funds under the Certificates. The following tables describe the fees and expenses that the Portfolios will pay and that therefore a Certificate owner will indirectly pay periodically during the time that he or she owns a Certificate. The first table shows the minimum and maximum fees and expenses charged by the Portfolios for the fiscal year ended December 31, 2008. The second table shows each Portfolio's fees and expenses, as a percentage of average daily net assets, as of December 31, 2008, in some cases after contractual waivers and/or expense reimbursements. More detail concerning each Portfolio's fees and expenses is contained in the attached Fund prospectuses. Certain Portfolios may impose a redemption fee in the future. MINIMUM AND MAXIMUM TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES
MINIMUM MAXIMUM -------------------------------------------------------------------------------------- TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES (expenses that are deducted from Portfolio assets, including management fees, distribution and/or service (12b-1) fees, and other expenses) 0.29% 0.95% --------------------------------------------------------------------------------------
PORTFOLIO FEES AND EXPENSES (as a percentage of average daily net assets)
CONTRACT- DISTRIB- UAL FEE UTION WAIVER AND/OR ACQUIRED TOTAL AND/OR NET TOTAL MANAGE- SERVICE FUND FEES ANNUAL EXPENSE ANNUAL MENT (12B-1) OTHER AND OPERATING REIM- OPERATING PORTFOLIO FEE FEES EXPENSES EXPENSES* EXPENSES BURSEMENT EXPENSES** --------------------------------------------------------------------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- INITIAL CLASS --------------------------------------------------------------------------------- Freedom 2010 Portfolio -- -- -- 0.56% 0.56% -- 0.56%/1/ --------------------------------------------------------------------------------- Freedom 2020 Portfolio -- -- -- 0.63% 0.63% -- 0.63%/1/ --------------------------------------------------------------------------------- Freedom 2030 Portfolio -- -- -- 0.67% 0.67% -- 0.67%/1/ --------------------------------------------------------------------------------- MET INVESTORS SERIES TRUST -- CLASS A --------------------------------------------------------------------------------- BlackRock Large Cap Core Portfolio 0.58% -- 0.04% -- 0.62% -- 0.62% --------------------------------------------------------------------------------- Lord Abbett Bond Debenture Portfolio 0.50% -- 0.03% -- 0.53% -- 0.53%
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CONTRACT- DISTRIB- UAL FEE UTION WAIVER AND/OR ACQUIRED TOTAL AND/OR NET TOTAL MANAGE- SERVICE FUND FEES ANNUAL EXPENSE ANNUAL MENT (12B-1) OTHER AND OPERATING REIM- OPERATING PORTFOLIO FEE FEES EXPENSES EXPENSES* EXPENSES BURSEMENT EXPENSES** ---------------------------------------------------------------------------------- METROPOLITAN SERIES FUND, INC. -- CLASS A ---------------------------------------------------------------------------------- Artio International Stock Portfolio 0.82% -- 0.13% -- 0.95% 0.03% 0.92%/2/ ---------------------------------------------------------------------------------- Barclays Capital Aggregate Bond Index Portfolio 0.25% -- 0.04% -- 0.29% 0.01% 0.28%/3/ ---------------------------------------------------------------------------------- BlackRock Bond Income Portfolio 0.38% -- 0.05% -- 0.43% 0.01% 0.42%/4/ ---------------------------------------------------------------------------------- BlackRock Diversified Portfolio 0.45% -- 0.04% -- 0.49% -- 0.49% ---------------------------------------------------------------------------------- FI Mid Cap Opportunities Portfolio 0.68% -- 0.07% -- 0.75% -- 0.75% ---------------------------------------------------------------------------------- MetLife Stock Index Portfolio 0.25% -- 0.04% -- 0.29% 0.01% 0.28%/3/ ---------------------------------------------------------------------------------- MFS(R) Value Portfolio 0.72% -- 0.08% -- 0.80% 0.07% 0.73%/5/ ---------------------------------------------------------------------------------- Morgan Stanley EAFE(R) Index Portfolio 0.30% -- 0.12% 0.01% 0.43% 0.01% 0.42%/6/ ---------------------------------------------------------------------------------- Oppenheimer Global Equity Portfolio 0.52% -- 0.09% -- 0.61% -- 0.61% ---------------------------------------------------------------------------------- Russell 2000(R) Index Portfolio 0.25% -- 0.07% 0.01% 0.33% 0.01% 0.32%/3/ ---------------------------------------------------------------------------------- T. Rowe Price Small Cap Growth Portfolio 0.51% -- 0.08% -- 0.59% -- 0.59%
* Acquired Fund Fees and Expenses are fees and expenses incurred indirectly by a portfolio as a result of investing in shares of one or more underlying portfolios. ** Net Total Annual Operating Expenses do not reflect: (1) voluntary waivers of fees or expenses; (2) contractual waivers that are in effect for less than one year from the date of this Prospectus; or (3) expense reductions resulting from custodial fee credits or directed brokerage arrangements. -------- /1/ The Portfolio purchases Initial Class shares of underlying Fidelity funds. As an investor in an underlying Fidelity fund, the Portfolio will bear its pro rata share of the fees and expenses of the underlying Fidelity fund. /2/ MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009 through April 30, 2010, to reduce the management fee for each Class of the Portfolio to the annual rate of 0.81% for the first $500 million of the Portfolio's average daily net assets and 0.78% for the next $500 million. /3/ MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009 through April 30, 2010, to reduce the management fee for each Class of the Portfolio to 0.243%. /4/ MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009 through April 30, 2010, to reduce the management fee for each Class of the Portfolio to the annual rate of 0.325% for the Portfolio's average daily net assets in excess of $1 billion but less than $2 billion. /5/ MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009 through April 30, 2010, to reduce the management fee for each Class of the Portfolio to the annual rate of 0.65% for the first $1.25 billion of the Portfolio's average daily net assets, 0.60% for the next $250 million, and 0.50% for amounts over $1.5 billion. /6/ MetLife Advisers, LLC has contractually agreed, for the period May 1, 2009 through April 30, 2010, to reduce the management fee for each Class of the Portfolio to 0.293%. THE FEE AND EXPENSE INFORMATION REGARDING THE PORTFOLIOS WAS PROVIDED BY THOSE PORTFOLIOS. FOR INFORMATION CONCERNING COMPENSATION PAID FOR THE SALE OF THE GROUP POLICIES AND CERTIFICATES, SEE "SALES OF CERTIFICATES." 10 METLIFE 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. We are obligated to pay all amounts and other benefits and other amounts to which you are entitled under the terms of your Certificate. THE FIXED ACCOUNT The Fixed Account is part of our general assets that are not in any legally segregated separate accounts. The minimum guaranteed interest rate will vary based on the provisions stated in the Certificate but will never be lower than 3%. We may also credit excess interest on such amounts. Different excess interest rates may apply to different amounts based upon when such amounts were allocated to the Fixed Account. We credit the guaranteed and excess interest on each "Valuation Date" (as defined below in "Other Certificate Provisions--When Your Requests Become Effective"). We guarantee the credited interest, and it becomes part of the Certificate's cash value in the Fixed Account. We charge the portion of the monthly deduction that is deducted from the Fixed Account against the most recent premiums paid and interest credited thereto. We can delay transfers, withdrawals, surrender and payment of Certificate loans from the Fixed Account for up to 6 months. Since the Fixed Account is not registered under the federal securities laws, this Prospectus contains only limited information about the Fixed Account. The Group Policy and the Certificate give you more information on the operation of the Fixed Account. SEPARATE ACCOUNT UL THE SEPARATE ACCOUNT The Separate Account receives premium payments from the Group Policies and Certificates described in this Prospectus and other variable life insurance policies that we issue. The assets in the Separate Account legally belong to us, but they are held solely for the benefit of investors in the Separate Account and no one else, including our other policyholders and creditors. We will keep an amount in the Separate Account that at least equals the value of our commitments to policy owners that are based on their investments in the Separate Account. We can also keep charges that we deduct and other excess amounts in the Separate Account or we can transfer the excess out of the Separate Account. THE INVESTMENT DIVISIONS [SIDEBAR: EACH SEPARATE ACCOUNT INVESTMENT DIVISION INVESTS IN A CORRESPONDING PORTFOLIO OF A FUND.] The Separate Account has subdivisions, called "investment divisions." Each investment division invests its assets exclusively in shares of a corresponding Portfolio of a Fund. We can add new investment divisions to or eliminate investment divisions from the Separate Account. You can designate how you would like your net premiums and cash value to be allocated among the available investment divisions and our Fixed Account. In some cases, your employer retains the right to allocate the portion of any net premiums it pays (rather than any premiums you pay). If so, the Certificate will state this. Amounts you allocate to each investment division receive the investment experience of the investment division, and you bear this investment risk. 11 SUBSTITUTION OF INVESTMENTS If investment in the Portfolios or a particular Portfolio is no longer possible, or 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. THE FUNDS [SIDEBAR: YOU SHOULD CAREFULLY REVIEW THE INVESTMENT OBJECTIVES, STRATEGIES, AND RISKS OF EACH PORTFOLIO WHICH ARE DESCRIBED IN THE PROSPECTUS FOR EACH FUND THAT IS ATTACHED AT THE END OF THIS PROSPECTUS.] Each of the Funds is a "series" type of mutual fund, which is registered as an open-end management investment company under the 1940 Act. Each Fund is divided into Portfolios, each of which represent a different class of stock in which a corresponding investment division of the Separate Account invests. Not all of the Portfolios of a Fund are available in connection with the Certificates. You should read each Fund prospectus, which is attached at the end of this Prospectus. It contains information about each Fund and its Portfolios, including the investment objectives, strategies, risks and investment advisers that are associated with each Portfolio. It also contains information on our different separate accounts and those of our affiliates that invest in each Fund and the risks related thereto. CERTAIN PAYMENTS WE RECEIVE WITH REGARD TO THE PORTFOLIOS An investment adviser (other than our affiliate MetLife Advisers, LLC), or a sub-adviser of a Portfolio or its affiliates may make payments to us and/or certain of our affiliates. These payments may be used for a variety of purposes, including payment of expenses for certain administrative, marketing and support services with respect to the Policies, and, in the Company's role as an intermediary, with respect to the Portfolios. The Company and its affiliates may profit from these payments. These payments may be derived, in whole or in part, from the advisory fee deducted from Portfolio assets. Policy Owners, through their direct investment in the Portfolios, bear the costs of these advisory fees. (See the Portfolios' prospectuses for more information.) The amount of the payments we receive 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 0.50%. We, and certain of our affiliated insurance companies, have an ownership interest in our affiliated investment adviser, MetLife Advisers, LLC which is formed as a limited liability company. Our ownership interest in MetLife Advisers, LLC entitles us to profit distributions if the adviser makes a profit with respect to the advisory fees it receives from a Portfolio. We will benefit accordingly from assets allocated to the Portfolios to the extent they result in profits to the advisers. (See "Fee Tables--Annual Portfolio Operating Expenses" for information on the management fees paid by the Portfolios 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.) 12 Additionally, an investment adviser or sub-adviser of a Portfolio or its affiliates may provide us with wholesaling services that assist in the distribution of the Policies and may pay us and/or certain affiliates amounts to participate in sales meetings. These amounts may be significant and may provide the adviser or sub-adviser (or their affiliate) with increased access to persons involved in the distribution of the Policies. SELECTION OF PORTFOLIOS We select the Portfolios offered through the Policy based on a number of criteria, including asset class coverage, the strength of the adviser's or sub-adviser'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 sub-adviser is one of our affiliates or whether the Portfolio, its adviser, its sub-adviser(s), or an affiliate will make payments to us or our affiliates. In this regard, the profit distributions we receive from our affiliated investment advisers are a component of the total revenue that we consider in configuring the features and investment choices available in the variable insurance products that we and our affiliated insurance companies issue. Since we and our affiliated insurance companies may benefit more from the allocation of assets to portfolios advised by our affiliates than those that are not, we may be more inclined to offer portfolios advised by our affiliates in the variable insurance products we issue. We review the Portfolios periodically and may remove a Portfolio or limit its availability to new premium payments and/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 policy owners. In some cases, we have included Portfolios based on recommendations made by selling firms. These selling firms may receive payments from the Portfolios they recommend and may benefit accordingly from the allocation of Cash Value to such Portfolio. We do not provide investment advice and do not recommend or endorse any particular Portfolio. You bear the risk of any decline in the Cash Value of your Equity Options resulting from the performance of the Portfolios you have chosen. MANAGEMENT OF PORTFOLIOS Each Fund has an investment adviser who is responsible for overall management of the Fund. These investment advisers have contracted with sub-advisers to make the day-to-day investment decisions for some of the Portfolios. The adviser, any sub-adviser and the investment objective of each Portfolio are as follows:
------------------------------------------------------------------------------------- INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE ADVISER/SUBADVISER ------------------------------------------------------------------------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- INITIAL CLASS ------------------------------------------------------------------------------------- Freedom 2010 Portfolio Seeks high total return with a Strategic Advisers(R), Inc. secondary objective of principal preservation as the fund approaches its target date and beyond. -------------------------------------------------------------------------------------
13
---------------------------------------------------------------------------------------------- INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE ADVISER/SUBADVISER ---------------------------------------------------------------------------------------------- FIDELITY(R) VARIABLE INSURANCE PRODUCTS -- INITIAL CLASS ---------------------------------------------------------------------------------------------- Freedom 2020 Portfolio Seeks high total return with a Strategic Advisers(R), Inc. secondary objective of principal preservation as the fund approaches its target date and beyond. ---------------------------------------------------------------------------------------------- Freedom 2030 Portfolio Seeks high total return with a Strategic Advisers(R), Inc. secondary objective of principal preservation as the fund approaches its target date and beyond. ---------------------------------------------------------------------------------------------- MET INVESTORS SERIES TRUST -- CLASS A/1/ ---------------------------------------------------------------------------------------------- BlackRock Large Cap Core Seeks long-term capital MetLife Advisers, LLC Portfolio growth. Subadviser: BlackRock Advisors, LLC ---------------------------------------------------------------------------------------------- Lord Abbett Bond Seeks high current income and MetLife Advisers, LLC Debenture Portfolio the opportunity for capital Subadviser: Lord, Abbett & appreciation to produce a high Co. LLC total return. ---------------------------------------------------------------------------------------------- METROPOLITAN SERIES FUND, INC. -- CLASS A ---------------------------------------------------------------------------------------------- Artio International Stock Seeks long-term growth of MetLife Advisers, LLC Portfolio/2/ capital. Subadviser: Artio Global Management, LLC ---------------------------------------------------------------------------------------------- Barclays Capital Aggregate Seeks to equal the performance MetLife Advisers, LLC Bond Index Portfolio/3/ of the Barclays Capital U.S. Subadviser: MetLife Aggregate Bond Index. Investment Advisors Company ---------------------------------------------------------------------------------------------- BlackRock Bond Income Seeks a competitive total MetLife Advisers, LLC Portfolio return primarily from Subadviser: BlackRock investing in fixed-income Advisors, LLC securities. ---------------------------------------------------------------------------------------------- BlackRock Diversified Seeks high total return while MetLife Advisers, LLC Portfolio attempting to limit investment Subadviser: BlackRock risk and preserve capital. Advisors, LLC ---------------------------------------------------------------------------------------------- FI Mid Cap Opportunities Seeks long-term growth of MetLife Advisers, LLC Portfolio capital. Subadviser: Pyramis Global Advisors, LLC ---------------------------------------------------------------------------------------------- MetLife Stock Index Seeks to equal the MetLife Advisers, LLC Portfolio performance of the Standard & Subadviser: MetLife Poor's 500(R) Composite Stock Investment Advisors Price Index. Company, LLC ---------------------------------------------------------------------------------------------- MFS(R) Value Portfolio Seeks capital appreciation. MetLife Advisers, LLC Subadviser: Massachusetts Financial Services Company ---------------------------------------------------------------------------------------------- Morgan Stanley EAFE(R) Seeks to equal the MetLife Advisers, LLC Index Portfolio performance of the MSCI Subadviser: MetLife EAFE(R) Index. Investment Advisors Company, LLC ---------------------------------------------------------------------------------------------- Oppenheimer Global Equity Seeks capital appreciation. MetLife Advisers, LLC Portfolio Subadviser: OppenheimerFunds, Inc. ---------------------------------------------------------------------------------------------- Russell 2000(R) Index Portfolio Seeks to equal the return of MetLife Advisers, LLC the Russell 2000(R) Index. Subadviser: MetLife Investment Advisors Company, LLC ---------------------------------------------------------------------------------------------- T. Rowe Price Small Cap Seeks long-term capital MetLife Advisers, LLC Growth Portfolio growth. Subadviser: T. Rowe Price Associates, Inc. ----------------------------------------------------------------------------------------------
-------- 1. Prior to May 1, 2009, Met Investors Advisory, LLC was the investment adviser of Met Investors Series Trust (the "Trust"). On May 1, 2009, Met Investors Advisory, LLC merged with and into MetLife Advisers, LLC, and MetLife Advisers, LLC has now become the investment adviser of the Trust. 2. Prior to May 1, 2009, Julius Baer Investment Management LLC was the sub-adviser to this Portfolio. 3. Prior to May 1, 2009, the name of this Portfolio was the Lehman Brothers(R) Aggregate Bond Index Portfolio. 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. 14 THE PORTFOLIO SHARE CLASSES THAT WE OFFER The Funds offer various classes of shares, each of which has a different level of expenses. The Fund prospectuses may provide information for share classes or Portfolios that are not available through the Certificate. When you consult the Fund prospectus for a Portfolio, you should be careful to refer only to the information regarding the Portfolio and class of shares that is available through the Certificate: . For the Metropolitan Series Fund, Inc. and the Met Investors Series Trust, we offer Class A shares only. PURCHASE AND REDEMPTION OF PORTFOLIO SHARES BY OUR SEPARATE ACCOUNT As of the end of each Valuation Period (see "Valuation Period" description below in "Other Certificate Provisions--When Your Requests Become Effective"), we purchase and redeem Fund shares for the Separate Account at their net asset value without any sales or redemption charges. These purchases and redemptions reflect the amount of any of the following transactions that take effect at the end of the Valuation Period: . The allocation of net premiums to the Separate Account. . Dividends and distributions on Fund shares that are reinvested as of the dates paid (which reduces the value of each share of the Fund and increases the number of Fund shares outstanding, but has no effect on the cash value in the Separate Account). . Certificate loans and loan repayments allocated to the Separate Account. . Transfers to and among investment divisions. . Withdrawals and surrenders taken from the Separate Account. VOTING RIGHTS THAT YOU WILL HAVE [SIDEBAR: YOU CAN GIVE US VOTING INSTRUCTIONS ON SHARES OF EACH PORTFOLIO OF A FUND THAT ARE ATTRIBUTED TO YOUR CERTIFICATE.] The Funds have shareholder meetings from time to time to, for example, elect directors and approve some changes in investment management arrangements. We will vote the shares of each Portfolio that are attributed to your Certificate based on your instructions. Should we determine that the 1940 Act no longer requires us to do this, we may decide to vote Fund shares in our own right, without input from you or any other owners of variable life insurance policies or variable annuity contracts that participate in a Fund. ISSUING A GROUP POLICY AND A CERTIFICATE [SIDEBAR: WE WILL ISSUE A CERTIFICATE TO YOU AS OWNER. UNLESS YOUR EMPLOYER HAS RESERVED OTHERWISE, YOU WILL HAVE ALL THE RIGHTS UNDER THE CERTIFICATE, INCLUDING THE ABILITY TO NAME A NEW OWNER OR CONTINGENT OWNER.] We may issue a Group Policy to an employer or association ("employer") or to a trust through which an employer participates. Generally, the minimum number of people in a group that is required before we will issue a Group Policy directly to an employer is 200 lives. However, we reserve the right to issue a Group Policy or provide coverage to an employer that does not meet this minimum. Employees of employers and members of associations ("employees") may own Certificates issued under their employer's Group Policy. If you want to own a Certificate, then you must complete an enrollment form, which must be received by the Administrative Office. We reserve the right to reject an enrollment form for any reason permitted by law, and our acceptance of an enrollment form is subject to our underwriting rules. 15 Generally, we will issue a Certificate only to an eligible employee, or a spouse of an eligible employee when permitted by the employer. The person upon whose life the Certificate is issued is called the covered person. The owner is generally the employee unless the enrollment form designates someone else as owner. For the purpose of computing the covered person's age under the Certificate, we start with the covered person's age on a day selected by your employer. Age can be measured from December 31st in a given year, or from any other date agreed to by your employer and us. The Date of Certificate is set forth in the Certificate and is the effective date for life insurance protection under the Certificate. We use the Date of Certificate to calculate the Certificate years (and Certificate months and monthly anniversaries). PAYMENT AND ALLOCATION OF PREMIUMS [SIDEBAR: YOU CAN MAKE PLANNED PERIODIC PREMIUM PAYMENTS AND UNSCHEDULED PREMIUM PAYMENTS.] The payment of a given premium will not necessarily guarantee that your Certificate will remain in force. Rather, this depends on the Certificate's cash surrender value. PAYING PREMIUMS You can make premium payments, subject to certain limitations discussed below, through: . PAYROLL DEDUCTION: Where provided by your employer, you may pay premiums through payroll deduction. Your employer may require that you pay a minimum monthly amount in order to use payroll deduction. Your employer may send payroll deductions to us as much as 30 days after the deduction is made. . PLANNED PERIODIC PAYMENTS: If there is no payroll deduction available, you may elect to pay premiums monthly, quarterly or annually. . UNSCHEDULED PREMIUM PAYMENT OPTION: You also can make other premium payments at any time. We do not accept premiums made in cash or by money order. If you send your premium payments or transaction requests to an address other than the one we have designated for receipt of such premium payments or requests, we may return the premium payment to you, or there may be a delay in applying the premium payment or transaction to your Certificate. MAXIMUM AND MINIMUM PREMIUM PAYMENTS . The first premium may not be less than the planned premium. . Unscheduled premium payments must be at least $100 each. We may change this minimum amount on 90 days notice to you. . You may not pay premiums that exceed tax law premium limitations for life insurance policies. We will return any amounts that exceed these limits except that we will keep any amounts that are required to keep the Certificate from terminating. We will let you make premium payments that would turn the Certificate into a modified endowment contract, but we will promptly tell you of this status, and if possible, we will tell you how to reverse the status. ("See Tax Matters--Modified Endowment Contracts.") 16 ALLOCATING NET PREMIUMS [SIDEBAR: NET PREMIUMS ARE YOUR PREMIUMS MINUS THE CHARGES DEDUCTED FROM YOUR PREMIUMS.] Generally, you indicate on your enrollment form the initial allocation of net premiums (your premiums minus the charges deducted from your premiums) among the Fixed Account and the investment divisions of the Separate Account. In some cases, your employer has the right to allocate the portion of any net premiums it pays (but not any premiums that you pay) until the covered person retires (if the covered person is employed by your employer) or the Certificate becomes portable. (See "Portable Certificate" under "Other Certificate Provisions--Effect of Termination of Employer Participation in the Group Policy.") The Certificate includes a description of your right to allocate net premiums. The percentage of your net premium allocation into each of these investment options must be a minimum of 10% and in whole numbers. You can change your allocations at any time by giving us written notification at our Administrative Office or in any other manner that we permit. INSURANCE PROCEEDS If the Certificate is in force, we will pay your beneficiary the insurance proceeds as of the end of the Valuation Period that includes the covered person's date of death. We will pay this amount after we receive documents that we request as due proof of the covered person's death. The beneficiary can receive the death benefit in a single sum or under an income plan described below. You may make this choice during the covered person's lifetime. 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. Unless otherwise requested, the Policy's death proceeds may be paid to your beneficiary through an account called the Total Control Account. The Total Control Account is an interest-bearing account through which the beneficiary has complete access to the proceeds, with unlimited check writing privileges. We credit interest to the account at a rate that will not be less than a minimum guaranteed rate. You may also elect to have any Policy surrender proceeds paid into a Total Control Account established for you. Assets backing the Total Control Accounts are maintained in our general account and are subject to the claims of our creditors. We will bear the investment experience of such assets; however, regardless of the investment experience of such assets, the interest credited to the Total Control Account will never fall below the applicable guaranteed minimum rate. Because we bear the investment experience of the assets backing the Total Control Accounts, we may receive a profit from these assets. The Total Control Account is not insured by the FDIC or any other governmental agency. The insurance proceeds equal: . The death benefit provided on the date of death or the alternate death benefit; plus . Any additional insurance proceeds provided by rider; minus . Any unpaid Certificate loans and accrued interest thereon, and any due and unpaid charges accruing during a grace period. 17 The amount of the death benefit that exceeds the Certificate's Cash Value is paid from our general account. Death benefit amounts paid from our general account are subject to the claims of our creditors. DEATH BENEFIT The death benefit varies and equals the specified face amount of insurance of the Certificate plus the cash value on the date of death. ALTERNATE DEATH BENEFIT [SIDEBAR: THE CERTIFICATE PROVIDES A DEATH BENEFIT WHICH INCLUDES THE CASH VALUE OF THE CERTIFICATE.] In order to ensure that the Certificate qualifies as life insurance under the federal income tax laws, the beneficiary will receive an alternate death benefit if it is greater than the amount that the beneficiary would have received under the death benefit described above. The alternate death benefit is calculated by multiplying the Certificate's cash value by a prescribed percentage. The prescribed percentage is determined by the covered person's age at the time of the calculation and declines as the covered person grows older. The alternate death benefit is as follows:
AGE OF COVERED PERSON AT DEATH % OF CASH VALUE* ------------------------------------------------- 40 and less 250% 45 215% 50 185% 55 150% 60 130% 65 120% 70 115% 75 to 90 105% 95 100%
-------- * For the ages not listed, the percentage decreases by a ratable portion for each full year. During any period when your cash value is high enough that the alternate death benefit applies, your charges for insurance costs will be higher, since the effective amount of your coverage will be greater. In no event will the death benefit be less than the minimum insurance amount required under current Federal income tax rules applicable to the definition of life insurance as in effect on the date your Certificate is issued. SPECIFIED FACE AMOUNT [SIDEBAR: YOU CAN GENERALLY INCREASE OR DECREASE THE CERTIFICATE'S SPECIFIED FACE AMOUNT.] The specified face amount is the basic amount of life insurance specified in the Certificate. The Minimum Specified Face Amount is the smallest amount of specified face amount for which a Certificate may be issued, and is set forth in the Certificate. This amount will never be less than $10,000. Generally, you may change your specified face amount subject to certain limitations. Any change you request will be effective on the monthly anniversary on or next following our approval of your request. You are permitted to decrease the specified face amount to as low as the Minimum Specified Face Amount set forth in the Certificate. You may request an increase on dates determined by your employer and set forth in the Certificate. If you are a qualifying employee, we will make automatic increases in the specified face amount when your salary increases on a date or dates determined by your employer. However, you can notify us in writing at any time that you do not desire such automatic increases in the future. Any requirements as to the minimum amount of an increase are set 18 forth in the Certificate. Any increase is subject to our underwriting rules which may include a requirement for evidence satisfactory to us of the covered person's insurability. Before you change your specified face amount you should consider the following: . The insurance portion of your death benefit will change. This will affect the insurance charges, cash value and death benefit levels; . Reducing your specified face amount may result in our returning an amount to you which, if it occurs during the first 15 Certificate years, could then be taxed on an income first basis, even if the Certificate is not a modified endowment contract; . The amount of additional premiums that the tax laws permit you to pay into the Certificate may increase or decrease. The additional amount you can pay without causing the Certificate to be a modified endowment contract for tax purposes may also increase or decrease (see "Tax Matters--Modified Endowment Contracts"); and . The Certificate could become a modified endowment contract in certain circumstances. INCOME PLANS [SIDEBAR: GENERALLY YOU CAN RECEIVE THE CERTIFICATE'S INSURANCE PROCEEDS UNDER AN INCOME PLAN INSTEAD OF IN A LUMP SUM.] The insurance proceeds can generally be paid under a variety of income plans. We currently make the following income plans available: . Interest Income . Installment Income for a Stated Period . Installment Income of a Stated Amount . Single Life Income-Guaranteed Payment Period . Joint and Survivor Life Income . Single Life Income-Guaranteed Return Before you choose an income plan you should consider: . The tax consequences associated with the Certificate proceeds, which can vary considerably, depending on whether a plan is chosen. You or your beneficiary should consult with a qualified tax advisor about tax consequences; and . That the rates of return we credit under these plans are not based on the investment performance of any of the Portfolios. CASH VALUE, TRANSFERS AND WITHDRAWALS CASH VALUE [SIDEBAR: THE CERTIFICATE IS DESIGNED TO ACCUMULATE CASH VALUE.] The Certificate's CASH VALUE equals: . The Fixed Account cash value, plus . The Loan Account cash value, plus . The Separate Account cash value. The Certificate's CASH SURRENDER VALUE equals your cash value minus: . Any outstanding Certificate loans (plus any accrued and unpaid loan interest); . Any accrued and unpaid monthly deduction; and . Any surrender transaction fee. Unless the Group Policy is still in its first year, we will, on the Investment Start Date for the Certificate, allocate your cash value among the investment divisions as you requested your net premiums to be allocated in your enrollment form or a subsequent reallocation request. See "Investment Start Date" description below in "Other Certificate Provisions--When Your 19 Requests Become Effective." If the Group Policy is still in its first year, we will make this allocation 20 days after the Investment Start Date. Thereafter, at the end of each Valuation Period the cash value in an investment division will equal: . The cash value in the investment division at the beginning of the Valuation Period; plus . All net premiums, loan repayments and cash value transfers into the investment division during the Valuation Period; minus . All partial cash withdrawals, loans and cash value transfers out of the investment division during the Valuation Period; minus . The portion of any charges and deductions allocated to the cash value in the investment division during the Valuation Period; plus . The net investment return for the Valuation Period on the amount of cash value in the investment division at the beginning of the Valuation Period. The net investment return currently equals the rate of increase or decrease in the net asset value per share of the underlying Fund portfolio over the Valuation Period, adjusted upward to take appropriate account of any dividends and other distributions paid by the portfolio during the period. CASH VALUE TRANSFERS The minimum amount you may transfer is $200 or, if less, the total amount in an investment option. You may make transfers at any time after the Investment Start Date. In some cases, your employer retains the right to transfer the portion of any net premiums it pays (but not any premiums you pay). The Certificate will set forth any such employer rights. In some cases, the maximum amount that you may transfer or withdraw from the Fixed Account in any Certificate year is the greater of . $200 and . 25% of the largest amount in the Fixed Account over the last four Certificate years (or since the Date of Certificate if the Certificate has been in effect for less than four years). Any such limit does not apply to . a full surrender . any loans taken . any transfers under a systematic investment strategy The Certificate includes a description of your cash value transfer rights. We do not charge for transfers. Currently, transfers are not taxable transactions. Frequent requests from Certificate 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 20 turn adversely affect Certificate Owners and other persons who may have an interest in the Certificates (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., Artio International Stock Portfolio, Morgan Stanley EAFE(R) Index Portfolio, Oppenheimer Global Equity Portfolio, Russell 2000(R) Index Portfolio, T. Rowe Price Small Cap Growth Portfolio, and Lord Abbett Bond Debenture Portfolio) and we monitor transfer activity in those Portfolios (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 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 Portfolios 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 Certificate Owners or other persons who have an interest in the Certificates, we require all future transfer requests, to or from a Monitored Portfolio or other identified Portfolios, under that Certificate to be submitted in writing with an original signature. Transfers made under an automated investment strategy described in this prospectus 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 market timing 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 Certificate Owners to avoid such detection. Our ability to restrict such transfer activity may also be limited by provisions of the Certificates. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Certificate Owners and other persons with interests in the Certificates. We do not accommodate market timing in any Portfolios and there are no arrangements in place to permit any Certificate Owner to engage in market timing; we apply our policies and procedures without exception, waiver, or special arrangement. 21 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 less restrictive than the policies and procedures we have adopted. Although we may not have the contractual authority or the operational capacity to apply the frequent trading policies and procedures of the Portfolios, we have entered into a written agreement, as required by SEC regulation, with each Portfolio or its principal underwriter that obligates us to provide to the Portfolio promptly upon request certain information about the trading activity of individual Certificate owners, and to execute instructions from the Portfolio to restrict or prohibit further purchases or transfers by specific Certificate owners who violate the frequent trading policies established by the Portfolio. In addition, Certificate Owners and other persons with interests in the Certificates should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. 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 Certificate Owners) will not be harmed by transfer activity relating to the other insurance companies and/or retirement plans that may invest in the Portfolios. If a Portfolio believes that an omnibus order reflects one or more transfer requests from contract owners engaged in disruptive trading activity, the Portfolio may reject the entire omnibus order. 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 Certificate Owner). You should read the Portfolio prospectuses for more details. SYSTEMATIC INVESTMENT STRATEGIES. For certain groups, you can choose one of four currently available strategies described below. Your employer can inform you whether these investment strategies are available. You can also change or cancel your choice at any time. EQUITY GENERATOR /SM/. Allows you to transfer an amount equal to the interest earned in the Fixed Account in any Certificate month equal to at least $20 to the MetLife Stock Index investment division. The transfer will be made at the beginning of the Certificate month following the Certificate month in which the interest was earned. EQUALIZER /SM/. Allows you to periodically equalize amounts in your Fixed Account and the MetLife Stock Index investment division. We currently make equalization each quarter. We will terminate this strategy if you make a 22 transfer out of either of the investment divisions or the Fixed Account. You may then reelect the Equalizer on your next Certificate anniversary. REBALANCER/SM/. Allows you to periodically redistribute amounts in the Fixed Account and investment divisions in the same proportion that the net premiums are then being allocated. We currently make the redistribution each quarter. ALLOCATOR/SM/. Allows you to systematically transfer money from the Fixed Account to any investment division(s). When you elect Allocator, you must have enough cash value in the Fixed Account to enable the election to be in effect for three months. The election can be to transfer each month: . A specific amount, until the cash value in the Fixed Account is exhausted; . A specific amount for a specific number of months; or . Amounts in equal installments until the total amount you have requested has been transferred. 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. SURRENDER AND WITHDRAWAL PRIVILEGES [SIDEBAR: YOU CAN SURRENDER THE CERTIFICATE FOR ITS CASH SURRENDER VALUE.] We may ask you to return the Certificate before we honor your request to surrender the Certificate. The proceeds will be paid in a single sum. If the covered person dies after you surrender the Certificate but before the end of the Certificate month in which you surrendered the Certificate, we will pay your beneficiary an amount equal to the difference between the Certificate's death benefit and its cash value, computed as of the surrender date. You can make partial withdrawals if: . the withdrawal is at least $200; and . in some cases, the amount you request to withdraw from the Fixed Account is not more than the greater of (a) $200, and (b) 25% of the largest amount in the Fixed Account over the last four Certificate years (or since the Date of Certificate if the Certificate has been in effect for less than four years). The Certificate includes a description of your rights to make partial withdrawals. If you make a request for a partial withdrawal that is not permitted, we will tell you and you may then ask for a smaller withdrawal or surrender the Certificate. We will deduct your withdrawal from the Fixed Account and each of the investment divisions of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. As regards payment of amounts attributable to a check, we can wait for a reasonable time (15 days or less) to let the check clear. Before surrendering the Certificate or requesting a partial withdrawal you should consider the following: . Transaction fees of up to $25 (but not greater than 2% of the amount withdrawn) may apply, if the Certificate so states. . Amounts received may be taxable as income and, if your Certificate is a modified endowment contract, subject to certain tax penalties. (See "Tax Matters--Modified Endowment Contracts.") 23 . If you also decrease your specified face amount at the time of the withdrawal, the Certificate could become a modified endowment contract. . For partial withdrawals, your death benefit will decrease, generally by the amount of the withdrawal. In some cases you may be better off taking a Certificate loan, rather than a partial withdrawal. BENEFIT AT FINAL DATE The Final Date is the Certificate anniversary on which the covered person reaches age 95. Subject to certain conditions, we will allow you to extend that date where permitted by state law. If the covered person is living on the Final Date, we will pay the cash surrender value of the Certificate to the Certificate owner (generally the employee). The Certificate owner will receive the cash surrender value in a single sum. PAID-UP CERTIFICATE PROVISION Under this provision, you can choose to terminate the Certificate's usual death benefit (and any riders in effect) and use all or part of the cash surrender value as a single premium for a "paid-up" benefit under the Certificate. ("Paid-up" means no further premiums are required.) Thereafter, you may no longer allocate cash value to the Separate Account or the Fixed Account. You will receive in cash any remaining cash surrender value that is not used to elect a paid-up benefit. The paid-up benefit must not be: . more than can be purchased using the Certificate's cash surrender value; . more than the death benefit under the Certificate at the time you choose to use this provision; or . less than $10,000. LOAN PRIVILEGES [SIDEBAR: YOU CAN BORROW FROM US AND USE THE CERTIFICATE AS SECURITY FOR THE LOAN.] The amount of each loan must be: . At least $200; and . No more than 75% of the cash surrender value (unless state law requires a different percentage to be applied, as set forth in your Certificate) when added to all other outstanding Certificate loans. For certain Group Policies, we may charge a transaction fee of up to $25 for each loan if the Certificate so states. As of your loan request's Date of Receipt, we will: . Remove an amount equal to the loan from your cash value in the Fixed Account and each investment division of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. . Transfer such cash value to the Loan Account, where it will be credited with interest at a rate equal to the loan rate charged less a percentage charge, based on expenses associated with Certificate loans, determined by us. This percentage charge will not exceed 2%, and the minimum rate we will credit to the Loan Account will be 3% per year (for Group Policies issued prior to March 1, 1999, the minimum rate is 4%). At least once a year, we will transfer any interest earned in 24 your Loan Account to the Fixed Account and the investment divisions, according to the way that we then allocate your net premiums. . Charge you interest, which will accrue daily at a rate of up to 8% per year (which is the maximum rate we will ever charge). We will determine the current interest rate applicable to you at the time you take a loan. Your interest payments are generally due at the beginning of each Certificate year. However, we reserve the right to make interest payments due in a different manner. If you do not pay the amount within 31 days after it is due, we will treat it as a new Certificate loan. Repaying your loans (plus accrued interest) is done by sending in payments at any time before the Final Date while the covered person is living. You should designate whether a payment is intended as a loan repayment or a premium payment, since we will treat any payment for which no designation is made as a premium payment. We will allocate your repayment to the Fixed Account and the investment divisions, in the same proportion that net premiums are then allocated. Before taking a Certificate loan you should consider the following: . Interest payments on loans are generally not deductible for tax purposes. . Under certain situations, Certificate loans could be considered taxable distributions. . Amounts held in your Loan Account do not participate in the investment experience of the investment divisions or receive the interest rate credited to the Fixed Account either of which may be higher than the interest rate credited on the amount you borrow. . If you surrender the Certificate or if we terminate the Certificate, or at the Final Date, any outstanding loan amounts (plus accrued interest) may be taxed as a distribution. (See "Federal Tax Matters--Loans" below.) . A Certificate loan increases the chances of our terminating the Certificate due to insufficient cash surrender value. We will terminate your Certificate with no value if: (a) on a monthly anniversary your loans (plus accrued interest) exceed your cash value minus the monthly deduction; and (b) we tell you of the insufficiency and you do not make a sufficient payment within the greater of (i) 61 days of the monthly anniversary, or (ii) 30 days after the date notice of the start of the grace period is mailed to you. . The Certificate's death proceeds will be reduced by any unpaid loan (plus any accrued and unpaid loan interest). OPTIONAL BENEFITS ADDED BY RIDER You may be eligible for certain benefits provided by rider, subject to certain underwriting requirements and the payment of additional premiums. We will deduct any charges for the rider(s) as part of the monthly deduction. Each rider contains important information, including limits and conditions that apply to the benefits. Generally, we currently make the following benefits available by rider: .Disability Waiver of Monthly .Accidental Death or Deduction Benefit/1,2/ Dismemberment Benefit/1/ ------------------------------------------------------------------- .Accelerated Benefits Option/1,3/ .Dependent Life Benefits/1/ ------------------------------------------------------------------- .Accidental Death Benefit/1/
-------- /1/ Provided to you only if elected by your employer. /2/ An increase in specified face amount may not be covered by this rider. If not, the portion of the monthly deduction associated with the increase will continue to be deducted from the cash value, which if insufficient, could result in the Certificate's termination. For this reason, it may be 25 advantageous for the owner, at the time of total disability, to reduce the specified face amount to that covered by this rider. /3/ Payment under this rider may affect eligibility for benefits under state or federal law. Each rider contains important information, including limits and conditions that apply to the benefits. If you decide to purchase any of the riders, you should carefully review their provisions to be sure the benefit is something that you want. You should also consider: . That the addition of certain riders can restrict your ability to exercise certain rights under the Certificate. . That the amount of benefits provided under the rider is not based on investment performance of a separate account; but, if the Certificate terminates because of poor investment performance or any other reason, the rider generally will also terminate. . The tax consequences. You should consult with your tax advisor before purchasing one of the riders. CHARGES AND DEDUCTIONS [SIDEBAR: CAREFULLY REVIEW THE "FEE TABLES" IN THIS PROSPECTUS WHICH SET FORTH THE CHARGES THAT YOU PAY UNDER THE CERTIFICATE.] IMPORTANT INFORMATION APPLICABLE TO ALL CERTIFICATE CHARGES AND DEDUCTIONS The charges discussed in the paragraphs that follow are all included in the Fee Tables on pages 5 to 10 of this Prospectus. You should refer to those Fee Tables for information about the rates of and amounts of such charges, as well as other information that is not covered below. The Certificate charges compensate us for the services and benefits we provide, the costs and expenses we incur, and the risks we assume. Services and benefits we provide: . the death benefit, cash, and loan benefits under the Certificate . investment options, including premium allocations . administration of elective options . the distribution of reports to certificate owners Costs and expenses we incur: . costs associated with processing and underwriting applications, and with issuing and administering the Certificate (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 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 Certificates exceed the charges we deduct Our revenue from any particular charge may be more or less than any costs or expenses that charge is intended primarily to cover. We may use our revenues 26 from one charge to pay other costs and expenses in connection with the Certificates including distribution expenses. We may also profit from all the charges combined, including the cost of insurance charge and the Mortality and Expense Risk charge and use such profits for any corporate purpose. The following sets forth additional information about some (but not all) of the Certificate charges. CHARGES DEDUCTED FROM PREMIUMS CHARGE FOR AVERAGE EXPECTED STATE TAXES ATTRIBUTABLE TO PREMIUMS: We make this charge to reimburse us for the state premium taxes that we must pay on premiums we receive. Although premium taxes vary from state to state, we will charge one rate for each employer group. We estimate the initial charge for each employer group based on anticipated taxes to be incurred on behalf of each group during its first year of coverage. Thereafter, we will base this charge on anticipated taxes taking into account actual state and local premium taxes we incur on behalf of each employer group in the prior year and known factors affecting the coming year's taxes. This charge may vary based on changes in the law or changes in the residence of the Certificate owners. We may deduct this charge, as well as the charge for expected federal taxes attributable to premiums, either as a percent of premium or as part of the monthly deduction. In the latter case, the amount we deduct would depend on the amount of premiums paid by the group as a whole rather than the amount paid by you. Currently, we are charging covered employer groups rates up to 2.55%, which reflect the average state premium taxes currently being charged for the group. There is no specific maximum rate we may charge. CHARGE FOR EXPECTED FEDERAL TAXES ATTRIBUTABLE TO PREMIUMS. Federal income tax law requires us to pay certain amounts of taxes that are related to the amount of premiums we receive. We deduct 0.35% of each premium payment to offset the cost to us of those additional taxes, which may be more or less than the amount we pay in respect of your premiums. CHARGES INCLUDED IN THE MONTHLY DEDUCTION The Certificate describes the charges that are applicable to you as part of the monthly deduction. The monthly deduction accrues on each monthly anniversary starting with the Date of Certificate. However, we may make the actual deduction up to 45 days after each such monthly anniversary. We allocate the monthly deduction among the Fixed Account and each of the investment divisions of the Separate Account in the same proportion that the Certificate's cash value in each such option bears to the total cash value of the Certificate in the Fixed Account and the investment divisions. COST OF INSURANCE: This charge varies based on many factors. Each month, we determine the charge by multiplying your cost of insurance rate by the insurance amount. This is the amount we are at risk if the insured dies, and the Fee Table earlier in this Prospectus calls it our "Net Amount at Risk." The insurance amount (or Net Amount at Risk) is the death benefit at the beginning of the Certificate month, minus the cash value at the beginning of the Certificate month. The insurance amount will be affected by changes in the specified face amount of the Certificate. The insurance amount and 27 therefore the cost of insurance will be greater if the specified face amount is increased. If the alternate death benefit is in effect, then the insurance amount will increase and thus your cost of insurance will be higher. The cost of insurance rate is based on: . The age and rate class of the covered person . Group mortality characteristics . The particular characteristics that are agreed to by your employer and us, such as: 1. The rate class structure; 2. The degree of stability in the charges sought by your employer; and 3. Portability features. . The amount of any surplus or reserves to be transferred to us from any previous insurer or from another of our policies (see "Other Certificate Provisions--Retrospective Experience Rating and Dividends"). The actual monthly cost of insurance rates will be based on our expectations as to future experience. The rates, however, will never exceed the guaranteed cost of insurance rates set forth in the Certificate. These guaranteed rates may be up to 150% of the rates that could be charged based on the 1980 Commissioners Standard Ordinary Mortality Table, Males, age last birthday ("1980 CSO Table"). The maximum guaranteed rates may be higher than the 1980 CSO Table because we use simplified underwriting and non-medical issue procedures whereby we may not require the covered person to submit to a medical or paramedical examination, and may provide coverage to groups that present substandard risk characteristics according to our underwriting criteria. Our current rates are lower than 100% of the 1980 CSO Table in most cases. We review our rates periodically and may adjust them based on our expectations of future experience. We will apply the same rates to everyone in a group who has had their Certificate for the same amount of time and who is the same age and rate class. We adjust the rates from time to time based on several factors, including: . the number of Certificates in force for each group; . the number of Certificates in the group surrendered or becoming portable during the period; and . the actual experience of the group. As a general rule, the cost of insurance rate increases each year you own the Certificate, as the covered person's age increases. Our use of simplified underwriting and non-medical issue procedures may result in higher cost of insurance charges for some healthy individuals. Rate class relates to the level of mortality risk we assume with respect to a covered person. We and your employer will agree to the number of classes and characteristics of each class. The classes may vary by smoker and nonsmokers, active and retired status, Owners of portable Certificates and other Owners, and/or any other non-discriminatory classes we and your employer agree to. The covered person's rate class will affect your cost of insurance. ADMINISTRATION CHARGE: We make this monthly charge primarily to compensate us for expenses we incur in the administration of the Certificates, including our underwriting and start-up expenses. The Certificate will describe your administration charge. The charge will never exceed $5 per Certificate. We will determine differences in the administration charge rates applicable to different Certificates under the Group Policies based on expected differences in the administrative costs under the Certificates or in the amount 28 of revenues that we expect to derive from the charge. Such differences may result, for example, from: . features that are agreed to by your employer and us; . the extent to which certain administrative functions are to be performed by us or by your employer; and . the expected average Certificate death benefit. CHARGE AGAINST THE SEPARATE ACCOUNT We make this daily Mortality and Expense Risk charge against the assets in the Separate Account primarily to compensate us for: . mortality risks that covered persons may live for a shorter period than we expect; and . expense risks that our issuing and administrative expenses may be higher than we expect. The maximum rate we may charge is equivalent to an effective annual rate of .90% of the Cash Value in the Separate Account. We may determine differences in this charge for different employer groups based on differences in the levels of mortality and expense risks. These differences arise mainly from the fact that: . the factors discussed above on which the cost of insurance and administration charges are based are more uncertain in some cases than others; and . our ability to recover any unexpected costs from Certificate charges varies from case to case depending on the maximum rates for such charges we agree to with employers. We reserve the right, if permitted by law, to change the structure of this charge so that it is charged on a monthly basis as a percentage of cash value in the Separate Account or so that it is charged as a part of the monthly deduction. Our right to change the structure of this charge does not permit us to increase the maximum rate that is stated in the Policy. VARIATIONS IN CHARGES We will determine Certificate charge rates pursuant to our established actuarial procedures, and we will not discriminate unreasonably or unfairly against owners of Certificates under any Group Policy. PORTFOLIO COMPANY CHARGES Each of the Portfolios pays an investment management fee to its investment manager. Each Portfolio also incurs other direct expenses. See the fuller description contained in the Fee Table section of this Prospectus (also see the Fund Prospectus and Statement of Additional Information referred to therein for each Fund). You bear indirectly your proportionate share of the fees and expenses of the Portfolios of each Fund that correspond to the Separate Account investment divisions you are using. OTHER CHARGES ADDITIONAL TAXES. In general, we don't expect to incur federal, state or local taxes upon the earnings or realized capital gains attributable to the assets in 29 the Separate Account relating to the cash surrender value of the Policies. If we do incur such taxes, we reserve the right to charge cash value allocated to the Separate Account for these taxes. TRANSACTION FEE FOR SURRENDERS OR PARTIAL WITHDRAWALS. Your Certificate may provide that we may charge a transaction fee of up to $25 for each surrender or partial withdrawal. In no event, however, will the charge be greater than 2% of the amount withdrawn. LOAN INTEREST SPREAD: We charge interest on Certificate loans but credit you with interest on the amount of the Cash Value we hold as collateral for the loan. The loan interest spread is the excess of the interest rate we charge over the interest rate we credit. This charge is primarily to cover our expense in providing the loan. The spread is guaranteed to never exceed 2%. CERTIFICATE TERMINATION AND REINSTATEMENT TERMINATION: We will terminate the Certificate without any cash surrender value if: . The cash surrender value on any monthly anniversary is less than the monthly deduction; and . We do not receive a sufficient premium payment within the grace period to cover the monthly deduction. We will mail you notice if any grace period starts. The grace period is the greater of (a) 61 days measured from the monthly anniversary and (b) 30 days after the notice is mailed. REINSTATEMENT: The following applies unless the Group Policy has been terminated and you would not have been permitted to retain your Certificate on a portable or paid-up basis. Upon your request, we will reinstate the Certificate, subject to certain terms and conditions that the Certificate provides. We must receive your request within 3 years (or within a longer period if required by state law) after the end of the grace period and before the Final Date. You also must provide us with: . A written request for reinstatement. . Evidence of insurability that we find satisfactory. . An additional premium amount that the Certificate prescribes for this purpose. Your Certificate can also terminate in some cases if your employer ends its participation in the Group Policy. This is discussed in detail under "Other Certificate Provisions--Effect of Termination of Employer Participation in the Group Policy" below. FEDERAL TAX MATTERS [SIDEBAR: YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR TO FIND OUT HOW TAXES CAN AFFECT YOUR BENEFITS AND RIGHTS UNDER THE CERTIFICATE.] The following is a brief summary of some tax rules that may apply to the Certificate. Such discussion does not purport to be complete or to cover every situation. You must consult with and rely on the advice of your own tax or ERISA counsel especially where the Certificate is being purchased in connection with an employee benefit plan, such as a death benefit or deferred compensation plan, or is being purchased for estate, tax planning or similar purposes. You should also consult with your own tax advisor to find out how taxes can affect your benefits and rights under the Certificate. Such consultation is especially important before you make unscheduled premium payments, change your specified face amount, change coverage provided by riders, take a loan or withdrawal, or assign or surrender the Certificate. 30 Under current federal income tax law, the taxable portion of distributions from 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. IRS CIRCULAR 230 NOTICE: The tax information contained in this Prospectus is not intended to (and cannot) be used by anyone to avoid IRS penalties. It is intended to support the sale of the Policy. The Policyholder should seek tax advice based on its particular circumstances from an independent tax advisor. INSURANCE PROCEEDS . Insurance proceeds are generally excludable from your beneficiary's gross income to the extent provided in Section 101 of the Internal Revenue Code ("Code"). Insurance proceeds may be taxable in some circumstances, such as where there is a transfer-for-value of a Certificate or where a business is the Owner of the Certificate, if certain requirements are not satisfied. . The proceeds may be subject to federal estate tax: (i) if paid to the covered person's estate or (ii) if paid to a different beneficiary if the covered person possessed incidents of ownership at or within three years before death. . If you die before the covered person, the value of the Certificate (determined under IRS rules) is included in your estate and may be subject to federal estate tax. . Whether or not any federal estate tax is due is based on a number of factors including the estate size. . The insurance proceeds payable upon death of the insured will never be less than the minimum amount required for a Certificate to be treated as life insurance under section 7702 of the Internal Revenue Code, as in effect on the date the Certificate was issued. CASH VALUE (IF THE CERTIFICATE IS NOT A MODIFIED ENDOWMENT CONTRACT) . You are generally not taxed on your cash value until you withdraw it or surrender the Certificate or receive a distribution such as when your Certificate terminates or on the Final Date. In these cases, you are generally permitted to take withdrawals and receive other distributions up to the amount of premiums paid without any tax consequences. However, withdrawals and other distributions will be subject to income tax after you have received amounts equal to the total premiums you paid. Somewhat different rules may apply if there is a death benefit reduction in the first 15 Certificate years, when a distribution may be subject to tax on an income-out-first basis if there is a gain in the Certificate (which is generally when your cash value exceeds the cumulative premiums you paid). There may be an indirect tax upon the income in the Certificate or the proceeds of a Certificate under the Federal corporate alternative minimum tax, if you are subject to that tax. LOANS . Loan amounts you receive will generally not be subject to income tax, unless your Certificate is or becomes a modified endowment contract or terminates. . Interest on loans is generally not deductible. . If the Certificate terminates (upon surrender, cancellation, lapse, or the Final Date of replacement by your employer of your group coverage with other group coverage) while any Certificate loan is outstanding, the amount of the loan plus 31 accrued interest thereon will be deemed to be a "distribution" to you. Any such distribution will have the same tax consequences as any other Certificate distribution. Thus, there will generally be federal income tax payable on the amount by which withdrawals and loans exceed the premiums paid to date. In the case of an outstanding loan at the time of an exchange, the cancelled loan will generally be taxed to the extent of any policy gain. Please be advised that amounts borrowed and withdrawn reduce the Certificate's cash value and any remaining cash value of the Certificate may be insufficient to pay the income tax on your gains. MODIFIED ENDOWMENT CONTRACTS These contracts are life insurance contracts where the premiums paid during the first 7 years after the Certificate is issued, or after a material change in the Certificate, exceed tax law limits referred to as the "7-pay test." Material changes in the Certificate include changes in the level of benefits and certain other changes to the Certificate after the issue date. Reductions in benefits during a 7-pay period also may cause the Certificate to become a modified endowment contract. Generally, a life insurance policy that is received in exchange for a modified endowment contract will also be considered a modified endowment contract. The IRS has promulgated a procedure for the correction of inadvertent modified endowment contracts. Due to the flexibility of the Certificates as to premiums and benefits, the individual circumstances of each Certificate will determine whether it is classified as a MEC. If your Certificate is considered a modified endowment contract the following applies: . The death benefit will still generally be income tax free to your beneficiary, as discussed above. . Amounts withdrawn or distributed before the covered person's death, including (without limitation) loans, assignments and pledges, are treated as income first and subject to income tax (to the extent of any gain in the Certificate). All modified endowment contracts you purchase from us and our affiliates during the same calendar year are treated as a single contract for purposes of determining the amount of any such income. . An additional 10% income tax generally applies to the taxable portion of the amounts received before age 59 1/2, except generally if you are disabled or if the distribution is part of a series of substantially equal periodic payments made over life expectancy. . If a Certificate becomes a modified endowment contract, distributions that occur during the contract year will be taxed as distributions from a modified endowment contract. In addition, distributions from a Certificate within two years before it becomes a modified endowment contract will be taxed in this manner. This means that a distribution made from a Certificate that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract. DIVERSIFICATION In order for the Certificate to qualify as life insurance, we must comply with certain diversification standards with respect to the investments underlying the Certificate. We believe that we satisfy and will continue to satisfy these diversification standards. Inadvertent failure to meet these standards may be able to be corrected. Failure to meet these standards would result in 32 immediate taxation to Certificate owners of gains under their Certificates. In addition, if the Portfolio shares are sold directly to tax-qualified retirement plans that later lose their tax-qualified status or to non-qualified plans, the separate accounts investing in the Portfolio may fail the diversification requirements of Section 817(h) of the Internal Revenue Code, which could have adverse tax consequences on your Certificate, including losing the benefit of tax deferral. INVESTOR CONTROL In some circumstances, owners of variable contracts who retain excessive control over the investment of the separate account assets underlying their contracts 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 Certificates, we believe that the owner of a Certificate should not be treated as an owner of any assets in our Separate Account. We reserve the right to modify the Certificates to bring them into conformity with applicable standards should such modification be necessary to prevent owners of the Certificates from being treated as the owners of any 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 decendents 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 2007-2009 the maximum estate tax rate is 45%. The estate tax exemption is $2,000,000 for 2006-2008 and $3,500,000 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 Certificate 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 RESIDENTS OF PUERTO RICO In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service recently announced that income received by residents of Puerto Rico under life insurance contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States Federal income tax. 33 LIFE INSURANCE PURCHASES BY NONRESIDENT ALIENS Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from life insurance Certificates at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding taxation with respect to the purchase of a Certificate. CHANGES TO TAX RULES AND INTERPRETATIONS Changes in applicable tax rules and interpretations can adversely affect the tax treatment of your Certificate. These changes may take effect retroactively. We reserve the right to amend the Certificate in any way necessary to avoid any adverse tax treatment. Examples of changes that could create adverse tax consequences include: . Possible taxation of cash value transfers between investment funds. . Possible taxation as if you were the owner of your allocable portion of the Separate Account's assets. . Possible limits on the number of investment funds available or the frequency of transfers among them. . Possible changes in the tax treatment of Certificate benefits and rights. OTHER ISSUES RELATING TO GROUP VARIABLE UNIVERSAL LIFE While "employee pay all" group variable universal life should generally be treated as separate from any Internal Revenue Code Section 79 Group Term Life Insurance Plan also in effect, in some circumstances group variable universal life could be viewed as being part of such a plan, possibly giving rise to adverse tax consequences. Finally, employer involvement and other factors determine whether group variable universal life is subject to the Employee Retirement Income Security Act ("ERISA"). TAX CREDITS AND DEDUCTIONS The Company may be entitled to certain tax benefits related to the assets of the Separate Account. These tax benefits, which may include foreign tax credits and corporate dividend received deductions, are not passed back to the Separate Account or to Policy owners since the Company is the owner of the assets from which the tax benefits are derived. THE COMPANY'S INCOME TAXES Under current Federal income tax law we are not taxed on the Separate Account's operations. Thus, currently we do not deduct a charge from the Separate Account for company Federal income taxes. (We do deduct a charge for Federal taxes from premiums.) We reserve the right to charge the Separate Account for any future Federal income taxes we may incur. Under current laws we may incur state and local taxes (in addition to premium taxes). These taxes are not now significant and we are not currently charging for them. If they increase, we may deduct charges for such taxes. 34 RIGHTS WE RESERVE We reserve the right to make certain changes if we believe the changes are in the best interest of our Certificate owners or would help carry out the purposes of the Certificate. We will make these changes in the manner permitted by applicable law and only after obtaining any necessary owner and regulatory approval. We will notify you of any changes that result in a material change in the underlying investments in the investment divisions, and you will have a chance to transfer out of the affected division (without charge). Some of the changes we may make include: . Operating the Separate Account in any other form that is permitted by applicable law. . Changes to obtain or continue exemptions from the 1940 Act. . Transferring assets among investment divisions or to other separate accounts, or our general account or combining or removing investment divisions from the Separate Account. . Substituting Fund shares in an investment division for shares of another portfolio of a Fund or another fund or investment permitted by law. . Changing the way we assess charges without exceeding the aggregate amount of the Certificate's guaranteed maximum charges. . Making any necessary technical changes to the Certificate to conform it to the changes we have made. Some such changes might require us to obtain regulatory or Policy owner approval. Whether regulatory or Policy owner approval is required would depend on the nature of the change and, in many cases, the manner in which the change is implemented. You should not assume, therefore, that you necessarily will have an opportunity to approve or disapprove any such changes. Circumstances that could influence our determination to make any change might include changes in law or interpretations thereof; changes in financial or investment market conditions; changes in accepted methods of conducting operations in the relevant market; or a desire to achieve material operating economies or efficiencies. OTHER CERTIFICATE PROVISIONS [SIDEBAR: CAREFULLY REVIEW THE CERTIFICATE, WHICH CONTAINS A FULL DISCUSSION OF ALL ITS PROVISIONS.] FREE LOOK PERIOD You can return the Certificate or terminate an increase in the specified face amount during this period. The period ends on the later of: . 10 days after you receive the Certificate or, in the case of an increase, the revised Certificate (unless state law requires a longer specified period); and . 45 days after we receive the completed enrollment form or specified face amount increase request. If you return the Certificate, we will send you a complete refund of any premiums paid (or cash value plus any charges deducted if state law requires) within seven days. If you terminate an increase in the specified face amount, we will restore all Certificate values to what they would have been had there been no increase. We will also refund any premiums paid so that the Certificate will continue to qualify as life insurance under the federal income tax laws. SUICIDE Subject to applicable state law, if the covered person commits suicide within the first two Certificate years (or another period required by state law), your 35 beneficiary will receive all premiums paid (without interest), less any outstanding loans (plus accrued interest) and withdrawals taken. Similarly, we will pay the beneficiary only the cost of any increase in specified face amount if the covered person commits suicide within two years of such increase. RETROSPECTIVE EXPERIENCE RATING AND DIVIDENDS Depending on the provisions in the Group Policy and the claim experience under the Group Policy, the Group Policy may be eligible to receive premium refunds or dividends. We have set the cost of insurance rates in such a way that we will not generally pay a premium refund or a dividend. But, if either is due, it will be paid to the Group Policyholder who will distribute it to Certificate owners. Also, in some situations involving transfer of coverage to a Group Policy or to a successor insurer, certain amounts of surplus or reserves may also be transferred to us or the successor insurer rather than being declared as dividends or premium refunds. The Group Policy describes how we calculate whether any premium refund or dividend will be paid in more detail. EFFECT OF TERMINATION OF EMPLOYER PARTICIPATION IN THE GROUP POLICY Your employer can terminate its participation in the Group Policy. In addition, we may also terminate your employer's participation in the Group Policy if either: 1. during any twelve month period, the total specified face amount for all Certificate Owners under the Group Policy or the number of Certificates falls by certain amounts or below the minimum levels we establish (these levels are set forth in the Certificate), or 2. your employer makes available to its employees another life insurance product. Both your employer and MetLife must provide ninety days written notice to the other as well as to you before terminating participation in the Group Policy. Termination means that your employer will no longer send premiums to us through payroll deduction and that no new Certificates will be issued to employees in your employer's group. You will remain an Owner of your Certificate if: . you are an Owner of a Certificate that has become portable (as discussed below) not later than the Certificate monthly anniversary prior to termination of your employer's participation; or . you are an Owner who exercised the paid-up Certificate provision not later than the last Certificate monthly anniversary prior to notice being sent to you of the termination. For all other Owners, . If your employer replaces your group coverage with another life insurance product that is designed to have cash value, . we will terminate the Certificate and . we will transfer your cash surrender value to the other life insurance product (or pay your cash surrender value to you if you are not covered by the new product). Any outstanding loan may be taxable. . If the other life insurance product is not designed to have cash value, . we will terminate your certificate and 36 . we will pay your cash surrender value to you. In such case, the Federal income tax consequences to you would be the same as if you surrendered your Certificate. If your employer does not replace your group coverage with another life insurance product, then, depending on the terms of the Certificate, . you may have the option of choosing to become an Owner of a portable Certificate or a paid-up Certificate, and . you may have the option of purchasing insurance based on the "conversion" rights set forth in the Certificate and of receiving the cash surrender value of the Certificate. If you choose the conversion rights, the insurance provided will be substantially less (and in some cases nominal) than the insurance provided under the Certificate. Instead of any of the above options, you may choose to apply the Certificate's cash surrender value to the purchase of an annuity product from MetLife upon termination of the Certificate. PORTABLE CERTIFICATE: A Certificate becomes "portable" when an event specified in the Certificate occurs. These events may include: . termination of the payroll deduction plan with no successor carrier . other termination of the covered person's employment . the sale by your employer of the business unit with which the covered person is employed If you become the Owner of a portable Certificate, the current cost of insurance may change, but it will never be higher than the guaranteed cost of insurance. Also, we may no longer consider you a member of your employer's group for purposes of determining cost of insurance rates and charges. ASSIGNMENT AND CHANGE IN OWNERSHIP You can assign the Certificate if you notify us in writing. The assignment or release of the assignment is effective when it is recorded at the Administrative Office. We are not responsible for determining the validity of the assignment or its release. Also, there could be serious adverse tax consequences to you or your beneficiary, so you should consult with your tax advisor before making any change of ownership or other assignment. REPORTS Generally, you will promptly receive statements confirming your significant transactions such as: . Change in specified face amount; . Transfers among investment divisions (including those through Systematic Investment Strategies, which may be confirmed quarterly); . Partial withdrawals; . Loan amounts you request; and . Loan repayments and premium payments. If your premium payments are made through a payroll deduction plan, we will not send you any confirmation in addition to the one you receive from your bank or employer. 37 We will also send you an annual statement generally within 30 days after a Certificate year. This statement will summarize the year's transactions and include information on: . Deductions and charges; . Status of the death benefit; . Cash and cash surrender values; . Amounts in the investment divisions and Fixed Account; . Status of Certificate loans; . Automatic loans to pay interest; and . Information on your modified endowment contract status (if applicable) We will also send you a Fund's annual and semi-annual reports to shareholders. WHEN YOUR REQUESTS BECOME EFFECTIVE Generally, requests, premium payments and other instructions and notifications are effective on the Date of Receipt. In those cases, the effective time is at the end of the Valuation Period during which we receive them at our Administrative Office. (Some exceptions to this general rule are noted below and elsewhere in this Prospectus.) A Valuation Period is the period between two successive Valuation Dates. It begins at the close of regular trading on the New York Stock Exchange on a Valuation Date and ends at the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. The close of regular trading is 4:00 p.m., Eastern Time on most days. A Valuation Date is each day on which the New York Stock Exchange is open for trading, except on the day after Thanksgiving when our Administrative Office is closed. 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). If your employer's participation in the Group Policy is still in its first year, the effective time of premium allocation instructions and transfer requests you make in the Certificate enrollment form, or within 20 days of your Investment Start Date, is the end of the first Valuation Date after that 20 day period. During the 20 day period, all of your cash value is automatically allocated to our Fixed Account. Your Investment Start Date is the Date of Receipt of your first premium payment with respect to the Certificate, or, if later, the Date of Receipt of your enrollment form. If your employer's participation in the Group Policy is not still in its first year, the Investment Start Date is the effective time of the allocation instructions you made in the Certificate enrollment form. If your employer has determined to exchange your current insurance coverage for a MetLife Group Policy, there may be a delay between the effective date of the Certificate and the receipt of any cash value from the 38 prior certificate for the 1035 exchange. At the sole discretion of MetLife, the premium attributable to the 1035 exchange may be credited interest from the Certificate effective date. In no case will transfers among the investment options for the premium attributable to the 1035 exchange be applied prior to the date of receipt. The effective date of your Systematic Investment Strategies will be that set forth in the strategy chosen. PAYMENT AND DEFERMENT We can delay transfers, withdrawals, surrender and payment of Certificate loans from the Fixed Account for up to 6 months. Generally, we will pay or transfer amounts from the Separate Account within seven days after the Date of Receipt of all necessary documentation required for such payment or transfer. We can defer this if: . The New York Stock Exchange has an unscheduled closing. . There is an emergency so that we could not reasonably determine the investment experience of the Certificate. . The Securities and Exchange Commission determines that an emergency exists or by order permits us to do so for the protection of Certificate owners (provided that the delay is permitted under New York State insurance law and regulations). . With respect to the insurance proceeds, if entitlement to a payment is being questioned or is uncertain. We 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. We may withhold payment of surrender, partial withdrawals or loan proceeds if any portion of those proceeds would be derived from a Certificate Owner's check or from a preauthorized checking arrangement that has not yet cleared (i.e. that could still be dishonored by your banking institution). We may use telephone, fax, Internet or other means of communications to verify that payment from the Certificate owner's check or preauthorized checking arrangement has been or will be collected. We will not delay payment longer than necessary for us to verify that payment has been or will be collected. Certificate owners may avoid the possibility of delay in the disbursement of proceeds coming from a check that has not yet cleared by providing us with a certified check. THIRD PARTY REQUESTS Generally, we accept requests for transactions or information only from you. Therefore, we reserve the right not to process transactions requested on your behalf by your agent with a power of attorney or any other authorization. This includes processing transactions by an agent you designate, through a power of attorney or other authorization, who has the ability to control the amount and timing of transfers for a number of other Certificate owners, and who simultaneously makes the same request or series of requests on behalf of other Certificate owners. 39 EXCHANGE PRIVILEGE If you decide that you no longer want to take advantage of the investment divisions in the Separate Account, you may transfer all of your money into the Fixed Account. No transaction charge will be imposed on a transfer of your entire cash value (or the cash value attributable to a specified face amount increase) to the Fixed Account within the first 24 Certificate months (or within 24 Certificate months after a specified face amount increase you have requested, as applicable). In some states, in order to exercise your exchange privilege, you must transfer, without charge, the Certificate cash value (or the portion attributable to a specified face amount increase) to a flexible premium fixed benefit life insurance policy that we make available. SALES OF CERTIFICATES MetLife Investors Distribution Company ("MLIDC") is the principal underwriter and distributor of the Group Policies and Certificates. MLIDC's principal executive offices are located at 5 Park Plaza, Suite 1900, Irvine, CA 92614. MLIDC, which is our affiliate, is registered under the Securities Exchange Act of 1934 (the "34 Act") as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). An investor brochure that includes information describing FINRA's Public Disclosure Program is available by calling 1-800-289-9999, or by visiting FINRA's website at www.finra.org. DISTRIBUTING THE GROUP POLICIES AND CERTIFICATES MLIDC enters into selling agreements with affiliated and unaffiliated broker-dealers who sell the Group Policies and Certificates through their registered representatives who are also licensed life insurance sales representatives. Our affiliated broker-dealers are MetLife Securities, Inc. ("MSI"). New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. MSI and our other affiliated broker-dealers are registered with the SEC as broker-dealers under the 34 Act and are also members of FINRA. We reimburse MLIDC for expenses MLIDC incurs in distributing the Group Policies and Certificates, (e.g. commissions payable to the broker-dealers who sell the Group Policies and Certificates, including our affiliated broker-dealers). COMMISSIONS AND OTHER COMPENSATION MetLife sales representatives are sales representatives registered through MSI. We do not pay commissions to MetLife representatives for the sale of the Group Policies and Certificates, although they may earn certain incentive award credits. We may pay commissions to other registered broker-dealers (also referred to as selling firms) who have entered into selling agreements with us. Commissions or fees which are payable to a broker-dealer or third party administrator, including maximum commissions, are set forth in our schedules of group insurance commission rates. These commissions consist of: . Up to 15% of the cost of insurance, and may be based on the services provided by the broker-dealer or a third party administrator, and 40 . A per-Certificate payment, based on the total number of Certificates issued under a Group Policy. We may require all or part of the commission to be returned to us by the broker-dealer if you do not continue the Certificate for at least two years. COMPENSATION PAID TO SELLING FIRMS AND OTHER INTERMEDIARIES MetLife enters into arrangements concerning the sale, servicing and/or renewal of MetLife group insurance and certain other group-related products ("Products") with brokers, agents, consultants, third-party administrators, general agents, associations, and other parties that may participate in the sale, servicing and/or renewal of such Products (each an "Intermediary"). MetLife may pay your Intermediary compensation, which may include base compensation, supplemental compensation and/or a service fee. MetLife may pay compensation for the sale, servicing and/or renewal of Products, or remit compensation to an Intermediary on your behalf. Your Intermediary may also be owned by, controlled by or affiliated with another person or party, which may also be an Intermediary and who may also perform marketing and/or administration services in connection with your Products and be paid compensation by MetLife. Base compensation, which may vary from case to case and may change if you renew your Products with MetLife, may be payable to your Intermediary as a percentage of premium or a fixed dollar amount. In addition, supplemental compensation may be payable to your Intermediary. Under MetLife's current supplemental compensation plan, the amount payable as supplemental compensation may range from 0% to 2.25% of premium. The supplemental compensation percentage may be based on: (1) the number of Products sold or inforce through your Intermediary during a prior one-year period; (2) the amount of premium or fees with respect to Products sold or inforce through your Intermediary during a prior one-year period; and/or (3) a fixed percentage of the premium for Products as set by MetLife. The supplemental compensation percentage will be set by MetLife prior to the beginning of each calendar year and it may not be changed until the following calendar year. As such, the supplemental compensation percentage may vary from year to year, but will not exceed 2.25% under the current supplemental compensation plan. The cost of supplemental compensation is not directly charged to the price of our Products except as an allocation of overhead expense, which is applied to all eligible group insurance products, whether or not supplemental compensation is paid in relation to a particular sale or renewal. As a result, your rates will not differ by whether or not your Intermediary receives supplemental compensation. If your Intermediary collects the premium from you in relation to your Products, your Intermediary may earn a return on such amounts. Additionally, MetLife may have a variety of other relationships with your Intermediary or its affiliates that involve the payment of compensation and benefits that may or may not be related to your relationship with MetLife (e.g., consulting or reinsurance arrangements). More information about the eligibility criteria, limitations, payment calculations and other terms and conditions under MetLife's base compensation and supplemental compensation plans can be found on MetLife's Web site at www.whymetlife.com/brokercompensation. Questions regarding Intermediary compensation can be directed to ask4met@metlifeservice.com, 41 or if you would like to speak to someone about Intermediary compensation, please call (800) ASK 4MET. If you would like further information, ask your Intermediary or a MetLife representative for specific details concerning your Intermediary's compensation arrangement with MetLife. The commissions do not result in a charge against the Group Policies or Certificates in addition to the charges already described elsewhere in this Prospectus. The Statement of Additional Information contains additional information about the compensation paid for the sale of the Group Policies and Certificates. 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 believe any such action or proceeding will have a material adverse effect upon the Separate Account or upon the ability of MetLife Investors Distribution Company to perform its contract with the Separate Account or of MetLife to meet its obligations under the Group Policies or the Certificates. RESTRICTIONS ON FINANCIAL TRANSACTIONS Federal laws designed to counter terrorism and prevent money laundering by criminals might, in certain circumstances, require us to reject a premium payment and/or block or "freeze" your account. If these laws apply in a particular situation, we would not be allowed to process any request for withdrawals, surrenders, loans 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 Certificate to government regulators. FINANCIAL STATEMENTS The financial statements of the Company and the Separate Account are contained in the Statement of Additional Information referred to on the back cover of this Prospectus. The financial statements of the Company should be considered only as bearing upon our ability to meet our obligations under the Certificate. 42 Additional information about the Group Policy, the Certificate and the Separate Account can be found in the Statement of Additional Information. You may obtain a copy of the Statement of Additional Information, without charge, by calling 1-800-664-4885, by e-mailing us at our website, or by logging on to our website at www.metlifegvul.com. You may also obtain, without charge, a personalized illustration of death benefits, cash surrender values and cash values by calling 1-800-664-4885. In order to help you understand how the Certificate's values would vary over time under different sets of assumptions, we will provide you with certain illustrations upon request. These will be based on the age and insurance risk characteristics of the person insured under the Certificate and such factors as the specified face amount, premium payment amounts and rates of return (within limits) that you request. You can request such illustrations at any time. We have filed an example of such an illustration as an exhibit to the registration statement referred to below. This Prospectus incorporates by reference all of the information contained in the Statement of Additional Information, which is legally part of this Prospectus. Information about the Group Policy, Certificates and the Separate Account, including the Statement of Additional Information, is available for viewing and copying at the SEC's Public Reference Room in Washington, D.C. Information about the operation of the public reference room may be obtained by calling the SEC at 202-942-8090. The Statement of Additional Information, reports and other information about the Separate Account are available on the SEC Internet site as www.sec.gov. Copies of this information may be obtained upon payment of a duplicating fee, by writing to the SEC's Public Reference Section at 100 F Street, NE, Washington, DC 20549. 811-06025 43 GROUP VARIABLE UNIVERSAL LIFE POLICIES METROPOLITAN LIFE SEPARATE ACCOUNT UL ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY STATEMENT OF ADDITIONAL INFORMATION MAY 1, 2009 This Statement of Additional Information is not a prospectus. This Statement of Additional Information relates to the prospectus dated May 1, 2009 for Group Variable Universal Life and should be read in conjunction therewith. A copy of that prospectus may be obtained by writing to MetLife GVUL Administration, 190 Carondelet Plaza, St. Louis, Missouri 63105. B-1 TABLE OF CONTENTS The Company and the Separate Account............................. B-3 Additional Information about the Operations of the Certificates.. B-3 Limits to MetLife's Right to Challenge the Certificate......... B-3 Misstatement of Age............................................ B-3 Additional Information About Voting.............................. B-3 Restrictions on Financial Transactions........................... Additional Information About Commissions......................... B-3 Independent Registered Public Accounting Firm.................... B-4 Financial Statements............................................. B-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. We established the Separate Account under New York law on December 13, 1988. The Separate Account receives premium payments from the Policies described in the Prospectus and other variable life insurance policies that we issue. We have registered the Separate Account as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"). For more information about MetLife, please visit our website at www.metlife.com ADDITIONAL INFORMATION ABOUT THE OPERATIONS OF THE CERTIFICATES LIMITS TO METLIFE'S RIGHT TO CHALLENGE THE CERTIFICATE We will not contest: . The Certificate after two Certificate years from issue or reinstatement (excluding riders added later). . An increase in a death benefit after it has been in effect for two years. MISSTATEMENT OF AGE We will adjust benefits to reflect the correct age of the covered person, if this information is not correct in the Certificate enrollment form. ADDITIONAL INFORMATION ON VOTING If you are eligible to give us voting instructions, we will send you informational material and a form to send back to us. We are entitled to disregard voting instructions in certain limited circumstances prescribed by the SEC. If we do so, we will give you our reasons in the next semi-annual report to Certificate owners. The number of shares for which you can give us voting instructions is determined as of the record date for the Fund shareholder meeting by dividing: . The Certificate's cash value in the corresponding investment division; by . The net asset value of one share of that Portfolio. We will count fractional votes. If we do not receive timely voting instructions from Certificate owners and other insurance and annuity owners that are entitled to give us voting instructions, we will vote those shares in the same proportion as the shares held in the same separate account for which we did receive voting instructions. The effect of this proportional voting is that a small number of Certificate owners may control the outcome of the vote. 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 MetLife Investors Distribution Company ("MLIDC) is the principal underwriter and distributor of the Policies. MLIDC, which is our affiliate, is registered under the Securities Exchange Act of 1934 (the "34 Act") as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). B-3 The Group Policies and Certificates are sold through licensed life insurance sales representatives who are associated with MetLife Securities, Inc. ("MSI"), our affiliate, or with our other affiliated broker-dealers, New England Securities Corporation, Walnut Street Securities, Inc. and Tower Square Securities, Inc. MSI and our other affiliated broker-dealers are registered with the SEC as broker-dealers under the 34 Act and are also members of FINRA. The Group Policies and Certificates may also be sold through licensed life insurance sales representatives associated with unaffiliated broker-dealers with which MLIDC enters into a selling agreement. MLIDC received sales compensation with respect to the Group Policies and Certificates in the following amounts.
AGGREGATE AMOUNT OF COMMISSIONS RETAINED BY AGGREGATE AMOUNT DISTRIBUTOR AFTER OF COMMISSIONS PAYMENTS TO FISCAL YEAR PAID TO DISTRIBUTOR* SELLING FIRMS ----------- -------------------- ----------------- 2008..... $228,240.31 $0 2007..... $173,223.84 $0
-------- * Prior to May 1, 2007, we served as principal underwriter and distributor of the Group Policies and Certificates. As such we paid commissions in the following amounts, $75,031.13 (for 1/1/07-4/30/07) and $188,526 (for 2006). INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The financial statements of each of the Investment Divisions of Metropolitan Life Separate Account UL 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. The consolidated financial statements of Metropolitan Life Insurance Company and subsidiaries (the "Company") 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 (which report expresses an unqualified opinion and includes an explanatory paragraph referring to the fact that the Company changed its method of accounting for certain assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and changed its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007), and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. FINANCIAL STATEMENTS The financial statements of Metropolitan Life Separate Account UL and MetLife are attached to this Statement of Additional Information. Our financial statements should be considered only as bearing upon our ability to meet our obligations under the Certificate. B-4 ANNUAL REPORT DECEMBER 31, 2008 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Policy Owners of Metropolitan Life Separate Account UL and the Board of Directors of Metropolitan Life Insurance Company: We have audited the accompanying statements of assets and liabilities of Metropolitan Life Separate Account UL (the "Separate Account") of Metropolitan Life Insurance Company (the "Company") comprising each of the individual Investment Divisions listed in Appendix A as of December 31, 2008, and the related statements of operations and changes in net assets for each of the periods presented 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. 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 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, 2008, 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 constituting the Separate Account of the Company as of December 31, 2008, and the results of their operations and changes in net assets for each of the periods presented in the three years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHE LLP Certified Public Accountants Tampa, FL March 31, 2009 APPENDIX A MSF BlackRock Diversified Investment Division MSF BlackRock Aggressive Growth Investment Division MSF MetLife Stock Index Investment Division MSF Julius Baer International Stock Investment Division MSF FI Mid Cap Opportunities Investment Division MSF T. Rowe Price Small Cap Growth Investment Division MSF Oppenheimer Global Equity Investment Division MSF MFS Value Investment Division MSF Neuberger Berman Mid Cap Value Investment Division MSF T. Rowe Price Large Cap Growth Investment Division MSF Lehman Brothers Aggregate Bond Index Investment Division MSF Morgan Stanley EAFE Index Investment Division MSF Russell 2000 Index Investment Division MSF Jennison Growth Investment Division MSF BlackRock Strategic Value Investment Division MSF MetLife Mid Cap Stock Index Investment Division MSF Franklin Templeton Small Cap Growth Investment Division MSF BlackRock Large Cap Value Investment Division MSF Davis Venture Value Investment Division MSF Loomis Sayles Small Cap Investment Division MSF BlackRock Legacy Large Cap Growth Investment Division MSF BlackRock Bond Income Investment Division MSF FI Value Leaders Investment Division MSF Harris Oakmark Focused Value Investment Division MSF Western Asset Management Strategic Bond Opportunities Investment Division MSF Western Asset Management U.S. Government Investment Division MSF BlackRock Money Market Investment Division MSF MFS Total Return Investment Division MSF MetLife Conservative Allocation Investment Division MSF MetLife Conservative to Moderate Allocation Investment Division MSF MetLife Moderate Allocation Investment Division MSF MetLife Moderate to Aggressive Allocation Investment Division MSF MetLife Aggressive Allocation Investment Division MSF FI Large Cap Investment Division MSF Capital Guardian U.S. Equity Investment Division Janus Aspen Large Cap Growth Investment Division Janus Aspen Balanced Investment Division Janus Aspen Forty Investment Division Janus Aspen International Growth Investment Division Janus Aspen Mid Cap Value Investment Division AIM V.I. Global Real Estate Investment Division FTVIPT Templeton Foreign Securities Investment Division FTVIPT Mutual Discovery Securities Investment Division AllianceBernstein Global Technology Investment Division Fidelity VIP Contrafund Investment Division Fidelity VIP Asset Manager: Growth Investment Division Fidelity VIP Investment Grade Bond Investment Division Fidelity VIP Equity-Income Investment Division Fidelity VIP Mid Cap Investment Division Fidelity VIP Freedom 2010 Investment Division Fidelity VIP Freedom 2020 Investment Division Fidelity VIP Freedom 2030 Investment Division American Funds Growth Investment Division American Funds Growth-Income Investment Division American Funds Global Small Capitalization Investment Division American Funds Bond Investment Division American Funds International Investment Division American Funds U.S. Government/AAA Rated Securities Investment Division MIST T. Rowe Price Mid Cap Growth Investment Division MIST MFS Research International Investment Division MIST PIMCO Total Return Investment Division MIST RCM Technology Investment Division MIST Lord Abbett Bond Debenture Investment Division MIST Lazard Mid Cap Investment Division MIST Met/AIM Small Cap Growth Investment Division MIST Harris Oakmark International Investment Division MIST Legg Mason Partners Aggressive Growth Investment Division MIST Lord Abbett Growth and Income Investment Division MIST Clarion Global Real Estate Investment Division APPENDIX A -- (CONTINUED) MIST Van Kampen Mid Cap Growth Investment Division MIST Lord Abbett Mid Cap Value Investment Division MIST Third Avenue Small Cap Value Investment Division MIST Oppenheimer Capital Appreciation Investment Division MIST Legg Mason Value Equity Investment Division MIST SSgA Growth ETF Investment Division MIST SSgA Growth and Income ETF Investment Division MIST PIMCO Inflation Protected Bond Investment Division MIST BlackRock Large Cap Core Investment Division MIST Janus Forty Investment Division MIST Dreman Small Cap Value Investment Division MIST American Funds Balanced Allocation Investment Division MIST American Funds Growth Allocation Investment Division MIST American Funds Moderate Allocation Investment Division MIST Met/Franklin Income Investment Division MIST Met/Franklin Mutual Shares Investment Division MIST Met/Franklin Templeton Founding Strategy Investment Division MIST Met/Templeton Growth Investment Division American Century VP Vista Investment Division Delaware VIP Small Cap Value Investment Division Dreyfus VIF International Value Investment Division Goldman Sachs Mid Cap Value Investment Division Goldman Sachs Structured Small Cap Equity Investment Division MFS High Income Investment Division MFS Global Equity Investment Division MFS New Discovery Investment Division MFS Value Investment Division Van Kampen LIT Government Investment Division Wells Fargo VT Total Return Bond Investment Division Wells Fargo VT Money Market Investment Division Pioneer VCT Emerging Markets Investment Division This page is intentionally left blank. METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2008 MSF BLACKROCK MSF BLACKROCK MSF METLIFE MSF JULIUS BAER DIVERSIFIED AGGRESSIVE GROWTH STOCK INDEX INTERNATIONAL STOCK INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 235,599,172 $ 134,201,773 $ 473,152,989 $ 38,975,745 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 117,139 75,600 339 18,583 ------------------- ------------------- ------------------- ------------------- Total Assets 235,716,311 134,277,373 473,153,328 38,994,328 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 330 336 542,399 -- ------------------- ------------------- ------------------- ------------------- Total Liabilities 330 336 542,399 -- ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 235,715,981 $ 134,277,037 $ 472,610,929 $ 38,994,328 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 1 MSF MSF FI MID CAP MSF T. ROWE PRICE MSF OPPENHEIMER NEUBERGER BERMAN MSF T. ROWE PRICE OPPORTUNITIES SMALL CAP GROWTH GLOBAL EQUITY MSF MFS VALUE MID CAP VALUE LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 124,818,649 $ 52,278,168 $ 29,637,004 $ 41,020,778 $ 44,057,085 $ 30,701,963 -- -- -- -- -- -- 20,051 15,276 8,060 83,020 8,659 1,134 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 124,838,700 52,293,444 29,645,064 41,103,798 44,065,744 30,703,097 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- 79,647 -- -- -- 2,227 380 11,239 -- 522 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- 2,227 380 90,886 -- 522 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 124,838,700 $ 52,291,217 $ 29,644,684 $ 41,012,912 $ 44,065,744 $ 30,702,575 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 2 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MSF LEHMAN BROTHERS MSF MORGAN STANLEY MSF RUSSELL MSF JENNISON AGGREGATE BOND INDEX EAFE INDEX 2000 INDEX GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 96,521,089 $ 44,990,052 $ 37,443,817 $ 9,813,272 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 3,670 2,348 2,553 609 -------------------- ------------------- ------------------- ------------------- Total Assets 96,524,759 44,992,400 37,446,370 9,813,881 -------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 21 980 -- 112 -------------------- ------------------- ------------------- ------------------- Total Liabilities 21 980 -- 112 -------------------- ------------------- ------------------- ------------------- NET ASSETS $ 96,524,738 $ 44,991,420 $ 37,446,370 $ 9,813,769 ==================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 3 MSF MSF BLACKROCK MSF METLIFE FRANKLIN TEMPLETON MSF BLACKROCK MSF DAVIS MSF LOOMIS STRATEGIC VALUE MID CAP STOCK INDEX SMALL CAP GROWTH LARGE CAP VALUE VENTURE VALUE SAYLES SMALL CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 59,704,272 $ 40,730,368 $ 4,206,512 $ 9,569,788 $ 37,998,335 $ 11,033,290 -- -- -- -- -- -- 5,376 2,944 416 1,584 3,427 969 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 59,709,648 40,733,312 4,206,928 9,571,372 38,001,762 11,034,259 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- 3,429 177 -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 3,429 177 -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 59,706,219 $ 40,733,135 $ 4,206,928 $ 9,571,372 $ 38,001,762 $ 11,034,259 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 4 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MSF BLACKROCK LEGACY LARGE CAP MSF BLACKROCK MSF FI MSF HARRIS OAKMARK GROWTH BOND INCOME VALUE LEADERS FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 3,785,820 $ 81,956,350 $ 4,224,840 $ 29,972,618 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 1,068 29,000 598 2,998 ------------------- ------------------- ------------------- ------------------- Total Assets 3,786,888 81,985,350 4,225,438 29,975,616 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company -- -- -- -- ------------------- ------------------- ------------------- ------------------- Total Liabilities -- -- -- -- ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 3,786,888 $ 81,985,350 $ 4,225,438 $ 29,975,616 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 5 MSF WESTERN ASSET MANAGEMENT MSF WESTERN MSF METLIFE MSF METLIFE STRATEGIC BOND ASSET MANAGEMENT MSF BLACKROCK MSF MFS CONSERVATIVE CONSERVATIVE TO OPPORTUNITIES U.S. GOVERNMENT MONEY MARKET TOTAL RETURN ALLOCATION MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 15,462,835 $ 15,635,177 $ 63,275,886 $ 4,860,832 $ 1,349,993 $ 3,217,859 -- -- -- -- -- -- 1,627 1,704 -- 739 137 618 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 15,464,462 15,636,881 63,275,886 4,861,571 1,350,130 3,218,477 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- -- -- 10,872 34 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- 10,872 34 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 15,464,462 $ 15,636,881 $ 63,265,014 $ 4,861,537 $ 1,350,130 $ 3,218,477 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 6 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MSF METLIFE MSF METLIFE MODERATE TO MSF METLIFE MODERATE ALLOCATION AGGRESSIVE ALLOCATION AGGRESSIVE ALLOCATION MSF FI LARGE CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- --------------------- --------------------- ------------------- ASSETS: Investments at fair value $ 18,527,794 $ 33,868,379 $ 6,897,589 $ 333,633 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 7,315 3,568 900 52 ------------------- --------------------- --------------------- ------------------- Total Assets 18,535,109 33,871,947 6,898,489 333,685 ------------------- --------------------- --------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company -- 3 790 -- ------------------- --------------------- --------------------- ------------------- Total Liabilities -- 3 790 -- ------------------- --------------------- --------------------- ------------------- NET ASSETS $ 18,535,109 $ 33,871,944 $ 6,897,699 $ 333,685 =================== ===================== ===================== ===================
The accompanying notes are an integral part of these financial statements. 7 MSF CAPITAL JANUS ASPEN JANUS ASPEN JANUS ASPEN GUARDIAN U.S. EQUITY LARGE CAP GROWTH JANUS ASPEN BALANCED JANUS ASPEN FORTY INTERNATIONAL GROWTH MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- $ 232,738 $ 4,638,709 $ 246,414 $ 475,298 $ 25,985 $ 150,388 -- -- -- -- -- -- -- 164 -- -- -- -- -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- 232,738 4,638,873 246,414 475,298 25,985 150,388 -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- -- -- -- -- -- -- 2,875 -- 5 3 1 1 -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- 2,875 -- 5 3 1 1 -------------------- ------------------- -------------------- ------------------- -------------------- ------------------- $ 229,863 $ 4,638,873 $ 246,409 $ 475,295 $ 25,984 $ 150,387 ==================== =================== ==================== =================== ==================== ===================
The accompanying notes are an integral part of these financial statements. 8 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 AIM V.I. GLOBAL FTVIPT TEMPLETON FTVIPT MUTUAL ALLIANCEBERNSTEIN REAL ESTATE FOREIGN SECURITIES DISCOVERY SECURITIES GLOBAL TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- ASSETS: Investments at fair value $ 1,443,912 $ 5,855,420 $ 1,835,515 $ 49,417 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 11,174 752 6 31 ------------------- ------------------- -------------------- ------------------- Total Assets 1,455,086 5,856,172 1,835,521 49,448 ------------------- ------------------- -------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 1 4 3 1 ------------------- ------------------- -------------------- ------------------- Total Liabilities 1 4 3 1 ------------------- ------------------- -------------------- ------------------- NET ASSETS $ 1,455,085 $ 5,856,168 $ 1,835,518 $ 49,447 =================== =================== ==================== ===================
The accompanying notes are an integral part of these financial statements. 9 FIDELITY VIP FIDELITY VIP FIDELITY VIP ASSET INVESTMENT FIDELITY VIP FIDELITY VIP CONTRAFUND MANAGER: GROWTH GRADE BOND EQUITY-INCOME FIDELITY VIP MID CAP FREEDOM 2010 INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- $ 1,921,571 $ 908,728 $ 43,701 $ 576,902 $ 31,826 $ 23,570 -- -- -- -- -- -- 5,759 140 -- 899 -- -- ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- 1,927,330 908,868 43,701 577,801 31,826 23,570 ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- -- -- -- -- -- -- -- 1 -- -- 1 1 ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- -- 1 -- -- 1 1 ------------------- ------------------- ------------------- ------------------- -------------------- ------------------- $ 1,927,330 $ 908,867 $ 43,701 $ 577,801 $ 31,825 $ 23,569 =================== =================== =================== =================== ==================== ===================
The accompanying notes are an integral part of these financial statements. 10 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 FIDELITY VIP FIDELITY VIP AMERICAN FUNDS AMERICAN FUNDS FREEDOM 2020 FREEDOM 2030 GROWTH GROWTH-INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 37,723 $ 21,388 $ 76,506,651 $ 49,605,461 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company -- -- 8,641 5,207 ------------------- ------------------- ------------------- ------------------- Total Assets 37,723 21,388 76,515,292 49,610,668 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 2 1 -- -- ------------------- ------------------- ------------------- ------------------- Total Liabilities 2 1 -- -- ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 37,721 $ 21,387 $ 76,515,292 $ 49,610,668 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 11 AMERICAN FUNDS AMERICAN FUNDS GLOBAL SMALL AMERICAN FUNDS AMERICAN FUNDS U.S. GOVERNMENT/AAA MIST T. ROWE PRICE MIST MFS RESEARCH CAPITALIZATION BOND INTERNATIONAL RATED SECURITIES MID CAP GROWTH INTERNATIONAL INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 33,875,785 $ 3,142,526 $ 44,135 $ 34,884 $ 11,161,541 $ 9,812,884 -- -- -- -- -- -- 4,965 602 -- -- 1,176 1,682 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 33,880,750 3,143,128 44,135 34,884 11,162,717 9,814,566 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- -- -- 1 1 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- 1 1 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 33,880,750 $ 3,143,128 $ 44,134 $ 34,883 $ 11,162,717 $ 9,814,566 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 12 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST PIMCO MIST RCM MIST LORD ABBETT MIST LAZARD TOTAL RETURN TECHNOLOGY BOND DEBENTURE MID CAP INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 34,037,242 $ 7,120,609 $ 17,544,693 $ 3,422,612 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 3,817 887 3,985 473 ------------------- ------------------- ------------------- ------------------- Total Assets 34,041,059 7,121,496 17,548,678 3,423,085 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company -- -- -- 445 ------------------- ------------------- ------------------- ------------------- Total Liabilities -- -- -- 445 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 34,041,059 $ 7,121,496 $ 17,548,678 $ 3,422,640 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 13 MIST MIST LEGG MIST MET/AIM HARRIS OAKMARK MASON PARTNERS MIST LORD ABBETT MIST CLARION MIST VAN KAMPEN SMALL CAP GROWTH INTERNATIONAL AGGRESSIVE GROWTH GROWTH AND INCOME GLOBAL REAL ESTATE MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 2,187,010 $ 15,842,545 $ 4,956,541 $ 4,238,179 $ 12,523,890 $ 16,602 -- -- -- -- -- -- 247 2,125 286 -- 1,569 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 2,187,257 15,844,670 4,956,827 4,238,179 12,525,459 16,602 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- -- -- -- 2,368 4 2 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- 2,368 4 2 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 2,187,257 $ 15,844,670 $ 4,956,827 $ 4,235,811 $ 12,525,455 $ 16,600 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 14 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST LORD ABBETT MIST THIRD AVENUE MIST OPPENHEIMER MIST LEGG MASON MID CAP VALUE SMALL CAP VALUE CAPITAL APPRECIATION VALUE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- -------------------- ------------------- ASSETS: Investments at fair value $ 91,852 $ 243,863 $ 841,227 $ 2,789,122 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company -- -- 70 87 ------------------- ------------------- -------------------- ------------------- Total Assets 91,852 243,863 841,297 2,789,209 ------------------- ------------------- -------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 1 32 -- 856 ------------------- ------------------- -------------------- ------------------- Total Liabilities 1 32 -- 856 ------------------- ------------------- -------------------- ------------------- NET ASSETS $ 91,851 $ 243,831 $ 841,297 $ 2,788,353 =================== =================== ==================== ===================
The accompanying notes are an integral part of these financial statements. 15 MIST MIST SSGA MIST SSGA GROWTH PIMCO INFLATION MIST BLACKROCK MIST DREMAN GROWTH ETF AND INCOME ETF PROTECTED BOND LARGE CAP CORE MIST JANUS FORTY SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 457,271 $ 336,407 $ 5,522,186 $ 258,680,315 $ 6,914,473 $ 119 -- -- -- -- -- -- 60 42 980 118,964 920 1 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 457,331 336,449 5,523,166 258,799,279 6,915,393 120 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- -- -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 457,331 $ 336,449 $ 5,523,166 $ 258,799,279 $ 6,915,393 $ 120 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 16 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED) DECEMBER 31, 2008 MIST AMERICAN FUNDS MIST AMERICAN FUNDS MIST AMERICAN FUNDS MIST MET/FRANKLIN BALANCED ALLOCATION GROWTH ALLOCATION MODERATE ALLOCATION INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 10,107 $ 15,747 $ 4,607 $ 19,461 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company -- -- -- -- ---- -------------- ---- -------------- ---- -------------- ------------------- Total Assets 10,107 15,747 4,607 19,461 ---- -------------- ---- -------------- ---- -------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company -- -- -- -- ---- -------------- ---- -------------- ---- -------------- ------------------- Total Liabilities -- -- -- -- ---- -------------- ---- -------------- ---- -------------- ------------------- NET ASSETS $ 10,107 $ 15,747 $ 4,607 $ 19,461 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 17 MIST MET/FRANKLIN MIST MET/FRANKLIN TEMPLETON FOUNDING MIST MET/TEMPLETON AMERICAN DELAWARE VIP DREYFUS VIF MUTUAL SHARE STRATEGY GROWTH CENTURY VP VISTA SMALL CAP VALUE INTERNATIONAL VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 8,065 $ 10,682 $ 3,188 $ 79,195 $ 634,831 $ 342,619 -- -- -- -- -- -- -- -- -- 885 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 8,065 10,682 3,188 80,080 634,831 342,619 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- 1 1 -- 887 526 1,059 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 1 1 -- 887 526 1,059 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 8,064 $ 10,681 $ 3,188 $ 79,193 $ 634,305 $ 341,560 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 18 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF ASSETS AND LIABILITIES -- (CONCLUDED) DECEMBER 31, 2008 GOLDMAN SACHS GOLDMAN SACHS STRUCTURED MID CAP VALUE SMALL CAP EQUITY MFS HIGH INCOME MFS GLOBAL EQUITY INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ASSETS: Investments at fair value $ 911,638 $ 49,175 $ 6,327 $ 58,173 Other receivables -- -- -- -- Due from Metropolitan Life Insurance Company 2,171 222 -- -- ------------------- ------------------- ------------------- ------------------- Total Assets 913,809 49,397 6,327 58,173 ------------------- ------------------- ------------------- ------------------- LIABILITIES: Other payables -- -- -- -- Due to Metropolitan Life Insurance Company 1 1 3,216 14 ------------------- ------------------- ------------------- ------------------- Total Liabilities 1 1 3,216 14 ------------------- ------------------- ------------------- ------------------- NET ASSETS $ 913,808 $ 49,396 $ 3,111 $ 58,159 =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 19 VAN KAMPEN LIT WELLS FARGO VT WELLS FARGO VT PIONEER VCT MFS NEW DISCOVERY MFS VALUE GOVERNMENT TOTAL RETURN BOND MONEY MARKET EMERGING MARKETS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 1,944 $ 63,316 $ 31,527 $ 183,655 $ 2,089,157 $ 153,859 -- -- -- -- -- -- -- 19 -- 23 245 -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 1,944 63,335 31,527 183,678 2,089,402 153,859 ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- -- -- -- -- -- -- 2 1 1 4 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- 2 1 1 4 -- -- ------------------- ------------------- ------------------- ------------------- ------------------- ------------------- $ 1,942 $ 63,334 $ 31,526 $ 183,674 $ 2,089,402 $ 153,859 =================== =================== =================== =================== =================== ===================
The accompanying notes are an integral part of these financial statements. 20 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF BLACKROCK DIVERSIFIED INVESTMENT DIVISION ---------------- ------------------------- ------------ 2008 2007 2006 ---------------- ------------------------- ------------ INVESTMENT INCOME: Dividends $ 8,110,111 $ 8,526,571 $ 7,880,854 ---------------- ------------------------- ------------ EXPENSES: Mortality and expense risk charges 2,489,583 2,933,494 2,787,484 ---------------- ------------------------- ------------ Total expenses 2,489,583 2,933,494 2,787,484 ---------------- ------------------------- ------------ Net investment income (loss) 5,620,528 5,593,077 5,093,370 ---------------- ------------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,156,956 -- -- Realized gains (losses) on sale of investments (1,882,360) 3,011,483 2,697,730 ---------------- ------------------------- ------------ Net realized gains (losses) 1,274,596 3,011,483 2,697,730 ---------------- ------------------------- ------------ Change in unrealized gains (losses) on investments (90,018,067) 7,614,036 21,697,213 ---------------- ------------------------- ------------ Net realized and unrealized gains (losses) on investments (88,743,471) 10,625,519 24,394,943 ---------------- ------------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (83,122,943) $ 16,218,596 $ 29,488,313 ================ ========================= ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 21 MSF BLACKROCK AGGRESSIVE GROWTH MSF METLIFE STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------------- ------------------------------------------------------ 2008 2007 2006 2008 2007 2006 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ $ -- $ -- $ -- $ 12,272,736 $ 7,661,035 $ 12,777,493 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ 1,837,501 2,172,462 1,968,385 5,062,149 6,053,181 5,268,088 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ 1,837,501 2,172,462 1,968,385 5,062,149 6,053,181 5,268,088 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ (1,837,501) (2,172,462) (1,968,385) 7,210,587 1,607,854 7,509,405 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ -- -- -- 26,321,788 14,892,115 21,804,470 740,184 1,382,763 (1,521,325) (1,738,927) 7,438,301 6,189,767 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ 740,184 1,382,763 (1,521,325) 24,582,861 22,330,416 27,994,237 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ (115,833,611) 44,452,957 16,167,405 (312,125,621) 7,171,409 53,741,400 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ (115,093,427) 45,835,720 14,646,080 (287,542,760) 29,501,825 81,735,637 ----------------- ---------------------- ----------------- ----------------- ----------------------- ------------ $ (116,930,928) $ 43,663,258 $ 12,677,695 $ (280,332,173) $ 31,109,679 $ 89,245,042 ================= ====================== ================= ================= ======================= ============
The accompanying notes are an integral part of these financial statements. 22 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF JULIUS BAER INTERNATIONAL STOCK INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ---------------- ------------------- ------------- INVESTMENT INCOME: Dividends $ 1,797,231 $ 757,552 $ 881,159 ---------------- ------------------- ------------- EXPENSES: Mortality and expense risk charges 477,710 610,034 530,605 ---------------- ------------------- ------------- Total expenses 477,710 610,034 530,605 ---------------- ------------------- ------------- Net investment income (loss) 1,319,521 147,518 350,554 ---------------- ------------------- ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 6,924,494 3,680,153 -- Realized gains (losses) on sale of investments (470,754) 1,481,666 832,502 ---------------- ------------------- ------------- Net realized gains (losses) 6,453,740 5,161,819 832,502 ---------------- ------------------- ------------- Change in unrealized gains (losses) on investments (39,671,178) 1,044,733 7,805,567 ---------------- ------------------- ------------- Net realized and unrealized gains (losses) on investments (33,217,438) 6,206,552 8,638,069 ---------------- ------------------- ------------- Net increase (decrease) in net assets resulting from operations $ (31,897,917) $ 6,354,070 $ 8,988,623 ================ =================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 23 MSF FI MID CAP OPPORTUNITIES MSF T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------------- -------------------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- $ 914,818 $ 384,517 $ 14,072 $ -- $ -- $ -- ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- 1,894,554 2,541,446 2,242,728 578,209 695,384 661,143 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- 1,894,554 2,541,446 2,242,728 578,209 695,384 661,143 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- (979,736) (2,156,929) (2,228,656) (578,209) (695,384) (661,143) ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- -- -- -- 14,302,639 -- -- (1,134,327) (3,610,711) (4,482,428) (118,445) 1,678,195 842,686 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- (1,134,327) (3,610,711) (4,482,428) 14,184,194 1,678,195 842,686 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- (152,860,483) 25,889,645 33,489,573 (44,529,670) 6,321,798 2,138,730 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- (153,994,810) 22,278,934 29,007,145 (30,345,476) 7,999,993 2,981,416 ----------------- ---------------------- ----------------- ---------------- ---------------------- ---------------- $ (154,974,546) $ 20,122,005 $ 26,778,489 $ (30,923,685) $ 7,304,609 $ 2,320,273 ================= ====================== ================= ================ ====================== ================
The accompanying notes are an integral part of these financial statements. 24 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF OPPENHEIMER GLOBAL EQUITY INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ---------------- ------------------- ------------- INVESTMENT INCOME: Dividends $ 913,382 $ 569,763 $ 1,114,393 ---------------- ------------------- ------------- EXPENSES: Mortality and expense risk charges 333,397 418,432 361,328 ---------------- ------------------- ------------- Total expenses 333,397 418,432 361,328 ---------------- ------------------- ------------- Net investment income (loss) 579,985 151,331 753,065 ---------------- ------------------- ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,578,466 743,295 861,246 Realized gains (losses) on sale of investments 228,413 716,979 571,820 ---------------- ------------------- ------------- Net realized gains (losses) 1,806,879 1,460,274 1,433,066 ---------------- ------------------- ------------- Change in unrealized gains (losses) on investments (23,254,667) 1,125,527 4,443,736 ---------------- ------------------- ------------- Net realized and unrealized gains (losses) on investments (21,447,788) 2,585,801 5,876,802 ---------------- ------------------- ------------- Net increase (decrease) in net assets resulting from operations $ (20,867,803) $ 2,737,132 $ 6,629,867 ================ =================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 25 MSF MFS VALUE MSF NEUBERGER BERMAN MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ -------------------------------------------------------- 2008 2007 2006 2008 2007 2006 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- $ 994,357 $ 515,161 $ 447,049 $ 575,882 $ 454,135 $ 340,446 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- 433,021 543,267 478,172 576,904 715,283 602,710 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- 433,021 543,267 478,172 576,904 715,283 602,710 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- 561,336 (28,106) (31,123) (1,022) (261,148) (262,264) ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- 11,141,028 1,800,935 -- 827,106 2,444,204 6,150,111 (6,522,665) 1,197,838 835,096 (361,462) 1,469,284 895,063 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- 4,618,363 2,998,773 835,096 465,644 3,913,488 7,045,174 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- (26,124,726) (5,878,800) 8,574,081 (39,787,375) (1,796,392) 382,304 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- (21,506,363) (2,880,027) 9,409,177 (39,321,731) 2,117,096 7,427,478 ---------------- ---------------------- -------------- ---------------- ---------------------- ---------------- $ (20,945,027) $ (2,908,133) $ 9,378,054 $ (39,322,753) $ 1,855,948 $ 7,165,214 ================ ====================== ============== ================ ====================== ================
The accompanying notes are an integral part of these financial statements. 26 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF T. ROWE PRICE LARGE CAP GROWTH INVESTMENT DIVISION -------------------------------------------------------- 2008 2007 2006 ---------------- ---------------------- ---------------- INVESTMENT INCOME: Dividends $ 256,837 $ 236,325 $ 147,322 ---------------- ---------------------- ---------------- EXPENSES: Mortality and expense risk charges 353,556 435,556 370,484 ---------------- ---------------------- ---------------- Total expenses 353,556 435,556 370,484 ---------------- ---------------------- ---------------- Net investment income (loss) (96,719) (199,231) (223,162) ---------------- ---------------------- ---------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 2,456,006 469,367 2,175 Realized gains (losses) on sale of investments 109,779 1,613,290 505,143 ---------------- ---------------------- ---------------- Net realized gains (losses) 2,565,785 2,082,657 507,318 ---------------- ---------------------- ---------------- Change in unrealized gains (losses) on investments (24,832,884) 2,367,516 5,044,250 ---------------- ---------------------- ---------------- Net realized and unrealized gains (losses) on investments (22,267,099) 4,450,173 5,551,568 ---------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations $ (22,363,818) $ 4,250,942 $ 5,328,406 ================ ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 27 MSF LEHMAN BROTHERS AGGREGATE BOND INDEX MSF MORGAN STANLEY EAFE INDEX INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------------- --------------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ------------------- --------------------- ---------------- ------------------- -------------- $ 4,492,337 $ 4,412,510 $ 3,647,493 $ 1,719,052 $ 1,286,968 $ 843,327 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 746,783 729,528 616,266 488,801 561,411 419,647 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 746,783 729,528 616,266 488,801 561,411 419,647 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 3,745,554 3,682,982 3,031,227 1,230,251 725,557 423,680 ----------- ------------------- --------------------- ---------------- ------------------- -------------- -- -- -- 2,375,115 686,383 -- 578,961 192,840 (57,852) 523,799 1,572,951 984,685 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 578,961 192,840 (57,852) 2,898,914 2,259,334 984,685 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 873,489 2,133,669 (71,436) (35,342,222) 2,980,876 9,577,488 ----------- ------------------- --------------------- ---------------- ------------------- -------------- 1,452,450 2,326,509 (129,288) (32,443,308) 5,240,210 10,562,173 ----------- ------------------- --------------------- ---------------- ------------------- -------------- $ 5,198,004 $ 6,009,491 $ 2,901,939 $ (31,213,057) $ 5,965,767 $ 10,985,853 =========== =================== ===================== ================ =================== ==============
The accompanying notes are an integral part of these financial statements. 28 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF RUSSELL 2000 INDEX INVESTMENT DIVISION --------------------------------------------------------- 2008 2007 2006 ---------------- ------------------------- -------------- INVESTMENT INCOME: Dividends $ 619,536 $ 526,533 $ 397,966 ---------------- ------------------------- -------------- EXPENSES: Mortality and expense risk charges 395,877 476,230 402,879 ---------------- ------------------------- -------------- Total expenses 395,877 476,230 402,879 ---------------- ------------------------- -------------- Net investment income (loss) 223,659 50,303 (4,913) ---------------- ------------------------- -------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 2,430,488 4,308,974 1,842,549 Realized gains (losses) on sale of investments (448,303) 1,194,459 793,645 ---------------- ------------------------- -------------- Net realized gains (losses) 1,982,185 5,503,433 2,636,194 ---------------- ------------------------- -------------- Change in unrealized gains (losses) on investments (21,357,274) (6,890,836) 5,025,107 ---------------- ------------------------- -------------- Net realized and unrealized gains (losses) on investments (19,375,089) (1,387,403) 7,661,301 ---------------- ------------------------- -------------- Net increase (decrease) in net assets resulting from operations $ (19,151,430) $ (1,337,100) $ 7,656,388 ================ ========================= ==============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 29 MSF JENNISON GROWTH MSF BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------- --------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- $ 321,658 $ 62,722 $ -- $ 450,385 $ 321,242 $ 298,959 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- 112,222 127,403 113,119 713,800 923,234 828,876 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- 112,222 127,403 113,119 713,800 923,234 828,876 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- 209,436 (64,681) (113,119) (263,415) (601,992) (529,917) --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- 1,109,205 525,988 11,909 8,172,204 12,338,055 17,677,150 (8,418) 217,837 116,022 (2,015,489) 644,889 1,173,096 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- 1,100,787 743,825 127,931 6,156,715 12,982,944 18,850,246 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- (7,064,823) 832,560 269,709 (44,228,185) (16,875,056) (4,073,024) --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- (5,964,036) 1,576,385 397,640 (38,071,470) (3,892,112) 14,777,222 --------------- ---------------------- ------------ ---------------- ---------------------- ----------------- $ (5,754,600) $ 1,511,704 $ 284,521 $ (38,334,885) $ (4,494,104) $ 14,247,305 =============== ====================== ============ ================ ====================== =================
The accompanying notes are an integral part of these financial statements. 30 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MID CAP STOCK INDEX INVESTMENT DIVISION ---------------------------------------------------- 2008 2007 2006 ---------------- ---------------------- ------------ INVESTMENT INCOME: Dividends $ 771,366 $ 463,568 $ 617,181 ---------------- ---------------------- ------------ EXPENSES: Mortality and expense risk charges 446,840 517,186 431,166 ---------------- ---------------------- ------------ Total expenses 446,840 517,186 431,166 ---------------- ---------------------- ------------ Net investment income (loss) 324,526 (53,618) 186,015 ---------------- ---------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 5,083,631 2,483,952 3,502,918 Realized gains (losses) on sale of investments (306,285) 1,219,996 660,796 ---------------- ---------------------- ------------ Net realized gains (losses) 4,777,346 3,703,948 4,163,714 ---------------- ---------------------- ------------ Change in unrealized gains (losses) on investments (28,232,883) 158,945 201,865 ---------------- ---------------------- ------------ Net realized and unrealized gains (losses) on investments (23,455,537) 3,862,893 4,365,579 ---------------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (23,131,011) $ 3,809,275 $4,551,594 ================ ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 31 MSF FRANKLIN TEMPLETON SMALL CAP GROWTH MSF BLACKROCK LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ --------------- ---------------------- ------------ 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- --------------- ---------------------- ------------ $ -- $ -- $ -- $ 93,435 $ 112,942 $ 79,434 --------------- ---------------------- --------------- --------------- ---------------------- ------------ 48,690 60,634 50,288 96,194 99,096 57,120 ---- ---------- ---------------------- --------------- --------------- ---------------------- ------------ 48,690 60,634 50,288 96,194 99,096 57,120 ---- ---------- ---------------------- --------------- --------------- ---------------------- ------------ (48,690) (60,634) (50,288) (2,759) 13,846 22,314 --------------- ---------------------- --------------- --------------- ---------------------- ------------ 589,617 476,487 286,106 181,207 429,497 389,137 (127,526) 249,458 136,411 (190,470) 332,037 121,354 --------------- ---------------------- --------------- --------------- ---------------------- ------------ 462,091 725,945 422,517 (9,263) 761,534 510,491 --------------- ---------------------- --------------- --------------- ---------------------- ------------ (3,371,627) (436,173) 106,882 (4,899,187) (536,165) 656,059 --------------- ---------------------- --------------- --------------- ---------------------- ------------ (2,909,536) 289,772 529,399 (4,908,450) 225,369 1,166,550 --------------- ---------------------- --------------- --------------- ---------------------- ------------ $ (2,958,226) $ 229,138 $479,111 $ (4,911,209) $ 239,215 $1,188,864 =============== ====================== =============== =============== ====================== ============
The accompanying notes are an integral part of these financial statements. 32 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF DAVIS VENTURE VALUE INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 ---------------- -------------------------- ----------- INVESTMENT INCOME: Dividends $ 686,382 $ 429,495 $ 403,990 ---------------- -------------------------- ----------- EXPENSES: Mortality and expense risk charges 433,758 478,766 384,612 ---------------- -------------------------- ----------- Total expenses 433,758 478,766 384,612 ---------------- -------------------------- ----------- Net investment income (loss) 252,624 (49,271) 19,378 ---------------- -------------------------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 285,719 -- -- Realized gains (losses) on sale of investments (1,167) 581,875 2,307,728 ---------------- -------------------------- ----------- Net realized gains (losses) 284,552 581,875 2,307,728 ---------------- -------------------------- ----------- Change in unrealized gains (losses) on investments (24,908,606) 1,282,046 3,652,646 ---------------- -------------------------- ----------- Net realized and unrealized gains (losses) on investments (24,624,054) 1,863,921 5,960,374 ---------------- -------------------------- ----------- Net increase (decrease) in net assets resulting from operations $ (24,371,430) $ 1,814,650 $ 5,979,752 ================ ========================== ===========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 33 MSF LOOMIS SAYLES SMALL CAP MSF BLACKROCK LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ -- $ 11,412 $ -- $ 18,838 $ 5,522 $ 12,152 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 116,679 124,817 90,220 37,105 25,444 38,586 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 116,679 124,817 90,220 37,105 25,444 38,586 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (116,679) (113,405) (90,220) (18,267) (19,922) (26,434) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 2,223,393 1,567,864 848,702 -- -- -- (217,249) 234,076 208,239 (120,478) 64,255 954,600 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 2,006,144 1,801,940 1,056,941 (120,478) 64,255 954,600 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (7,889,493) (305,465) 425,449 (1,924,420) 437,029 (1,121,566) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (5,883,349) 1,496,475 1,482,390 (2,044,898) 501,284 (166,966) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ (6,000,028) $ 1,383,070 $1,392,170 $ (2,063,165) $ 481,362 $ (193,400) =============== ====================== =============== =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 34 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF BLACKROCK BOND INCOME INVESTMENT DIVISION ----------------------------------------------------- 2008 2007 2006 --------------- ------------------- ----------------- INVESTMENT INCOME: Dividends $ 4,557,033 $ 2,988,878 $ 5,391,669 --------------- ------------------- ----------------- EXPENSES: Mortality and expense risk charges 710,910 742,928 735,582 --------------- ------------------- ----------------- Total expenses 710,910 742,928 735,582 --------------- ------------------- ----------------- Net investment income (loss) 3,846,123 2,245,950 4,656,087 --------------- ------------------- ----------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- 92,238 Realized gains (losses) on sale of investments (261,951) 86,411 (260,701) --------------- ------------------- ----------------- Net realized gains (losses) (261,951) 86,411 (168,463) --------------- ------------------- ----------------- Change in unrealized gains (losses) on investments (7,357,146) 2,574,419 (1,188,505) --------------- ------------------- ----------------- Net realized and unrealized gains (losses) on investments (7,619,097) 2,660,830 (1,356,968) --------------- ------------------- ----------------- Net increase (decrease) in net assets resulting from operations $ (3,772,974) $ 4,906,780 $ 3,299,119 =============== =================== =================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 35 MSF FI VALUE LEADERS MSF HARRIS OAKMARK FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ----------------------- --------- ---------------- ---------------------- --------------- $ 109,493 $ 58,988 $ 45,870 $ 164,568 $ 328,815 $ 158,000 --------------- ----------------------- --------- ---------------- ---------------------- --------------- 47,319 55,755 39,722 374,696 513,319 447,521 --------------- ----------------------- --------- ---------------- ---------------------- --------------- 47,319 55,755 39,722 374,696 513,319 447,521 --------------- ----------------------- --------- ---------------- ---------------------- --------------- 62,174 3,233 6,148 (210,128) (184,504) (289,521) --------------- ----------------------- --------- ---------------- ---------------------- --------------- 594,849 558,447 105,940 5,071,026 7,250,319 4,875,177 (183,807) 116,557 71,567 (724,686) 896,818 862,876 --------------- ----------------------- --------- ---------------- ---------------------- --------------- 411,042 675,004 177,507 4,346,340 8,147,137 5,738,053 --------------- ----------------------- --------- ---------------- ---------------------- --------------- (3,184,937) (503,196) 304,366 (29,274,257) (12,430,441) 467,020 --------------- ----------------------- --------- ---------------- ---------------------- --------------- (2,773,895) 171,808 481,873 (24,927,917) (4,283,304) 6,205,073 --------------- ----------------------- --------- ---------------- ---------------------- --------------- $ (2,711,721) $ 175,041 $ 488,021 $ (25,138,045) $ (4,467,808) $5,915,552 =============== ======================= ========= ================ ====================== ===============
The accompanying notes are an integral part of these financial statements. 36 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF WESTERN ASSET MANAGEMENT STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION ------------------------------------------------------------ 2008 2007 2006 --------------- ------------------- ------------------------ INVESTMENT INCOME: Dividends $ 717,999 $ 459,233 $ 685,459 --------------- ------------------- ------------------------ EXPENSES: Mortality and expense risk charges 147,435 143,832 118,623 --------------- ------------------- ------------------------ Total expenses 147,435 143,832 118,623 --------------- ------------------- ------------------------ Net investment income (loss) 570,564 315,401 566,836 --------------- ------------------- ------------------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 105,934 15,836 109,245 Realized gains (losses) on sale of investments (211,377) 29,149 44,303 --------------- ------------------- ------------------------ Net realized gains (losses) (105,443) 44,985 153,548 --------------- ------------------- ------------------------ Change in unrealized gains (losses) on investments (3,452,504) 187,688 (101,864) --------------- ------------------- ------------------------ Net realized and unrealized gains (losses) on investments (3,557,947) 232,673 51,684 --------------- ------------------- ------------------------ Net increase (decrease) in net assets resulting from operations $ (2,987,383) $ 548,074 $ 618,520 =============== =================== ========================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 37 MSF WESTERN ASSET MANAGEMENT U.S. GOVERNMENT MSF BLACKROCK MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------- -------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ------------------- ------------- ----------- ------------------- ------------ $ 678,587 $ 398,651 $ 423,016 $ 1,783,326 $ 3,017,412 $1,804,658 ------------- ------------------- ------------- ----------- ------------------- ------------ 132,608 124,642 106,778 287,148 294,683 207,469 ------------- ------------------- ------------- ----------- ------------------- ------------ 132,608 124,642 106,778 287,148 294,683 207,469 ------------- ------------------- ------------- ----------- ------------------- ------------ 545,979 274,009 316,238 1,496,178 2,722,729 1,597,189 ------------- ------------------- ------------- ----------- ------------------- ------------ -- -- -- -- -- -- (26,281) 988 (10,510) -- -- -- ------------- ------------------- ------------- ----------- ------------------- ------------ (26,281) 988 (10,510) -- -- -- ------------- ------------------- ------------- ----------- ------------------- ------------ (712,221) 246,140 127,750 -- -- -- ------------- ------------------- ------------- ----------- ------------------- ------------ (738,502) 247,128 117,240 -- -- -- ------------- ------------------- ------------- ----------- ------------------- ------------ $ (192,523) $ 521,137 $ 433,478 $ 1,496,178 $ 2,722,729 $1,597,189 ============= =================== ============= =========== =================== ============
The accompanying notes are an integral part of these financial statements. 38 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF MFS TOTAL RETURN INVESTMENT DIVISION --------------- ----------------------- --------- 2008 2007 2006 --------------- ----------------------- --------- INVESTMENT INCOME: Dividends $ 192,751 $ 93,266 $ 93,810 --------------- ----------------------- --------- EXPENSES: Mortality and expense risk charges 44,824 40,006 27,494 --------------- ----------------------- --------- Total expenses 44,824 40,006 27,494 --------------- ----------------------- --------- Net investment income (loss) 147,927 53,260 66,316 --------------- ----------------------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 418,385 141,980 58,740 Realized gains (losses) on sale of investments (118,819) 25,643 5,870 --------------- ----------------------- --------- Net realized gains (losses) 299,566 167,623 64,610 --------------- ----------------------- --------- Change in unrealized gains (losses) on investments (1,824,737) (104,370) 205,638 --------------- ----------------------- --------- Net realized and unrealized gains (losses) on investments (1,525,171) 63,253 270,248 --------------- ----------------------- --------- Net increase (decrease) in net assets resulting from operations $ (1,377,244) $ 116,513 $ 336,564 =============== ======================= =========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 39 MSF METLIFE CONSERVATIVE ALLOCATION MSF METLIFE CONSERVATIVE TO MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- ----------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- ------------- ---------------------- ---------- $ 27,593 $ -- $10,638 $ 46,035 $ -- $ 30,389 ------------- ---------------------- ------------- ------------- ---------------------- ---------- 17,503 5,884 3,484 30,609 21,161 11,718 ------------- ---------------------- ------------- ------------- ---------------------- ---------- 17,503 5,884 3,484 30,609 21,161 11,718 ------------- ---------------------- ------------- ------------- ---------------------- ---------- 10,090 (5,884) 7,154 15,426 (21,161) 18,671 ------------- ---------------------- ------------- ------------- ---------------------- ---------- 19,805 413 4,082 39,596 3,872 20,839 (164,759) 23,983 (1,845) (49,375) 26,078 12,097 ------------- ---------------------- ------------- ------------- ---------------------- ---------- (144,954) 24,396 2,237 (9,779) 29,950 32,936 ------------- ---------------------- ------------- ------------- ---------------------- ---------- (182,260) 12,074 19,393 (847,823) 79,599 73,219 ------------- ---------------------- ------------- ------------- ---------------------- ---------- (327,214) 36,470 21,630 (857,602) 109,549 106,155 ------------- ---------------------- ------------- ------------- ---------------------- ---------- $ (317,124) $ 30,586 $28,784 $ (842,176) $ 88,388 $ 124,826 ============= ====================== ============= ============= ====================== ==========
The accompanying notes are an integral part of these financial statements. 40 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MODERATE ALLOCATION INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ----------- INVESTMENT INCOME: Dividends $ 202,771 $ 27,294 $ 76,104 --------------- ---------------------- ----------- EXPENSES: Mortality and expense risk charges 165,213 125,074 45,704 --------------- ---------------------- ----------- Total expenses 165,213 125,074 45,704 --------------- ---------------------- ----------- Net investment income (loss) 37,558 (97,780) 30,400 --------------- ---------------------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 246,852 18,896 106,419 Realized gains (losses) on sale of investments (436,886) 170,037 48,706 --------------- ---------------------- ----------- Net realized gains (losses) (190,034) 188,933 155,125 --------------- ---------------------- ----------- Change in unrealized gains (losses) on investments (6,087,839) 262,197 474,841 --------------- ---------------------- ----------- Net realized and unrealized gains (losses) on investments (6,277,873) 451,130 629,966 --------------- ---------------------- ----------- Net increase (decrease) in net assets resulting from operations $ (6,240,315) $ 353,350 $ 660,366 =============== ====================== ===========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 41 MSF METLIFE MODERATE TO AGGRESSIVE ALLOCATION MSF METLIFE AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 ---------------- ---------------------- ----------- --------------- ---------------------- ---------- $ 302,200 $ 45,711 $ 77,374 $ 61,269 $ 12,813 $ 9,703 ---------------- ---------------------- ----------- --------------- ---------------------- ------------- 318,359 215,858 65,099 71,617 52,966 13,592 ---------------- ---------------------- ----------- --------------- ---------------------- ------------- 318,359 215,858 65,099 71,617 52,966 13,592 ---------------- ---------------------- ----------- --------------- ---------------------- ------------- (16,159) (170,147) 12,275 (10,348) (40,153) (3,889) ---------------- ---------------------- ----------- --------------- ---------------------- ------------- 559,864 26,120 196,911 224,171 8,186 40,723 (384,363) 96,319 14,344 (133,321) 93,620 (41,990) ---------------- ---------------------- ----------- --------------- ---------------------- ------------- 175,501 122,439 211,255 90,850 101,806 (1,267) ---------------- ---------------------- ----------- --------------- ---------------------- ------------- (15,640,562) 371,705 870,757 (4,222,544) (95,922) 225,674 ---------------- ---------------------- ----------- --------------- ---------------------- ------------- (15,465,061) 494,144 1,082,012 (4,131,694) 5,884 224,407 ---------------- ---------------------- ----------- --------------- ---------------------- ------------- $ (15,481,220) $ 323,997 $ 1,094,287 $ (4,142,042) $ (34,269) $220,518 ================ ====================== =========== =============== ====================== =============
The accompanying notes are an integral part of these financial statements. 42 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF FI LARGE CAP INVESTMENT DIVISION ------------------------------------- 2008 2007 2006 (A) -------------- ----------- ---------- INVESTMENT INCOME: Dividends $ -- $ 221 $ -- -------------- ----------- ---------- EXPENSES: Mortality and expense risk charges 2,929 1,641 246 -------------- ----------- ---------- Total expenses 2,929 1,641 246 -------------- ----------- ---------- Net investment income (loss) (2,929) (1,420) (246) -------------- ----------- ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 9,165 -- Realized gains (losses) on sale of investments (123,745) 2,290 21 -------------- ----------- ---------- Net realized gains (losses) (123,745) 11,455 21 -------------- ----------- ---------- Change in unrealized gains (losses) on investments (117,754) (8,523) 4,291 -------------- ----------- ---------- Net realized and unrealized gains (losses) on investments (241,499) 2,932 4,312 -------------- ----------- ---------- Net increase (decrease) in net assets resulting from operations $ (244,428) $ 1,512 $ 4,066 ============== =========== ==========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 43 MSF CAPITAL GUARDIAN U.S. EQUITY JANUS ASPEN LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- ----------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 ------------- ---------------------- ------------- --------------- ------------------- ----------- $ 2,888 $ -- $ 1,689 $ 45,216 $ 48,004 $ 25,478 ------------- ---------------------- ------------- --------------- ------------------- ----------- 1,515 2,206 1,107 28,896 31,075 24,818 ------------- ---------------------- ------------- --------------- ------------------- ----------- 1,515 2,206 1,107 28,896 31,075 24,818 ------------- ---------------------- ------------- --------------- ------------------- ----------- 1,373 (2,206) 582 16,320 16,929 660 ------------- ---------------------- ------------- --------------- ------------------- ----------- 32,728 -- -- -- -- -- (31,255) 50,654 40 49,473 60,269 80,063 ------------- ---------------------- ------------- --------------- ------------------- ----------- 1,473 50,654 40 49,473 60,269 80,063 ------------- ---------------------- ------------- --------------- ------------------- ----------- (133,853) (50,293) 25,383 (3,051,413) 750,675 477,638 ------------- ---------------------- ------------- --------------- ------------------- ----------- (132,380) 361 25,423 (3,001,940) 810,944 557,701 ------------- ---------------------- ------------- --------------- ------------------- ----------- $ (131,007) $ (1,845) $ 26,005 $ (2,985,620) $ 827,873 $ 558,361 ============= ====================== ============= =============== =================== ===========
The accompanying notes are an integral part of these financial statements. 44 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 JANUS ASPEN BALANCED INVESTMENT DIVISION ------------------------------ 2008 2007 2006 ------------ --------- ------- INVESTMENT INCOME: Dividends $ 3,357 $ 1,879 $ 44 ------------ --------- ------- EXPENSES: Mortality and expense risk charges 361 256 7 ------------ --------- ------- Total expenses 361 256 7 ------------ --------- ------- Net investment income (loss) 2,996 1,623 37 ------------ --------- ------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 2,380 -- -- Realized gains (losses) on sale of investments 1,314 747 33 ------------ --------- ------- Net realized gains (losses) 3,694 747 33 ------------ --------- ------- Change in unrealized gains (losses) on investments (21,788) 2,101 147 ------------ --------- ------- Net realized and unrealized gains (losses) on investments (18,094) 2,848 180 ------------ --------- ------- Net increase (decrease) in net assets resulting from operations $ (15,098) $ 4,471 $217 ============ ========= =======
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 45 JANUS ASPEN JANUS ASPEN JANUS ASPEN FORTY INTERNATIONAL GROWTH MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ----------------------- ---------------------- 2008 2007 2006 2008 (B) 2008 (B) ------------- ---------------------- ------------ ----------------------- ---------------------- $ 53 $ 676 $ 152 $ -- $ 505 ------------- ---------------------- ------------ ----------------------- ---------------------- 2,353 1,060 383 44 77 ------------- ---------------------- ------------ ----------------------- ---------------------- 2,353 1,060 383 44 77 ------------- ---------------------- ------------ ----------------------- ---------------------- (2,300) (384) (231) (44) 428 ------------- ---------------------- ------------ ----------------------- ---------------------- -- -- -- -- -- (93,936) 6,298 (26) (177) (45) ------------- ---------------------- ------------ ----------------------- ---------------------- (93,936) 6,298 (26) (177) (45) ------------- ---------------------- ------------ ----------------------- ---------------------- (295,412) 82,907 8,113 (18,504) (2,160) ------------- ---------------------- ------------ ----------------------- ---------------------- (389,348) 89,205 8,087 (18,681) (2,205) ------------- ---------------------- ------------ ----------------------- ---------------------- $ (391,648) $ 88,821 $7,856 $ (18,725) $ (1,777) ============= ====================== ============ ======================= ======================
The accompanying notes are an integral part of these financial statements. 46 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AIM V.I. GLOBAL REAL ESTATE INVESTMENT DIVISION --------------- ----------------- --------- 2008 2007 2006 --------------- ----------------- --------- INVESTMENT INCOME: Dividends $ 127,467 $ 166,720 $ 25,329 --------------- ----------------- --------- EXPENSES: Mortality and expense risk charges 10,120 13,977 10,103 --------------- ----------------- --------- Total expenses 10,120 13,977 10,103 --------------- ----------------- --------- Net investment income (loss) 117,347 152,743 15,226 --------------- ----------------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 197,001 397,922 87,476 Realized gains (losses) on sale of investments (258,510) 172,588 329,460 --------------- ----------------- --------- Net realized gains (losses) (61,509) 570,510 416,936 --------------- ----------------- --------- Change in unrealized gains (losses) on investments (1,334,686) (881,479) 328,141 --------------- ----------------- --------- Net realized and unrealized gains (losses) on investments (1,396,195) (310,969) 745,077 --------------- ----------------- --------- Net increase (decrease) in net assets resulting from operations $ (1,278,848) $ (158,226) $ 760,303 =============== ================= =========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 47 FTVIPT TEMPLETON FOREIGN SECURITIES FTVIPT MUTUAL DISCOVERY SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ --------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ------------------- ------------ ------------- -------------- ---------- $ 202,235 $ 176,501 $ 91,823 $ 47,911 $ 21,726 $ 5,569 --------------- ------------------- ------------ ------------- -------------- ---------- 35,755 40,650 31,977 8,447 6,018 2,376 --------------- ------------------- ------------ ------------- -------------- ---------- 35,755 40,650 31,977 8,447 6,018 2,376 --------------- ------------------- ------------ ------------- -------------- ---------- 166,480 135,851 59,846 39,464 15,708 3,193 --------------- ------------------- ------------ ------------- -------------- ---------- 731,763 365,468 -- 89,758 17,873 19,692 3,883 366,226 553,100 (11,513) 71,623 7,128 --------------- ------------------- ------------ ------------- -------------- ---------- 735,646 731,694 553,100 78,245 89,496 26,820 --------------- ------------------- ------------ ------------- -------------- ---------- (4,855,241) 305,602 743,656 (759,844) 8,690 90,251 --------------- ------------------- ------------ ------------- -------------- ---------- (4,119,595) 1,037,296 1,296,756 (681,599) 98,186 117,071 --------------- ------------------- ------------ ------------- -------------- ---------- $ (3,953,115) $ 1,173,147 $1,356,602 $ (642,135) $ 113,894 $120,264 =============== =================== ============ ============= ============== ==========
The accompanying notes are an integral part of these financial statements. 48 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY INVESTMENT DIVISION ----------------------------------------- 2008 2007 2006 ------------ --------------- ------------ INVESTMENT INCOME: Dividends $ -- $ -- $ -- ------------ --------------- ------------ EXPENSES: Mortality and expense risk charges 223 334 169 ------------ --------------- ------------ Total expenses 223 334 169 ------------ --------------- ------------ Net investment income (loss) (223) (334) (169) ------------ --------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- Realized gains (losses) on sale of investments (414) 13,926 2,596 ------------ --------------- ------------ Net realized gains (losses) (414) 13,926 2,596 ------------ --------------- ------------ Change in unrealized gains (losses) on investments (37,457) (1,759) 2,024 ------------ --------------- ------------ Net realized and unrealized gains (losses) on investments (37,871) 12,167 4,620 ------------ --------------- ------------ Net increase (decrease) in net assets resulting from operations $ (38,094) $ 11,833 $ 4,451 ============ =============== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 49 FIDELITY VIP CONTRAFUND FIDELITY VIP ASSET MANAGER: GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------- -------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- -------------------------- ------------ ------------- ------------------- ---------- $ 24,698 $ 24,439 $ 18,557 $ 22,937 $ 47,327 $16,581 --------------- -------------------------- ------------ ------------- ------------------- ---------- 11,393 12,994 7,808 5,926 5,479 4,218 --------------- -------------------------- ------------ ------------- ------------------- ---------- 11,393 12,994 7,808 5,926 5,479 4,218 --------------- -------------------------- ------------ ------------- ------------------- ---------- 13,305 11,445 10,749 17,011 41,848 12,363 --------------- -------------------------- ------------ ------------- ------------------- ---------- 76,672 728,457 161,683 910 -- -- (319,330) 133,390 69,614 8,025 14,373 3,099 --------------- -------------------------- ------------ ------------- ------------------- ---------- (242,658) 861,847 231,297 8,935 14,373 3,099 --------------- -------------------------- ------------ ------------- ------------------- ---------- (1,292,698) (453,602) (100,652) (532,156) 140,304 39,972 --------------- -------------------------- ------------ ------------- ------------------- ---------- (1,535,356) 408,245 130,645 (523,221) 154,677 43,071 --------------- -------------------------- ------------ ------------- ------------------- ---------- $ (1,522,051) $ 419,690 $ 141,394 $ (506,210) $ 196,525 $55,434 =============== ========================== ============ ============= =================== ==========
The accompanying notes are an integral part of these financial statements. 50 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 FIDELITY VIP INVESTMENT GRADE BOND INVESTMENT DIVISION ---------------------------------- 2008 2007 2006 ---------- ---------- ------------ INVESTMENT INCOME: Dividends $ 2,038 $ 1,370 $1,506 ---------- ----------------------- EXPENSES: Mortality and expense risk charges 535 497 147 ---------- ---------- ------------ Total expenses 535 497 147 ---------- ---------- ------------ Net investment income (loss) 1,503 873 1,359 ---------- ---------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 40 -- 92 Realized gains (losses) on sale of investments 13,627 1,728 (928) ---------- ---------- ------------ Net realized gains (losses) 13,667 1,728 (836) ---------- ---------- ------------ Change in unrealized gains (losses) on investments (8,842) 6,849 767 ---------- ---------- ------------ Net realized and unrealized gains (losses) on investments 4,825 8,577 (69) ---------- ---------- ------------ Net increase (decrease) in net assets resulting from operations $ 6,328 $ 9,450 $1,290 ========== ========== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 51 FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP EQUITY-INCOME MID CAP FREEDOM 2010 FREEDOM 2020 FREEDOM 2030 INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- ---------------------- ---------------------- ---------------------- -------------------- 2008 2007 2006 2008 (B) 2008 (B) 2008 (B) 2008 (B) ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- $ 20,119 $ 21,939 $ 8,458 $ 49 $ 828 $ 1,266 $ 669 ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- 3,772 2,725 885 35 26 49 17 ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- 3,772 2,725 885 35 26 49 17 ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- 16,347 19,214 7,573 14 802 1,217 652 ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- 931 103,323 35,411 -- 721 1,384 1,202 (282,918) 17,259 3,265 (70) (176) (106) (88) ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- (281,987) 120,582 38,676 (70) 545 1,278 1,114 ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- (292,885) (137,717) 1,802 (10,714) (2,956) (11,135) (3,051) ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- (574,872) (17,135) 40,478 (10,784) (2,411) (9,857) (1,937) ------------- ----------------- --------- ---------------------- ---------------------- ---------------------- -------------------- $ (558,525) $ 2,079 $48,051 $ (10,770) $ (1,609) $ (8,640) $ (1,285) ============= ================= ========= ====================== ====================== ====================== ====================
The accompanying notes are an integral part of these financial statements. 52 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AMERICAN FUNDS GROWTH INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ---------------- ------------------ -------------- INVESTMENT INCOME: Dividends $ 916,946 $ 910,466 $ 727,425 ---------------- ------------------ -------------- EXPENSES: Mortality and expense risk charges 908,181 963,168 728,495 ---------------- ------------------ -------------- Total expenses 908,181 963,168 728,495 ---------------- ------------------ -------------- Net investment income (loss) 8,765 (52,702) (1,070) ---------------- ------------------ -------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 12,124,971 7,520,494 522,218 Realized gains (losses) on sale of investments (207,564) 893,765 399,390 ---------------- ------------------ -------------- Net realized gains (losses) 11,917,407 8,414,259 921,608 ---------------- ------------------ -------------- Change in unrealized gains (losses) on investments (70,192,654) 3,035,574 6,751,062 ---------------- ------------------ -------------- Net realized and unrealized gains (losses) on investments (58,275,247) 11,449,833 7,672,670 ---------------- ------------------ -------------- Net increase (decrease) in net assets resulting from operations $ (58,266,482) $ 11,397,131 $ 7,671,600 ================ ================== ==============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 53 AMERICAN FUNDS GROWTH-INCOME AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------- ------------------------------------------------------ 2008 2007 2006 2008 2007 2006 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- $ 1,175,716 $ 1,142,855 $ 918,542 $ -- $ 1,729,457 $ 162,359 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- 559,000 619,745 467,194 466,291 498,593 306,582 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- 559,000 619,745 467,194 466,291 498,593 306,582 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- 616,716 523,110 451,348 (466,291) 1,230,864 (144,223) ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- 4,335,077 2,332,094 1,285,086 7,571,704 4,252,758 1,814,506 (236,359) 792,717 194,098 (694,299) 1,739,097 1,195,131 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- 4,098,718 3,124,811 1,479,184 6,877,405 5,991,855 3,009,637 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- (34,739,655) (1,027,655) 5,509,333 (44,244,505) 1,948,016 4,197,799 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- (30,640,937) 2,097,156 6,988,517 (37,367,100) 7,939,871 7,207,436 ---------------- ---------------------- ------------ ---------------- ------------------- ----------------- $ (30,024,221) $ 2,620,266 $7,439,865 $ (37,833,391) $ 9,170,735 $7,063,213 ================ ====================== ============ ================ =================== =================
The accompanying notes are an integral part of these financial statements. 54 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AMERICAN FUNDS BOND INVESTMENT DIVISION ---------------------------------------- 2008 2007 2006 (A) ------------- --------------- ----------- INVESTMENT INCOME: Dividends $ 196,489 $ 185,659 $ 2,483 ------------- --------------- ----------- EXPENSES: Mortality and expense risk charges 28,355 15,059 1,499 ------------- --------------- ----------- Total expenses 28,355 15,059 1,499 ------------- --------------- ----------- Net investment income (loss) 168,134 170,600 984 ------------- --------------- ----------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 8,541 -- -- Realized gains (losses) on sale of investments (86,900) 13,076 (909) ------------- --------------- ----------- Net realized gains (losses) (78,359) 13,076 (909) ------------- --------------- ----------- Change in unrealized gains (losses) on investments (446,834) (143,419) 13,837 ------------- --------------- ----------- Net realized and unrealized gains (losses) on investments (525,193) (130,343) 12,928 ------------- --------------- ----------- Net increase (decrease) in net assets resulting from operations $ (357,059) $ 40,257 $ 13,912 ============= =============== ===========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 55 AMERICAN FUNDS AMERICAN FUNDS U.S. GOVERNMENT/AAA MIST T. ROWE PRICE INTERNATIONAL RATED SECURITIES MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ---------------------- ------------------------------------------ 2008 (B) 2008 (B) 2008 2007 2006 ---------------------- ---------------------- --------------- -------------- ------------ $ 1,123 $ 745 $ 10,159 $ 32,087 $ -- ---------------------- ---------------------- --------------- -------------- ------------ 48 36 131,625 119,212 91,448 ---------------------- ---------------------- --------------- -------------- ------------ 48 36 131,625 119,212 91,448 ---------------------- ---------------------- --------------- -------------- ------------ 1,075 709 (121,466) (87,125) (91,448) ---------------------- ---------------------- --------------- -------------- ------------ -- -- 1,828,446 624,268 373,372 (88) 1 (329,119) 750,188 524,517 ---------------------- ---------------------- --------------- -------------- ------------ (88) 1 1,499,327 1,374,456 897,889 ---------------------- ---------------------- --------------- -------------- ------------ (13,968) 862 (8,808,387) 843,627 (173,792) ---------------------- ---------------------- --------------- -------------- ------------ (14,056) 863 (7,309,060) 2,218,083 724,097 ---------------------- ---------------------- --------------- -------------- ------------ $ (12,981) $ 1,572 $ (7,430,526) $ 2,130,958 $ 632,649 ====================== ====================== =============== ============== ============
The accompanying notes are an integral part of these financial statements. 56 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION -------------------------------------------- 2008 2007 2006 --------------- --------------- ------------ INVESTMENT INCOME: Dividends $ 256,943 $ 175,461 $ 107,793 --------------- --------------- ------------ EXPENSES: Mortality and expense risk charges 103,390 103,179 56,798 --------------- --------------- ------------ Total expenses 103,390 103,179 56,798 --------------- --------------- ------------ Net investment income (loss) 153,553 72,282 50,995 --------------- --------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,302,185 1,709,535 423,780 Realized gains (losses) on sale of investments (411,130) 462,480 81,019 --------------- --------------- ------------ Net realized gains (losses) 891,055 2,172,015 504,799 --------------- --------------- ------------ Change in unrealized gains (losses) on investments (7,755,181) (879,168) 963,904 --------------- --------------- ------------ Net realized and unrealized gains (losses) on investments (6,864,126) 1,292,847 1,468,703 --------------- --------------- ------------ Net increase (decrease) in net assets resulting from operations $ (6,710,573) $ 1,365,129 $1,519,698 =============== =============== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 57 MIST PIMCO TOTAL RETURN MIST RCM TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- --------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ----------------------- ----------- --------------- ---------------------- ------------ $ 1,327,240 $ 1,037,985 $ 719,124 $ 1,349,744 $ -- $ -- -------------- ----------------------- ----------- --------------- ---------------------- ------------ 283,126 249,561 217,239 88,892 78,918 61,070 -------------- ----------------------- ----------- --------------- ---------------------- ------------ 283,126 249,561 217,239 88,892 78,918 61,070 -------------- ----------------------- ----------- --------------- ---------------------- ------------ 1,044,114 788,424 501,885 1,260,852 (78,918) (61,070) -------------- ----------------------- ----------- --------------- ---------------------- ------------ 807,479 -- 10,617 2,816,232 297,201 -- (11,712) 88,836 74,726 (702,139) 321,209 222,324 -------------- ----------------------- ----------- --------------- ---------------------- ------------ 795,767 88,836 85,343 2,114,093 618,410 222,324 -------------- ----------------------- ----------- --------------- ---------------------- ------------ (1,944,451) 1,198,111 469,783 (9,308,569) 1,944,863 156,356 -------------- ----------------------- ----------- --------------- ---------------------- ------------ (1,148,684) 1,286,947 555,126 (7,194,476) 2,563,273 378,680 -------------- ----------------------- ----------- --------------- ---------------------- ------------ $ (104,570) $ 2,075,371 $ 1,057,011 $ (5,933,624) $ 2,484,355 $ 317,610 ============== ======================= =========== =============== ====================== ============
The accompanying notes are an integral part of these financial statements. 58 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST LORD ABBETT BOND DEBENTURE INVESTMENT DIVISION --------------- ------------------- ------------ 2008 2007 2006 --------------- ------------------- ------------ INVESTMENT INCOME: Dividends $ 901,666 $ 1,117,160 $1,191,085 --------------- ------------------- ------------ EXPENSES: Mortality and expense risk charges 160,256 166,476 139,802 --------------- ------------------- ------------ Total expenses 160,256 166,476 139,802 --------------- ------------------- ------------ Net investment income (loss) 741,410 950,684 1,051,283 --------------- ------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 312,735 25,764 -- Realized gains (losses) on sale of investments (153,114) 179,522 93,973 --------------- ------------------- ------------ Net realized gains (losses) 159,621 205,286 93,973 --------------- ------------------- ------------ Change in unrealized gains (losses) on investments (5,045,528) 39,883 324,579 --------------- ------------------- ------------ Net realized and unrealized gains (losses) on investments (4,885,907) 245,169 418,552 --------------- ------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (4,144,497) $ 1,195,853 $1,469,835 =============== =================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 59 MIST LAZARD MID CAP MIST MET/AIM SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- ------------ --------------- ---------------------- ------------- $ 55,298 $ 32,279 $ 17,856 $ -- $ -- $ -- --------------- ---------------------- ------------ --------------- ---------------------- ------------- 39,050 44,498 29,336 24,205 24,194 16,523 --------------- ---------------------- ------------ --------------- ---------------------- ------------- 39,050 44,498 29,336 24,205 24,194 16,523 --------------- ---------------------- ------------ --------------- ---------------------- ------------- 16,248 (12,219) (11,480) (24,205) (24,194) (16,523) --------------- ---------------------- ------------ --------------- ---------------------- ------------- 338,409 442,382 392,270 254,249 37,183 267,325 (302,807) 40,395 20,740 (56,467) 80,971 18,065 --------------- ---------------------- ------------ --------------- ---------------------- ------------- 35,602 482,777 413,010 197,782 118,154 285,390 --------------- ---------------------- ------------ --------------- ---------------------- ------------- (2,239,073) (720,263) 56,316 (1,510,157) 135,230 (33,826) --------------- ---------------------- ------------ --------------- ---------------------- ------------- (2,203,471) (237,486) 469,326 (1,312,375) 253,384 251,564 --------------- ---------------------- ------------ --------------- ---------------------- ------------- $ (2,187,223) $ (249,705) $ 457,846 $ (1,336,580) $ 229,190 $235,041 =============== ====================== ============ =============== ====================== =============
The accompanying notes are an integral part of these financial statements. 60 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST HARRIS OAKMARK INTERNATIONAL INVESTMENT DIVISION ---------------- ---------------------- ------------ 2008 2007 2006 ---------------- ---------------------- ------------ INVESTMENT INCOME: Dividends $ 427,414 $ 234,443 $ 350,324 ---------------- ---------------------- ------------ EXPENSES: Mortality and expense risk charges 185,029 229,276 127,018 ---------------- ---------------------- ------------ Total expenses 185,029 229,276 127,018 ---------------- ---------------------- ------------ Net investment income (loss) 242,385 5,167 223,306 ---------------- ---------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 3,659,339 2,011,612 874,510 Realized gains (losses) on sale of investments (984,052) 713,857 125,443 ---------------- ---------------------- ------------ Net realized gains (losses) 2,675,287 2,725,469 999,953 ---------------- ---------------------- ------------ Change in unrealized gains (losses) on investments (13,913,907) (3,512,929) 2,507,928 ---------------- ---------------------- ------------ Net realized and unrealized gains (losses) on investments (11,238,620) (787,460) 3,507,881 ---------------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (10,996,235) $ (782,293) $3,731,187 ================ ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 61 MIST LEGG MASON PARTNERS AGGRESSIVE GROWTH MIST LORD ABBETT GROWTH AND INCOME INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- ------------- --------------- ---------------------- -------------- $ 943 $ 17,148 $ -- $ 96,064 $ 59,988 $ 887 --------------- ---------------------- ------------- --------------- ---------------------- -------------- 57,519 67,790 65,378 25,528 28,949 22,648 ---- ---------- ---------------------- ------------- --------------- ---------------------- -------------- 57,519 67,790 65,378 25,528 28,949 22,648 ---- ---------- ---------------------- ------------- --------------- ---------------------- -------------- (56,576) (50,642) (65,378) 70,536 31,039 (21,761) --------------- ---------------------- ------------- --------------- ---------------------- -------------- 54,432 718,994 438,536 543,774 259,517 3,901 (72,581) 207,519 177,119 (71,592) 36,864 958,803 --------------- ---------------------- ------------- --------------- ---------------------- -------------- (18,149) 926,513 615,655 472,182 296,381 962,704 --------------- ---------------------- ------------- --------------- ---------------------- -------------- (3,076,964) (747,047) (742,982) (2,888,440) (147,617) (295,172) --------------- ---------------------- ------------- --------------- ---------------------- -------------- (3,095,113) 179,466 (127,327) (2,416,258) 148,764 667,532 --------------- ---------------------- ------------- --------------- ---------------------- -------------- $ (3,151,689) $ 128,824 $ (192,705) $ (2,345,722) $ 179,803 $ 645,771 =============== ====================== ============= =============== ====================== ==============
The accompanying notes are an integral part of these financial statements. 62 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST CLARION GLOBAL REAL ESTATE INVESTMENT DIVISION --------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ------------ INVESTMENT INCOME: Dividends $ 332,725 $ 222,388 $ 128,299 --------------- ---------------------- ------------ EXPENSES: Mortality and expense risk charges 140,313 177,701 108,818 --------------- ---------------------- ------------ Total expenses 140,313 177,701 108,818 --------------- ---------------------- ------------ Net investment income (loss) 192,412 44,687 19,481 --------------- ---------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 1,614,459 1,785,543 609,936 Realized gains (losses) on sale of investments (667,437) 745,343 210,018 --------------- ---------------------- ------------ Net realized gains (losses) 947,022 2,530,886 819,954 --------------- ---------------------- ------------ Change in unrealized gains (losses) on investments (9,433,208) (6,132,457) 3,020,558 --------------- ---------------------- ------------ Net realized and unrealized gains (losses) on investments (8,486,186) (3,601,571) 3,840,512 --------------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (8,293,774) $ (3,556,884) $3,859,993 =============== ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 63 MIST VAN KAMPEN MID CAP GROWTH MIST LORD ABBETT MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- $ 345 $ -- $ -- $ 197 $ 530 $ 203 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- 78 24 -- 312 218 184 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- 78 24 -- 312 218 184 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- 267 (24) -- (115) 312 19 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- 2,390 -- -- 5,229 11,174 3,482 (81) -- -- (14,654) (1,133) (69) ------------- ---------------------- ------------ ------------ ---------------------- ----------------- 2,309 -- -- (9,425) 10,041 3,413 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- (17,251) (570) -- (38,556) (10,458) 880 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- (14,942) (570) -- (47,981) (417) 4,293 ------------- ---------------------- ------------ ------------ ---------------------- ----------------- $ (14,675) $ (594) $ -- $ (48,096) $ (105) $ 4,312 ============= ====================== ============ ============ ====================== =================
The accompanying notes are an integral part of these financial statements. 64 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST THIRD AVENUE SMALL CAP VALUE INVESTMENT DIVISION -------------------------------------------- 2008 2007 2006 ------------- ---------------- ------------- INVESTMENT INCOME: Dividends $ 2,384 $ 2,794 $ 133 ------------- ---------------- ------------- EXPENSES: Mortality and expense risk charges 1,496 1,456 482 ------------- ---------------- ------------- Total expenses 1,496 1,456 482 ------------- ---------------- ------------- Net investment income (loss) 888 1,338 (349) ------------- ---------------- ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 21,799 18,350 2,011 Realized gains (losses) on sale of investments (21,646) 4,229 1,511 ------------- ---------------- ------------- Net realized gains (losses) 153 22,579 3,522 ------------- ---------------- ------------- Change in unrealized gains (losses) on investments (119,764) (41,016) 21,745 ------------- ---------------- ------------- Net realized and unrealized gains (losses) on investments (119,611) (18,437) 25,267 ------------- ---------------- ------------- Net increase (decrease) in net assets resulting from operations $ (118,723) $ (17,099) $24,918 ============= ================ =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 65 MIST OPPENHEIMER CAPITAL APPRECIATION MIST LEGG MASON VALUE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 (A) ------------- ------------------ ------------- --------------- ---------------------- ------------- $ 40,326 $ 618 $ 583 $ 12,937 $ 190 $ 7,771 ------------- ------------------ ------------- --------------- ---------------------- ------------- 9,700 4,920 1,966 33,929 54,485 28,159 ------------- ------------------ ------------- --------------- ---------------------- ------------- 9,700 4,920 1,966 33,929 54,485 28,159 ------------- ------------------ ------------- --------------- ---------------------- ------------- 30,626 (4,302) (1,383) (20,992) (54,295) (20,388) ------------- ------------------ ------------- --------------- ---------------------- ------------- 295,189 27,608 1,330 176,346 6,404 103,047 (106,123) 9,182 6,117 (135,383) 31,337 (4,060) ------------- ------------------ ------------- --------------- ---------------------- ------------- 189,066 36,790 7,447 40,963 37,741 98,987 ------------- ------------------ ------------- --------------- ---------------------- ------------- (860,586) 18,908 12,744 (3,108,496) (371,535) 306,184 ------------- ------------------ ------------- --------------- ---------------------- ------------- (671,520) 55,698 20,191 (3,067,533) (333,794) 405,171 ------------- ------------------ ------------- --------------- ---------------------- ------------- $ (640,894) $ 51,396 $18,808 $ (3,088,525) $ (388,089) $384,783 ============= ================== ============= =============== ====================== =============
The accompanying notes are an integral part of these financial statements. 66 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST SSGA GROWTH ETF INVESTMENT DIVISION ----------------------------------- 2008 2007 2006 (A) ------------- ----------- --------- INVESTMENT INCOME: Dividends $ 9,041 $ -- $1,841 ------------- ----------- --------- EXPENSES: Mortality and expense risk charges 4,512 3,337 279 ------------- ----------- --------- Total expenses 4,512 3,337 279 ------------- ----------- --------- Net investment income (loss) 4,529 (3,337) 1,562 ------------- ----------- --------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 11,307 -- 385 Realized gains (losses) on sale of investments (32,358) 10,329 1,385 ------------- ----------- --------- Net realized gains (losses) (21,051) 10,329 1,770 ------------- ----------- --------- Change in unrealized gains (losses) on investments (210,490) (2,639) 4,607 ------------- ----------- --------- Net realized and unrealized gains (losses) on investments (231,541) 7,690 6,377 ------------- ----------- --------- Net increase (decrease) in net assets resulting from operations $ (227,012) $ 4,353 $7,939 ============= =========== =========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 67 MIST SSGA GROWTH AND INCOME ETF MIST PIMCO INFLATION PROTECTED BOND INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------- ----------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 (A) ------------- ---------------------- --------------- ------------- ------------------- ------------- $ 7,559 $ 1 $1,529 $ 129,679 $ 5,472 $ -- ------------- ---------------------- --------------- ------------- ------------------- ------------- 3,301 2,341 230 34,082 3,681 463 ------------- ---------------------- --------------- ------------- ------------------- ------------- 3,301 2,341 230 34,082 3,681 463 ------------- ---------------------- --------------- ------------- ------------------- ------------- 4,258 (2,340) 1,299 95,597 1,791 (463) ------------- ---------------------- --------------- ------------- ------------------- ------------- 8,201 15 -- 6,847 -- -- (45,016) 9,148 1,197 (100,879) 4,018 1,472 ------------- ---------------------- --------------- ------------- ------------------- ------------- (36,815) 9,163 1,197 (94,032) 4,018 1,472 ------------- ---------------------- --------------- ------------- ------------------- ------------- (94,558) (2,024) 2,231 (678,454) 50,303 (1,429) ------------- ---------------------- --------------- ------------- ------------------- ------------- (131,373) 7,139 3,428 (772,486) 54,321 43 ------------- ---------------------- --------------- ------------- ------------------- ------------- $ (127,115) $ 4,799 $4,727 $ (676,889) $ 56,112 $ (420) ============= ====================== =============== ============= =================== =============
The accompanying notes are an integral part of these financial statements. 68 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST BLACKROCK LARGE CAP CORE MIST JANUS FORTY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------- ---------------------------- 2008 2007 (C) 2008 2007 (C) ---------------- --------------- --------------- ------------ INVESTMENT INCOME: Dividends $ 2,475,191 $ -- $ 306,277 $ -- ---------------- --------------- --------------- ------------ EXPENSES: Mortality and expense risk charges 2,792,458 2,431,291 57,079 4,282 ---------------- --------------- --------------- ------------ Total expenses 2,792,458 2,431,291 57,079 4,282 ---------------- --------------- --------------- ------------ Net investment income (loss) (317,267) (2,431,291) 249,198 (4,282) ---------------- --------------- --------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 16,168,718 -- 132,557 -- Realized gains (losses) on sale of investments (6,439,384) 181,462 (167,618) 23,570 ---------------- --------------- --------------- ------------ Net realized gains (losses) 9,729,334 181,462 (35,061) 23,570 ---------------- --------------- --------------- ------------ Change in unrealized gains (losses) on investments (169,653,539) 4,642,363 (4,523,728) 188,079 ---------------- --------------- --------------- ------------ Net realized and unrealized gains (losses) on investments (159,924,205) 4,823,825 (4,558,789) 211,649 ---------------- --------------- --------------- ------------ Net increase (decrease) in net assets resulting from operations $(160,241,472) $ 2,392,534 $ (4,309,591) $ 207,367 ================ =============== =============== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 69 MIST MIST AMERICAN FUNDS MIST AMERICAN FUNDS MIST MIST DREMAN BALANCED AMERICAN FUNDS MODERATE MET/FRANKLIN SMALL CAP VALUE ALLOCATION GROWTH ALLOCATION ALLOCATION INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- -------------------- 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) -------------------- -------------------- -------------------- -------------------- -------------------- $ -- $ 368 $ 644 $ 165 $ 469 -------------------- -------------------- -------------------- -------------------- -------------------- -- -- -- -- -- -------------------- -------------------- -------------------- -------------------- -------------------- -- -- -- -- -- -------------------- -------------------- -------------------- -------------------- -------------------- -- 368 644 165 469 -------------------- -------------------- -------------------- -------------------- -------------------- -- 1 -- -- -- (10) (91) 12 (29) (63) -------------------- -------------------- -------------------- -------------------- -------------------- (10) (90) 12 (29) (63) -------------------- -------------------- -------------------- -------------------- -------------------- 6 (1,781) (48) (130) (2,459) -------------------- -------------------- -------------------- -------------------- -------------------- (4) (1,871) (36) (159) (2,522) -------------------- -------------------- -------------------- -------------------- -------------------- $ (4) $ (1,503) $ 608 $ 6 $ (2,053) ==================== ==================== ==================== ==================== ====================
MIST MIST MET/FRANKLIN MET/FRANKLIN TEMPLETON MUTUAL SHARES FOUNDING STRATEGY INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- 2008 (B) 2008 (B) -------------------- -------------------- $ 234 $ 207 -------------------- -------------------- -- -- -------------------- -------------------- -- -- -------------------- -------------------- 234 207 -------------------- -------------------- -- -- (83) (21) -------------------- -------------------- (83) (21) -------------------- -------------------- (2,584) (146) -------------------- -------------------- (2,667) (167) -------------------- -------------------- $ (2,433) $ 40 ==================== ====================
The accompanying notes are an integral part of these financial statements. 70 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST MET/TEMPLETON GROWTH AMERICAN CENTURY VP VISTA INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ------------------------------------------------ 2008 (B) 2008 2007 2006 ---------------------- ------------ ---------------------- ------------ INVESTMENT INCOME: Dividends $ 18 $ -- $ -- $ -- ---------------------- ------------ ---------------------- ------------ EXPENSES: Mortality and expense risk charges -- 285 93 81 ---------------------- ------------ ---------------------- ------------ Total expenses -- 285 93 81 ---------------------- ------------ ---------------------- ------------ Net investment income (loss) 18 (285) (93) (81) ---------------------- ------------ ---------------------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- 1,116 -- 52 Realized gains (losses) on sale of investments (39) (912) 1,950 66 ---------------------- ------------ ---------------------- ------------ Net realized gains (losses) (39) 204 1,950 118 ---------------------- ------------ ---------------------- ------------ Change in unrealized gains (losses) on investments (322) (65,328) 4,790 1,653 ---------------------- ------------ ---------------------- ------------ Net realized and unrealized gains (losses) on investments (361) (65,124) 6,740 1,771 ---------------------- ------------ ---------------------- ------------ Net increase (decrease) in net assets resulting from operations $ (343) $ (65,409) $ 6,647 $1,690 ====================== ============ ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 71 DELAWARE VIP SMALL CAP VALUE DREYFUS VIF INTERNATIONAL VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ---------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------ ------------- ---------------------- --------- $ 4,853 $ 1,797 $ 87 $ 10,713 $ 11,153 $2,040 ------------- ---------------------- ------------ ------------- ---------------------- --------- 4,658 3,812 1,667 2,366 3,245 1,650 ------------- ---------------------- ------------ ------------- ---------------------- --------- 4,658 3,812 1,667 2,366 3,245 1,650 ------------- ---------------------- ------------ ------------- ---------------------- --------- 195 (2,015) (1,580) 8,347 7,908 390 ------------- ---------------------- ------------ ------------- ---------------------- --------- 70,050 53,893 23,651 92,929 99,784 12,788 (158,860) 765 3,801 (67,586) 23,384 2,803 ------------- ---------------------- ------------ ------------- ---------------------- --------- (88,810) 54,658 27,452 25,343 123,168 15,591 ------------- ---------------------- ------------ ------------- ---------------------- --------- (269,207) (146,882) 21,618 (268,322) (101,858) 67,169 ------------- ---------------------- ------------ ------------- ---------------------- --------- (358,017) (92,224) 49,070 (242,979) 21,310 82,760 ------------- ---------------------- ------------ ------------- ---------------------- --------- $ (357,822) $ (94,239) $47,490 $ (234,632) $ 29,218 $83,150 ============= ====================== ============ ============= ====================== =========
The accompanying notes are an integral part of these financial statements. 72 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 GOLDMAN SACHS MID CAP VALUE INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------- INVESTMENT INCOME: Dividends $ 13,616 $ 10,129 $ 2,401 ------------- ---------------------- ------------- EXPENSES: Mortality and expense risk charges 5,676 3,838 502 ------------- ---------------------- ------------- Total expenses 5,676 3,838 502 ------------- ---------------------- ------------- Net investment income (loss) 7,940 6,291 1,899 ------------- ---------------------- ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 2,438 187,441 26,443 Realized gains (losses) on sale of investments (114,620) 15,940 1,291 ------------- ---------------------- ------------- Net realized gains (losses) (112,182) 203,381 27,734 ------------- ---------------------- ------------- Change in unrealized gains (losses) on investments (486,662) (272,066) (2,200) ------------- ---------------------- ------------- Net realized and unrealized gains (losses) on investments (598,844) (68,685) 25,534 ------------- ---------------------- ------------- Net increase (decrease) in net assets resulting from operations $ (590,904) $ (62,394) $27,433 ============= ====================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 73 GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY MFS HIGH INCOME INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ ---------------------------------- 2008 2007 2006 2008 2007 2006 ------------ ---------------------- ------------ ----------- ------------ --------- $ 447 $ 579 $ 576 $ 1,656 $ 4,038 $4,418 ------------ ---------------------- ------------ ----------- ------------ --------- 255 510 319 62 175 372 ------------ ---------------------- ------------ ----------- ------------ --------- 255 510 319 62 175 372 ------------ ---------------------- ------------ ----------- ------------ --------- 192 69 257 1,594 3,863 4,046 ------------ ---------------------- ------------ ----------- ------------ --------- 113 15,009 6,284 -- -- -- (35,096) (448) (124) (3,105) 1,517 1,254 ------------ ---------------------- ------------ ----------- ------------ --------- (34,983) 14,561 6,160 (3,105) 1,517 1,254 ------------ ---------------------- ------------ ----------- ------------ --------- (655) (37,975) 1,891 (1,097) (3,019) 2,298 ---- ------- ---------------------- ------------ ----------- ------------ --------- (35,638) (23,414) 8,051 (4,202) (1,502) 3,552 ------------ ---------------------- ------------ ----------- ------------ --------- $ (35,446) $ (23,345) $8,308 $ (2,608) $ 2,361 $7,598 ============ ====================== ============ =========== ============ =========
The accompanying notes are an integral part of these financial statements. 74 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MFS GLOBAL EQUITY INVESTMENT DIVISION ---------------------------------------- 2008 2007 2006 ------------- ------------ ------------- INVESTMENT INCOME: Dividends $ 480 $ 796 $ -- ------------- ------------ ------------- EXPENSES: Mortality and expense risk charges 255 184 38 ------------- ------------ ------------- Total expenses 255 184 38 ------------- ------------ ------------- Net investment income (loss) 225 612 (38) ------------- ------------ ------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions 4,968 2,587 -- Realized gains (losses) on sale of investments (670) 2,926 100 ------------- ------------ ------------- Net realized gains (losses) 4,298 5,513 100 ------------- ------------ ------------- Change in unrealized gains (losses) on investments (30,617) (2,915) 2,944 ------------- ------------ ------------- Net realized and unrealized gains (losses) on investments (26,319) 2,598 3,044 ------------- ------------ ------------- Net increase (decrease) in net assets resulting from operations $ (26,094) $ 3,210 $ 3,006 ============= ============ =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 75 MFS NEW DISCOVERY MFS VALUE INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------- ------------------------------------ 2008 2007 2006 2008 2007 2006 -------------- -------------- -------- ----------- --------------- -------- $ -- $ -- $ -- $ 10,331 $ -- $ -- -------------- -------------- -------- ----------- --------------- -------- 11 13 -- 302 78 -- -------------- -------------- -------- ----------- --------------- -------- 11 13 -- 302 78 -- -------------- -------------- -------- ----------- --------------- -------- (11) (13) 10,029 (78) -- -------------- -------------- -------- ----------- --------------- -------- 561 243 -- 42,245 -- -- (22) (4) -- (23,850) 2,376 -- -------------- -------------- -------- ----------- --------------- -------- 539 239 -- 18,395 2,376 -- -------------- -------------- -------- ----------- --------------- -------- (1,817) (349) -- (26,364) (1,846) -- -------------- -------------- -------- ----------- --------------- -------- (1,278) (110) -- (7,969) 530 -- -------------- -------------- -------- ----------- --------------- -------- $ (1,289) $ (123) $ -- $ 2,060 $ 452 $ -- ============== ============== ======== =========== =============== ========
The accompanying notes are an integral part of these financial statements. 76 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 VAN KAMPEN LIT GOVERNMENT INVESTMENT DIVISION -------------------------------- 2008 2007 2006 ---------- -------- ------------ INVESTMENT INCOME: Dividends $ 2,019 $ 863 $ 621 ---------- -------- ------------ EXPENSES: Mortality and expense risk charges 143 68 54 ---------- -------- ------------ Total expenses 143 68 ---------- -------- ------------ Net investment income (loss) 1,876 795 567 ---------- -------- ------------ NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS: Realized gain distributions -- -- -- Realized gains (losses) on sale of investments (1,270) 38 (329) ---------- -------- ---- ------- Net realized gains (losses) (1,270) 38 (329) ---------- -------- ------------ Change in unrealized gains (losses) on investments (983) 35 121 ---------- -------- ------------ Net realized and unrealized gains (losses) on investments (2,253) 73 (208) ---------- -------- ------------ Net increase (decrease) in net assets resulting from operations $ (377) $ 868 $ 359 ========== ======== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 77 PIONEER VCT EMERGING WELLS FARGO VT TOTAL RETURN BOND WELLS FARGO VT MONEY MARKET MARKETS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------- -------------------------------- -------------------- 2008 2007 2006 2008 2007 2006 2008 (B) ---------- ------------------- --------- -------- ------------ ---------- -------------------- $ 7,542 $ 4,429 $1,616 $ 46,050 $ 56,709 $ 17,272 $ -- ---------- ------------------- --------- -------- ------------ ---------- -------------------- 619 393 138 8,287 5,004 1,399 141 ---------- ------------------- --------- -------- ------------ ---------- -------------------- 619 393 8,287 5,004 141 ---------- ------------------- --------- -------- ------------ ---------- -------------------- 6,923 4,036 1,478 37,763 51,705 15,873 (141) ---------- ------------------- --------- -------- ------------ ---------- -------------------- -- -- -- -- -- -- -- (532) 482 (203) -- -- -- (554) ---------- ------------------- --------- -------- ------------ ---------- -------------------- (532) 482 (203) -- -- -- (554) ---------- ------------------- --------- -------- ------------ ---------- -------------------- (2,943) 726 969 -- -- -- (40,541) ---------- ------------------- --------- -------- ------------ ---------- -------------------- (3,475) 1,208 766 -- -- -- (41,095) ---------- ------------------- --------- -------- ------------ ---------- -------------------- $ 3,448 $ 5,244 $2,244 $ 37,763 $ 51,705 $ 15,873 $ (41,236) ========== =================== ========= ======== ============ ========== ====================
The accompanying notes are an integral part of these financial statements. 78 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF BLACKROCK DIVERSIFIED INVESTMENT DIVISION -------------------------------------------------------------- 2008 2007 2006 ---------------- ---------------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 5,620,528 $ 5,593,077 $ 5,093,370 Net realized gains (losses) 1,274,596 3,011,483 2,697,730 Change in unrealized gains (losses) on investments (90,018,067) 7,614,036 21,697,213 ---------------- ---------------------------- ---------------- Net increase (decrease) in net assets resulting from operations (83,122,943) 16,218,596 29,488,313 ---------------- ---------------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 36,312,304 40,003,652 43,210,333 Net transfers (including fixed account) (7,645,743) (6,583,051) (14,585,173) Policy charges (25,234,783) (24,846,715) (25,567,832) Transfers for policy benefits and terminations (18,838,290) (21,979,765) (20,863,345) ---------------- ---------------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (15,406,512) (13,405,879) (17,806,017) ---------------- ---------------------------- ---------------- Net increase (decrease) in net assets (98,529,455) 2,812,717 11,682,296 NET ASSETS: Beginning of period 334,245,436 331,432,719 319,750,423 ---------------- ---------------------------- ---------------- End of period $ 235,715,981 $ 334,245,436 $ 331,432,719 ================ ============================ ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 79 MSF BLACKROCK AGGRESSIVE GROWTH MSF METLIFE STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------------- ------------------------------------------------------------ 2008 2007 2006 2008 2007 2006 ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- $ (1,837,501) $ (2,172,462) $ (1,968,385) $ 7,210,587 $ 1,607,854 $ 7,509,405 740,184 1,382,763 (1,521,325) 24,582,861 22,330,416 27,994,237 (115,833,611) 44,452,957 16,167,405 (312,125,621) 7,171,409 53,741,400 ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- (116,930,928) 43,663,258 12,677,695 (280,332,173) 31,109,679 89,245,042 ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- 22,493,319 24,166,939 26,442,113 104,846,071 108,420,954 97,155,710 (1,853,857) (6,084,428) (4,120,591) (10,320,663) (8,388,405) (16,861,291) (14,747,697) (14,515,068) (14,565,748) (45,394,792) (45,320,834) (44,010,383) (14,745,615) (15,886,481) (13,935,844) (44,256,002) (45,317,699) (23,533,626) ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- (8,853,850) (12,319,038) (6,180,070) 4,874,614 9,394,016 12,750,410 ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- (125,784,778) 31,344,220 6,497,625 (275,457,559) 40,503,695 101,995,452 260,061,815 228,717,595 222,219,970 748,068,488 707,564,793 605,569,341 ---------------- ---------------------- ----------------- ---------------- -------------------------- ---------------- $ 134,277,037 $ 260,061,815 $228,717,595 $ 472,610,929 $ 748,068,488 $ 707,564,793 ================ ====================== ================= ================ ========================== ================
The accompanying notes are an integral part of these financial statements. 80 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF JULIUS BAER INTERNATIONAL STOCK INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,319,521 $ 147,518 $ 350,554 Net realized gains (losses) 6,453,740 5,161,819 832,502 Change in unrealized gains (losses) on investments (39,671,178) 1,044,733 7,805,567 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (31,897,917) 6,354,070 8,988,623 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 6,916,925 7,358,066 7,377,673 Net transfers (including fixed account) (1,195,679) 338,266 2,367,896 Policy charges (3,925,209) (4,047,380) (3,898,913) Transfers for policy benefits and terminations (3,608,501) (4,807,457) (4,181,849) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (1,812,464) (1,158,505) 1,664,807 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (33,710,381) 5,195,565 10,653,430 NET ASSETS: Beginning of period 72,704,709 67,509,144 56,855,714 --------------- ---------------------- ---------------- End of period $ 38,994,328 $ 72,704,709 $67,509,144 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 81 MSF FI MID CAP OPPORTUNITIES MSF T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------------- ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 ---------------- ---------------------- ----------------- --------------- --------------------------------------- $ (979,736) $ (2,156,929) $ (2,228,656) $ (578,209) $ (695,384) $ (661,143) (1,134,327) (3,610,711) (4,482,428) 14,184,194 1,678,195 842,686 (152,860,483) 25,889,645 33,489,573 (44,529,670) 6,321,798 2,138,730 ---------------- ---------------------- ----------------- --------------- ---------------------- ---------------- (154,974,546) 20,122,005 26,778,489 (30,923,685) 7,304,609 2,320,273 ---------------- ---------------------- ----------------- --------------- ---------------------- ---------------- 31,724,715 35,873,638 38,876,326 8,304,333 9,360,936 10,038,924 (4,453,234) (7,434,397) (8,221,054) (1,832,472) (3,254,756) (2,086,001) (15,821,684) (17,322,434) (17,360,725) (4,567,009) (4,451,023) (4,682,277) (14,714,403) (19,624,632) (16,355,336) (4,436,137) (5,026,325) (4,410,219) ---------------- ---------------------- ----------------- --------------- ---------------------- ---------------- (3,264,606) (8,507,825) (3,060,789) (2,531,285) (3,371,168) (1,139,573) ---------------- ---------------------- ----------------- --------------- ---------------------- ---------------- (158,239,152) 11,614,180 23,717,700 (33,454,970) 3,933,441 1,180,700 283,077,852 271,463,672 247,745,972 85,746,187 81,812,746 80,632,046 ---------------- ---------------------- ----------------- --------------- ---------------------- ---------------- $ 124,838,700 $ 283,077,852 $271,463,672 $ 52,291,217 $ 85,746,187 $81,812,746 ================ ====================== ================= =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 82 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF OPPENHEIMER GLOBAL EQUITY INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 579,985 $ 151,331 $ 753,065 Net realized gains (losses) 1,806,879 1,460,274 1,433,066 Change in unrealized gains (losses) on investments (23,254,667) 1,125,527 4,443,736 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (20,867,803) 2,737,132 6,629,867 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 4,811,674 5,517,581 5,350,913 Net transfers (including fixed account) (1,307,371) 265,706 346,998 Policy charges (2,551,030) (2,601,520) (2,495,915) Transfers for policy benefits and terminations (2,513,495) (2,790,725) (2,492,124) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (1,560,222) 391,042 709,872 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (22,428,025) 3,128,174 7,339,739 NET ASSETS: Beginning of period 52,072,709 48,944,535 41,604,796 --------------- ---------------------- ---------------- End of period $ 29,644,684 $ 52,072,709 $48,944,535 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 83 MSF MFS VALUE MSF NEUBERGER BERMAN MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- --------------- ---------------------- ------------- $ 561,336 $ (28,106) $ (31,123) $ (1,022) $ (261,148) $(262,264) 4,618,363 2,998,773 835,096 465,644 3,913,488 7,045,174 (26,124,726) (5,878,800) 8,574,081 (39,787,375) (1,796,392) 382,304 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (20,945,027) (2,908,133) 9,378,054 (39,322,753) 1,855,948 7,165,214 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 9,258,644 10,581,263 11,305,507 12,028,118 13,273,938 13,072,820 (2,421,442) (1,429,602) (3,330,328) (1,512,789) (503,917) 3,378,877 (4,038,000) (4,317,588) (4,238,848) (5,289,330) (5,570,345) (5,310,344) (2,767,928) (4,292,114) (3,266,980) (3,842,875) (4,785,600) (3,723,613) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 31,274 541,959 469,351 1,383,124 2,414,076 7,417,740 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (20,913,753) (2,366,174) 9,847,405 (37,939,629) 4,270,024 14,582,954 61,926,665 64,292,839 54,445,434 82,005,373 77,735,349 63,152,395 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ 41,012,912 $ 61,926,665 $ 64,292,839 $ 44,065,744 $ 82,005,373 $77,735,349 =============== ====================== =============== =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 84 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF T. ROWE PRICE LARGE CAP GROWTH INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (96,719) $ (199,231) $ (223,162) Net realized gains (losses) 2,565,785 2,082,657 507,318 Change in unrealized gains (losses) on investments (24,832,884) 2,367,516 5,044,250 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (22,363,818) 4,250,942 5,328,406 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 6,714,567 7,257,794 7,320,586 Net transfers (including fixed account) (722,396) (2,228,506) 264,173 Policy charges (3,279,014) (3,216,395) (3,041,779) Transfers for policy benefits and terminations (2,458,005) (2,568,167) (2,505,832) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions 255,152 (755,274) 2,037,148 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (22,108,666) 3,495,668 7,365,554 NET ASSETS: Beginning of period 52,811,241 49,315,573 41,950,019 --------------- ---------------------- ---------------- End of period $ 30,702,575 $ 52,811,241 $49,315,573 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 85 MSF LEHMAN BROTHERS AGGREGATE BOND INDEX MSF MORGAN STANLEY EAFE INDEX INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ 3,745,554 $ 3,682,982 $ 3,031,227 $ 1,230,251 $ 725,557 $ 423,680 578,961 192,840 (57,852) 2,898,914 2,259,334 984,685 873,489 2,133,669 (71,436) (35,342,222) 2,980,876 9,577,488 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 5,198,004 6,009,491 2,901,939 (31,213,057) 5,965,767 10,985,853 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 17,571,072 17,877,600 17,471,563 11,532,998 11,289,849 9,956,199 (10,724,107) 3,276,682 387,397 1,253,714 4,399,093 1,802,577 (8,741,597) (7,537,250) (6,943,571) (4,798,345) (4,672,031) (3,911,321) (11,706,897) (5,115,587) (3,947,414) (3,419,820) (3,748,512) (2,889,103) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (13,601,529) 8,501,445 6,967,975 4,568,547 7,268,399 4,958,352 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (8,403,525) 14,510,936 9,869,914 (26,644,510) 13,234,166 15,944,205 104,928,263 90,417,327 80,547,413 71,635,930 58,401,764 42,457,559 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ 96,524,738 $ 104,928,263 $ 90,417,327 $ 44,991,420 $ 71,635,930 $58,401,764 =============== ====================== =============== =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 86 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF RUSSELL 2000 INDEX INVESTMENT DIVISION --------------------------------------------------------- 2008 2007 2006 --------------- ------------------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 223,659 $ 50,303 $ (4,913) Net realized gains (losses) 1,982,185 5,503,433 2,636,194 Change in unrealized gains (losses) on investments (21,357,274) (6,890,836) 5,025,107 --------------- ------------------------- --------------- Net increase (decrease) in net assets resulting from operations (19,151,430) (1,337,100) 7,656,388 --------------- ------------------------- --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 7,965,817 8,728,900 9,061,617 Net transfers (including fixed account) (1,376,858) 182,391 1,828,304 Policy charges (3,405,238) (3,451,476) (3,270,510) Transfers for policy benefits and terminations (2,830,521) (3,167,104) (2,623,656) --------------- ------------------------- --------------- Net increase (decrease) in net assets resulting from policy transactions 353,200 2,292,711 4,995,755 --------------- ------------------------- --------------- Net increase (decrease) in net assets (18,798,230) 955,611 12,652,143 NET ASSETS: Beginning of period 56,244,600 55,288,989 42,636,846 --------------- ------------------------- --------------- End of period $ 37,446,370 $ 56,244,600 $ 55,288,989 =============== ========================= ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 87 MSF JENNISON GROWTH MSF BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------------- -------------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- --------------- --------------- ---------------------- ----------------- $ 209,436 $ (64,681) $ (113,119) $ (263,415) $ (601,992) $ (529,917) 1,100,787 743,825 127,931 6,156,715 12,982,944 18,850,246 (7,064,823) 832,560 269,709 (44,228,185) (16,875,056) (4,073,024) -------------- ---------------------- --------------- --------------- ---------------------- ----------------- (5,754,600) 1,511,704 284,521 (38,334,885) (4,494,104) 14,247,305 -------------- ---------------------- --------------- --------------- ---------------------- ----------------- 1,982,892 2,217,875 2,455,072 13,840,463 15,755,463 17,326,197 (361,588) (414,141) (87,387) (4,686,927) (2,527,871) (3,858,623) (951,173) (905,170) (914,319) (6,294,459) (6,814,895) (6,990,567) (843,478) (767,811) (722,873) (5,526,338) (6,624,745) (5,432,706) -------------- ---------------------- --------------- --------------- ---------------------- ----------------- (173,347) 130,753 730,493 (2,667,261) (212,048) 1,044,301 -------------- ---------------------- --------------- --------------- ---------------------- ----------------- (5,927,947) 1,642,457 1,015,014 (41,002,146) (4,706,152) 15,291,606 15,741,716 14,099,259 13,084,245 100,708,365 105,414,517 90,122,911 -------------- ---------------------- --------------- --------------- ---------------------- ----------------- $ 9,813,769 $ 15,741,716 $ 14,099,259 $ 59,706,219 $ 100,708,365 $ 105,414,517 ============== ====================== =============== =============== ====================== =================
The accompanying notes are an integral part of these financial statements. 88 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MID CAP STOCK INDEX INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 324,526 $ (53,618) $ 186,015 Net realized gains (losses) 4,777,346 3,703,948 4,163,714 Change in unrealized gains (losses) on investments (28,232,883) 158,945 201,865 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (23,131,011) 3,809,275 4,551,594 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 9,503,166 10,058,472 9,822,002 Net transfers (including fixed account) 922,808 1,446,934 1,873,265 Policy charges (4,174,112) (4,088,802) (3,798,648) Transfers for policy benefits and terminations (6,346,919) (3,356,812) (2,881,354) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (95,057) 4,059,792 5,015,265 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (23,226,068) 7,869,067 9,566,859 NET ASSETS: Beginning of period 63,959,203 56,090,136 46,523,277 --------------- ---------------------- ---------------- End of period $ 40,733,135 $ 63,959,203 $56,090,136 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 89 MSF FRANKLIN TEMPLETON SMALL CAP GROWTH MSF BLACKROCK LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION -------------- ---------------------- --------------- -------------- ---------------------- --------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- --------------- -------------- ---------------------- --------------- $ (48,690) $ (60,634) $ (50,288) $ (2,759) $ 13,846 $ 22,314 462,091 725,945 422,517 (9,263) 761,534 510,491 (3,371,627) (436,173) 106,882 (4,899,187) (536,165) 656,059 -------------- ---------------------- --------------- -------------- ---------------------- --------------- (2,958,226) 229,138 479,111 (4,911,209) 239,215 1,188,864 -------------- ---------------------- --------------- -------------- ---------------------- --------------- 1,143,026 1,295,669 1,209,783 2,920,669 2,853,366 1,723,914 (232,983) (34,464) 321,633 905,258 1,496,583 2,275,636 (445,177) (461,653) (432,712) (1,106,269) (997,837) (637,550) (339,761) (356,935) (317,572) (512,125) (713,538) (290,749) -------------- ---------------------- --------------- -------------- ---------------------- --------------- 125,105 442,617 781,132 2,207,533 2,638,574 3,071,251 -------------- ---------------------- --------------- -------------- ---------------------- --------------- (2,833,121) 671,755 1,260,243 (2,703,676) 2,877,789 4,260,115 7,040,049 6,368,294 5,108,051 12,275,048 9,397,259 5,137,144 -------------- ---------------------- --------------- -------------- ---------------------- --------------- $ 4,206,928 $ 7,040,049 $6,368,294 $ 9,571,372 $ 12,275,048 $9,397,259 ============== ====================== =============== ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 90 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF DAVIS VENTURE VALUE INVESTMENT DIVISION ---------------------------------------------------------- 2008 2007 2006 --------------- -------------------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 252,624 $ (49,271) $ 19,378 Net realized gains (losses) 284,552 581,875 2,307,728 Change in unrealized gains (losses) on investments (24,908,606) 1,282,046 3,652,646 --------------- -------------------------- --------------- Net increase (decrease) in net assets resulting from operations (24,371,430) 1,814,650 5,979,752 --------------- -------------------------- --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 10,613,485 10,865,750 9,665,122 Net transfers (including fixed account) 154,312 3,012,023 (4,035,297) Policy charges (4,201,518) (4,001,496) (3,767,671) Transfers for policy benefits and terminations (2,743,331) (3,000,396) (1,975,307) --------------- -------------------------- --------------- Net increase (decrease) in net assets resulting from policy transactions 3,822,948 6,875,881 (113,153) --------------- -------------------------- --------------- Net increase (decrease) in net assets (20,548,482) 8,690,531 5,866,599 NET ASSETS: Beginning of period 58,550,244 49,859,713 43,993,114 --------------- -------------------------- --------------- End of period $ 38,001,762 $ 58,550,244 $ 49,859,713 =============== ========================== ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 91 MSF LOOMIS SAYLES SMALL CAP MSF BLACKROCK LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------- ------------------------------------------------------ 2008 2007 2006 2008 2007 2006 --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- $ (116,679) $ (113,405) $ (90,220) $ (18,267) $ (19,922) $ (26,434) 2,006,144 1,801,940 1,056,941 (120,478) 64,255 954,600 (7,889,493) (305,465) 425,449 (1,924,420) 437,029 (1,121,566) --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- (6,000,028) 1,383,070 1,392,170 (2,063,165) 481,362 (193,400) --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- 2,662,737 2,609,684 2,123,062 1,197,008 860,589 579,414 421,215 1,184,072 2,032,759 1,571,610 621,856 (7,570,628) (1,093,210) (976,939) (791,339) (466,831) (303,215) (483,151) (727,927) (762,075) (537,409) (276,284) (105,375) (171,948) --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- 1,262,815 2,054,742 2,827,073 2,025,503 1,073,855 (7,646,313) --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- (4,737,213) 3,437,812 4,219,243 (37,662) 1,555,217 (7,839,713) 15,771,472 12,333,660 8,114,417 3,824,550 2,269,333 10,109,046 --------------- ---------------------- ---------------- -------------- ---------------------- ---------------- $ 11,034,259 $ 15,771,472 $ 12,333,660 $ 3,786,888 $ 3,824,550 $2,269,333 =============== ====================== ================ ============== ====================== =================
The accompanying notes are an integral part of these financial statements. 92 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF BLACKROCK BOND INCOME INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 3,846,123 $ 2,245,950 $4,656,087 Net realized gains (losses) (261,951) 86,411 (168,463) Change in unrealized gains (losses) on investments (7,357,146) 2,574,419 (1,188,505) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (3,772,974) 4,906,780 3,299,119 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 10,790,630 12,386,608 13,105,607 Net transfers (including fixed account) (3,035,916) (1,778,536) (6,953,279) Policy charges (7,121,758) (6,382,704) (6,810,300) Transfers for policy benefits and terminations (7,310,990) (9,006,967) (5,023,099) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (6,678,034) (4,781,599) (5,681,071) --------------- ---------------------- ---------------- Net increase (decrease) in net assets (10,451,008) 125,181 (2,381,952) NET ASSETS: Beginning of period 92,436,358 92,311,177 94,693,129 --------------- ---------------------- ---------------- End of period $ 81,985,350 $ 92,436,358 $92,311,177 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 93 MSF FI VALUE LEADERS MSF HARRIS OAKMARK FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------------- ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ----------------------- -------------- --------------- ---------------------- ---------------- $ 62,174 $ 3,233 $ 6,148 $ (210,128) $ (184,504) $ (289,521) 411,042 675,004 177,507 4,346,340 8,147,137 5,738,053 (3,184,937) (503,196) 304,366 (29,274,257) (12,430,441) 467,020 -------------- ----------------------- -------------- --------------- ---------------------- ---------------- (2,711,721) 175,041 488,021 (25,138,045) (4,467,808) 5,915,552 -------------- ----------------------- -------------- --------------- ---------------------- ---------------- 1,366,282 1,529,707 1,367,655 8,854,520 10,174,883 10,865,790 (339,700) 104,032 1,301,345 (1,996,000) (2,660,752) (1,374,110) (540,376) (556,747) (460,789) (3,462,919) (4,002,257) (4,090,493) (291,811) (288,167) (180,208) (2,411,660) (3,090,850) (2,391,996) -------------- ----------------------- -------------- --------------- ---------------------- ---------------- 194,395 788,825 2,028,003 983,941 421,024 3,009,191 -------------- ----------------------- -------------- --------------- ---------------------- ---------------- (2,517,326) 963,866 2,516,024 (24,154,104) (4,046,784) 8,924,743 6,742,764 5,778,898 3,262,874 54,129,720 58,176,504 49,251,761 -------------- ----------------------- -------------- --------------- ---------------------- ---------------- $ 4,225,438 $ 6,742,764 $ 5,778,898 $ 29,975,616 $ 54,129,720 $58,176,504 ============== ======================= ============== =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 94 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF WESTERN ASSET MANAGEMENT STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION ------------------------------------------------------------ 2008 2007 2006 --------------- ---------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 570,564 $ 315,401 $ 566,836 Net realized gains (losses) (105,443) 44,985 153,548 Change in unrealized gains (losses) on investments (3,452,504) 187,688 (101,864) --------------- ---------------------- --------------------- Net increase (decrease) in net assets resulting from operations (2,987,383) 548,074 618,520 --------------- ---------------------- --------------------- POLICY TRANSACTIONS: Premium payments received from policy owners 3,632,344 3,898,365 4,045,076 Net transfers (including fixed account) (873,301) 466,692 608,234 Policy charges (1,570,638) (1,437,856) (1,458,611) Transfers for policy benefits and terminations (1,108,566) (905,402) (719,792) --------------- ---------------------- --------------------- Net increase (decrease) in net assets resulting from policy transactions 79,839 2,021,799 2,474,907 --------------- ---------------------- --------------------- Net increase (decrease) in net assets (2,907,544) 2,569,873 3,093,427 NET ASSETS: Beginning of period 18,372,006 15,802,133 12,708,706 --------------- ---------------------- --------------------- End of period $ 15,464,462 $ 18,372,006 $ 15,802,133 =============== ====================== =====================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 95 MSF WESTERN ASSET MANAGEMENT U.S. GOVERNMENT MSF BLACKROCK MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ 545,979 $ 274,009 $ 316,238 $ 1,496,178 $ 2,722,729 $1,597,189 (26,281) 988 (10,510) -- -- -- (712,221) 246,140 127,750 -- -- -- --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (192,523) 521,137 433,478 1,496,178 2,722,729 1,597,189 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 3,041,844 3,196,989 3,383,683 7,147,517 5,145,397 5,160,393 (439,337) 65,805 68,005 (3,230,345) (71,102) 28,142,059 (1,426,939) (1,262,963) (1,263,500) (1,791,374) (3,180,663) (1,921,201) (1,143,545) (773,977) (585,585) (3,755,019) (547,125) (1,677,592) --------------- ---------------------- --------------- --------------- ---------------------- ---------------- 32,023 1,225,854 1,602,603 (1,629,221) 1,346,507 29,703,659 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- (160,500) 1,746,991 2,036,081 (133,043) 4,069,236 31,300,848 15,797,381 14,050,390 12,014,309 63,398,057 59,328,821 28,027,973 --------------- ---------------------- --------------- --------------- ---------------------- ---------------- $ 15,636,881 $ 15,797,381 $ 14,050,390 $ 63,265,014 $ 63,398,057 $59,328,821 =============== ====================== =============== =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 96 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF MFS TOTAL RETURN INVESTMENT DIVISION ----------------------------------------------------- 2008 2007 2006 -------------- ----------------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 147,927 $ 53,260 $ 66,316 Net realized gains (losses) 299,566 167,623 64,610 Change in unrealized gains (losses) on investments (1,824,737) (104,370) 205,638 -------------- ----------------------- -------------- Net increase (decrease) in net assets resulting from operations (1,377,244) 116,513 336,564 -------------- ----------------------- -------------- POLICY TRANSACTIONS: Premium payments received from policy owners 1,252,582 1,181,286 1,268,749 Net transfers (including fixed account) 209,612 1,133,382 560,665 Policy charges (544,548) (457,695) (455,108) Transfers for policy benefits and terminations (228,375) (205,897) (86,159) -------------- ----------------------- -------------- Net increase (decrease) in net assets resulting from policy transactions 689,271 1,651,076 1,288,147 -------------- ----------------------- -------------- Net increase (decrease) in net assets (687,973) 1,767,589 1,624,711 NET ASSETS: Beginning of period 5,549,510 3,781,921 2,157,210 -------------- ----------------------- -------------- End of period $ 4,861,537 $ 5,549,510 $ 3,781,921 ============== ======================= ==============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 97 MSF METLIFE CONSERVATIVE ALLOCATION MSF METLIFE CONSERVATIVE TO MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- ------------- -------------- ---------------------- -------------- $ 10,090 $ (5,884) $ 7,154 $ 15,426 $ (21,161) $ 18,671 (144,954) 24,396 2,237 (9,779) 29,950 32,936 (182,260) 12,074 19,393 (847,823) 79,599 73,219 -------------- ---------------------- ------------- -------------- ---------------------- -------------- (317,124) 30,586 28,784 (842,176) 88,388 124,826 -------------- ---------------------- ------------- -------------- ---------------------- -------------- 277,237 157,209 60,249 1,068,633 793,665 351,209 917,176 218,409 382,425 821,833 772,317 1,104,702 (193,582) (89,575) (39,164) (557,733) (367,535) (201,780) (117,612) (24,846) (58,267) (249,480) (193,487) (73,416) -------------- ---------------------- ------------- -------------- ---------------------- -------------- 883,219 261,197 345,243 1,083,253 1,004,960 1,180,715 -------------- ---------------------- ------------- -------------- ---------------------- -------------- 566,095 291,783 374,027 241,077 1,093,348 1,305,541 784,035 492,252 118,225 2,977,400 1,884,052 578,511 -------------- ---------------------- ------------- -------------- ---------------------- -------------- $ 1,350,130 $ 784,035 $492,252 $ 3,218,477 $ 2,977,400 $ 1,884,052 ============== ====================== ============= ============== ====================== ==============
The accompanying notes are an integral part of these financial statements. 98 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MODERATE ALLOCATION INVESTMENT DIVISION --------------- ---------------------- --------------- 2008 2007 2006 --------------- ---------------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 37,558 $ (97,780) $ 30,400 Net realized gains (losses) (190,034) 188,933 155,125 Change in unrealized gains (losses) on investments (6,087,839) 262,197 474,841 --------------- ---------------------- --------------- Net increase (decrease) in net assets resulting from operations (6,240,315) 353,350 660,366 --------------- ---------------------- --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 6,618,762 4,870,486 2,581,867 Net transfers (including fixed account) 3,791,639 6,540,248 5,712,018 Policy charges (2,810,307) (1,921,467) (821,648) Transfers for policy benefits and terminations (1,220,615) (852,946) (175,764) --------------- ---------------------- --------------- Net increase (decrease) in net assets resulting from policy transactions 6,379,479 8,636,321 7,296,473 --------------- ---------------------- --------------- Net increase (decrease) in net assets 139,164 8,989,671 7,956,839 NET ASSETS: Beginning of period 18,395,945 9,406,274 1,449,435 --------------- ---------------------- --------------- End of period $ 18,535,109 $ 18,395,945 $9,406,274 =============== ====================== ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 99 MSF METLIFE MODERATE TO AGGRESSIVE ALLOCATION MSF METLIFE AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------ ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- --------------- -------------- ---------------------- --------------- $ (16,159) $ (170,147) $ 12,275 $ (10,348) $ (40,153) $ (3,889) 175,501 122,439 211,255 90,850 101,806 (1,267) (15,640,562) 371,705 870,757 (4,222,544) (95,922) 225,674 --------------- ---------------------- --------------- -------------- ---------------------- --------------- (15,481,220) 323,997 1,094,287 (4,142,042) (34,269) 220,518 --------------- ---------------------- --------------- -------------- ---------------------- --------------- 18,467,427 11,490,456 3,660,525 3,819,292 2,720,243 769,602 5,509,124 12,371,719 8,417,200 697,397 3,811,580 1,804,040 (6,415,360) (3,994,239) (1,282,528) (1,345,001) (899,415) (265,591) (1,143,926) (1,174,499) (320,422) (323,045) (341,600) (46,683) --------------- ---------------------- --------------- -------------- ---------------------- --------------- 16,417,265 18,693,437 10,474,775 2,848,643 5,290,808 2,261,368 --------------- ---------------------- --------------- -------------- ---------------------- --------------- 936,045 19,017,434 11,569,062 (1,293,399) 5,256,539 2,481,886 32,935,899 13,918,465 2,349,403 8,191,098 2,934,559 452,673 --------------- ---------------------- --------------- -------------- ---------------------- --------------- $ 33,871,944 $ 32,935,899 $ 13,918,465 $ 6,897,699 $ 8,191,098 $2,934,559 =============== ====================== =============== ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 100 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF FI LARGE CAP INVESTMENT DIVISION ----------------------------------------------- 2008 2007 2006 (A) ------------ ---------------------- ----------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (2,929) $ (1,420) $ (246) Net realized gains (losses) (123,745) 11,455 21 Change in unrealized gains (losses) on investments (117,754) (8,523) 4,291 ------------ ---------------------- ----------- Net increase (decrease) in net assets resulting from operations (244,428) 1,512 4,066 ------------ ---------------------- ----------- POLICY TRANSACTIONS: Premium payments received from policy owners 96,860 51,455 13,027 Net transfers (including fixed account) 229,731 217,615 64,888 Policy charges (46,254) (22,401) (4,862) Transfers for policy benefits and terminations (6,453) (5,637) (15,434) ------------ ---------------------- ----------- Net increase (decrease) in net assets resulting from policy transactions 273,884 241,032 57,619 ------------ ---------------------- ----------- Net increase (decrease) in net assets 29,456 242,544 61,685 NET ASSETS: Beginning of period 304,229 61,685 -- ------------ ---------------------- ----------- End of period $ 333,685 $ 304,229 $ 61,685 ============ ====================== ===========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 101 MSF CAPITAL GUARDIAN U.S. EQUITY JANUS ASPEN LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 ------------ ---------------------- ------------- -------------- ---------------------- --------------- $ 1,373 $ (2,206) $ 582 $ 16,320 $ 16,929 $ 660 1,473 50,654 40 49,473 60,269 80,063 (133,853) (50,293) 25,383 (3,051,413) 750,675 477,638 ------------ ---------------------- ------------- -------------- ---------------------- --------------- (131,007) (1,845) 26,005 (2,985,620) 827,873 558,361 ------------ ---------------------- ------------- -------------- ---------------------- --------------- 17,989 78,786 48,952 663,301 704,439 729,644 13,455 60,667 245,401 122,598 57,292 (237,146) (6,716) (6,117) (2,972) (245,583) (191,669) (178,843) (180,389) 197 67,457 (135,708) 20,341 (4,481) ------------ ---------------------- ------------- -------------- ---------------------- --------------- (155,661) 133,533 358,838 404,608 590,403 309,174 ------------ ---------------------- ------------- -------------- ---------------------- --------------- (286,668) 131,688 384,843 (2,581,012) 1,418,276 867,535 516,531 384,843 -- 7,219,885 5,801,609 4,934,074 ------------ ---------------------- ------------- -------------- ---------------------- --------------- $ 229,863 $ 516,531 $384,843 $ 4,638,873 $ 7,219,885 $5,801,609 ============ ====================== ============= ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 102 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 JANUS ASPEN BALANCED INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 -------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 2,996 $ 1,623 $ 37 Net realized gains (losses) 3,694 747 33 Change in unrealized gains (losses) on investments (21,788) 2,101 147 ------------ ----------------------- ------------ Net increase (decrease) in net assets resulting from operations (15,098) 4,471 217 ------------ ----------------------- ------------ POLICY TRANSACTIONS: Premium payments received from policy owners 43,848 34,534 234 Net transfers (including fixed account) 144,876 41,177 -- Policy charges (4,348) (3,275) (328) Transfers for policy benefits and terminations (2,904) 817 -- ------------ ----------------------- ------------ Net increase (decrease) in net assets resulting from policy transactions 181,472 73,253 (94) ------------ ----------------------- ------------ Net increase (decrease) in net assets 166,374 77,724 123 NET ASSETS: Beginning of period 80,035 2,311 2,188 ------------ ----------------------- ------------ End of period $ 246,409 $ 80,035 $2,311 ============ ======================= ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 103 JANUS ASPEN INTERNATIONAL JANUS ASPEN JANUS ASPEN FORTY GROWTH MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ ---------------------- ---------------------- 2008 2007 2006 2008 (B) 2008 (B) ------------ ---------------------- ------------ ---------------------- ---------------------- $ (2,300) $ (384) $ (231) $ (44) $ 428 (93,936) 6,298 (26) (177) (45) (295,412) 82,907 8,113 (18,504) (2,160) ------------ ---------------------- ------------ ---------------------- ---------------------- (391,648) 88,821 7,856 (18,725) (1,777) ------------ ---------------------- ------------ ---------------------- ---------------------- 22,794 216,674 -- 38 42,634 641,922 107,905 107,014 45,738 114,248 (14,473) (5,310) (3,469) (400) (649) (302,227) (525) (39) (667) (4,069) ------------ ---------------------- ------------ ---------------------- ---------------------- 348,016 318,744 103,506 44,709 152,164 ------------ ---------------------- ------------ ---------------------- ---------------------- (43,632) 407,565 111,362 25,984 150,387 518,927 111,362 -- -- -- ------------ ---------------------- ------------ ---------------------- ---------------------- $ 475,295 $ 518,927 $ 111,362 $ 25,984 $ 150,387 ============ ====================== ============ ====================== ======================
The accompanying notes are an integral part of these financial statements. 104 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AIM V.I. GLOBAL REAL ESTATE INVESTMENT DIVISION ------------------------------------------------------------ 2008 2007 2006 -------------- ------------------------------ -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 117,347 $ 152,743 $ 15,226 Net realized gains (losses) (61,509) 570,510 416,936 Change in unrealized gains (losses) on investments (1,334,686) (881,479) 328,141 -------------- ------------------------------ -------------- Net increase (decrease) in net assets resulting from operations (1,278,848) (158,226) 760,303 -------------- ------------------------------ -------------- POLICY TRANSACTIONS: Premium payments received from policy owners 125,102 118,444 86,308 Net transfers (including fixed account) 28,052 155,185 198,270 Policy charges (71,189) (75,484) (59,455) Transfers for policy benefits and terminations 80,702 (231,266) 29,368 -------------- ------------------------------ -------------- Net increase (decrease) in net assets resulting from policy transactions 162,667 (33,121) 254,491 -------------- ------------------------------ -------------- Net increase (decrease) in net assets (1,116,181) (191,347) 1,014,794 NET ASSETS: Beginning of period 2,571,266 2,762,613 1,747,819 -------------- ------------------------------ -------------- End of period $ 1,455,085 $ 2,571,266 $ 2,762,613 ============== ============================== ==============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 105 FTVIPT TEMPLETON FOREIGN SECURITIES FTVIPT MUTUAL DISCOVERY SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------------- --------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- --------------- -------------- ---------------------- ------------- $ 166,480 $ 135,851 $ 59,846 $ 39,464 $ 15,708 $ 3,193 735,646 731,694 553,100 78,245 89,496 26,820 (4,855,241) 305,602 743,656 (759,844) 8,690 90,251 -------------- ---------------------- --------------- -------------- ---------------------- ------------- (3,953,115) 1,173,147 1,356,602 (642,135) 113,894 120,264 -------------- ---------------------- --------------- -------------- ---------------------- ------------- 773,781 1,046,007 763,068 407,392 388,710 81,841 350,298 (11,614) (517,563) 463,793 341,064 596,967 (323,164) (294,839) (285,443) (44,076) (29,330) (17,388) (355,256) (115,394) (188,427) (55,518) (7,385) (4,239) -------------- ---------------------- --------------- -------------- ---------------------- ------------- 445,659 624,160 (228,365) 771,591 693,059 657,181 -------------- ---------------------- --------------- -------------- ---------------------- ------------- (3,507,456) 1,797,307 1,128,237 129,456 806,953 777,445 9,363,624 7,566,317 6,438,080 1,706,062 899,109 121,664 -------------- ---------------------- --------------- -------------- ---------------------- ------------- $ 5,856,168 $ 9,363,624 $7,566,317 $ 1,835,518 $ 1,706,062 $899,109 ============== ====================== =============== ============== ====================== =============
The accompanying notes are an integral part of these financial statements. 106 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 ----------- ---------------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (223) $ (334) $ (169) Net realized gains (losses) (414) 13,926 2,596 Change in unrealized gains (losses) on investments (37,457) (1,759) 2,024 ----------- ---------------------- ------------- Net increase (decrease) in net assets resulting from operations (38,094) 11,833 4,451 ----------- ---------------------- ------------- POLICY TRANSACTIONS: Premium payments received from policy owners 5,432 8,465 17,259 Net transfers (including fixed account) 30,492 (9,577) (346) Policy charges (913) (2,740) (1,156) Transfers for policy benefits and terminations (567) (17,975) 575 ----------- ---------------------- ------------- Net increase (decrease) in net assets resulting from policy transactions 34,444 (21,827) 16,332 ----------- ---------------------- ------------- Net increase (decrease) in net assets (3,650) (9,994) 20,783 NET ASSETS: Beginning of period 53,097 63,091 42,308 ----------- ---------------------- ------------- End of period $ 49,447 $ 53,097 $63,091 =========== ====================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 107 FIDELITY VIP CONTRAFUND FIDELITY VIP ASSET MANAGER: GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------------- ------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- -------------------------- -------------- ------------ ---------------------- ------------- $ 13,305 $ 11,445 $ 10,749 $ 17,011 $ 41,848 $12,363 (242,658) 861,847 231,297 8,935 14,373 3,099 (1,292,698) (453,602) (100,652) (532,156) 140,304 39,972 -------------- -------------------------- -------------- ------------ ---------------------- ------------- (1,522,051) 419,690 141,394 (506,210) 196,525 55,434 -------------- -------------------------- -------------- ------------ ---------------------- ------------- 540,486 608,723 311,963 167,675 166,685 206,112 269,458 115,952 978,906 79,494 19,124 26,719 (91,935) (106,944) (71,195) (45,464) (37,503) (32,847) (170,946) (226,422) (190,863) (46,018) (43,517) (5,743) -------------- -------------------------- -------------- ------------ ---------------------- ------------- 547,063 391,309 1,028,811 155,687 104,789 194,241 -------------- -------------------------- -------------- ------------ ---------------------- ------------- (974,988) 810,999 1,170,205 (350,523) 301,314 249,675 2,902,318 2,091,319 921,114 1,259,390 958,076 708,401 -------------- -------------------------- -------------- ------------ ---------------------- ------------- $ 1,927,330 $ 2,902,318 $ 2,091,319 $ 908,867 $ 1,259,390 $958,076 ============== ========================== ============== ============ ====================== =============
The accompanying notes are an integral part of these financial statements. 108 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 FIDELITY VIP INVESTMENT GRADE BOND INVESTMENT DIVISION ----------------------------------------------- 2008 2007 2006 ----------- ---------------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,503 $ 873 $1,359 Net realized gains (losses) 13,667 1,728 (836) Change in unrealized gains (losses) on investments (8,842) 6,849 767 ----------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations 6,328 9,450 1,290 ----------- ---------------------- ------------ POLICY TRANSACTIONS: Premium payments received from policy owners 5,021 13,197 6,033 Net transfers (including fixed account) (563,563) 806,070 (2,639) Policy charges (5,850) (4,182) (1,496) Transfers for policy benefits and terminations (250,607) (9,141) 306 ----------- ---------------------- ------------ Net increase (decrease) in net assets resulting from policy transactions (814,999) 805,944 2,204 ----------- ---------------------- ------------ Net increase (decrease) in net assets (808,671) 815,394 3,494 NET ASSETS: Beginning of period 852,372 36,978 33,484 ----------- ---------------------- ------------ End of period $ 43,701 $ 852,372 $36,978 =========== ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 109 FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP EQUITY-INCOME MID CAP FREEDOM 2010 FREEDOM 2020 FREEDOM 2030 INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- ------------------- ---------------------- ---------------------- ---------------------- 2008 2007 2006 2008 (B) 2008 (B) 2008 (B) 2008 (B) ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- $ 16,347 $ 19,214 $ 7,573 $ 14 $ 802 $ 1,217 $ 652 (281,987) 120,582 38,676 (70) 545 1,278 1,114 (292,885) (137,717) 1,802 (10,714) (2,956) (11,135) (3,051) ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- (558,525) 2,079 48,051 (10,770) (1,609) (8,640) (1,285) ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- 140,670 252,674 100,155 -- 339 344 109 350,624 593,876 268,439 43,089 26,580 46,772 22,132 (27,027) (17,750) (8,287) (179) -- (315) -- (544,605) (47,391) (590) (315) (1,741) (440) 431 ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- (80,338) 781,409 359,717 42,595 25,178 46,361 22,672 ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- (638,863) 783,488 407,768 31,825 23,569 37,721 21,387 1,216,664 433,176 25,408 -- -- -- -- ------------ -------------- ------------- ------------------- ---------------------- ---------------------- ---------------------- $ 577,801 $ 1,216,664 $433,176 $ 31,825 $ 23,569 $ 37,721 $ 21,387 ============ ============== ============= =================== ====================== ====================== ======================
The accompanying notes are an integral part of these financial statements. 110 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AMERICAN FUNDS GROWTH INVESTMENT DIVISION -------------------------------------------------------- 2008 2007 2006 --------------- ------------------------ --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 8,765 $ (52,702) $ (1,070) Net realized gains (losses) 11,917,407 8,414,259 921,608 Change in unrealized gains (losses) on investments (70,192,654) 3,035,574 6,751,062 --------------- ------------------------ --------------- Net increase (decrease) in net assets resulting from operations (58,266,482) 11,397,131 7,671,600 --------------- ------------------------ --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 22,132,573 21,780,214 20,408,448 Net transfers (including fixed account) 5,909,829 5,478,471 7,977,297 Policy charges (9,064,293) (8,331,204) (7,453,637) Transfers for policy benefits and terminations (5,469,352) (6,086,335) (3,900,210) --------------- ------------------------ --------------- Net increase (decrease) in net assets resulting from policy transactions 13,508,757 12,841,146 17,031,898 --------------- ------------------------ --------------- Net increase (decrease) in net assets (44,757,725) 24,238,277 24,703,498 NET ASSETS: Beginning of period 121,273,017 97,034,740 72,331,242 --------------- ------------------------ --------------- End of period $ 76,515,292 $ 121,273,017 $ 97,034,740 =============== ======================== ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 111 AMERICAN FUNDS GROWTH-INCOME AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------------- ------------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- $ 616,716 $ 523,110 $ 451,348 $ (466,291) $ 1,230,864 $ (144,223) 4,098,718 3,124,811 1,479,184 6,877,405 5,991,855 3,009,637 (34,739,655) (1,027,655) 5,509,333 (44,244,505) 1,948,016 4,197,799 --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- (30,024,221) 2,620,266 7,439,865 (37,833,391) 9,170,735 7,063,213 --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- 13,919,840 14,383,389 13,556,781 11,097,448 10,006,735 7,823,334 (337,648) 4,796,374 3,888,560 87,246 11,624,893 8,047,794 (5,766,937) (5,606,686) (5,046,973) (4,406,590) (3,980,217) (2,891,945) (3,550,594) (4,721,206) (2,734,867) (2,679,242) (2,849,609) (1,630,844) --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- 4,264,661 8,851,871 9,663,501 4,098,862 14,801,802 11,348,339 --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- (25,759,560) 11,472,137 17,103,366 (33,734,529) 23,972,537 18,411,552 75,370,228 63,898,091 46,794,725 67,615,279 43,642,742 25,231,190 --------------- ---------------------- ---------------- --------------- ---------------------- ---------------- $ 49,610,668 $ 75,370,228 $63,898,091 $ 33,880,750 $ 67,615,279 $43,642,742 =============== ====================== ================ =============== ====================== ================
The accompanying notes are an integral part of these financial statements. 112 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 AMERICAN FUNDS BOND INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 (A) -------------- ---------------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 168,134 $ 170,600 $ 984 Net realized gains (losses) (78,359) 13,076 (909) Change in unrealized gains (losses) on investments (446,834) (143,419) 13,837 -------------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations (357,059) 40,257 13,912 -------------- ---------------------- ------------ POLICY TRANSACTIONS: Premium payments received from policy owners 813,635 628,735 89,127 Net transfers (including fixed account) 63,592 2,131,106 574,222 Policy charges (377,262) (207,007) (24,950) Transfers for policy benefits and terminations (182,193) (54,852) (8,135) -------------- ---------------------- ------------ Net increase (decrease) in net assets resulting from policy transactions 317,772 2,497,982 630,264 -------------- ---------------------- ------------ Net increase (decrease) in net assets (39,287) 2,538,239 644,176 NET ASSETS: Beginning of period 3,182,415 644,176 -- -------------- ---------------------- ------------ End of period $ 3,143,128 $ 3,182,415 $ 644,176 ============== ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 113 AMERICAN FUNDS AMERICAN FUNDS U.S. GOVERNMENT/ INTERNATIONAL AAA RATED SECURITIES MIST T. ROWE PRICE MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ----------------------- ---------------------------------------------------- 2008 (B) 2008 (B) 2008 2007 2006 ---------------------- ----------------------- --------------- --------------------- -------------- $ 1,075 $ 709 $ (121,466) $ (87,125) $ (91,448) (88) 1 1,499,327 1,374,456 897,889 (13,968) 862 (8,808,387) 843,627 (173,792) ---------------------- ----------------------- --------------- ---------------------- -------------- (12,981) 1,572 (7,430,526) 2,130,958 632,649 ---------------------- ----------------------- --------------- ---------------------- -------------- -- -- 3,106,587 2,924,293 2,471,595 57,452 33,514 478,281 2,016,463 1,091,785 (246) (181) (1,260,749) (1,027,788) (896,982) (91) (22) (1,115,075) (1,061,019) (715,557) ---------------------- ----------------------- --------------- ---------------------- -------------- 57,115 33,311 1,209,044 2,851,949 1,950,841 ---------------------- ----------------------- --------------- ---------------------- -------------- 44,134 34,883 (6,221,482) 4,982,907 2,583,490 -- -- 17,384,199 12,401,292 9,817,802 ---------------------- ----------------------- --------------- ---------------------- -------------- $ 44,134 $ 34,883 $ 11,162,717 $ 17,384,199 $12,401,292 ====================== ======================= =============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 114 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION ----------------------------------------------------- 2008 2007 2006 -------------- ---------------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 153,553 $ 72,282 $ 50,995 Net realized gains (losses) 891,055 2,172,015 504,799 Change in unrealized gains (losses) on investments (7,755,181) (879,168) 963,904 -------------- ---------------------- --------------- Net increase (decrease) in net assets resulting from operations (6,710,573) 1,365,129 1,519,698 -------------- ---------------------- --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 2,439,035 2,129,890 1,296,474 Net transfers (including fixed account) 2,279,426 2,358,045 3,802,566 Policy charges (971,130) (783,344) (479,047) Transfers for policy benefits and terminations (852,116) (1,243,321) (394,238) -------------- ---------------------- --------------- Net increase (decrease) in net assets resulting from policy transactions 2,895,215 2,461,270 4,225,755 -------------- ---------------------- --------------- Net increase (decrease) in net assets (3,815,358) 3,826,399 5,745,453 NET ASSETS: Beginning of period 13,629,924 9,803,525 4,058,072 -------------- ---------------------- --------------- End of period $ 9,814,566 $ 13,629,924 $9,803,525 ============== ====================== ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 115 MIST PIMCO TOTAL RETURN MIST RCM TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 --------------- -------------------------- --------------- -------------- ---------------------- -------------- $ 1,044,114 $ 788,424 $ 501,885 $ 1,260,852 $ (78,918) $ (61,070) 795,767 88,836 85,343 2,114,093 618,410 222,324 (1,944,451) 1,198,111 469,783 (9,308,569) 1,944,863 156,356 --------------- -------------------------- --------------- -------------- ---------------------- -------------- (104,570) 2,075,371 1,057,011 (5,933,624) 2,484,355 317,610 --------------- -------------------------- --------------- -------------- ---------------------- -------------- 6,020,557 6,177,463 6,639,135 1,927,758 1,463,874 1,514,309 960,679 (29,170) (231,899) (675,929) 2,934,006 (174,207) (2,840,352) (2,306,501) (2,326,888) (820,489) (611,502) (544,205) (2,205,736) (1,722,935) (1,385,066) (607,497) (563,025) (414,629) --------------- -------------------------- --------------- -------------- ---------------------- -------------- 1,935,148 2,118,857 2,695,282 (176,157) 3,223,353 381,268 --------------- -------------------------- --------------- -------------- ---------------------- -------------- 1,830,578 4,194,228 3,752,293 (6,109,781) 5,707,708 698,878 32,210,481 28,016,253 24,263,960 13,231,277 7,523,569 6,824,691 --------------- -------------------------- --------------- -------------- ---------------------- -------------- $ 34,041,059 $ 32,210,481 $ 28,016,253 $ 7,121,496 $ 13,231,277 $ 7,523,569 =============== ========================== =============== ============== ====================== ==============
The accompanying notes are an integral part of these financial statements. 116 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST LORD ABBETT BOND DEBENTURE INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 741,410 $ 950,684 $1,051,283 Net realized gains (losses) 159,621 205,286 93,973 Change in unrealized gains (losses) on investments (5,045,528) 39,883 324,579 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (4,144,497) 1,195,853 1,469,835 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 3,044,630 3,554,382 3,396,611 Net transfers (including fixed account) (840,812) 500,659 251,738 Policy charges (1,532,129) (1,363,634) (1,319,485) Transfers for policy benefits and terminations (1,240,893) (993,295) (961,494) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions (569,204) 1,698,112 1,367,370 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (4,713,701) 2,893,965 2,837,205 NET ASSETS: Beginning of period 22,262,379 19,368,414 16,531,209 --------------- ---------------------- ---------------- End of period $ 17,548,678 $ 22,262,379 $19,368,414 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 117 MIST LAZARD MID CAP MIST MET/AIM SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- -------------- -------------- ---------------------- --------------- $ 16,248 $ (12,219) $ (11,480) $ (24,205) $ (24,194) $ (16,523) 35,602 482,777 413,010 197,782 118,154 285,390 (2,239,073) (720,263) 56,316 (1,510,157) 135,230 (33,826) -------------- ---------------------- -------------- -------------- ---------------------- --------------- (2,187,223) (249,705) 457,846 (1,336,580) 229,190 235,041 -------------- ---------------------- -------------- -------------- ---------------------- --------------- 992,305 1,149,737 908,370 623,838 601,183 582,851 293,008 838,156 136,080 84,613 354,513 239,798 (394,747) (393,479) (318,175) (237,487) (197,171) (173,327) (365,399) (280,900) (197,498) (180,449) (131,197) (94,796) -------------- ---------------------- -------------- -------------- ---------------------- --------------- 525,167 1,313,514 528,777 290,515 627,328 554,526 -------------- ---------------------- -------------- -------------- ---------------------- --------------- (1,662,056) 1,063,809 986,623 (1,046,065) 856,518 789,567 5,084,696 4,020,887 3,034,264 3,233,322 2,376,804 1,587,237 -------------- ---------------------- -------------- -------------- ---------------------- --------------- $ 3,422,640 $ 5,084,696 $ 4,020,887 $ 2,187,257 $ 3,233,322 $2,376,804 ============== ====================== ============== ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 118 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST HARRIS OAKMARK INTERNATIONAL INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 242,385 $ 5,167 $ 223,306 Net realized gains (losses) 2,675,287 2,725,469 999,953 Change in unrealized gains (losses) on investments (13,913,907) (3,512,929) 2,507,928 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (10,996,235) (782,293) 3,731,187 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 5,154,234 5,746,134 3,829,877 Net transfers (including fixed account) (2,283,317) 3,549,633 5,611,008 Policy charges (1,786,246) (1,935,617) (1,281,424) Transfers for policy benefits and terminations (944,552) (1,288,608) (452,967) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions 140,119 6,071,542 7,706,494 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (10,856,116) 5,289,249 11,437,681 NET ASSETS: Beginning of period 26,700,786 21,411,537 9,973,856 --------------- ---------------------- ---------------- End of period $ 15,844,670 $ 26,700,786 $21,411,537 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 119 MIST LEGG MASON PARTNERS AGGRESSIVE GROWTH MIST LORD ABBETT GROWTH AND INCOME INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- -------------- -------------- ---------------------- --------------- $ (56,576) $ (50,642) $ (65,378) $ 70,536 $ 31,039 $ (21,761) (18,149) 926,513 615,655 472,182 296,381 962,704 (3,076,964) (747,047) (742,982) (2,888,440) (147,617) (295,172) -------------- ---------------------- -------------- -------------- ---------------------- --------------- (3,151,689) 128,824 (192,705) (2,345,722) 179,803 645,771 -------------- ---------------------- -------------- -------------- ---------------------- --------------- 1,253,068 1,456,917 1,626,695 479,313 510,985 975,882 (80,248) (281,052) (19,816) (17,411) (145,041) 189,576 (526,115) (539,471) (581,499) (146,058) (120,041) (112,856) (342,790) (705,050) (411,238) (23,697) 2,312 2,408 -------------- ---------------------- -------------- -------------- ---------------------- --------------- 303,915 (68,656) 614,142 292,147 248,215 1,055,010 -------------- ---------------------- -------------- -------------- ---------------------- --------------- (2,847,774) 60,168 421,437 (2,053,575) 428,018 1,700,781 7,804,601 7,744,433 7,322,996 6,289,386 5,861,368 4,160,587 -------------- ---------------------- -------------- -------------- ---------------------- --------------- $ 4,956,827 $ 7,804,601 $ 7,744,433 $ 4,235,811 $ 6,289,386 $5,861,368 ============== ====================== ============== ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 120 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST CLARION GLOBAL REAL ESTATE INVESTMENT DIVISION ------------------------------------------------------- 2008 2007 2006 --------------- ---------------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 192,412 $ 44,687 $ 19,481 Net realized gains (losses) 947,022 2,530,886 819,954 Change in unrealized gains (losses) on investments (9,433,208) (6,132,457) 3,020,558 --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from operations (8,293,774) (3,556,884) 3,859,993 --------------- ---------------------- ---------------- POLICY TRANSACTIONS: Premium payments received from policy owners 4,540,759 5,237,292 3,735,060 Net transfers (including fixed account) 360,392 710,529 5,998,130 Policy charges (1,606,318) (1,829,684) (1,362,713) Transfers for policy benefits and terminations (908,507) (1,115,544) (638,267) --------------- ---------------------- ---------------- Net increase (decrease) in net assets resulting from policy transactions 2,386,326 3,002,593 7,732,210 --------------- ---------------------- ---------------- Net increase (decrease) in net assets (5,907,448) (554,291) 11,592,203 NET ASSETS: Beginning of period 18,432,903 18,987,194 7,394,991 --------------- ---------------------- ---------------- End of period $ 12,525,455 $ 18,432,903 $18,987,194 =============== ====================== ================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 121 MIST VAN KAMPEN MID CAP GROWTH MIST LORD ABBETT MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------------------- ----------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- ------- ----------- ---------------------- ------------- $ 267 $ (24) $ -- $ (115) $ 312 $ 19 2,309 -- -- (9,425) 10,041 3,413 (17,251) (570) -- (38,556) (10,458) 880 -------------- ---------------------- ------- ----------- ---------------------- ------------- (14,675) (594) -- (48,096) (105) 4,312 -------------- ---------------------- ------- ----------- ---------------------- ------------- 31 -- -- 6,403 13,650 3,267 36 32,025 -- 79,533 12,564 5,000 (162) (33) -- (4,269) (2,281) (1,756) (1) (27) -- (8,220) 92 (547) -------------- ---------------------- ------- ----------- ---------------------- ------------- (96) 31,965 -- 73,447 24,025 5,964 -------------- ---------------------- ------- ----------- ---------------------- ------------- (14,771) 31,371 -- 25,351 23,920 10,276 31,371 -- -- 66,500 42,580 32,304 -------------- ---------------------- ------- ----------- ---------------------- ------------- $ 16,600 $ 31,371 $ -- $ 91,851 $ 66,500 $42,580 ============== ====================== ======= =========== ====================== =============
The accompanying notes are an integral part of these financial statements. 122 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST THIRD AVENUE SMALL CAP VALUE INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 -------------- ---------------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 888 $ 1,338 $ (349) Net realized gains (losses) 153 22,579 3,522 Change in unrealized gains (losses) on investments (119,764) (41,016) 21,745 -------------- ---------------------- ------------- Net increase (decrease) in net assets resulting from operations (118,723) (17,099) 24,918 -------------- ---------------------- ------------- POLICY TRANSACTIONS: Premium payments received from policy owners 48,914 129,727 55,993 Net transfers (including fixed account) 30,930 12,080 172,022 Policy charges (11,149) (9,900) (4,612) Transfers for policy benefits and terminations (87,205) (9,328) (1,597) -------------- ---------------------- ------------- Net increase (decrease) in net assets resulting from policy transactions (18,510) 122,579 221,806 -------------- ---------------------- ------------- Net increase (decrease) in net assets (137,233) 105,480 246,724 NET ASSETS: Beginning of period 381,064 275,584 28,860 -------------- ---------------------- ------------- End of period $ 243,831 $ 381,064 $275,584 ============== ====================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 123 MIST OPPENHEIMER CAPITAL APPRECIATION MIST LEGG MASON VALUE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ----------------------------------------------------- 2008 2007 2006 2008 2007 2006 (A) ------------ ---------------------- ------------- -------------- ---------------------- --------------- $ 30,626 $ (4,302) $(1,383) $ (20,992) $ (54,295) $ (20,388) 189,066 36,790 7,447 40,963 37,741 98,987 (860,586) 18,908 12,744 (3,108,496) (371,535) 306,184 ------------ ---------------------- ------------- -------------- ---------------------- --------------- (640,894) 51,396 18,808 (3,088,525) (388,089) 384,783 ------------ ---------------------- ------------- -------------- ---------------------- --------------- 373,345 205,021 117,398 938,630 1,048,842 765,241 325,069 461,399 123,969 186,585 (45,958) 4,793,005 (131,344) (68,093) (39,578) (346,212) (411,469) (378,446) (40,306) (23,596) (7,607) (338,027) (305,084) (26,923) ------------ ---------------------- ------------- -------------- ---------------------- --------------- 526,764 574,731 194,182 440,976 286,331 5,152,877 ------------ ---------------------- ------------- -------------- ---------------------- --------------- (114,130) 626,127 212,990 (2,647,549) (101,758) 5,537,660 955,427 329,300 116,310 5,435,902 5,537,660 -- ------------ ---------------------- ------------- -------------- ---------------------- --------------- $ 841,297 $ 955,427 $329,300 $ 2,788,353 $ 5,435,902 $5,537,660 ============ ====================== ============= ============== ====================== ===============
The accompanying notes are an integral part of these financial statements. 124 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST SSGA GROWTH ETF INVESTMENT DIVISION ------------------------------------------------- 2008 2007 2006 (A) ------------ ----------------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 4,529 $ (3,337) $ 1,562 Net realized gains (losses) (21,051) 10,329 1,770 Change in unrealized gains (losses) on investments (210,490) (2,639) 4,607 ------------ ----------------------- ------------ Net increase (decrease) in net assets resulting from operations (227,012) 4,353 7,939 ------------ ----------------------- ------------ POLICY TRANSACTIONS: Premium payments received from policy owners 168,313 89,074 9,903 Net transfers (including fixed account) (72,658) 415,367 162,517 Policy charges (43,964) (30,535) (3,804) Transfers for policy benefits and terminations (6,807) (15,115) (240) ------------ ----------------------- ------------ Net increase (decrease) in net assets resulting from policy transactions 44,884 458,791 168,376 ------------ ----------------------- ------------ Net increase (decrease) in net assets (182,128) 463,144 176,315 NET ASSETS: Beginning of period 639,459 176,315 -- ------------ ----------------------- ------------ End of period $ 457,331 $ 639,459 $ 176,315 ============ ======================= ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 125 MIST SSGA GROWTH AND INCOME ETF MIST PIMCO INFLATION PROTECTED BOND INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- --------------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 (A) ------------ ---------------------- ------------- -------------- ---------------------- ------------- $ 4,258 $ (2,340) $ 1,299 $ 95,597 $ 1,791 $ (463) (36,815) 9,163 1,197 (94,032) 4,018 1,472 (94,558) (2,024) 2,231 (678,454) 50,303 (1,429) ------------ ---------------------- ------------- -------------- ---------------------- ------------- (127,115) 4,799 4,727 (676,889) 56,112 (420) ------------ ---------------------- ------------- -------------- ---------------------- ------------- 163,517 139,370 6,299 878,509 100,106 30,639 17,087 115,257 108,357 4,986,265 716,990 134,189 (43,029) (28,375) (2,470) (339,089) (37,516) (6,678) (19,484) (2,126) (365) (237,169) (53,881) (28,002) ------------ ---------------------- ------------- -------------- ---------------------- ------------- 118,091 224,126 111,821 5,288,516 725,699 130,148 ------------ ---------------------- ------------- -------------- ---------------------- ------------- (9,024) 228,925 116,548 4,611,627 781,811 129,728 345,473 116,548 -- 911,539 129,728 -- ------------ ---------------------- ------------- -------------- ---------------------- ------------- $ 336,449 $ 345,473 $116,548 $ 5,523,166 $ 911,539 $129,728 ============ ====================== ============= ============== ====================== =============
The accompanying notes are an integral part of these financial statements. 126 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST BLACKROCK LARGE CAP CORE MIST JANUS FORTY INVESTMENT DIVISION INVESTMENT DIVISION --------------------------------- ----------------------------- 2008 2007 (C) 2008 2007 (C) ---------------- ---------------- -------------- -------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ (317,267) $ (2,431,291) $ 249,198 $ (4,282) Net realized gains (losses) 9,729,334 181,462 (35,061) 23,570 Change in unrealized gains (losses) on investments (169,653,539) 4,642,363 (4,523,728) 188,079 ---------------- ---------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations (160,241,472) 2,392,534 (4,309,591) 207,367 ---------------- ---------------- -------------- -------------- POLICY TRANSACTIONS: Premium payments received from policy owners 42,625,658 31,838,356 1,649,448 150,350 Net transfers (including fixed account) (7,982,176) 442,192,771 7,003,261 3,200,586 Policy charges (28,104,995) (19,369,800) (590,128) (32,750) Transfers for policy benefits and terminations (24,473,418) (20,078,179) (325,545) (37,605) ---------------- ---------------- -------------- -------------- Net increase (decrease) in net assets resulting from policy transactions (17,934,931) 434,583,148 7,737,036 3,280,581 ---------------- ---------------- -------------- -------------- Net increase (decrease) in net assets (178,176,403) 436,975,682 3,427,445 3,487,948 NET ASSETS: Beginning of period 436,975,682 -- 3,487,948 -- ---------------- ---------------- -------------- -------------- End of period $ 258,799,279 $ 436,975,682 $ 6,915,393 $ 3,487,948 ================ ================ ============== ==============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 127 MIST AMERICAN MIST AMERICAN MIST AMERICAN MIST MET/ MIST DREMAN FUNDS BALANCED FUNDS GROWTH FUNDS MODERATE FRANKLIN SMALL CAP VALUE ALLOCATION ALLOCATION ALLOCATION INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------- -------------------- -------------------- -------------------- -------------------- 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) -------------------- -------------------- -------------------- -------------------- -------------------- $ -- $ 368 $ 644 $ 165 $ 469 (10) (90) 12 (29) (63) 6 (1,781) (48) (130) (2,459) -------------------- -------------------- -------------------- -------------------- -------------------- (4) (1,503) 608 6 (2,053) -------------------- -------------------- -------------------- -------------------- -------------------- -- 302 2,162 3,061 2,138 114 12,281 14,336 2,966 20,690 -- (973) (1,358) (1,421) (1,315) 10 -- (1) (5) 1 -------------------- -------------------- -------------------- -------------------- -------------------- 124 11,610 15,139 4,601 21,514 -------------------- -------------------- -------------------- -------------------- -------------------- 120 10,107 15,747 4,607 19,461 -- -- -- -- -- -------------------- -------------------- -------------------- -------------------- -------------------- $ 120 $ 10,107 $ 15,747 $ 4,607 $ 19,461 ==================== ==================== ==================== ==================== ====================
MIST MET/ FRANKLIN MIST MET/ TEMPLETON FRANKLIN FOUNDING MUTUAL SHARES STRATEGY INVESTMENT DIVISION INVESTMENT DIVISION -------------------- ------------------- 2008 (B) 2008 (B) -------------------- ------------------- $ 234 $ 207 (83) (21) (2,584) (146) -------------------- ------------------- (2,433) 40 -------------------- ------------------- 4,224 940 7,195 10,164 (946) (459) 24 (4) -------------------- ------------------- 10,497 10,641 -------------------- ------------------- 8,064 10,681 -- -- -------------------- ------------------- $ 8,064 $ 10,681 ==================== ===================
The accompanying notes are an integral part of these financial statements. 128 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST MET/ TEMPLETON GROWTH AMERICAN CENTURY VP VISTA INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- -------------------------------------------------- 2008 (B) 2008 2007 2006 ---------------------- ----------- ---------------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 18 $ (285) $ (93) $ (81) Net realized gains (losses) (39) 204 1,950 118 Change in unrealized gains (losses) on investments (322) (65,328) 4,790 1,653 ---------------------- ----------- ---------------------- --------------- Net increase (decrease) in net assets resulting from operations (343) (65,409) 6,647 1,690 ---------------------- ----------- ---------------------- --------------- POLICY TRANSACTIONS: Premium payments received from policy owners 1,057 13,124 7,595.00 -- Net transfers (including fixed account) 2,915 106,780 953 9,705 Policy charges (442) (3,919) (1,106) (536) Transfers for policy benefits and terminations 1 (516) (9,883) (515) ---------------------- ----------- ---------------------- --------------- Net increase (decrease) in net assets resulting from policy transactions 3,531 115,469 (2,441) 8,654 ---------------------- ----------- ---------------------- --------------- Net increase (decrease) in net assets 3,188 50,060 4,206 10,344 NET ASSETS: Beginning of period -- 29,133 24,927 14,583.00 ---------------------- ----------- ---------------------- --------------- End of period $ 3,188 $ 79,193 $ 29,133 $ 24,927 ====================== =========== ====================== ===============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 129 DELAWARE VIP SMALL CAP VALUE DREYFUS VIF INTERNATIONAL VALUE INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------ ---------------------- ------------- ------------ ---------------------- ------------- $ 195 $ (2,015) $(1,580) $ 8,347 $ 7,908 $ 390 (88,810) 54,658 27,452 25,343 123,168 15,591 (269,207) (146,882) 21,618 (268,322) (101,858) 67,169 ------------ ---------------------- ------------- ------------ ---------------------- ------------- (357,822) (94,239) 47,490 (234,632) 29,218 83,150 ------------ ---------------------- ------------- ------------ ---------------------- ------------- 119,309 340,918 5,729 2,055 185,615 66,631 78,642 290,002 342,518 3,974 (194,916) 383,627 (21,619) (15,765) (10,021) (12,689) (14,159) (8,030) (210,049) (19,176) (1,578) (118,241) (21,097) 2,577 ------------ ---------------------- ------------- ------------ ---------------------- ------------- (33,717) 595,979 336,648 (124,901) (44,557) 444,805 ------------ ---------------------- ------------- ------------ ---------------------- ------------- (391,539) 501,740 384,138 (359,533) (15,339) 527,955 1,025,844 524,104 139,966 701,093 716,432 188,477 ------------ ---------------------- ------------- ------------ ---------------------- ------------- $ 634,305 $ 1,025,844 $524,104 $ 341,560 $ 701,093 $716,432 ============ ====================== ============= ============ ====================== =============
The accompanying notes are an integral part of these financial statements. 130 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 GOLDMAN SACHS MID CAP VALUE INVESTMENT DIVISION ------------------------------------------------- 2008 2007 2006 ------------ ---------------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 7,940 $ 6,291 $ 1,899 Net realized gains (losses) (112,182) 203,381 27,734 Change in unrealized gains (losses) on investments (486,662) (272,066) (2,200) ------------ ---------------------- ------------- Net increase (decrease) in net assets resulting from operations (590,904) (62,394) 27,433 ------------ ---------------------- ------------- POLICY TRANSACTIONS: Premium payments received from policy owners 205,990 105,410 35,499 Net transfers (including fixed account) 102,395 978,190 156,680 Policy charges (27,133) (16,541) (3,580) Transfers for policy benefits and terminations 12,539 (57,710) 1,288 ------------ ---------------------- ------------- Net increase (decrease) in net assets resulting from policy transactions 293,791 1,009,349 189,887 ------------ ---------------------- ------------- Net increase (decrease) in net assets (297,113) 946,955 217,320 NET ASSETS: Beginning of period 1,210,921 263,966 46,646 ------------ ---------------------- ------------- End of period $ 913,808 $ 1,210,921 $263,966 ============ ====================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 131 GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY MFS HIGH INCOME INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ ----------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ---------------------- ------------- ---------- ---------------------- ------------- $ 192 $ 69 $ 257 $ 1,594 $ 3,863 $4,046 (34,983) 14,561 6,160 (3,105) 1,517 1,254 (655) (37,975) 1,891 (1,097) (3,019) 2,298 ----------- ---------------------- ------------- ---------- ---------------------- ------------- (35,446) (23,345) 8,308 (2,608) 2,361 7,598 ----------- ---------------------- ------------- ---------- ---------------------- ------------- 1,613 26,101 19,548 696 5,591 14,794 25,177 47,326 13,395 (8,416) (64,551) (7,401) (2,152) (2,711) (1,623) (180) (846) (2,093) (74,323) (2,434) (204) (8,325) (2,622) 86 ----------- ---------------------- ------------- ---------- ---------------------- ------------- (49,685) 68,282 31,116 (16,225) (62,428) 5,386 ----------- ---------------------- ------------- ---------- ---------------------- ------------- (85,131) 44,937 39,424 (18,833) (60,067) 12,984 134,527 89,590 50,166 21,944 82,011 69,027 ----------- ---------------------- ------------- ---------- ---------------------- ------------- $ 49,396 $ 134,527 $89,590 $ 3,111 $ 21,944 $82,011 =========== ====================== ============= ========== ====================== =============
The accompanying notes are an integral part of these financial statements. 132 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MFS GLOBAL EQUITY INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 ----------- ---------------------- ------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 225 $ 612 $ (38) Net realized gains (losses) 4,298 5,513 100 Change in unrealized gains (losses) on investments (30,617) (2,915) 2,944 ----------- ---------------------- ------------- Net increase (decrease) in net assets resulting from operations (26,094) 3,210 3,006 ----------- ---------------------- ------------- POLICY TRANSACTIONS: Premium payments received from policy owners 16,644 24,545 11,259 Net transfers (including fixed account) 8,770 12,209 13,359 Policy charges (2,425) (2,386) (793) Transfers for policy benefits and terminations (3,305) 135 25 ----------- ---------------------- ------------- Net increase (decrease) in net assets resulting from policy transactions 19,684 34,503 23,850 ----------- ---------------------- ------------- Net increase (decrease) in net assets (6,410) 37,713 26,856 NET ASSETS: Beginning of period 64,569 26,856 -- ----------- ---------------------- ------------- End of period $ 58,159 $ 64,569 $26,856 =========== ====================== =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 133 MFS NEW DISCOVERY MFS VALUE INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ------------------------------------------- 2008 2007 2006 2008 2007 2006 -------------- ---------------------- -------- ----------- ---------------------- -------- $ (11) $ (13) $ -- $ 10,029 $ (78) $ -- 539 239 -- 18,395 2,376 -- (1,817) (349) -- (26,364) (1,846) -- -------------- ---------------------- -------- ----------- ---------------------- -------- (1,289) (123) -- 2,060 452 -- -------------- ---------------------- -------- ----------- ---------------------- -------- -- -- -- (5,064) 5,064 -- -- 3,357 -- 55,984 42,062 -- (37) (78) -- (3,817) (1,514) -- (1) 113 -- (31,762) (131) -- -------------- ---------------------- -------- ----------- ---------------------- -------- (38) 3,392 -- 15,341 45,481 -- -------------- ---------------------- -------- ----------- ---------------------- -------- (1,327) 3,269 -- 17,401 45,933 -- 3,269 -- -- 45,933 -- -- -------------- ---------------------- -------- ----------- ---------------------- -------- $ 1,942 $ 3,269 $ -- $ 63,334 $ 45,933 $ -- ============== ====================== ======== =========== ====================== ========
The accompanying notes are an integral part of these financial statements. 134 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY STATEMENTS OF CHANGES IN NET ASSETS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 VAN KAMPEN LIT GOVERNMENT INVESTMENT DIVISION ----------------------------------------------- 2008 2007 2006 ----------- ---------------------- ------------ INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income (loss) $ 1,876 $ 795 $ 567 Net realized gains (losses) (1,270) 38 (329) Change in unrealized gains (losses) on investments (983) 35 121 ----------- ---------------------- ------------ Net increase (decrease) in net assets resulting from operations (377) 868 359 ----------- ---------------------- ------------ POLICY TRANSACTIONS: Premium payments received from policy owners 30,742 9,025 4,438 Net transfers (including fixed account) 444 -- (3,528) Policy charges (6,986) (171) (346) Transfers for policy benefits and terminations (15,013) (1,839) 274 ----------- ---------------------- ------------ Net increase (decrease) in net assets resulting from policy transactions 9,187 7,015 838 ----------- ---------------------- ------------ Net increase (decrease) in net assets 8,810 7,883 1,197 NET ASSETS: Beginning of period 22,716 14,833 13,636 ----------- ---------------------- ------------ End of period $ 31,526 $ 22,716 $14,833 =========== ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. The accompanying notes are an integral part of these financial statements. 135 PIONEER VCT EMERGING WELLS FARGO VT TOTAL RETURN BOND WELLS FARGO VT MONEY MARKET MARKETS INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ --------------------------------------------------- ---------------------- 2008 2007 2006 2008 2007 2006 2008 (B) ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- $ 6,923 $ 4,036 $1,478 $ 37,763 $ 51,705 $15,873 $ (141) (532) 482 (203) -- -- -- (554) (2,943) 726 969 -- -- -- (40,541) ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- 3,448 5,244 2,244 37,763 51,705 15,873 (41,236) ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- 41,989 21,305 5,794 90,094 764,383 465,461 25 50,132 30,954 36,582 310,047 319,843 527,851 213,338 (4,589) (2,836) (1,105) (91,356) (68,591) (27,417) (1,388) (20,785) (2,379) 477 (308,880) 2,280 346 (16,880) ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- 66,747 47,044 41,748 (95) 1,017,915 966,241 195,095 ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- 70,195 52,288 43,992 37,668 1,069,620 982,114 153,859 113,479 61,191 17,199 2,051,734 982,114 -- -- ------------ ---------------------- ------------ -------------- ---------------------- ------------- ---------------------- $ 183,674 $ 113,479 $61,191 $ 2,089,402 $ 2,051,734 $982,114 $ 153,859 ============ ====================== ============ ============== ====================== ============= ======================
The accompanying notes are an integral part of these financial statements. 136 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS 1. ORGANIZATION Metropolitan Life Separate Account UL (the "Separate Account"), a separate account of Metropolitan Life Insurance Company (the "Company"), was established by the Company's Board of Directors on December 13, 1988 to support operations of the Company with respect to certain variable life insurance policies (the "Policies"). The Company is a direct wholly-owned subsidiary of MetLife, Inc., a Delaware corporation. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with the regulations of the New York Department of Insurance. The Separate Account is divided into Investment Divisions, each of which is treated as an individual accounting entity for financial reporting purposes. Each Investment Division invests in shares of the corresponding portfolio, series, or fund (with the same name) of registered investment management companies (the "Trusts"), which are presented below: Metropolitan Series Fund, Inc. ("MSF")* Janus Aspen Series ("Janus Aspen") AIM Variable Insurance Funds ("AIM V.I.") Franklin Templeton Variable Insurance Products Trust ("FTVIPT") AllianceBernstein Variable Products Series Fund, Inc. ("AllianceBernstein") Fidelity Variable Insurance Products Fund ("Fidelity VIP") American Funds Insurance Series ("American Funds") Met Investors Series Trust ("MIST")* American Century Variable Portfolios, Inc. ("American Century VP") Delaware VIP Trust ("Delaware VIP") Dreyfus Variable Investment Fund ("Dreyfus VIF") Goldman Sachs Variable Insurance Trust ("Goldman Sachs") MFS Variable Insurance Trust ("MFS") Van Kampen Life Investment Trust ("Van Kampen LIT") Wells Fargo Variable Trust ("Wells Fargo VT") Oppenheimer Variable Account Funds ("Oppenheimer") Pioneer Variable Contracts Trust ("Pioneer VCT") Putnam Variable Trust ("Putnam VT") Royce Capital Fund ("Royce") The Universal Institutional Funds, Inc. ("UIF") * See Note 3 for discussion of additional information on related party transactions. The assets of each of the Investment Divisions of the Separate Account are registered in the name of the Company. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from the Company's other assets and liabilities. The portion of the Separate Account's assets applicable to the Policies is not chargeable with liabilities arising out of any other business the Company may conduct. Premium payments, less any applicable charges, applied to the Separate Account are invested in one or more Investment Divisions in accordance with the selection made by the policy owner. The Separate Account was comprised of the following Investment Divisions as of December 31, 2008: MSF BlackRock Diversified Investment Division MSF BlackRock Aggressive Growth Investment Division MSF MetLife Stock Index Investment Division MSF Julius Baer International Stock Investment Division MSF FI Mid Cap Opportunities Investment Division MSF T. Rowe Price Small Cap Growth Investment Division* MSF Oppenheimer GlobalEquity Investment Division MSF MFS Value Investment Division MSF Neuberger Berman Mid Cap Value Investment Division MSF T. Rowe Price Large Cap Growth Investment Division 137 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONTINUED) MSF Lehman Brothers Aggregate Bond Index Investment Division MSF Morgan Stanley EAFE Index Investment Division MSF Russell 2000 Index Investment Division MSF Jennison Growth Investment Division MSF BlackRock Strategic Value Investment Division MSF MetLife Mid Cap Stock Index Investment Division MSF Franklin Templeton Small Cap Growth Investment Division MSF BlackRock Large Cap Value Investment Division MSF Davis Venture Value Investment Division MSF Loomis Sayles Small Cap Investment Division MSF BlackRock Legacy Large Cap Growth Investment Division MSF BlackRock Bond Income Investment Division MSF FI Value Leaders Investment Division MSF Harris Oakmark Focused Value Investment Division MSF Western Asset Management Strategic Bond Opportunities Investment Division MSF Western Asset Management U.S. Government Investment Division MSF BlackRock Money Market Investment Division MSF MFS Total Return Investment Division* MSF MetLife Conservative Allocation Investment Division MSF MetLife Conservative to Moderate Allocation Investment Division MSF MetLife Moderate Allocation Investment Division MSF MetLife Moderate to Aggressive Allocation Investment Division MSF MetLife Aggressive Allocation Investment Division MSF FI Large Cap Investment Division MSF Capital Guardian U.S. Equity Investment Division Janus Aspen Large Cap Growth Investment Division Janus Aspen Balanced Investment Division Janus Aspen Forty Investment Division Janus Aspen International Growth Investment Division (a) Janus Aspen Mid Cap Value Investment Division (a) AIM V.I. Global Real Estate Investment Division AIM V.I. International Growth Investment Division** FTVIPT Templeton Foreign Securities Investment Division FTVIPT Mutual Discovery Securities Investment Division AllianceBernstein Global Technology Investment Division AllianceBernstein Intermediate Bond Investment Division (a)** AllianceBernstein International Value Investment Division (a)** Fidelity VIP Contrafund Investment Division Fidelity VIP Asset Manager: Growth Investment Division Fidelity VIP Investment Grade Bond Investment Division Fidelity VIP Equity-Income Investment Division Fidelity VIP Mid Cap Investment Division (a) Fidelity VIP Freedom 2010 Investment Division (a) Fidelity VIP Freedom 2015 Investment Division (a)** Fidelity VIP Freedom 2020 Investment Division (a) Fidelity VIP Freedom 2025 Investment Division (a)** Fidelity VIP Freedom 2030 Investment Division (a) Fidelity VIP High Income Investment Division (a)** American Funds Growth Investment Division American Funds Growth-Income Investment Division American Funds Global Small Capitalization Investment Division American Funds Bond Investment Division American Funds International Investment Division (a) American Funds U.S. Government/AAA Rated Securities Investment Division (a) MIST T. Rowe Price Mid Cap Growth Investment Division* MIST MFS Research International Investment Division MIST PIMCO Total Return Investment Division MIST RCM Technology Investment Division MIST Lord Abbett Bond Debenture Investment Division MIST Lazard Mid Cap Investment Division* MIST Met/AIM Small Cap Growth Investment Division MIST Harris Oakmark International Investment Division MIST Legg Mason Partners Aggressive Growth Investment Division* MIST Lord Abbett Growth and Income Investment Division MIST Clarion Global Real Estate Investment Division* 138 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONTINUED) MIST Van Kampen Mid Cap Growth Investment Division MIST Lord Abbett Mid Cap Value Investment Division MIST Third Avenue Small Cap Value Investment Division MIST Oppenheimer Capital Appreciation Investment Division MIST Legg Mason Value Equity Investment Division MIST SSgA Growth ETF Investment Division MIST SSgA Growth and Income ETF Investment Division MIST PIMCO Inflation Protected Bond Investment Division MIST BlackRock Large Cap Core Investment Division MIST Janus Forty Investment Division MIST Dreman Small Cap Value Investment Division (a) MIST American Funds Balanced Allocation Investment Division (a) MIST American Funds Growth Allocation Investment Division (a) MIST American Funds Moderate Allocation Investment Division (a) MIST Met/Franklin Income Investment Division (a) MIST Met/Franklin Mutual Shares Investment Division (a) MIST Met/Franklin Templeton Founding Strategy Investment Division (a) MIST Met/Templeton Growth Investment Division (a) American Century VP Vista Investment Division Delaware VIP Small Cap Value Investment Division Dreyfus VIF International Value Investment Division Goldman Sachs Mid Cap Value Investment Division Goldman Sachs Structured Small Cap Equity Investment Division MFS High Income Investment Division MFS Global Equity Investment Division MFS New Discovery Investment Division MFS Value Investment Division Van Kampen LIT Government Investment Division Wells Fargo VT Total Return Bond Investment Division Wells Fargo VT Money Market Investment Division Oppenheimer Main Street Small Cap Investment Division (a)** Pioneer VCT Emerging Markets Investment Division (a) Pioneer VCT Mid Cap Value Investment Division (a)** Putnam VT International Growth and Income Investment Division (a)** Royce Micro-Cap Investment Division (a)** Royce Small-Cap Investment Division (a)** UIF Emerging Markets Debt Investment Division (a)** UIF Emerging Markets Equity Investment Division (a)** (a) This Investment Division began operations during the year ended December 31, 2008. * This Investment Division invests in two or more share classes within the underlying portfolio, series, or fund of the Trusts that may assess 12b-1 fees. ** This Investment Division had no net assets as of December 31, 2008. The following Investment Division ceased operations during the year ended December 31, 2008: Dreyfus VIF Mid Cap Stock Investment Division The operations of the Investment Divisions were affected by the following changes that occurred during the year ended December 31, 2008: NAME CHANGES: OLD NAME FI International Stock Portfolio Harris Oakmark Large Cap Value Portfolio AllianceBernstein U.S. Government/High Grade Securities Portfolio Neuberger Berman Real Estate Portfolio Cyclical Growth ETF Portfolio Cyclical Growth and Income ETF Portfolio NEW NAME Julius Baer International Stock Portfolio MFS Value Portfolio AllianceBernstein Intermediate Bond Portfolio Clarion Global Real Estate Portfolio SSgA Growth ETF Portfolio SSgA Growth and Income ETF Portfolio 139 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 1. ORGANIZATION -- (CONCLUDED) SUBSTITUTION: OLD NAME Dreyfus VIF Mid Cap Stock Portfolio NEW NAME Lazard Mid Cap Portfolio This report is prepared for the general information of policy owners and is not an offer of units of the Separate Account or shares of the Separate Account's underlying investments. It should not be used in connection with any offer except in conjunction with the prospectus for the Separate Account products offered by the Company and the prospectus of the underlying portfolio, series, or fund, which collectively contain all the pertinent information, including additional information on charges and expenses. 2. SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") applicable to variable life separate accounts registered as unit investment trusts. SECURITY TRANSACTIONS Security transactions are recorded on a trade date basis. Realized gains and losses on the sales of investments are computed on the basis of the average cost of the investment sold. Income from dividends and realized gain distributions are recorded on the ex-distribution date. SECURITY VALUATION The Investment Divisions' investment in shares of the portfolio, series or fund of the Trusts is valued at fair value based on the closing net asset value or price per share as determined by the Trusts as of the end of the year. All changes in fair value are recorded as changes in unrealized gains (losses) on investments in the statements of operations of the applicable Investment Divisions. FEDERAL INCOME TAXES The operations of the Separate Account form a part of the total operations of the Company and are not taxed separately. The Company is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of the Separate Account to the extent the earnings are credited under the Policies. Accordingly, no charge is being made to the Separate Account for federal income taxes. The Company will periodically review 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 Policies. PREMIUM PAYMENTS The Company deducts a sales charge and a state premium tax charge from premiums before amounts are allocated to the Separate Account. The Company also deducts a federal income tax charge before amounts are allocated to the Separate Account. This federal income tax charge is imposed to recover a portion of the federal income tax adjustment attributable to policy acquisition expenses. Net premiums are reported as payments received from policy owners on the statements of changes in net assets of the applicable Investment Divisions and are credited as accumulation units as of the end of the valuation period in which received, as provided in the prospectus. NET TRANSFERS Funds transferred by the policy owner into or out of the Investment Divisions within the Separate Account or into or out of the fixed account (an investment option in the Company's general account) are recorded on a net basis as net transfers in the statements of changes in net assets of the applicable Investment Divisions. 140 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) USE OF ESTIMATES The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from these estimates. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS ("SFAS 157"). SFAS 157 defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Separate Account has categorized its assets based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows: Level 1 Unadjusted quoted prices in active markets for identical assets. Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets. Effective January 1, 2008, the Separate Account adopted SFAS 157 and applied the provisions of the statement prospectively to assets measured at fair value. The adoption of SFAS 157 had no impact on the fair value of items measured at fair value. Each Investment Division invests in shares of open-end mutual funds which calculate a daily net asset value based on the value of the underlying securities in its portfolios. As a result, and as required by law, shares of open-end mutual funds are purchased and redeemed at their quoted daily net asset values as reported by the Trusts at the close of each business day. On that basis, the fair value measurements of all shares held by the Separate Account are reported as Level 1. Effective January 1, 2007, the Company adopted FASB Interpretation ("FIN") No. 48, ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES -- AN INTERPRETATION OF FASB STATEMENT NO. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. The adoption of FIN 48 had no impact on the financial statements of each of the Investment Divisions. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT In December 2007, the FASB issued SFAS No. 160, NONCONTROLLING INTERESTS IN CONSOLIDATED FINANCIAL STATEMENTS --AN AMENDMENT OF ACCOUNTING RESEARCH BULLETIN NO. 51 ("SFAS 160"). SFAS 160 defines and establishes accounting and reporting standards for noncontrolling interests in a subsidiary. The pronouncement is effective for fiscal years beginning on or after December 15, 2008. The Separate Account believes the adoption of SFAS 160 will have no material impact on the financial statements of each of the Investment Divisions. 141 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 3. EXPENSES AND RELATED PARTY TRANSACTIONS The following annual Separate Account charge is an asset-based charge and assessed through a daily reduction in unit values, which is recorded as an expense in the accompanying statements of operations of the applicable Investment Divisions: MORTALITY AND EXPENSE RISK -- The mortality risk assumed by the Company is the risk that those insured may die sooner than anticipated and therefore, the Company will pay an aggregate amount of death benefits greater than anticipated. The expense risk assumed is where expenses incurred in issuing and administering the Policies will exceed the amounts realized from the administrative charges assessed against the Policies. The table below represents the range of effective annual rates for the respective charge for the year ended December 31, 2008: Mortality and Expense Risk 0.45% - 0.90%
The above referenced charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge or associated with a particular policy. For some Policies, the mortality and expense risk charge which ranges from 0.30% to 0.60% is assessed through the redemption of units on a monthly basis and recorded as mortality and expense risk charges in the statements of operations of the applicable Investment Divisions. Other policy charges that are assessed through the redemption of units generally include: cost of insurance ("COI") charges, administrative charges, a policy fee, and charges for benefits provided by rider. The COI charge is the primary charge under the policy for the death benefit provided by the Company which may vary by policy based on underwriting criteria. Administrative charges range from $0 to $35 and are assessed monthly. For some Policies, a surrender charge is imposed if the policy is partially or fully surrendered within the specified surrender charge period that ranges from $3.75 to $38.25 for every $1,000 of the policy face amount. These charges are recorded as policy charges in the accompanying statements of changes in net assets of the applicable Investment Divisions. Surrender charges for other Policies is equal to the lesser of the maximum surrender charge premium or the premiums actually paid in the first two policy years. For these policies, in the first policy year, the maximum surrender charge premium is 75% of the smoker federal guideline premium for the policy, assuming a level death benefit for the policy and any riders; and in the second and later policy years, it is 100% of the smoker federal guideline premium for the policy, assuming a level death benefit for the policy and any riders. The surrender charge cannot exceed 100% of the cumulative premiums paid in the first two policy years. If the policy is surrendered in the first two policy years, the Company will deduct 100% of the surrender charge, determined as described above. After the second policy year, the percentage the Company deducts declines until it reaches 0% at the end of the 15th policy year. These charges are recorded as policy charges in the accompanying statements of changes in net assets of the applicable Investment Divisions. Most policies offer optional benefits that can be added to the policy by rider. The change for riders that provide life insurance benefits can range from $0.01 to $37.98 per $1,000 of coverage and the charge for riders providing benefits in the event of disability can range from $0.00 to $61.44 per $100 of the benefit provided. These charges are recorded as policy charges in the accompanying statements of changes in net assets of the applicable Investment Divisions. Certain investments in the various portfolios, series, or funds of the MIST and MSF Trusts hold shares which are managed by Met Investors Advisory, LLC and MetLife Advisers, LLC, respectively. Both act in the capacity of investment advisor and are indirect affiliates of the Company. 142 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENTS OF INVESTMENTS FOR THE YEAR ENDED AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ---------- ------------ ------------- -------------- MSF BlackRock Diversified Investment Division 17,875,507 292,484,800 15,044,547 21,778,329 MSF BlackRock Aggressive Growth Investment Division 8,558,788 198,025,659 6,495,939 17,254,140 MSF MetLife Stock Index Investment Division 21,497,181 675,889,370 79,168,273 40,223,742 MSF Julius Baer International Stock Investment Division 4,996,889 59,543,455 11,640,857 5,304,361 MSF FI Mid Cap Opportunities Investment Division 13,250,387 230,992,262 7,895,224 12,190,837 MSF T.Rowe Price Small Cap Growth Investment Division 5,776,686 72,049,229 16,897,371 5,670,487 MSF Oppenheimer Global Equity Investment Division 2,993,634 37,622,950 4,356,923 3,766,564 MSF MFS Value Investment Division 4,425,111 57,619,269 73,055,746 61,251,406 MSF Neuberger Berman Mid Cap Value Investment Division 4,005,189 71,294,090 5,959,626 3,867,856 MSF T.Rowe Price Large Cap Growth Investment Division 3,392,481 41,097,181 5,650,189 3,020,856 MSF Lehman Brothers Aggregate Bond Index Investment Division 8,695,594 93,160,066 16,152,796 26,022,528 MSF Morgan Stanley EAFE Index Investment Division 4,806,629 55,775,555 15,193,765 6,990,520 MSF Russell 2000 Index Investment Division 4,211,902 51,255,843 7,194,763 4,191,936 MSF Jennison Growth Investment Division 1,256,501 13,569,385 2,133,071 975,493 MSF BlackRock Strategic Value Investment Division 7,040,597 106,001,087 12,044,166 6,739,442 MSF MetLife Mid Cap Stock Index Investment Division 4,703,275 58,083,322 11,780,291 6,471,178 MSF Franklin Templeton Small Cap Growth Investment Division 740,582 7,017,416 1,178,123 512,505 MSF BlackRock Large Cap Value Investment Division 1,105,056 13,855,587 3,454,033 1,069,637 MSF Davis Venture Value Investment Division 1,748,657 48,872,915 6,856,962 2,499,324 MSF Loomis Sayles Small Cap Investment Division 81,862 17,018,622 4,495,312 1,126,750 MSF BlackRock Legacy Large Cap Growth Investment Division 223,880 5,150,846 3,294,599 1,293,892 MSF BlackRock Bond Income Investment Division 799,575 86,456,955 7,468,261 10,331,662 MSF FI Value Leaders Investment Division 39,666 7,273,169 1,500,853 650,036 MSF Harris Oakmark Focused Value Investment Division 282,947 60,463,249 8,333,357 2,491,515 MSF Western Asset Management Strategic Bond Opportunities Investment Division 1,496,886 18,573,401 2,671,204 1,916,494 MSF Western Asset Management U.S. Government Investment Division 1,311,676 16,029,828 2,271,180 1,694,881 MSF BlackRock Money Market Investment Division 632,759 63,275,886 15,109,006 15,269,859 MSF MFS Total Return Investment Division 45,210 6,548,239 2,133,280 878,445 MSF MetLife Conservative Allocation Investment Division 143,312 1,500,231 3,158,877 2,245,900 MSF MetLife Conservative to Moderate Allocation Investment Division 361,152 3,903,620 2,131,525 993,867 MSF MetLife Moderate Allocation Investment Division 2,205,748 23,852,774 10,719,005 4,062,431 MSF MetLife Moderate to Aggressive Allocation Investment Division 4,287,135 48,201,914 19,457,870 2,500,464 MSF MetLife Aggressive Allocation Investment Division 943,620 10,979,655 4,336,877 1,274,522 MSF FI Large Cap Investment Division 41,240 455,619 618,643 347,740 MSF Capital Guardian U.S. Equity Investment Division 35,972 391,501 127,949 177,531 Janus Aspen Large Cap Growth Investment Division 293,589 5,609,605 824,176 408,884 Janus Aspen Balanced Investment Division 10,375 265,950 309,422 122,571 Janus Aspen Forty Investment Division 20,920 679,691 740,466 394,749 Janus Aspen International Growth Investment Division (a) 999 44,489 45,096 431 Janus Aspen Mid Cap Value Investment Division (a) 14,134 152,548 152,983 389 AIM V.I. Global Real Estate Investment Division 156,437 3,074,938 1,158,552 873,626 FTVIPT Templeton Foreign Securities Investment Division 534,741 8,317,126 2,286,116 963,597 FTVIPT Mutual Discovery Securities Investment Division 115,805 2,487,655 1,174,492 273,709 AllianceBernstein Global Technology Investment Division 4,631 80,825 38,600 4,416 Fidelity VIP Contrafund Investment Division 125,347 3,634,532 992,239 511,413 Fidelity VIP Asset Manager: Growth Investment Division 94,462 1,233,514 320,716 151,662
(a) For the period April 28, 2008 to December 31, 2008. 143 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENTS OF INVESTMENTS -- (CONTINUED) FOR THE YEAR ENDED AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) ---------- ------------ ------------- -------------- Fidelity VIP Investment Grade Bond Investment Division 3,719 45,285 179,708 993,163 Fidelity VIP Equity-Income Investment Division 43,904 1,005,097 1,014,272 1,106,697 Fidelity VIP Mid Cap Investment Division 1,756 42,540 42,824 214 Fidelity VIP Freedom 2010 Investment Division (a) 2,864 26,526 31,189 4,486 Fidelity VIP Freedom 2020 Investment Division (a) 4,893 48,858 49,899 935 Fidelity VIP Freedom 2030 Investment Division (a) 3,004 24,439 25,744 1,216 American Funds Growth Investment Division 2,299,570 120,063,096 28,459,211 2,825,359 American Funds Growth-Income Investment Division 2,057,464 72,785,127 11,434,557 2,223,309 American Funds Global Small Capitalization Investment Division 3,071,241 65,592,185 15,958,974 4,759,664 American Funds Bond Investment Division 335,382 3,718,942 1,520,187 1,026,343 American Funds International Investment Division (a) 3,621 58,103 58,485 293 American Funds U.S. Government/AAA Rated Securities Investment Division (a) 2,859 34,022 34,237 217 MIST T. Rowe Price Mid Cap Growth Investment Division 2,106,124 17,122,013 4,627,328 1,712,484 MIST MFS Research International Investment Division 1,324,275 16,836,180 5,726,828 1,380,718 MIST PIMCO Total Return Investment Division 2,934,245 34,210,667 7,741,660 3,958,736 MIST RCM Technology Investment Division 2,966,918 13,471,090 7,062,983 3,162,943 MIST Lord Abbett Bond Debenture Investment Division 1,801,304 21,383,057 3,314,474 2,836,796 MIST Lazard Mid Cap Investment Division 493,929 6,289,713 1,861,635 981,838 MIST Met/AIM Small Cap Growth Investment Division 261,604 3,433,022 876,207 355,896 MIST Harris Oakmark International Investment Division 1,848,605 29,576,350 6,761,818 2,722,100 MIST Legg Mason Partners Aggressive Growth Investment Division 1,085,186 7,672,956 739,042 437,556 MIST Lord Abbett Growth and Income Investment Division 257,797 6,819,834 1,135,832 221,047 MIST Clarion Global Real Estate Investment Division 1,692,746 24,284,083 6,284,473 2,092,833 MIST Van Kampen Mid Cap Growth Investment Division 2,980 34,423 2,812 248 MIST Lord Abbett Mid Cap Value Investment Division 8,944 139,891 134,921 56,360 MIST Third Avenue Small Cap Value Investment Division 23,791 381,096 109,950 105,740 MIST Oppenheimer Capital Appreciation Investment Division 214,053 1,667,447 1,059,779 207,270 MIST Legg Mason Value Equity Investment Division 607,651 5,962,969 1,081,215 462,068 MIST SSgA Growth ETF Investment Division 58,549 665,794 258,758 198,097 MIST SSgA Growth and Income ETF Investment Division 39,623 430,758 294,173 163,666 MIST PIMCO Inflation Protected Bond Investment Division 561,768 6,151,764 6,980,769 1,590,791 MIST BlackRock Large Cap Core Investment Division 38,782,655 423,691,492 23,543,567 25,778,635 MIST Janus Forty Investment Division 152,908 11,250,122 8,817,060 699,189 MIST Dreman Small Cap Value Investment Division (a) 12 113 168 45 MIST American Funds Balanced Allocation Investment Division (a) 1,482 11,888 12,418 438 MIST American Funds Growth Allocation Investment Division (a) 2,552 15,795 16,966 1,182 MIST American Funds Moderate Allocation Investment Division (a) 615 4,737 5,455 689 MIST Met/Franklin Income Investment Division (a) 2,470 21,920 22,436 454 MIST Met/Franklin Mutual Shares Investment Division (a) 1,244 10,649 13,358 2,627 MIST Met/Franklin Templeton Founding Strategy Investment Division (a) 1,532 10,828 11,165 316 MIST Met/Templeton Growth Investment Division (a) 483 3,510 3,850 301 American Century VP Vista Investment Division 7,353 137,118 119,967 3,668 Delaware VIP Small Cap Value Investment Division 34,149 1,026,763 299,322 251,494 Dreyfus VIF International Value Investment Division 39,067 632,570 137,263 128,722 Goldman Sachs Mid Cap Value Investment Division 105,270 1,672,806 384,045 130,961 Goldman Sachs Structured Small Cap Equity Investment Division 7,063 91,558 25,443 76,600 MFS High Income Investment Division 1,020 7,855 5,939 17,353
(a) For the Period April 28, 2008 to December 31, 2008. 144 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 4. STATEMENTS OF INVESTMENTS -- (CONCLUDED) FOR THE YEAR ENDED AS OF DECEMBER 31, 2008 DECEMBER 31, 2008 ----------------------- ---------------------------- COST OF PROCEEDS SHARES COST ($) PURCHASES ($) FROM SALES ($) --------- ------------- ------------- -------------- MFS Global Equity Investment Division 6,221 88,761 30,860 5,970 MFS New Discovery Investment Division 243 4,109 561 48 MFS Value Investment Division 6,548 91,526 1,093,727 1,026,130 Van Kampen LIT Government Investment Division 3,405 32,230 33,703 22,640 Wells Fargo VT Total Return Bond Investment Division 18,933 184,886 159,650 85,978 Wells Fargo VT Money Market Investment Division 2,089,157 2,089,157 461,993 424,261 Pioneer VCT Emerging Markets Investment Division (a) 9,850 194,400 196,475 1,521 (a) For the period April 28, 2008 to December 31, 2008.
145 This page is intentionally left blank. METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF BLACKROCK DIVERSIFIED INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------- Units beginning of year 12,715,624 13,096,726 13,638,816 Units issued and transferred from other funding options 3,715,948 1,576,102 5,196,699 Units redeemed and transferred to other funding options (4,295,375) (1,957,204) (5,738,789) ------------- ---------------------- ------------- Units end of year 12,136,197 12,715,624 13,096,726 ============= ====================== =============
MSF JULIUS BAER INTERNATIONAL STOCK INVESTMENT DIVISION ---------------------------------------------------- 2008 2007 2006 ------------- ------------------------ ------------- Units beginning of year 3,371,026 3,412,213 3,294,341 Units issued and transferred from other funding options 1,065,634 449,737 1,366,842 Units redeemed and transferred to other funding options (1,164,619) (490,924) (1,248,970) ------------- ------------------------ ------------- Units end of year 3,272,041 3,371,026 3,412,213 ============= ======================== =============
MSF OPPENHEIMER GLOBAL EQUITY INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 ------------ ---------------------- ------------ Units beginning of year 2,347,437 2,344,938 2,314,718 Units issued and transferred from other funding options 653,061 280,327 882,876 Units redeemed and transferred to other funding options (749,708) (277,828) (852,656) ------------ ---------------------- ------------ Units end of year 2,250,790 2,347,437 2,344,938 ============ ====================== ============
MSF T. ROWE PRICE LARGE CAP GROWTH INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------- Units beginning of year 3,529,093 3,620,946 3,547,628 Units issued and transferred from other funding options 1,354,500 579,434 1,740,365 Units redeemed and transferred to other funding options (1,361,306) (671,287) (1,667,047) ------------- ---------------------- ------------- Units end of year 3,522,287 3,529,093 3,620,946 ============= ====================== =============
MSF RUSSELL 2000 INDEX INVESTMENT DIVISION --------------------------------------------------- 2008 2007 2006 ------------- ------------------------- ------------- Units beginning of year 2,975,863 2,884,744 2,619,288 Units issued and transferred from other funding options 1,318,726 550,789 1,598,139 Units redeemed and transferred to other funding options (1,315,023) (459,670) (1,332,683) ------------- ------------------------- ------------- Units end of year 2,979,566 2,975,863 2,884,744 ============= ========================= =============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 147 MSF BLACKROCK AGGRESSIVE GROWTH MSF METLIFE STOCK INDEX INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- ---------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- -------------- ---------------------- -------------- 10,673,487 11,198,297 11,502,614 34,637,993 33,607,228 32,156,989 2,758,625 1,043,072 3,534,643 13,540,436 5,684,335 14,883,687 (3,205,304) (1,567,882) (3,838,960) (12,057,576) (4,653,570) (13,433,448) ------------- ---------------------- ------------- -------------- ---------------------- -------------- 10,226,808 10,673,487 11,198,297 36,120,853 34,637,993 33,607,228 ============= ====================== ============= ============== ====================== ==============
MSF FI MID CAP OPPORTUNITIES MSF T. ROWE PRICE SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- -------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- ------------- ---------------------- ------------- 13,843,071 14,298,595 14,520,500 4,692,085 4,913,291 5,103,342 4,385,339 1,586,888 5,633,860 1,202,595 490,842 1,690,078 (4,523,827) (2,042,412) (5,855,765) (1,396,433) (712,048) (1,880,129) ------------- ---------------------- ------------- ------------- ---------------------- ------------- 13,704,583 13,843,071 14,298,595 4,498,247 4,692,085 4,913,291 ============= ====================== ============= ============= ====================== =============
MSF MFS VALUE MSF NEUBERGER BERMAN MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- -------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- ------------- ---------------------- ------------- 4,115,566 4,099,325 4,085,993 3,292,329 3,225,765 2,912,765 1,700,729 706,700 2,271,700 1,542,307 609,119 2,211,103 (1,754,568) (690,459) (2,258,368) (1,479,212) (542,555) (1,898,103) ------------- ---------------------- ------------- ------------- ---------------------- ------------- 4,061,727 4,115,566 4,099,325 3,355,424 3,292,329 3,225,765 ============= ====================== ============= ============= ====================== =============
MSF LEHMAN BROTHERS AGGREGATE BOND INDEX MSF MORGAN STANLEY EAFE INDEX INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- -------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- ------------- ---------------------- ------------- 6,582,200 6,058,549 5,619,973 4,186,312 3,792,545 3,464,106 3,155,394 1,388,135 3,458,933 2,508,640 1,009,072 2,413,387 (4,031,955) (864,484) (3,020,357) (2,146,083) (615,305) (2,084,948) ------------- ---------------------- ------------- ------------- ---------------------- ------------- 5,705,639 6,582,200 6,058,549 4,548,869 4,186,312 3,792,545 ============= ====================== ============= ============= ====================== =============
MSF JENNISON GROWTH MSF BLACKROCK STRATEGIC VALUE INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- ------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------ ---------------------- ------------- ------------- ---------------------- ------------- 1,203,057 1,356,790 1,297,642 4,450,536 4,494,782 4,485,936 394,023 166,465 1,435,002 1,678,023 646,818 2,369,030 (426,979) (320,198) (1,375,854) (1,843,526) (691,064) (2,360,184) ------------ ---------------------- ------------- ------------- ---------------------- ------------- 1,170,101 1,203,057 1,356,790 4,285,033 4,450,536 4,494,782 ============ ====================== ============= ============= ====================== =============
148 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MID CAP STOCK INDEX INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------- Units beginning of year 3,466,871 3,270,208 2,985,941 Units issued and transferred from other funding options 1,669,439 702,937 1,900,659 Units redeemed and transferred to other funding options (1,686,195) (506,274) (1,616,392) ------------- ---------------------- ------------- Units end of year 3,450,115 3,466,871 3,270,208 ============= ====================== =============
MSF DAVIS VENTURE VALUE INVESTMENT DIVISION ----------------------------------------------------- 2008 2007 2006 ------------ -------------------------- ------------- Units beginning of year 1,479,707 1,301,427 1,739,984 Units issued and transferred from other funding options 814,725 357,240 934,602 Units redeemed and transferred to other funding options (713,807) (178,960) (1,373,159) ------------ -------------------------- ------------- Units end of year 1,580,625 1,479,707 1,301,427 ============ ========================== =============
MSF BLACKROCK BOND INCOME INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------- Units beginning of year 4,467,585 4,668,001 5,010,744 Units issued and transferred from other funding options 1,342,396 708,428 2,023,116 Units redeemed and transferred to other funding options (1,672,194) (908,844) (2,365,859) ------------- ---------------------- ------------- Units end of year 4,137,787 4,467,585 4,668,001 ============= ====================== =============
MSF WESTERN ASSET MANAGEMENT STRATEGIC BOND OPPORTUNITIES INVESTMENT DIVISION ------------------------------------------------------------ 2008 2007 2006 ------------ ---------------------- ------------------------ Units beginning of year 1,117,386 998,939 843,296 Units issued and transferred from other funding options 616,116 270,755 946,567 Units redeemed and transferred to other funding options (626,669) (152,308) (790,924) ------------ ---------------------- ------------------------ Units end of year 1,106,833 1,117,386 998,939 ============ ====================== ========================
MSF MFS TOTAL RETURN INVESTMENT DIVISION ----------------------------------------------- 2008 2007 2006 ----------- ----------------------- ----------- Units beginning of year 418,473 297,430 190,293 Units issued and transferred from other funding options 357,123 187,982 495,889 Units redeemed and transferred to other funding options (305,741) (66,939) (388,752) ----------- ----------------------- ----------- Units end of year 469,855 418,473 297,430 =========== ======================= ===========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 149 MSF FRANKLIN TEMPLETON SMALL CAP GROWTH MSF BLACKROCK LARGE CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ---------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ---------------------- ----------- ----------- ---------------------- ----------- 569,953 538,941 474,966 770,111 608,908 396,107 284,532 110,335 358,131 738,266 293,309 614,025 (275,163) (79,323) (294,156) (583,382) (132,106) (401,224) ----------- ---------------------- ----------- ----------- ---------------------- ----------- 579,322 569,953 538,941 924,995 770,111 608,908 =========== ====================== =========== =========== ====================== ===========
MSF LOOMIS SAYLES SMALL CAP MSF BLACKROCK LEGACY LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------- ------------------------------------------------ 2008 2007 2006 2008 2007 2006 ---------- ---------------------- ---------- ----------- ---------------------- ------------- 98,083 78,273 39,978 265,094 190,308 1,201,181 60,203 30,647 62,838 481,035 112,767 396,179 (42,129) (10,837) (24,543) (332,436) (37,981) (1,407,052) ---------- ---------------------- ---------- ----------- ---------------------- ------------- 116,157 98,083 78,273 413,693 265,094 190,308 ========== ====================== ========== =========== ====================== =============
MSF FI VALUE LEADERS MSF HARRIS OAKMARK FOCUSED VALUE INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------- ----------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ----------------------- ----------- ---------- ------------------------ ----------- 440,904 393,835 248,972 191,591 191,529 182,165 277,204 120,346 471,583 89,923 32,899 130,546 (266,702) (73,277) (326,720) (84,713) (32,837) (121,182) ----------- ----------------------- ----------- ---------- ------------------------ ----------- 451,406 440,904 393,835 196,801 191,591 191,529 =========== ======================= =========== ========== ======================== ===========
MSF WESTERN ASSET MANAGEMENT U.S. GOVERNMENT MSF BLACKROCK MONEY MARKET INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------------- ------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------ ---------------------- ----------- ------------- ---------------------- ------------ 1,066,735 988,756 879,572 3,638,086 3,575,759 1,760,759 562,109 236,483 760,575 902,181 494,785 2,526,901 (569,246) (158,504) (651,391) (1,006,790) (432,458) (711,901) ------------ ---------------------- ----------- ------------- ---------------------- ------------ 1,059,598 1,066,735 988,756 3,533,477 3,638,086 3,575,759 ============ ====================== =========== ============= ====================== ============
MSF METLIFE CONSERVATIVE ALLOCATION MSF METLIFE CONSERVATIVE TO MODERATE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- -------------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- -------------------------- ----------- ----------- ---------------------- --------------- 66,558 44,128 53,570 244,254 161,903 65,370 353,431 46,280 137,937 381,130 121,294 243,072 (286,293) (23,850) (147,379) (288,878) (38,943) (146,539) ----------- -------------------------- ----------- ----------- ---------------------- --------------- 133,696 66,558 44,128 336,506 244,254 161,903 =========== ========================== =========== =========== ====================== ===============
150 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MSF METLIFE MODERATE ALLOCATION INVESTMENT DIVISION ------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------ Units beginning of year 1,452,241 775,138 165,720 Units issued and transferred from other funding options 2,404,563 935,987 1,073,164 Units redeemed and transferred to other funding options (1,825,365) (258,884) (463,746) ------------- ---------------------- ------------ Units end of year 2,031,439 1,452,241 775,138 ============= ====================== ============
MSF FI LARGE CAP INVESTMENT DIVISION -------------------------------------------- 2008 2007 2006 (A) ---------- ---------------------- ---------- Units beginning of year 28,739 6,047 -- Units issued and transferred from other funding options 112,786 26,099 11,244 Units redeemed and transferred to other funding options (84,704) (3,407) (5,197) ---------- ---------------------- ---------- Units end of year 56,821 28,739 6,047 ========== ====================== ==========
JANUS ASPEN BALANCED INVESTMENT DIVISION ---------------------------------------------- 2008 2007 2006 --------- ----------------------- ------------ Units beginning of year 5,625 179 187 Units issued and transferred from other funding options 20,270 7,946 20 Units redeemed and transferred to other funding options (5,262) (2,500) (28) --------- ----------------------- ----------- Units end of year 20,633 5,625 179 ========= ======================= ===========
AIM V.I. GLOBAL REAL ESTATE INVESTMENT DIVISION ------------------------------------------- 2008 2007 2006 ---------- ---------------------- --------- Units beginning of year 74,508 70,179 63,997 Units issued and transferred from other funding options 21,095 13,540 11,212 Units redeemed and transferred to other funding options (19,431) (9,211) (5,030) ---------- ---------------------- --------- Units end of year 76,172 74,508 70,179 ========== ====================== =========
ALLIANCEBERNSTEIN GLOBAL TECHNOLOGY INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 --------- ---------------------------- --------- Units beginning of year 8,261 11,769 8,553 Units issued and transferred from other funding options 6,627 10,367 6,356 Units redeemed and transferred to other funding options (244) (13,875) (3,140) --------- ---------------------------- --------- Units end of year 14,644 8,261 11,769 ========= ============================ =========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 151 MSF METLIFE MODERATE TO AGGRESSIVE ALLOCATION MSF METLIFE AGGRESSIVE ALLOCATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ------------------------------------------------ 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------ ----------- ------------------------ ----------- 2,499,351 1,098,433 249,839 608,756 225,274 49,908 4,336,625 1,608,801 1,395,647 960,727 441,487 388,486 (2,879,066) (207,883) (547,053) (718,415) (58,005) (213,120) ------------- ---------------------- ------------ ----------- ------------------------ ----------- 3,956,910 2,499,351 1,098,433 851,068 608,756 225,274 ============= ====================== ============ =========== ======================== ===========
MSF CAPITAL GUARDIAN U.S. EQUITY JANUS ASPEN LARGE CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- -------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 ---------- ------------------------ ---------- ---------- ---------------------- ---------- 33,111 25,159 -- 643,417 595,051 563,653 2,335 35,341 25,387 85,627 69,313 80,037 (10,793) (27,389) (228) (43,253) (20,947) (48,639) ---------- ------------------------ ---------- ---------- ---------------------- ---------- 24,653 33,111 25,159 685,791 643,417 595,051 ========== ======================== ========== ========== ====================== ==========
JANUS ASPEN INTERNATIONAL JANUS ASPEN JANUS ASPEN FORTY GROWTH MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ---------------------- ---------------------- 2008 2007 2006 2008 (B) 2008 (B) ---------- ---------------------- ------------ ---------------------- ---------------------- 27,126 7,954 -- -- -- 46,241 21,485 8,253 1,802 13,355 (28,185) (2,313) (299) (25) (62) ---------- ---------------------- ------------ ---------------------- ---------------------- 45,182 27,126 7,954 1,777 13,293 ========== ====================== ============ ====================== ======================
FTVIPT TEMPLETON FOREIGN SECURITIES FTVIPT MUTUAL DISCOVERY SECURITIES INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------- ----------------------------------------------- 2008 2007 2006 2008 2007 2006 ---------- --------------------------- ---------- ---------- -------------------------- --------- 504,436 471,719 488,477 93,103 54,880 9,138 90,235 84,038 66,725 55,579 56,645 47,509 (66,805) (51,321) (83,483) (8,676) (18,422) (1,767) ---------- --------------------------- ---------- ---------- -------------------------- --------- 527,866 504,436 471,719 140,006 93,103 54,880 ========== =========================== ========== ========== ========================== =========
FIDELITY VIP CONTRAFUND FIDELITY VIP ASSET MANAGER: GROWTH INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------- ------------------------------------------------ 2008 2007 2006 2008 2007 2006 ---------- ---------------------- ---------- ---------- -------------------------- ---------- 188,529 151,404 74,414 112,746 102,160 80,752 67,806 81,153 104,221 28,458 22,228 26,178 (38,175) (44,028) (27,231) (14,314) (11,642) (4,770) ---------- ---------------------- ---------- ---------- -------------------------- ---------- 218,160 188,529 151,404 126,890 112,746 102,160 ========== ====================== ========== ========== ========================== ==========
152 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 FIDELITY VIP INVESTMENT GRADE BOND INVESTMENT DIVISION ----------------------------------------------- 2008 2007 2006 ---------- -------------------------- --------- Units beginning of year 73,675 3,341 3,156 Units issued and transferred from other funding options 1,647 118,771 1,406 Units redeemed and transferred to other funding options (71,414) (48,437) (1,221) ---------- -------------------------- --------- Units end of year 3,908 73,675 3,341 ========== ========================== =========
AMERICAN FUNDS GROWTH INVESTMENT DIVISION -------------------------------------------------- 2008 2007 2006 ------------ ------------------------ ------------ Units beginning of year 1,218,654 1,094,384 898,134 Units issued and transferred from other funding options 771,486 276,228 867,857 Units redeemed and transferred to other funding options (607,854) (151,958) (671,607) ------------ ------------------------ ------------ Units end of year 1,382,286 1,218,654 1,094,384 ============ ======================== ============
AMERICAN FUNDS BOND INVESTMENT DIVISION --------------------------------------------- 2008 2007 2006 (A) ----------- ---------------------- ---------- Units beginning of year 291,647 63,414 -- Units issued and transferred from other funding options 466,213 243,689 77,194 Units redeemed and transferred to other funding options (440,713) (15,456) (13,780) ----------- ---------------------- ---------- Units end of year 317,147 291,647 63,414 =========== ====================== ==========
MIST MFS RESEARCH INTERNATIONAL INVESTMENT DIVISION ---------------------------------------------- 2008 2007 2006 ----------- ---------------------- ----------- Units beginning of year 695,827 566,593 294,106 Units issued and transferred from other funding options 702,443 256,067 541,071 Units redeemed and transferred to other funding options (527,667) (126,833) (268,584) ----------- ---------------------- ----------- Units end of year 870,603 695,827 566,593 =========== ====================== ===========
MIST LORD ABBETT BOND DEBENTURE INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 ------------ ---------------------- ------------ Units beginning of year 1,249,287 1,162,806 1,085,144 Units issued and transferred from other funding options 372,521 184,166 609,507 Units redeemed and transferred to other funding options (416,698) (97,685) (531,845) ------------ ---------------------- ------------ Units end of year 1,205,110 1,249,287 1,162,806 ============ ====================== ============
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 153 FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP FIDELITY VIP EQUITY-INCOME MID CAP FREEDOM 2010 FREEDOM 2020 FREEDOM 2030 INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------- ---------------------- ---------------------- ---------------------- ---------------------- 2008 2007 2006 2008 (B) 2008 (B) 2008 (B) 2008 (B) ---------- ----------- --------- ---------------------- ---------------------- ---------------------- ---------------------- 87,700 30,951 2,190 -- -- -- -- 72,887 69,741 30,655 2,085 3,101 4,660 3,402 (87,896) (12,992) (1,894) (14) (12) (43) (78) ---------- ----------- --------- ---------------------- ---------------------- ---------------------- ---------------------- 72,691 87,700 30,951 2,071 3,089 4,617 3,324 ========== =========== ========= ====================== ====================== ====================== ======================
AMERICAN FUNDS GROWTH-INCOME AMERICAN FUNDS GLOBAL SMALL CAPITALIZATION INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------------ -------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------ ---------------------- ------------ ------------- ---------------------- ------------- 1,381,044 1,228,077 1,035,047 1,945,062 1,521,701 1,088,603 759,706 321,727 919,357 1,620,594 741,710 1,590,658 (678,871) (168,760) (726,327) (1,467,539) (318,349) (1,157,560) ------------ ---------------------- ------------ ------------- ---------------------- ------------- 1,461,879 1,381,044 1,228,077 2,098,117 1,945,062 1,521,701 ============ ====================== ============ ============= ====================== =============
AMERICAN FUNDS U.S. GOVERNMENT/ AMERICAN FUNDS AAA RATED MIST T. ROWE PRICE INTERNATIONAL SECURITIES MID CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ---------------------- ------------------------------------------------- 2008 (B) 2008 (B) 2008 2007 2006 ---------------------- ---------------------- ------------- ---------------------- ------------ -- -- 1,587,296 1,338,870 1,132,034 2,351 1,820 1,301,840 592,655 1,200,709 (16) (12) (1,186,379) (344,229) (993,873) ---------------------- ---------------------- ------------- ---------------------- ------------ 2,335 1,808 1,702,757 1,587,296 1,338,870 ====================== ====================== ============= ====================== ============
MIST PIMCO TOTAL RETURN MIST RCM TECHNOLOGY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------------- ------------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ---------------------- ------------- ------------- ---------------------- ------------ 2,175,489 2,039,385 1,849,249 1,867,295 1,395,573 1,334,943 1,322,359 459,131 1,580,219 1,857,487 861,145 1,036,397 (1,210,103) (323,027) (1,390,083) (1,917,937) (389,423) (975,767) ------------- ---------------------- ------------- ------------- ---------------------- ------------ 2,287,745 2,175,489 2,039,385 1,806,845 1,867,295 1,395,573 ============= ====================== ============= ============= ====================== ============
MIST LAZARD MID CAP MIST MET/AIM SMALL CAP GROWTH INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ---------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ---------------------- ----------- ----------- ---------------------- ----------- 340,316 261,764 226,296 208,985 170,794 129,221 294,536 129,129 244,858 181,529 87,382 152,658 (263,120) (50,577) (209,390) (159,896) (49,191) (111,085) ----------- ---------------------- ----------- ----------- ---------------------- ----------- 371,732 340,316 261,764 230,618 208,985 170,794 =========== ====================== =========== =========== ====================== ===========
154 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST HARRIS OAKMARK INTERNATIONAL INVESTMENT DIVISION ------------------------------------------------- 2008 2007 2006 ------------- ---------------------- ------------ Units beginning of year 1,335,770 1,060,490 636,793 Units issued and transferred from other funding options 1,015,983 501,471 1,213,847 Units redeemed and transferred to other funding options (1,014,079) (226,191) (790,150) ------------- ---------------------- ------------ Units end of year 1,337,674 1,335,770 1,060,490 ============= ====================== ============
MIST CLARION GLOBAL REAL ESTATE INVESTMENT DIVISION ------------------------------------------------ 2008 2007 2006 ------------ ---------------------- ------------ Units beginning of year 1,071,638 939,464 503,432 Units issued and transferred from other funding options 1,053,139 419,170 1,259,740 Units redeemed and transferred to other funding options (877,554) (286,996) (823,708) ------------ ---------------------- ------------ Units end of year 1,247,223 1,071,638 939,464 ============ ====================== ============
MIST THIRD AVENUE SMALL CAP VALUE INVESTMENT DIVISION ---------------------------------------------- 2008 2007 2006 --------- -------------------------- --------- Units beginning of year 24,943 17,494 2,073 Units issued and transferred from other funding options 5,677 11,206 16,123 Units redeemed and transferred to other funding options (7,878) (3,757) (702) --------- -------------------------- --------- Units end of year 22,742 24,943 17,494 ========= ========================== =========
MIST SSGA GROWTH ETF INVESTMENT DIVISION -------------------------------------------- 2008 2007 2006 (A) ---------- ---------------------- ---------- Units beginning of year 56,164 16,395 -- Units issued and transferred from other funding options 75,852 43,076 18,885 Units redeemed and transferred to other funding options (72,118) (3,307) (2,490) ---------- ---------------------- ---------- Units end of year 59,898 56,164 16,395 ========== ====================== ==========
MIST BLACKROCK LARGE CAP CORE INVESTMENT DIVISION -------------------------------- 2008 2007 (C) ------------- ------------------ Units beginning of year 15,352,126 -- Units issued and transferred from other funding options 4,069,201 17,523,204 Units redeemed and transferred to other funding options (4,750,547) (2,171,078) ------------- ------------------ Units end of year 14,670,780 15,352,126 ============= ==================
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 155 MIST LEGG MASON PARTNERS AGGRESSIVE GROWTH MIST LORD ABBETT GROWTH AND INCOME INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- --------------------------------------------- 2008 2007 2006 2008 2007 2006 ----------- ---------------------- ----------- ---------- ---------------------- ----------- 893,124 908,926 844,525 539,972 523,423 342,402 427,707 167,283 564,765 51,580 43,331 529,241 (391,387) (183,085) (500,364) (21,638) (26,782) (348,220) ----------- ---------------------- ----------- ---------- ---------------------- ----------- 929,444 893,124 908,926 569,914 539,972 523,423 =========== ====================== =========== ========== ====================== ===========
MIST VAN KAMPEN MID CAP GROWTH MIST LORD ABBETT MID CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------------- ---------------------------------------------- 2008 2007 2006 2008 2007 2006 ------------- ------------------------ ------- --------- ----------------------- ------------ 2,000 -- -- 4,638 2,988 2,543 9 2,004 -- 8,670 4,172 710 (22) (4) -- (2,845) (2,522) (265) ------------- ------------------------ ------- --------- ----------------------- ------------ 1,987 2,000 -- 10,463 4,638 2,988 ====-======== ======================== ======= ========= ======================= ============
MIST OPPENHEIMER CAPITAL APPRECIATION MIST LEGG MASON VALUE EQUITY INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------- --------------------------------------------- 2008 2007 2006 2008 2007 2006 (A) ---------- ---------------------- ---------- ----------- ---------------------- ---------- 70,634 27,796 10,588 511,093 490,888 -- 142,400 50,236 48,969 304,320 90,867 548,298 (98,048) (7,398) (31,761) (238,810) (70,662) (57,410) ---------- ---------------------- ---------- ----------- ---------------------- ---------- 114,986 70,634 27,796 576,603 511,093 490,888 ========== ====================== ========== =========== ====================== ==========
MIST SSGA GROWTH AND INCOME ETF MIST PIMCO INFLATION PROTECTED BOND INVESTMENT DIVISION INVESTMENT DIVISION -------------------------------------------- --------------------------------------------- 2008 2007 2006 (A) 2008 2007 2006 (A) ---------- ---------------------- ---------- ----------- ---------------------- ---------- 30,551 10,875 -- 80,592 12,722 -- 57,632 25,957 12,571 872,786 86,389 33,652 (48,441) (6,281) (1,696) (429,490) (18,519) (20,930) ---------- ---------------------- ---------- ----------- ---------------------- ---------- 39,742 30,551 10,875 523,888 80,592 12,722 ========== ====================== ========== =========== ====================== ==========
MIST MIST MIST MIST MIST DREMEN SMALL CAP AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS MET/FRANKLIN MIST JANUS FORTY VALUE BALANCED ALLOCATION GROWTH ALLOCATION MODERATE ALLOCATION INCOME INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ----------------------- -------------------- -------------------- -------------------- -------------------- -------------------- 2008 2007 (C) 2008 (B) 2008 (B) 2008 (B) 2008 (B) 2008 (B) ------------ ---------- -------------------- -------------------- -------------------- -------------------- -------------------- 281,380 -- -- -- -- -- -- 1,255,331 305,557 15 1,565 2,697 809 2,572 (593,541) (24,177) (4) (138) (258) (216) (164) ------------ ---------- -------------------- -------------------- -------------------- -------------------- -------------------- 943,170 281,380 11 1,427 2,439 593 2,408 ============ ========== ==================== ==================== ==================== ==================== ====================
156 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 5. SCHEDULES OF UNITS -- (CONCLUDED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007, AND 2006 MIST MIST MET/ MIST MET/FRANKLIN FRANKLIN TEMPLETON MET/TEMPLETON MUTUAL SHARES FOUNDING STRATEGY GROWTH INVESTMENT DIVISION INVESTMENT DIVISION INVESTMENT DIVISION ---------------------- ---------------------- ---------------------- 2008 (B) 2008 (B) 2008 (B) ---------------------- ---------------------- ---------------------- Units beginning of year -- -- -- Units issued and transferred from other funding options 1,620 1,613 543 Units redeemed and transferred to other funding options (412) (110) (63) ---------------------- ---------------------- ---------------------- Units end of year 1,208 1,503 480 ====================== ====================== ======================
DREYFUS VIF INTERNATIONAL VALUE INVESTMENT DIVISION -------------------------------------------- 2008 2007 2006 ---------- ----------------------- --------- Units beginning of year 42,550 45,198 14,559 Units issued and transferred from other funding options 1,327 17,418 32,872 Units redeemed and transferred to other funding options (10,721) (20,066) (2,233) ---------- ----------------------- --------- Units end of year 33,156 42,550 45,198 ========== ======================= =========
MFS HIGH INCOME INVESTMENT DIVISION ------------------------------------------ 2008 2007 2006 --------- ---------------------- --------- Units beginning of year 1,776 6,738 6,238 Units issued and transferred from other funding options 77 823 8,397 Units redeemed and transferred to other funding options (1,499) (5,785) (7,897) --------- ---------------------- --------- Units end of year 354 1,776 6,738 ========= ====================== =========
MFS VALUE INVESTMENT DIVISION ------------------------------------ 2008 2007 2006 -------- ---------------------- ---- Units beginning of year 2,966 -- -- Units issued and transferred from other funding options 3,928 3,069 -- Units redeemed and transferred to other funding options (813) (103) -- -------- ---------------------- ---- Units end of year 6,081 2,966 -- ======== ====================== ====
WELLS FARGO VT MONEY MARKET INVESTMENT DIVISION ------------------------------------------- 2008 2007 2006 ---------- ---------------------- --------- Units beginning of year 181,995 91,188 -- Units issued and transferred from other funding options 37,528 105,491 93,909 Units redeemed and transferred to other funding options (38,316) (14,684) (2,721) ---------- ---------------------- --------- Units end of year 181,207 181,995 91,188 ========== ====================== =========
(a) For the period May 1, 2006 to December 31, 2006. (b) For the period April 28, 2008 to December 31, 2008. (c) For the period April 30, 2007 to December 31, 2007. 157 AMERICAN CENTURY VP VISTA DELAWARE VIP SMALL CAP VALUE INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------- ------------------------------------------- 2008 2007 2006 2008 2007 2006 -------- ---------------------- -------- ---------- ---------------------- --------- 1,642 1,963 1,252 67,044 31,911 9,876 7,373 511 761 14,415 43,174 25,950 (329) (832) (50) (22,180) (8,041) (3,915) -------- ---------------------- -------- ---------- ---------------------- --------- 8,686 1,642 1,963 59,279 67,044 31,911 ======== ====================== ======== ========== ====================== =========
GOLDMAN SACHS MID CAP VALUE GOLDMAN SACHS STRUCTURED SMALL CAP EQUITY INVESTMENT DIVISION INVESTMENT DIVISION ------------------------------------------- ----------------------------------------- 2008 2007 2006 2008 2007 2006 ---------- ---------------------- --------- --------- ---------------------- -------- 84,789 18,361 3,769 12,264 6,743 4,239 29,281 68,111 15,229 2,521 5,781 2,659 (11,968) (1,683) (637) (7,967) (260) (155) ---------- ---------------------- --------- --------- ---------------------- -------- 102,102 84,789 18,361 6,818 12,264 6,743 ========== ====================== ========= ========= ====================== ========
C> MFS GLOBAL EQUITY MFS NEW DISCOVERY INVESTMENT DIVISION INVESTMENT DIVISION ---------------------------------------- ---------------------------------- 2008 2007 2006 2008 2007 2006 -------- ---------------------- -------- ------ ---------------------- ---- 3,948 1,789 -- 253 -- -- 1,868 2,461 1,849 -- 260.33 -- (430) (302) (60) (4) (7) -- -------- ---------------------- -------- ------ ---------------------- ---- 5,386 3,948 1,789 249 253 -- ======== ====================== ======== ====== ====================== ====
VAN KAMPEN LITGOVERNMENT WELLS FARGO VT TOTAL RETURN BOND INVESTMENT DIVISION INVESTMENT DIVISION ----------------------------------------- -------------------------------------------- 2008 2007 2006 2008 2007 2006 --------- ---------------------- -------- --------- ------------------------- -------- 1,920 1,342 1,272 9,697 5,553 1,620 2,736 1,425 701 9,589 5,733 4,733 (2,031) (847) (631) (3,957) (1,589) (800) --------- ---------------------- -------- --------- ------------------------- -------- 2,625 1,920 1,342 15,329 9,697 5,553 ========= ====================== ======== ========= ========================= ========
PIONEER VCT EMERGING MARKETS INVESTMENT DIVISION ---------------------- 2008 (B) ---------------------- -- 13,166 (136) ---------------------- 13,031 ======================
158 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS The following table is a summary of unit values and units outstanding for the Policies, net investment income ratios, and expense ratios, excluding expenses for the underlying portfolio, series, or fund for each of the five years in the period ended December 31, 2008: AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ----------- ------------- ---------------- ------------------- MSF BlackRock Diversified 2008 12,136,197 11.61 - 46.97 235,715,981 2.81 0.45 - 0.90 (25.47) - (20.65) Investment Division 2007 12,715,624 15.43 - 38.69 334,245,436 2.54 0.45 - 0.90 4.96 - 8.02 2006 13,096,726 14.57 - 36.86 331,432,719 2.44 0.40 - 0.90 7.38 - 10.53 2005 13,638,816 13.18 - 33.65 319,750,423 1.57 0.40 - 0.90 2.13 - 3.05 2004 13,455,017 12.79 - 32.95 315,176,729 1.83 0.40 - 0.90 7.54 - 8.51 MSF BlackRock Aggressive Growth 2008 10,226,808 10.19 - 37.93 134,277,037 -- 0.45 - 0.90 (46.22) - (44.59) Investment Division 2007 10,673,487 18.84 - 26.64 260,061,815 -- 0.45 - 0.90 19.53 - 20.60 2006 11,198,297 15.63 - 22.09 228,717,595 -- 0.40 - 0.90 5.76 - 6.75 2005 11,502,614 14.64 - 20.73 222,219,970 -- 0.40 - 0.90 9.72 - 10.70 2004 11,775,258 13.23 - 18.89 207,749,362 -- 0.40 - 0.90 11.97 - 12.98 MSF MetLife Stock Index 2008 36,120,853 8.47 - 37.94 472,610,929 1.94 0.45 - 0.90 (37.67) - (34.22) Investment Division 2007 34,637,993 13.47 - 39.67 748,068,488 1.03 0.45 - 0.90 4.28 - 10.73 2006 33,607,228 12.80 - 38.04 707,564,793 1.97 0.40 - 0.90 8.73 - 15.48 2005 32,156,989 11.08 - 33.24 605,569,341 1.56 0.40 - 0.90 3.71 - 4.64 2004 29,475,869 10.59 - 32.05 548,175,778 0.83 0.40 - 0.90 9.55 - 10.53 MSF Julius Baer International Stock 2008 3,272,041 9.71 - 14.31 38,994,328 3.13 0.45 - 0.90 (44.63) - (40.37) Investment Division 2007 3,371,026 17.46 - 23.95 72,704,709 1.05 0.45 - 0.90 9.36 - 11.35 2006 3,412,213 15.68 - 21.90 67,509,144 1.40 0.40 - 0.90 14.38 - 16.49 2005 3,294,341 13.71 - 18.97 56,855,714 0.60 0.40 - 0.90 16.95 - 18.00 2004 3,241,370 11.67 - 16.22 48,075,000 1.32 0.40 - 0.90 17.14 - 18.19 MSF FI Mid Cap Opportunities 2008 13,704,583 3.86 - 10.96 124,838,700 0.41 0.45 - 0.90 (55.69) - (51.44) Investment Division 2007 13,843,071 8.63 - 24.16 283,077,852 0.13 0.45 - 0.90 7.38 - 8.34 2006 14,298,595 7.97 - 22.36 271,463,672 0.01 0.45 - 0.90 10.85 - 28.32 2005 14,520,500 7.12 - 20.08 247,745,972 -- 0.45 - 0.90 5.97 - 6.92 2004 14,284,163 6.66 - 18.87 229,326,208 0.53 0.45 - 0.90 16.15 - 17.19 MSF T. Rowe Price Small Cap Growth 2008 4,498,247 10.85 - 12.37 52,291,217 -- 0.45 - 0.90 (36.76) - (33.41) Investment Division 2007 4,692,085 17.16 - 19.47 85,746,187 -- 0.45 - 0.90 8.88 - 9.89 2006 4,913,291 15.76 - 17.80 81,812,746 -- 0.45 - 0.90 2.96 - 3.93 2005 5,103,342 8.20 - 17.21 80,632,046 -- 0.45 - 0.90 10.02 - 11.01 2004 5,056,605 7.41 - 15.57 72,034,034 -- 0.45 - 0.90 9.58 - 11.08 MSF Oppenheimer Global Equity 2008 2,250,790 12.94 - 14.42 29,644,684 2.15 0.45 - 0.90 (40.90) - (37.34) Investment Division 2007 2,347,437 21.71 - 24.18 52,072,709 1.10 0.45 - 0.90 5.53 - 10.86 2006 2,344,938 20.38 - 22.70 48,944,535 2.49 0.45 - 0.90 11.00 - 16.59 2005 2,314,718 17.48 - 19.47 41,604,796 0.55 0.45 - 0.90 15.19 - 16.22 2004 2,201,362 15.04 - 16.76 34,182,477 1.52 0.45 - 0.90 15.38 - 16.42 MSF MFS Value Investment Division 2008 4,061,727 9.35 - 13.40 41,012,912 1.91 0.45 - 0.90 (34.05) - (17.37) 2007 4,115,566 14.14 - 17.54 61,926,665 0.78 0.45 - 0.90 (4.67) - (3.48) 2006 4,099,325 14.65 - 18.40 64,292,839 0.77 0.40 - 0.90 16.70 - 18.14 2005 4,085,993 12.55 - 15.72 54,445,434 0.70 0.40 - 0.90 (2.26) - (1.38) 2004 3,767,330 12.79 - 16.08 51,133,000 0.49 0.40 - 0.90 10.42 - 11.42
159 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ----------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ------------- ----------- ------------- ---------------- ------------------- MSF Neuberger Berman Mid Cap 2008 3,355,424 11.10 - 16.33 44,065,744 0.85 0.90 (47.81) - (46.55) Value Investment Division 2007 3,292,329 21.27 - 30.68 82,005,373 0.55 0.90 2.51 - 3.45 2006 3,225,765 20.75 - 29.66 77,735,349 0.48 0.40 - 0.90 10.46 - 11.46 2005 2,912,765 18.79 - 26.61 63,152,395 0.29 0.40 - 0.90 11.27 - 12.27 2004 2,435,399 16.88 - 23.70 47,215,000 0.23 0.40 - 0.90 21.81 - 22.91 MSF T. Rowe Price Large Cap Growth 2008 3,522,287 6.64 - 10.23 30,702,575 0.59 0.90 (41.89) - (38.27) Investment Division 2007 3,529,093 11.53 - 17.60 52,811,241 0.45 0.90 8.47 - 9.40 2006 3,620,946 10.63 - 16.09 49,315,573 0.33 0.40 - 0.90 12.21 - 13.23 2005 3,547,628 6.84 - 14.21 41,950,019 0.54 0.40 - 0.90 4.12 - 6.59 2004 3,354,771 6.47 - 13.33 36,962,724 0.21 0.40 - 0.90 2.91 - 9.93 MSF Lehman Brothers Aggregate 2008 5,705,639 15.30 - 17.13 96,524,738 4.55 0.45 - 0.90 4.32 - 5.99 Bond Index Investment Division 2007 6,582,200 14.56 - 16.17 104,928,263 4.49 0.45 - 0.90 5.89 - 11.27 2006 6,058,549 13.75 - 15.13 90,417,327 4.29 0.45 - 0.90 (0.88) - 4.15 2005 5,619,973 13.32 - 14.53 80,547,413 3.76 0.45 - 0.90 1.16 - 2.06 2004 4,812,639 13.17 - 14.23 67,709,808 3.00 0.45 - 0.90 3.17 - 4.10 MSF Morgan Stanley EAFE Index 2008 4,548,869 8.21 - 11.34 44,991,420 2.87 0.45 - 0.90 (42.58) - (40.15) Investment Division 2007 4,186,312 14.30 - 19.58 71,635,930 1.94 0.45 - 0.90 9.83 - 13.98 2006 3,792,545 13.02 - 17.67 58,401,764 1.70 0.40 - 0.90 23.03 - 25.75 2005 3,464,106 10.45 - 14.05 42,457,559 1.59 0.40 - 0.90 12.24 - 13.24 2004 3,014,776 9.31 - 12.41 32,551,579 0.71 0.40 - 0.90 18.58 - 19.64 MSF Russell 2000 Index 2008 2,979,566 9.77 - 13.88 37,446,370 1.26 0.45 - 0.90 (34.09) - (30.11) Investment Division 2007 2,975,863 14.83 - 20.87 56,244,600 0.91 0.45 - 0.90 (2.43) - 2.72 2006 2,884,744 15.20 - 21.19 55,288,989 0.81 0.45 - 0.90 12.11 - 17.99 2005 2,619,288 13.00 - 17.96 42,636,846 0.74 0.45 - 0.90 3.57 - 4.50 2004 2,380,540 12.55 - 17.19 37,085,761 0.44 0.45 - 0.90 16.71 - 17.77 MSF Jennison Growth 2008 1,170,101 4.12 - 9.10 9,813,769 2.43 0.90 (37.00) - (26.98) Investment Division 2007 1,203,057 6.48 - 13.98 15,741,716 0.42 0.90 10.62 - 11.66 (Commenced 5/1/2005) 2006 1,356,790 5.81 - 12.52 14,099,259 -- 0.40 - 0.90 1.88 - 2.82 2005 1,147,750 5.65 - 12.19 13,084,245 -- 0.40 - 0.90 20.77 - 21.49 MSF BlackRock Strategic Value 2008 4,285,033 12.90 - 14.08 59,706,219 0.54 0.90 (38.96) - (35.81) Investment Division 2007 4,450,536 20.94 - 22.86 100,708,365 0.30 0.90 (4.30) - (3.41) 2006 4,494,782 21.68 - 23.68 105,414,517 0.31 0.40 - 0.90 15.68 - 16.74 2005 4,485,936 18.58 - 20.28 90,122,911 -- 0.40 - 0.90 3.23 - 4.15 2004 4,164,014 17.84 - 19.48 80,342,000 -- 0.40 - 0.90 14.31 - 15.34 MSF MetLife Mid Cap Stock Index 2008 3,450,115 10.90 - 11.97 40,733,135 1.41 0.90 (36.75) - (35.42) Investment Division 2007 3,466,871 17.07 - 18.75 63,959,203 0.75 0.90 6.83 - 7.82 2006 3,270,208 15.84 - 17.39 56,090,136 1.19 0.48 - 0.90 9.11 - 10.09 2005 2,985,941 14.39 - 15.80 46,523,277 0.67 0.48 - 0.90 11.28 - 12.27 2004 2,658,110 12.82 - 14.07 36,885,384 0.48 0.48 - 0.90 15.01 - 16.05 MSF Franklin Templeton Small Cap 2008 579,322 5.93 - 7.33 4,206,928 -- 0.90 (41.67) - (36.32) Growth Investment Division 2007 569,953 11.73 - 12.46 7,040,049 -- 0.90 3.53 - 4.53 2006 538,941 11.33 - 11.92 6,368,294 -- 0.90 9.07 - 10.05 2005 474,966 8.20 - 10.83 5,108,051 -- 0.90 3.72 - 10.71 2004 440,124 10.01 - 10.35 4,527,432 -- 0.90 10.41 - 11.41
160 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ----------------- ---------- ------------- ---------------- ------------------- MSF BlackRock Large Cap Value 2008 924,995 9.87 - 10.48 9,571,372 0.82 0.90 (35.46) - (30.94) Investment Division 2007 770,111 15.30 - 16.10 12,275,048 0.98 0.90 2.41 - 3.40 2006 608,908 8.29 - 15.57 9,397,259 1.17 0.90 18.29 - 19.30 2005 396,107 12.63 - 13.05 5,137,144 0.88 0.90 5.04 - 5.98 2004 271,012 12.02 - 12.31 3,320,893 -- 0.90 12.39 - 13.40 MSF Davis Venture Value 2008 1,580,625 8.81 - 29.12 38,001,762 1.34 0.90 (39.89) - (37.59) Investment Division 2007 1,479,707 14.53 - 42.17 58,550,244 0.77 0.90 3.65 - 4.56 2006 1,301,427 13.90 - 40.33 49,859,713 0.85 0.40 - 0.90 13.55 - 14.62 2005 1,739,984 12.13 - 35.19 43,993,114 0.65 0.40 - 0.90 9.32 - 10.30 2004 1,365,956 11.00 - 31.91 31,374,337 0.54 0.40 - 0.90 11.36 - 12.37 MSF Loomis Sayles Small Cap 2008 116,157 9.66 - 213.94 11,034,259 -- 0.90 (36.47) - (30.05) Investment Division 2007 98,083 15.07 - 333.74 15,771,472 0.08 0.90 10.90 - 11.90 2006 78,273 13.47 - 298.24 12,333,660 -- 0.40 - 0.90 15.64 - 16.72 2005 39,978 11.54 - 255.61 8,114,417 -- 0.40 - 0.90 6.00 - 6.96 2004 37,547 10.79 - 238.98 6,406,000 -- 0.40 - 0.90 15.31 - 16.35 MSF BlackRock Legacy Large Cap 2008 413,693 6.25 - 25.16 3,786,888 0.43 0.90 (37.07) - (34.56) Growth Investment Division 2007 265,094 9.85 - 14.78 3,824,550 0.19 0.90 17.60 - 18.77 2006 190,308 8.29 - 12.45 2,269,333 0.16 0.48 - 0.90 3.23 - 4.13 2005 1,201,181 7.96 - 11.96 10,109,046 0.39 0.48 - 0.90 6.05 - 7.00 2004 851,014 7.44 - 11.17 6,457,524 -- 0.48 - 0.90 8.81 - 11.74 MSF BlackRock Bond Income 2008 4,137,787 14.77 - 69.96 81,985,350 5.16 0.45 - 0.90 (4.31) - (3.43) Investment Division 2007 4,467,585 15.30 - 31.06 92,436,358 3.24 0.45 - 0.90 5.36 - 12.31 2006 4,668,001 14.39 - 29.48 92,311,177 5.74 0.40 - 0.90 (2.17) - 4.43 2005 5,010,744 13.78 - 28.49 94,693,129 3.93 0.40 - 0.90 1.50 - 2.41 2004 4,716,266 13.46 - 28.07 89,174,083 4.09 0.40 - 0.90 3.50 - 4.43 MSF FI Value Leaders 2008 451,406 7.50 - 24.71 4,225,438 1.93 0.90 (39.49) - (34.25) Investment Division 2007 440,904 12.29 - 15.50 6,742,764 0.91 0.90 3.22 - 4.24 2006 393,835 11.79 - 14.87 5,778,898 1.00 0.40 - 0.90 10.97 - 11.91 2005 248,972 10.54 - 13.29 3,262,874 1.04 0.40 - 0.90 9.71 - 10.69 2004 101,071 9.52 - 12.01 1,190,557 1.10 0.40 - 0.90 12.71 - 13.73 MSF Harris Oakmark Focused Value 2008 196,801 24.85 - 153.92 29,975,616 0.37 0.90 (46.49) - (42.81) Investment Division 2007 191,591 268.52 - 285.05 54,129,720 0.56 0.90 (7.67) - (6.84) 2006 191,529 290.84 - 305.98 58,176,504 0.30 0.90 11.45 - 12.45 2005 182,165 260.95 - 272.09 49,251,761 0.04 0.90 9.00 - 9.98 2004 153,755 239.40 - 247.40 37,844,733 0.04 0.90 8.95 - 9.93 MSF Western Asset Management 2008 1,106,833 13.17 - 22.28 15,464,462 4.07 0.90 (15.76) - (14.42) Strategic Bond Opportunities 2007 1,117,386 15.63 - 16.60 18,372,006 2.67 0.90 3.10 - 4.08 Investment Division 2006 998,939 15.16 - 15.95 15,802,133 4.79 0.90 3.38 - 4.33 2005 843,296 14.56 - 15.19 12,708,706 3.01 0.90 1.92 - 2.83 2004 595,935 14.29 - 14.77 8,742,547 2.66 0.90 5.66 - 6.61 MSF Western Asset Management 2008 1,059,598 13.91 - 20.52 15,636,881 4.27 0.90 (1.23) - (0.36) U.S. Government 2007 1,066,735 14.08 - 14.95 15,797,381 2.66 0.90 3.38 - 4.33 Investment Division 2006 988,756 13.62 - 14.33 14,050,390 3.26 0.90 3.25 - 4.19 2005 879,572 13.19 - 13.75 12,014,309 1.33 0.90 0.82 - 1.72 2004 705,185 13.08 - 13.52 9,478,138 1.25 0.90 2.09 - 3.01
161 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ----------------- ---------- ------------- ---------------- ------------------- MSF BlackRock Money Market 2008 3,533,477 17.90 - 17.91 63,265,014 2.81 0.90 1.92 - 2.84 Investment Division 2007 3,638,086 17.41 - 17.57 63,398,057 4.94 0.90 4.15 - 5.07 2006 3,575,759 16.57 - 16.87 59,328,821 4.81 0.40 - 0.90 3.86 - 4.82 2005 1,760,759 12.92 - 16.24 28,027,973 2.78 0.40 - 0.90 1.97 - 2.89 2004 1,880,485 15.36 - 15.93 29,162,123 1.03 0.40 - 0.90 0.08 - 0.99 MSF MFS Total Return 2008 469,855 9.95 - 50.76 4,861,537 3.50 0.90 (22.84) - (20.13) Investment Division 2007 418,473 12.90 - 13.33 5,549,510 1.97 0.90 3.45 - 4.39 2006 297,430 12.47 - 12.77 3,781,921 3.21 0.40 - 0.90 11.19 - 12.18 2005 190,293 11.21 - 11.68 2,159,396 1.64 0.40 - 0.90 2.20 - 7.66 2004 69,569 10.85 - 11.04 767,164 -- 0.40 - 0.90 8.52 - 10.39 MSF MetLife Conservative 2008 133,696 9.82 - 10.14 1,350,130 1.41 0.90 (14.87) - (13.89) Allocation Investment Division 2007 66,558 11.53 - 11.81 784,035 -- 0.90 4.82 - 5.73 (Commenced 5/1/2005) 2006 44,128 11.00 - 11.17 492,252 2.90 0.90 6.27 - 7.27 2005 11,372 10.35 - 10.41 118,225 0.63 0.90 3.51 - 4.13 MSF MetLife Conservative to 2008 336,506 9.33 - 9.64 3,218,477 1.34 0.90 (22.11) - (20.23) Moderate Allocation 2007 244,254 11.98 - 12.27 2,977,400 -- 0.90 4.08 - 5.05 Investment Division 2006 161,903 11.51 - 11.68 1,884,052 2.36 0.90 8.80 - 9.74 (Commenced 5/1/2005) 2005 54,464 10.58 - 10.64 578,511 0.77 0.90 5.80 - 6.43 MSF MetLife Moderate Allocation 2008 2,031,439 8.82 - 90.36 18,535,109 1.08 0.90 (29.06) - (26.51) Investment Division 2007 1,452,241 12.44 - 12.74 18,395,945 0.19 0.90 3.58 - 4.51 (Commenced 5/1/2005) 2006 775,138 12.01 - 12.19 9,406,274 1.48 0.90 11.20 - 12.19 2005 133,610 10.80 - 10.87 1,449,435 0.83 0.90 8.02 - 8.66 MSF MetLife Moderate to Aggressive 2008 3,956,910 8.33 - 8.61 33,871,944 0.84 0.90 (35.55) - (32.36) Allocation Investment Division 2007 2,499,351 12.92 - 13.23 32,935,899 0.19 0.90 3.19 - 4.09 (Commenced 5/1/2005) 2006 1,098,433 12.52 - 12.71 13,918,465 1.07 0.90 13.54 - 14.57 2005 212,022 11.03 - 11.09 2,349,403 0.77 0.90 10.28 - 10.94 MSF MetLife Aggressive Allocation 2008 851,068 7.82 - 80.06 6,897,699 0.76 0.90 (40.83) - (37.15) Investment Division 2007 608,756 13.22 - 13.54 8,191,098 0.22 0.90 2.56 - 3.52 (Commenced 5/1/2005) 2006 225,274 12.89 - 13.08 2,934,559 0.67 0.90 15.05 - 16.04 2005 40,224 11.20 - 11.27 452,673 0.73 0.90 12.05 - 12.72 MSF FI Large Cap 2008 56,821 5.73 - 11.76 333,685 -- 0.90 (45.32) - (38.34) Investment Division 2007 28,739 10.47 - 10.63 304,229 0.12 0.90 3.05 - 4.01 (Commenced 5/1/2006) 2006 6,047 10.16 - 10.22 61,685 -- 0.90 1.60 - 2.20 MSF Capital Guardian U.S. Equity 2008 24,653 9.32 229,863 1.07 -- (40.23) Investment Division 2007 33,111 15.60 516,531 -- -- 1.96 (Commenced 5/1/2006) 2006 25,159 15.30 384,843 0.50 0.48 36.32 Janus Aspen Large Cap Growth 2008 685,791 6.76 4,638,873 0.74 -- (39.71) Investment Division 2007 643,417 11.22 7,219,885 0.74 -- 15.08 2006 595,051 9.75 5,801,609 0.49 0.48 - 0.60 11.38 2005 563,653 8.75 4,934,074 0.33 0.48 - 0.60 4.29 2004 509,009 8.39 4,276,635 0.15 0.48 - 0.60 4.52
162 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ ------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ----------------- ---------- ------------- ---------------- ------------------ Janus Aspen Balanced 2008 20,633 11.94 246,409 3.65 -- (16.08) Investment Division 2007 5,625 14.23 80,035 3.00 -- 10.31 2006 179 12.90 2,311 1.92 0.48 10.41 2005 187 11.68 2,186 2.07 0.60 7.66 2004 22 10.85 237 3.38 0.60 8.52 Janus Aspen Forty Investment Division 2008 45,182 10.65 475,295 0.01 -- (44.31) (Commenced 5/1/2004) 2007 27,126 19.13 518,927 0.25 -- 36.64 2006 7,954 14.00 111,362 0.14 0.48 9.11 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- -- Janus Aspen International Growth Investment Division (Commenced 4/28/08) 2008 1,777 14.62 25,984 -- -- (52.68) Janus Aspen Mid Cap Value Investment Division (Commenced 4/28/08) 2008 13,293 11.31 150,387 0.81 -- (28.41) AIM V.I. Global Real Estate 2008 76,172 19.10 1,455,085 5.47 -- (44.65) Investment Division 2007 74,508 34.51 2,571,266 5.97 -- (12.34) 2006 70,179 39.37 2,762,613 1.18 0.40 - 0.60 42.62 2005 63,997 27.61 1,747,819 1.18 0.40 - 0.60 15.46 2004 54,709 23.91 1,308,000 1.25 0.40 - 0.60 34.40 FTVIPT Templeton Foreign Securities 2008 527,866 11.09 5,856,168 2.58 -- (40.23) Investment Division 2007 504,436 18.56 9,363,624 2.07 -- 15.78 2006 471,719 16.03 7,566,317 1.35 0.48 - 0.60 21.69 2005 488,477 13.17 6,438,080 1.22 0.48 - 0.60 10.48 2004 444,204 11.92 5,300,000 1.12 0.48 - 0.60 18.87 FTVIPT Mutual Discovery Securities 2008 140,006 13.11 1,835,518 2.51 -- (28.44) Investment Division 2007 93,103 18.32 1,706,062 1.59 -- 11.84 (Commenced 5/1/2004) 2006 54,880 16.38 899,109 0.99 0.40 - 0.48 23.03 2005 9,138 13.31 121,664 1.34 0.40 - 0.48 15.97 2004 -- -- -- -- -- -- AllianceBernstien Global Technology 2008 14,644 3.38 49,447 -- -- (47.48) Investment Division 2007 8,261 6.43 53,097 -- -- 19.96 2006 11,769 5.36 63,091 -- 0.40 - 0.60 8.36 2005 8,553 4.95 42,308 -- 0.40 - 0.60 3.65 2004 4,324 4.77 20,636 -- 0.48 - 0.60 5.09 Fidelity VIP Contrafund 2008 218,160 8.83 1,927,330 0.90 -- (42.60) Investment Division 2007 188,529 15.39 2,902,318 0.91 -- 11.44 2006 151,404 13.81 2,091,319 1.15 0.40 - 0.60 11.57 2005 74,414 12.38 921,114 0.21 0.40 - 0.60 16.85 2004 77,301 10.59 819 0.21 0.40 - 0.60 15.34
163 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- -------------- ----------- ------------- ---------------- ------------------- Fidelity VIP Asset Manager: Growth 2008 126,890 7.16 908,867 1.87 -- (35.88) Investment Division 2007 112,746 11.17 1,259,390 4.07 -- 18.83 2006 102,160 9.40 958,076 1.87 0.48 6.89 2005 80,752 8.79 708,401 2.58 0.48 3.79 2004 83,331 8.47 704,000 2.23 0.48 5.85 Fidelity VIP Investment Grade Bond 2008 3,908 11.18 43,701 1.19 -- (3.35) Investment Division 2007 73,675 11.57 852,372 0.68 -- 4.23 2006 3,341 11.10 36,978 4.18 0.40 - 0.48 4.28 2005 3,156 10.64 33,484 2.35 0.40 - 0.48 2.08 2004 1,268 10.43 13,121 -- 0.40 4.27 Fidelity VIP Equity-Income 2008 72,691 7.95 577,801 1.89 -- (42.69) Investment Division 2007 87,700 13.87 1,216,664 3.23 -- (0.93) 2006 30,951 14.00 433,176 3.96 0.40 - 0.48 20.07 2005 2,190 11.66 25,408 1.05 0.40 - 0.48 5.76 2004 928 11.02 10,110 -- 0.40 10.25 Fidelity VIP Mid Cap Investment Division (Commenced 4/28/08) 2008 2,071 15.37 31,825 0.15 -- (46.25) Fidelity VIP Freedom 2010 Investment Division (Commenced 4/28/08) 2008 3,089 7.63 - 9.69 23,569 6.53 0.45 (23.71) - (23.48) Fidelity VIP Freedom 2020 Investment Division (Commenced 4/28/08) 2008 4,617 6.94 - 9.26 37,721 4.51 0.45 (30.60) - (30.39) Fidelity VIP Freedom 2030 Investment Division (Commenced 4/28/08) 2008 3,324 6.43 - 8.74 21,387 6.89 0.45 (35.65) - (35.46) American Funds Growth 2008 1,382,286 12.64 - 138.29 76,515,292 0.86 0.90 (44.47) - 27.72 Investment Division 2007 1,218,654 94.52 - 100.35 121,273,017 0.82 0.90 11.33 - 12.35 2006 1,094,384 84.90 - 89.32 97,034,740 0.86 0.90 9.24 - 10.22 2005 898,134 77.72 - 81.04 72,331,242 0.74 0.90 15.16 - 16.19 2004 656,749 67.49 - 69.75 45,571,772 0.20 0.90 11.49 - 12.50 American Funds Growth-Income 2008 1,461,879 31.95 - 104.26 49,610,668 1.79 0.90 (38.41) - (35.35) Investment Division 2007 1,381,044 51.88 - 55.07 75,370,228 1.59 0.90 4.11 - 5.04 2006 1,228,077 49.83 - 52.43 63,898,091 1.68 0.90 14.17 - 15.21 2005 1,035,047 43.64 - 45.51 46,794,725 1.44 0.90 4.89 - 5.83 2004 811,401 41.61 - 43.00 34,701,703 1.00 0.90 9.39 - 10.37 American Funds Global Small 2008 2,098,117 15.27 - 18.81 33,880,750 -- 0.90 (53.94) - (48.89) Capitalization Investment Division 2007 1,945,062 33.16 - 35.20 67,615,279 3.01 0.90 20.32 - 21.42 2006 1,521,701 27.56 - 28.99 43,642,742 0.46 0.90 22.97 - 24.05 2005 1,088,603 22.41 - 23.37 25,231,190 0.89 0.90 24.24 - 25.35 2004 676,191 18.04 - 18.64 12,527,867 -- 0.90 19.80 - 20.88
164 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ----------------- ---------- ------------- ---------------- ------------------- American Funds Bond 2008 317,147 9.69 - 16.69 3,143,128 5.80 0.90 (10.12) - (9.37) Investment Division 2007 291,647 10.78 - 10.95 3,182,415 10.03 0.90 6.52 - 7.56 (Commenced 5/1/06) 2006 63,414 10.12 - 10.18 644,176 0.87 0.90 1.20 - 1.80 American Funds International Investment Division (Commenced 4/28/08) 2008 2,335 18.89 44,134 2.51 -- (39.19) American Funds U.S. Government/AAA Rated Securities Investment Division (Commenced 4/28/08) 2008 1,808 19.29 34,883 2.26 -- 6.61 MIST T. Rowe Price Mid Cap Growth 2008 1,702,757 6.18 - 9.87 11,162,717 0.07 0.90 (40.16) - (37.28) Investment Division 2007 1,587,296 10.32 - 16.38 17,384,199 0.21 0.90 16.74 - 17.85 2006 1,338,870 8.84 - 13.92 12,401,292 -- 0.60 - 0.90 5.66 - 6.60 2005 1,132,034 8.37 - 13.11 9,817,802 -- 0.60 - 0.90 13.85 - 14.87 2004 856,351 7.35 - 11.44 6,475,187 -- 0.60 - 0.90 14.40 - 18.15 MIST MFS Research International 2008 870,603 9.99 - 11.57 9,814,566 2.06 0.90 (42.78) - (41.00) Investment Division 2007 695,827 17.33 - 20.03 13,629,924 1.44 0.90 12.59 - 13.61 2006 566,593 15.30 - 17.63 9,803,525 1.59 0.90 25.80 - 26.90 2005 294,107 12.09 - 13.89 4,058,072 0.63 0.90 6.38 - 16.77 2004 234,898 11.51 - 11.90 2,780,832 -- 0.90 18.65 - 19.72 MIST PIMCO Total Return 2008 2,287,745 14.03 - 15.03 34,041,059 3.92 0.90 (1.28) - 0.61 Investment Division 2007 2,175,489 14.07 - 14.94 32,210,481 3.46 0.90 6.91 - 7.87 2006 2,039,385 13.16 - 13.85 28,016,253 2.73 0.90 3.85 - 4.81 2005 1,849,249 12.67 - 13.21 24,263,960 0.06 0.90 1.55 - 2.46 2004 1,483,392 12.48 - 12.90 19,019,859 7.63 0.90 4.31 - 5.25 MIST RCM Technology 2008 1,806,845 3.72 - 3.99 7,121,496 13.07 0.90 (44.79) - (37.82) Investment Division 2007 1,867,295 6.74 - 7.15 13,231,277 -- 0.90 30.62 - 31.68 2006 1,395,573 5.16 - 5.43 7,523,569 -- 0.90 4.51 - 5.47 2005 1,334,943 4.94 - 5.15 6,824,691 -- 0.90 10.36 - 11.35 2004 1,273,073 4.47 - 4.62 5,849,160 -- 0.90 (5.13) - (4.28) MIST Lord Abbett Bond Debenture 2008 1,205,110 12.96 - 19.00 17,548,678 4.38 0.45 - 0.90 (19.13) - (18.40) Investment Division 2007 1,249,287 16.02 - 19.29 22,262,379 5.32 0.45 - 0.90 5.88 - 14.15 2006 1,162,806 14.77 - 18.05 19,368,414 6.71 0.40 - 0.90 1.42 - 9.34 2005 1,085,144 13.96 - 16.51 16,531,209 4.70 0.40 - 0.90 0.90 - 1.81 2004 1,015,708 10.84 - 16.22 15,192,966 3.51 0.40 - 0.90 7.46 - 9.61 MIST Lazard Mid Cap 2008 371,732 8.11 - 10.73 3,422,640 1.17 0.90 (38.70) - (36.07) Investment Division 2007 340,316 13.14 - 15.10 5,084,696 0.63 0.90 (3.37) - (2.45) 2006 261,764 14.85 - 15.48 4,020,887 0.52 0.90 6.62 - 14.86 2005 226,296 11.78 - 13.48 3,034,264 0.41 0.90 7.44 - 8.40 2004 171,772 12.14 - 12.43 2,124,397 -- 0.90 13.57 - 14.60 MIST Met/AIM Small Cap Growth 2008 230,618 9.03 - 10.86 2,187,257 -- 0.90 (38.73) - (34.43) Investment Division 2007 208,985 14.84 - 15.62 3,233,322 -- 0.90 10.42 - 11.41 2006 170,794 13.44 - 14.02 2,376,804 -- 0.90 3.77 - 13.93 2005 129,221 11.71 - 12.31 1,587,237 -- 0.90 7.63 - 10.16 2004 101,110 11.06 - 11.33 1,143,358 -- 0.90 5.78 - 6.73
165 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 -------------------------------------- -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) --------- ----------------- ---------- ------------- ---------------- ------------------- MIST Harris Oakmark International 2008 1,337,674 11.28 - 11.97 15,844,670 1.96 0.90 (41.26) - (37.26) Investment Division 2007 1,335,770 19.20 - 20.20 26,700,786 0.89 0.90 (1.74) - (0.83) 2006 1,060,490 19.54 - 20.37 21,411,537 2.33 0.90 28.05 - 29.18 2005 636,793 15.26 - 15.77 9,973,856 0.16 0.90 13.47 - 14.48 2004 289,245 13.45 - 13.77 3,963,209 0.04 0.90 19.73 - 20.80 MIST Legg Mason Partners 2008 929,444 4.59 - 5.47 4,956,827 0.01 0.90 (39.49) - (36.35) Aggressive Growth 2007 893,124 7.54 - 8.82 7,804,601 0.22 0.90 1.71 - 2.56 Investment Division 2006 908,926 7.37 - 8.60 7,744,433 -- 0.48 - 0.90 (2.53) - (1.60) 2005 844,525 7.50 - 8.74 7,322,996 -- 0.48 - 0.90 12.83 - 13.84 2004 741,720 6.60 - 7.68 5,657,453 -- 0.48 - 0.90 7.85 - 8.82 MIST Lord Abbett Growth and 2008 569,914 7.43 - 48.32 4,235,811 1.80 -- (36.20) - (32.76) Income Investment Division 2007 539,972 11.65 6,289,386 1.00 -- 4.02 2006 523,423 11.20 5,861,368 0.03 0.40 - 0.60 18.05 2005 342,402 9.49 - 12.19 4,160,587 0.10 0.40 - 0.60 3.68 - 4.62 2004 280,704 9.15 - 11.65 3,254,684 0.49 0.40 - 0.60 11.22 - 12.92 MIST Clarion Global Real Estate 2008 1,247,223 9.71 - 10.12 12,525,455 2.00 0.90 (44.73) - (41.56) Investment Division 2007 1,071,638 16.76 - 17.32 18,432,903 1.09 0.90 (15.57) - (14.81) 2006 939,464 19.85 - 20.33 18,987,194 1.01 0.40 - 0.90 36.70 - 37.93 2005 503,432 14.52 - 14.74 7,394,991 -- 0.40 - 0.90 12.60 - 13.61 2004 151,740 12.90 - 12.97 1,964,753 3.30 0.40 - 0.90 28.97 - 29.74 MIST Van Kampen Mid Cap Growth 2008 1,987 8.35 - 8.96 16,600 1.36 -- (46.77) - (43.85) Investment Division 2007 2,000 15.69 31,371 -- -- 23.52 (Commenced 5/1/2004) 2006 -- -- -- -- -- -- 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- -- MIST Lord Abbett Mid Cap Value 2008 10,463 8.78 91,851 0.25 -- (38.78) Investment Division 2007 4,638 14.34 66,500 0.94 -- 0.63 2006 2,988 14.25 42,580 0.54 0.48 - 0.60 12.16 2005 2,543 12.71 32,304 0.86 0.48 - 0.60 8.05 2004 21 11.76 246 0.72 0.60 17.59 MIST Third Avenue Small Cap Value 2008 22,742 10.72 243,831 0.70 -- (29.73) Investment Division 2007 24,943 15.28 381,064 0.85 -- (2.98) 2006 17,494 15.75 275,584 0.11 0.48 - 0.60 13.11 2005 2,073 13.92 28,860 -- 0.40 - 0.60 15.48 2004 366 12.06 4,407 0.55 0.40 20.58 MIST Oppenheimer Capital 2008 114,986 6.26 - 7.37 841,297 3.67 0.90 (46.29) - (43.37) Appreciation Investment Division 2007 70,634 13.27 - 13.59 955,427 0.11 0.90 13.42 - 14.49 (Commenced 5/1/2005) 2006 27,796 11.70 - 11.87 329,300 0.26 0.90 6.88 - 7.78 2005 10,588 10.95 - 11.01 116,310 0.13 0.90 9.21 - 9.86 MIST Legg Mason Value Equity 2008 576,603 4.53 - 5.20 2,788,353 0.32 0.90 (54.82) - (47.12) Investment Division 2007 511,093 10.02 - 11.42 5,435,902 -- 0.90 (6.62) - (5.70) (Commenced 5/1/2006) 2006 490,888 10.73 - 12.11 5,537,660 0.16 0.48 - 0.90 7.73 - 27.65
166 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ -------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ---------- ------------- ----------- ------------- ---------------- ------------------- MIST SSgA Growth ETF 2008 59,898 7.48 - 8.29 457,331 1.65 0.90 (33.42) - (30.82) Investment Division 2007 56,164 11.24 - 11.41 639,459 -- 0.90 4.95 - 5.94 (Commenced 5/1/2006) 2006 16,395 10.71 - 10.77 176,315 2.52 0.90 7.10 - 7.70 MIST SSgA Growth and Income ETF 2008 39,742 8.33 - 9.05 336,449 1.95 0.90 (25.54) - (23.99) Investment Division 2007 30,551 11.18 - 11.35 345,473 -- 0.90 4.78 - 5.78 (Commenced 5/1/2006) 2006 10,875 10.67 - 10.73 116,548 3.14 0.90 6.70 - 7.30 MIST PIMCO Inflation Protected 2008 523,888 10.33 - 12.23 5,523,166 3.28 0.90 (9.73) - (6.61) Bond Investment Division 2007 80,592 11.16 - 11.33 911,539 1.27 0.90 10.06 - 11.08 (Commenced 5/1/2006) 2006 12,722 10.14 - 10.20 129,728 -- 0.90 1.40 - 2.00 MIST BlackRock Large Cap Core Investment Division 2008 14,670,780 6.31 - 27.82 258,799,279 0.70 0.45 - 0.90 (37.68) - (31.87) (Commenced 4/30/2007) 2007 15,352,126 10.08 - 44.64 436,975,682 -- 0.45 - 0.90 0.80 - 6.77 MIST Janus Forty Investment Division 2008 943,170 7.10 - 226.02 6,915,393 4.58 0.90 (44.68) - (41.84) (Commenced 4/30/2007 ) 2007 281,380 12.33 - 12.40 3,487,948 -- 0.90 23.30 - 24.00 MIST Dreman Small Cap Value Investment Division (Commenced 4/28/08) 2008 11 10.45 120 -- -- (25.08) MIST American Funds Balanced Allocation Investment Division (Commenced 4/28/08) 2008 1,427 7.08 10,107 5.25 -- (29.27) MIST American Funds Growth Allocation Investment Division (Commenced 4/28/08) 2008 2,439 6.45 15,747 8.38 -- (35.51) MIST American Funds Moderate Allocation Investment Division (Commenced 4/28/08) 2008 593 7.77 4,607 6.80 -- (22.46) MIST Met/Franklin Income Investment Division (Commenced 4/28/08) 2008 2,408 8.08 19,461 4.29 -- (19.19) MIST Met/Franklin Mutual Shares Investment Division (Commenced 4/28/08) 2008 1,208 6.68 8,064 3.53 -- (33.20) MIST Met/Franklin Templeton Founding Strategy Investment Division (Commenced 4/28/08) 2008 1,503 7.11 10,681 7.79 -- (28.92) MIST Met/Templeton Growth Investment Division (Commenced 4/28/08) 2008 480 6.64 3,188 1.08 -- (33.62)
167 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED) 6. FINANCIAL HIGHLIGHTS -- (CONTINUED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ ------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ----------------- ---------- ------------- ---------------- ------------------ American Century VP Vista 2008 8,686 9.12 79,193 -- -- (48.63) Investment Division 2007 1,642 17.75 29,133 -- -- 39.76 (Commenced 5/1/2004) 2006 1,963 12.70 24,927 -- 0.40 9.03 2005 1,252 11.65 14,583 -- 0.40 8.13 2004 -- -- -- -- -- -- Delaware VIP Small Cap Value 2008 59,279 10.70 634,305 0.47 -- (30.06) Investment Division 2007 67,044 15.30 1,025,844 0.21 -- (6.82) (Commenced 5/1/2004) 2006 31,911 16.42 524,104 0.02 0.48 15.86 2005 9,876 14.17 139,966 0.26 0.48 17.85 2004 -- -- -- -- -- -- Dreyfus VIF International Value 2008 33,156 10.30 341,560 2.14 -- (37.50) Investment Division 2007 42,550 16.48 701,093 1.66 -- 3.97 2006 45,198 15.85 716,432 -- 0.40 - 0.48 22.35 2005 14,559 12.95 188,477 -- 0.40 - 0.48 11.69 2004 1,371 11.6 15,540 -- 0.40 15.99 Goldman Sachs Mid Cap Value 2008 102,102 8.95 913,808 1.06 -- (37.33) Investment Division 2007 84,789 14.28 1,210,921 1.16 -- (0.70) 2006 18,361 14.38 263,966 1.82 0.40 - 0.48 16.17 2005 3,769 12.38 46,646 0.91 0.40 - 0.48 12.83 2004 1,123 10.97 12,276 1.17 0.40 - 0.48 9.71 Goldman Sachs Structured Small 2008 6,818 7.24 49,396 0.66 -- (33.96) Cap Equity Investment Division 2007 12,264 10.97 134,527 0.51 -- (17.46) (Commenced 5/1/2004) 2006 6,743 13.29 89,590 0.87 0.48 12.30 2005 4,239 11.83 50,166 0.45 0.48 6.07 2004 -- -- -- -- -- -- MFS High Income 2008 354 8.82 3,111 10.38 -- (28.67) Investment Division 2007 1,776 12.36 21,944 9.79 -- 1.56 2006 6,738 12.17 82,011 5.42 0.40 - 0.48 9.98 2005 6,238 11.07 69,027 11.32 0.40 - 0.48 2.05 2004 4,700 10.84 51 -- 0.48 8.43 MFS Global Equity 2008 5,386 10.80 58,159 0.76 -- (33.95) Investment Division 2007 3,948 16.35 64,569 1.71 -- 8.93 (Commenced 5/1/2004) 2006 1,789 15.01 26,856 -- 0.40 - 0.48 24.04 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- -- MFS New Discovery 2008 249 7.80 1,942 -- -- (39.52) Investment Division 2007 253 12.89 3,269 -- -- 2.25 (Commenced 5/1/2004) 2006 -- -- -- -- -- -- 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- -- MFS Value Investment Division 2008 6,081 10.41 63,334 6.73 -- (32.72) (Commenced 5/1/2004) 2007 2,966 15.48 45,933 -- -- 7.56 2006 -- -- -- -- -- -- 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- --
168 METROPOLITAN LIFE SEPARATE ACCOUNT UL OF METROPOLITAN LIFE INSURANCE COMPANY NOTES TO THE FINANCIAL STATEMENTS -- (CONCLUDED) 6. FINANCIAL HIGHLIGHTS -- (CONCLUDED) AS OF DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31 ------------------------------------ ------------------------------------------------- UNIT VALUE(1) INVESTMENT(2) EXPENSE RATIO(3) TOTAL RETURN(4) LOWEST TO NET INCOME LOWEST TO LOWEST TO UNITS HIGHEST ($) ASSETS ($) RATIO (%) HIGHEST (%) HIGHEST (%) ------- ----------------- ---------- ------------- ---------------- ------------------ Van Kampen LIT Government 2008 2,625 12.01 31,526 5.03 -- 1.53 Investment Division 2007 1,920 11.83 22,716 5.06 -- 6.96 (Commenced 5/1/2004) 2006 1,342 11.06 14,833 4.52 0.40 3.14 2005 1,272 10.72 13,636 -- 0.40 3.28 2004 -- -- -- -- -- -- Wells Fargo VT Total Return Bond 2008 15,329 11.98 183,674 4.82 -- 2.41 Investment Division 2007 9,697 11.70 113,479 4.64 -- 6.17 (Commenced 5/1/2004) 2006 5,553 11.02 61,191 4.43 0.40 3.79 2005 1,620 10.62 17,199 3.06 0.40 1.90 2004 -- -- -- -- -- -- Wells Fargo VT Money Market 2008 181,207 11.53 2,089,402 2.24 -- 2.31 Investment Division 2007 181,995 11.27 2,051,734 4.42 -- 4.64 (Commenced 5/1/2004) 2006 91,188 10.77 982,114 2.41 0.40 4.39 2005 -- -- -- -- -- -- 2004 -- -- -- -- -- -- Pioneer VCT Emerging Markets Investment Division (Commenced 4/28/08) 2008 13,031 11.81 153,859 -- -- (55.11)
(1) The Company sells a number of variable life products, which have unique combinations of features and fees that are charged against the policy owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios, and total returns. (2) These amounts represent the dividends, excluding distributions of capital gains, received by the Investment Division from the underlying portfolio, series, or fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense risk charges, that are assessed against policy owner accounts either through reductions in the unit values or the redemption of units. The investment income ratio is calculated for each period indicated or from the effective date through the end of the reporting period. The recognition of investment income by the Investment Division is affected by the timing of the declaration of dividends by the underlying portfolio, series, or fund in which the Investment Division invests. (3) These amounts represent the annualized policy expenses of each of the applicable Investment Divisions, consisting primarily of mortality and expense risk charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to policy owner accounts through the redemption of units and expenses of the underlying portfolio, series, or fund have been excluded. (4) These amounts represent the total return for the period indicated, including changes in the value of the underlying portfolio, series, or fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. The total return is calculated for each period indicated or from the effective date through the end of the reporting period. The total return is presented as a range of minimum to maximum returns, based on minimum and maximum returns within each product grouping of the applicable Investment Division. 169 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholder of Metropolitan Life Insurance Company: We have audited the accompanying consolidated balance sheets of Metropolitan Life Insurance Company and subsidiaries (the "Company") as of December 31, 2008 and 2007, 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, 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the 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 consolidated 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 as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, 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 assets and liabilities to a fair value measurement approach as required by accounting guidance adopted on January 1, 2008, and changed its method of accounting for deferred acquisition costs and for income taxes as required by accounting guidance adopted on January 1, 2007. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP New York, New York April 3, 2009 F-1 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 AND 2007 (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
2008 2007 -------- -------- ASSETS Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $135,428 and $148,865, respectively)............................................ $122,229 $152,266 Equity securities available-for-sale, at estimated fair value (cost: $2,931 and $3,897, respectively)............ 2,298 4,167 Trading securities, at estimated fair value (cost: $281 and $456, respectively)...................................... 277 457 Mortgage and consumer loans, net............................ 42,105 39,180 Policy loans................................................ 7,881 7,677 Real estate and real estate joint ventures held-for- investment............................................... 6,255 5,484 Real estate held-for-sale................................... 1 39 Other limited partnership interests......................... 4,732 4,945 Short-term investments...................................... 7,598 603 Other invested assets....................................... 9,916 4,375 -------- -------- Total investments........................................ 203,292 219,193 Cash and cash equivalents..................................... 10,279 1,927 Accrued investment income..................................... 2,079 2,451 Premiums and other receivables................................ 28,290 24,077 Deferred policy acquisition costs and value of business acquired.................................................... 10,871 8,628 Current income tax recoverable................................ 75 -- Deferred income tax assets.................................... 2,557 -- Other assets.................................................. 4,517 6,361 Assets of subsidiaries held-for-sale.......................... -- 22,037 Separate account assets....................................... 72,259 89,703 -------- -------- Total assets............................................. $334,219 $374,377 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES: Future policy benefits...................................... $ 98,183 $ 93,752 Policyholder account balances............................... 93,308 81,003 Other policyholder funds.................................... 5,483 5,535 Policyholder dividends payable.............................. 1,023 991 Policyholder dividend obligation............................ -- 789 Short-term debt............................................. 414 357 Long-term debt.............................................. 2,722 2,687 Current income tax payable.................................. -- 359 Deferred income tax liability............................... -- 985 Payables for collateral under securities loaned and other transactions............................................. 18,649 28,952 Other liabilities........................................... 29,433 28,005 Liabilities of subsidiaries held-for-sale................... -- 19,958 Separate account liabilities................................ 72,259 89,703 -------- -------- Total liabilities........................................ 321,474 353,076 -------- -------- CONTINGENCIES, COMMITMENTS AND GUARANTEES (NOTE 13) 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 both December 31, 2008 and 2007............................. 5 5 Additional paid-in capital.................................... 14,437 14,426 Retained earnings............................................. 7,298 5,529 Accumulated other comprehensive income (loss)................. (8,995) 1,341 -------- -------- Total stockholder's equity............................... 12,745 21,301 -------- -------- Total liabilities and stockholder's equity............... $334,219 $374,377 ======== ========
See accompanying notes to the consolidated financial statements. F-2 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 ------- ------- ------- REVENUES Premiums............................................... $18,444 $16,435 $15,936 Universal life and investment-type product policy fees................................................. 2,285 2,246 2,183 Net investment income.................................. 11,122 12,582 11,518 Other revenues......................................... 1,882 934 833 Net investment gains (losses).......................... 3,472 (287) (834) ------- ------- ------- Total revenues....................................... 37,205 31,910 29,636 ------- ------- ------- EXPENSES Policyholder benefits and claims....................... 20,699 18,275 17,647 Interest credited to policyholder account balances..... 3,181 3,515 2,993 Policyholder dividends................................. 1,716 1,687 1,671 Other expenses......................................... 6,582 5,127 5,096 ------- ------- ------- Total expenses....................................... 32,178 28,604 27,407 ------- ------- ------- Income from continuing operations before provision for income tax........................................... 5,027 3,306 2,229 Provision for income tax............................... 1,651 1,054 557 ------- ------- ------- Income from continuing operations...................... 3,376 2,252 1,672 Income (loss) from discontinued operations, net of income tax........................................... (289) 180 254 ------- ------- ------- Net income............................................. $ 3,087 $ 2,432 $ 1,926 ======= ======= =======
See accompanying notes to the consolidated financial statements. F-3 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) --------------------------------------- NET FOREIGN DEFINED ADDITIONAL UNREALIZED CURRENCY BENEFIT COMMON PAID-IN RETAINED INVESTMENT TRANSLATION PLANS STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENTS ADJUSTMENT TOTAL ------ ---------- -------- -------------- ----------- ---------- -------- Balance at January 1, 2006.............. $ 5 $ 13,808 $ 2,749 $ 1,809 $ 137 $ (41) $ 18,467 Treasury stock transactions, net -- by subsidiary............................ 12 12 Capital contributions from MetLife, Inc. (Notes 2 and 15)...................... 489 489 Excess tax benefits related to stock- based compensation.................... 34 34 Dividends on common stock............... (863) (863) Comprehensive income: Net income............................ 1,926 1,926 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax....................... (20) (20) Unrealized investment gains (losses), net of related offsets and income tax................... (93) (93) Foreign currency translation adjustments, net of income tax... 7 7 Additional minimum pension liability adjustment, net of income tax....................... (18) (18) -------- Other comprehensive income (loss).. (124) -------- Comprehensive income.................. 1,802 -------- Adoption of SFAS 158, net of income tax................................ (749) (749) --- -------- ------- -------- ----- -------- -------- Balance at December 31, 2006............ 5 14,343 3,812 1,696 144 (808) 19,192 Cumulative effect of changes in accounting principles, net of income tax (Note 1).......................... (215) (215) --- -------- ------- -------- ----- -------- -------- Balance at January 1, 2007.............. 5 14,343 3,597 1,696 144 (808) 18,977 Treasury stock transactions, net -- by subsidiary............................ 10 10 Capital contributions from MetLife, Inc. (Notes 2 and 15)...................... 7 7 Excess proceeds received on sale of interests in affiliate (Note 15)...... 30 30 Excess tax benefits related to stock- based compensation.................... 36 36 Dividends on common stock............... (500) (500) Comprehensive income: Net income............................ 2,432 2,432 Other comprehensive income: Unrealized gains (losses) on derivative instruments, net of income tax....................... (15) (15) Unrealized investment gains (losses), net of related offsets and income tax................... (339) (339) Foreign currency translation adjustments, net of income tax... 139 139 Defined benefit plans adjustment, net of income tax................ 524 524 -------- Other comprehensive income......... 309 -------- Comprehensive income.................. 2,741 --- -------- ------- -------- ----- -------- -------- Balance at December 31, 2007............ 5 14,426 5,529 1,342 283 (284) 21,301 Treasury stock transactions, net -- by subsidiary............................ (11) (11) Capital contributions from MetLife, Inc. (Note 15)............................. 13 13 Excess tax benefits related to stock- based compensation.................... 9 9 Dividend of interests in subsidiary (Note 2).............................. (1,318) (1,318) Comprehensive loss: Net income............................ 3,087 3,087 Other comprehensive income (loss): Unrealized gains (losses) on derivative instruments, net of income tax....................... 272 272 Unrealized investment gains (losses), net of related offsets and income tax................... (9,315) (9,315) Foreign currency translation adjustments, net of income tax... (140) (140) Defined benefit plans adjustment, net of income tax................ (1,153) (1,153) -------- Other comprehensive income (loss).. (10,336) -------- Comprehensive loss.................... (7,249) --- -------- ------- -------- ----- -------- -------- Balance at December 31, 2008............ $5 $14,437 $ 7,298 $ (7,701) $ 143 $ (1,437) $ 12,745 === ======== ======= ======== ===== ======== ========
See accompanying notes to the consolidated financial statements. F-4 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income............................................ $ 3,087 $ 2,432 $ 1,926 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expenses.............. 258 368 308 Amortization of premiums and accretion of discounts associated with investments, net................. (660) (592) (467) (Gains) losses from sales of investments and businesses, net.................................. (2,868) 420 687 Undistributed equity earnings of real estate joint ventures and other limited partnership interests........................................ 524 (433) (376) Interest credited to policyholder account balances.. 3,289 3,777 3,247 Universal life and investment-type product policy fees............................................. (2,285) (2,246) (2,183) Change in accrued investment income................. 316 (201) (295) Change in premiums and other receivables............ (1,734) 228 (3,565) Change in deferred policy acquisition costs, net.... (100) (598) (672) Change in insurance-related liabilities............. 5,117 4,022 3,743 Change in trading securities........................ 74 188 (196) Change in income tax payable........................ 630 715 144 Change in other assets.............................. 2,828 (232) 772 Change in other liabilities......................... 1,827 (1,309) 1,109 Other, net.......................................... 161 51 (37) -------- -------- -------- Net cash provided by operating activities............. 10,464 6,590 4,145 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Sales, maturities and repayments of: Fixed maturity securities........................ 68,089 73,576 73,351 Equity securities................................ 2,140 1,265 858 Mortgage and consumer loans...................... 5,238 8,085 7,632 Real estate and real estate joint ventures....... 159 503 847 Other limited partnership interests.............. 404 764 1,253 Purchases of: Fixed maturity securities........................ (56,251) (73,375) (90,163) Equity securities................................ (1,094) (2,204) (731) Mortgage and consumer loans...................... (8,819) (11,891) (10,535) Real estate and real estate joint ventures....... (1,071) (1,369) (1,069) Other limited partnership interests.............. (1,163) (1,459) (1,551) Net change in short-term investments................ (6,967) 582 (362) Purchases of subsidiaries........................... -- -- (193) (Payments) proceeds from sales of businesses........ (4) 25 48 Dividend of subsidiary.............................. (270) -- -- Excess proceeds received on sale of interests in affiliate........................................ -- 30 -- Net change in other invested assets................. (1,831) (1,587) (1,084) Net change in policy loans.......................... (193) (149) (176) Net change in property, equipment and leasehold improvements..................................... (171) (88) (109) Other, net.......................................... -- 22 (4) -------- -------- -------- Net cash used in investing activities................. $ (1,804) $ (7,270) $(21,988) -------- -------- --------
See accompanying notes to the consolidated financial statements. F-5 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (IN MILLIONS)
2008 2007 2006 -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Policyholder account balances: Deposits.......................................... $ 58,338 $ 39,125 $ 37,411 Withdrawals....................................... (48,818) (34,135) (31,366) Net change in short-term debt........................ 57 (476) 380 Long-term debt issued................................ 27 1,705 8 Long-term debt repaid................................ (21) (894) (112) Collateral financing arrangements issued............. -- -- 850 Shares subject to mandatory redemption............... -- (131) -- Debt issuance costs.................................. -- (8) (13) Net change in payables for collateral under securities loaned and other transactions.......... (10,303) (3,167) 11,110 Capital contribution from MetLife, Inc. ............. -- 7 93 Dividends on common stock............................ -- (500) (863) Other, net........................................... 8 30 13 -------- -------- -------- Net cash (used in) provided by financing activities.... (712) 1,556 17,511 -------- -------- -------- Change in cash and cash equivalents.................... 7,948 876 (332) Cash and cash equivalents, beginning of year........... 2,331 1,455 1,787 -------- -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR................. $ 10,279 $ 2,331 $ 1,455 ======== ======== ======== Cash and cash equivalents, subsidiaries held-for-sale, beginning of year.................................... $ 404 $ 164 $ 129 ======== ======== ======== CASH AND CASH EQUIVALENTS, SUBSIDIARIES HELD-FOR-SALE, END OF YEAR.......................................... $ -- $ 404 $ 164 ======== ======== ======== Cash and cash equivalents, from continuing operations, beginning of year.................................... $ 1,927 $ 1,291 $ 1,658 ======== ======== ======== CASH AND CASH EQUIVALENTS, FROM CONTINUING OPERATIONS, END OF YEAR.......................................... $ 10,279 $ 1,927 $ 1,291 ======== ======== ======== Supplemental disclosures of cash flow information: Net cash paid during the year for: Interest.......................................... $ 268 $ 332 $ 256 ======== ======== ======== Income tax........................................ $ 494 $ 1,010 $ 197 ======== ======== ======== Non-cash transactions during the year: Dividend of subsidiary: Assets disposed................................. $ 22,135 $ -- $ -- Less: liabilities disposed...................... (20,689) -- -- -------- -------- -------- Net assets disposed............................. 1,446 -- -- Add: cash disposed.............................. 270 -- -- Less: dividend of interests in subsidiary....... (1,318) -- -- -------- -------- -------- Loss on dividend of interests in subsidiary..... $ 398 $ -- $ -- ======== ======== ======== Fixed maturity securities received in connection with insurance contract commutation............. $ 115 $ -- $ -- ======== ======== ======== Capital contribution from MetLife, Inc. .......... $ 13 $ -- $ -- ======== ======== ======== Real estate acquired in satisfaction of debt...... $ -- $ -- $ 6 ======== ======== ======== Contribution of other intangible assets, net of deferred income tax............................. $ -- $ -- $ 377 ======== ======== ======== Excess of net assets over purchase price for subsidiary...................................... $ -- $ -- $ 19 ======== ======== ======== Issuance of secured demand note collateral agreement....................................... $ 25 $ -- $ -- ======== ======== ========
See accompanying notes to the consolidated financial statements. F-6 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS Metropolitan Life Insurance Company and its subsidiaries (collectively, "MLIC" or the "Company") is a leading provider of individual insurance, employee benefits and financial services with operations throughout the United States. The Company offers life insurance and annuities to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions. The Company is organized into two operating segments: Institutional and Individual, as well as Corporate & Other. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Metropolitan Life Insurance Company and its subsidiaries as well as partnerships and joint ventures in which the Company has control. 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 9. Intercompany accounts and transactions have been eliminated. In addition, the Company has invested in certain structured transactions that are variable interest entities ("VIEs") under Financial Accounting Standards Board ("FASB") Interpretation ("FIN") No. 46(r), Consolidation of Variable Interest Entities -- An Interpretation of Accounting Research Bulletin No. 51 ("FIN 46(r)"). These structured transactions include asset-backed securitizations, trust preferred securities, joint ventures, limited partnerships and limited liability companies. The Company is required to consolidate those VIEs for which it is deemed to be the primary beneficiary. The Company reconsiders whether it is the primary beneficiary for investments designated as VIEs on a quarterly basis. 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 a minor influence over the joint venture's or 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 investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint venture's or the partnership's operations. Minority interest related to consolidated entities included in other liabilities was $83 million and $162 million at December 31, 2008 and 2007, respectively. There was also minority interest of $1.5 billion included in liabilities of subsidiaries held-for-sale at December 31, 2007. Certain amounts in the prior year periods' consolidated financial statements have been reclassified to conform with the 2008 presentation. See Note 18 for reclassifications related to discontinued operations. Since the Company is a member of a controlled group of affiliated companies, its results may not be indicative of those of a stand-alone entity. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND 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) the estimated fair value of investments in the absence of quoted market values; (ii) investment impairments; F-7 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iii) the recognition of income on certain investment entities; (iv) the application of the consolidation rules to certain investments; (v) the existence and estimated fair value of embedded derivatives requiring bifurcation; (vi) the estimated fair value of and accounting for derivatives; (vii) the capitalization and amortization of deferred policy acquisition costs ("DAC") and the establishment and amortization of value of business acquired ("VOBA"); (viii) the liability for future policyholder benefits; (ix) accounting for income taxes and the valuation of deferred tax assets; (x) accounting for reinsurance transactions; (xi) accounting for employee benefit plans; and (xii) the liability for litigation and regulatory matters. A description of such critical estimates is incorporated within the discussion of the related accounting policies which follow. 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. Fair Value As described below, certain assets and liabilities are measured at estimated fair value on the Company's consolidated balance sheets. In addition, the footnotes to the consolidated financial statements include disclosures of estimated fair values. Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition. However, in certain cases, the transaction price may not represent fair value. Under SFAS 157, fair value of a liability is based on the amount that would be paid to transfer a liability to a third party with the same credit standing. SFAS 157 requires that fair value be a market-based measurement in which the fair value is determined based on a hypothetical transaction at the measurement date, considered from the perspective of a market participant. When quoted prices are not used to determine fair value, SFAS 157 requires consideration of three broad valuation techniques: (i) the market approach, (ii) the income approach, and (iii) the cost approach. The approaches are not new, but SFAS 157 requires that entities determine the most appropriate valuation technique to use, given what is being measured and the availability of sufficient inputs. SFAS 157 prioritizes the inputs to fair valuation techniques and allows for the use of unobservable inputs to the extent that observable inputs are not available. The Company has categorized its assets and liabilities measured at estimated fair value into a three-level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. SFAS 157 defines the input levels as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. The Company defines active markets based on average trading volume for equity securities. The size of the bid/ask spread is used as an indicator of market activity for fixed maturity securities. F-8 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Level 2 Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the estimated fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of estimated fair value requires significant management judgment or estimation. The measurement and disclosures under SFAS 157 in the accompanying consolidated financial statements and footnotes exclude certain items such as nonfinancial assets and nonfinancial liabilities initially measured at estimated fair value in a business combination, reporting units measured at estimated fair value in the first step of a goodwill impairment test and indefinite-lived intangible assets measured at estimated fair value for impairment assessment. The effective date for these items was deferred to January 1, 2009. Prior to adoption of SFAS 157, estimated fair value was determined based solely upon the perspective of the reporting entity. Therefore, methodologies used to determine the estimated fair value of certain financial instruments prior to January 1, 2008, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Investments The Company's principal investments are in fixed maturity and equity securities, trading securities, mortgage and consumer loans, policy loans, real estate, real estate joint ventures and other limited partnership interests, short-term investments, and other invested assets. The accounting policies related to each are as follows: Fixed Maturity and Equity Securities. The Company's fixed maturity and equity securities are classified as available-for-sale, except for trading securities, and are reported at their estimated fair value. Unrealized investment gains and losses on these securities are recorded as a separate component of other comprehensive income (loss), net of policyholder related amounts and deferred income taxes. All security transactions are recorded on a trade date basis. Investment gains and losses on sales of securities are determined on a specific identification basis. Interest income on fixed maturity securities is recorded when earned using an effective yield method giving effect to amortization of premiums and accretion of discounts. Dividends on equity securities are recorded when declared. These dividends and interest income are recorded in net investment income. Included within fixed maturity securities are loan-backed securities including mortgage-backed and asset-backed securities. Amortization of the premium or discount from the purchase of these securities considers the estimated timing and amount of prepayments of the underlying loans. Actual prepayment experience is periodically reviewed and effective yields are recalculated when differences arise between the prepayments originally anticipated and the actual prepayments received and currently anticipated. Prepayment assumptions for single class and multi-class mortgage-backed and asset-backed securities are estimated by management using inputs obtained from third party specialists, including broker-dealers, and based on management's knowledge of the current market. For credit-sensitive mortgage-backed and asset-backed securities and certain prepayment- sensitive securities, the effective yield is recalculated on a prospective basis. F-9 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For all other mortgage-backed and asset-backed securities, the effective yield is recalculated on a retrospective basis. The cost or amortized 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 impairments are included within net investment gains (losses) and the cost basis of the fixed maturity and equity securities is reduced accordingly. The Company does not change the revised cost basis for subsequent recoveries in value. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in estimated fair value. The Company's review of its fixed maturity and equity securities for impairments 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. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for certain equity securities, greater weight and consideration are given by the Company to a decline in market value and the likelihood such market value decline will recover. See also Note 3. Additionally, 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 (See also Note 3); (vii) unfavorable changes in forecasted cash flows on mortgage-backed and asset-backed securities; and (viii) other subjective factors, including concentrations and information obtained from regulators and rating agencies. In periods subsequent to the recognition of an other-than-temporary impairment on a debt security, the Company accounts for the impaired security as if it had been purchased on the measurement date of the impairment. Accordingly, the discount (or reduced premium) based on the new cost basis is accreted into net investment income over the remaining term of the debt security in a prospective manner based on the amount and timing of estimated future cash flows. The Company purchases and receives beneficial interests in special purpose entities ("SPEs"), which enhance the Company's total return on its investment portfolio principally by providing equity-based returns on debt securities. These investments are generally made through structured notes and similar instruments (collectively, "Structured Investment Transactions"). The Company has not guaranteed the performance, liquidity or obligations of the SPEs and its exposure to loss is limited to its carrying value of the beneficial interests in the SPEs. The Company does not consolidate such SPEs as it has determined it is not the primary beneficiary. These Structured Investment Transactions are included in fixed maturity securities and their F-10 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) income is generally recognized using the retrospective interest method. Impairments of these investments are included in net investment gains (losses). Trading Securities. The Company's trading securities portfolio, principally consisting of fixed maturity and equity securities, supports investment strategies that involve the active and frequent purchase and sale of securities and the execution of short sale agreements, and supports asset and liability matching strategies for certain insurance products. Trading securities and short sale agreement liabilities are recorded at estimated fair value with subsequent changes in estimated fair value recognized in net investment income. Related dividends and investment income are also included in net investment income. Securities Lending. Securities loaned transactions, whereby blocks of securities, which are included in fixed maturity securities and short-term investments, are loaned to third parties, are treated as financing arrangements and the associated liability is recorded at the amount of cash received. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. The Company monitors the estimated fair value of the securities loaned on a daily basis with additional collateral obtained as necessary. Substantially all of the Company's securities loaned transactions are with large brokerage firms and commercial banks. Income and expenses associated with securities loaned transactions are reported as investment income and investment expense, respectively, within net investment income. Mortgage and Consumer Loans. Mortgage and consumer loans held-for- investment are stated at unpaid principal balance, adjusted for any unamortized premium or discount, deferred fees or expenses, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income. 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. Based on the facts and circumstances of the individual loans being impaired, valuation allowances are established for the excess carrying value of the loan over either: (i) the present value of expected future cash flows discounted at the loan's original effective interest rate, (ii) the estimated fair value of the loan's underlying collateral if the loan is in the process of foreclosure or otherwise collateral dependent, or (iii) the loan's estimated fair value. The Company also establishes allowances for loan losses when a loss contingency exists for pools of loans with similar characteristics, such as mortgage loans based on similar property types or loan to value risk factors. A loss contingency exists when the likelihood that a future event will occur is probable based on past events. 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 when the collection of interest is not considered probable. Cash receipts on such impaired loans are recorded as a reduction of the recorded investment. Gains and losses from the sale of loans and changes in valuation allowances are reported in net investment gains (losses). Certain mortgage loans previously designated as held-for-investment have been designated as held-for-sale to reflect a change in the Company's intention as it relates to holding such loans. At the time of transfer, such loans are recorded at the lower of amortized cost or estimated fair value less expected disposition costs determined on an individual loan basis. Amortized cost is determined in the same manner as mortgage loans held-for-investment described above. The amount by which amortized cost exceeds estimated fair value less expected disposition costs is accounted for as a valuation allowance. Changes in such valuation allowance are recognized in net investment gains (losses). Policy Loans. Policy loans are stated at unpaid principal balances. Interest income on such loans is recorded as earned using the contractually agreed upon interest rate. Generally, interest is capitalized on the policy's anniversary date. F-11 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Real Estate. 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). Rental income is recognized on a straight-line basis over the term of the respective leases. The Company classifies a property as held-for-sale if it commits to a plan to sell a property within one year and actively markets the property in its current condition for a price that is reasonable in comparison to its estimated fair value. The Company classifies the results of operations and the gain or loss on sale of a property that either has been disposed of or classified as held-for-sale as discontinued operations, if the ongoing operations of the property will be eliminated from the ongoing operations of the Company and if the Company will not have any significant continuing involvement in the operations of the property after the sale. Real estate held-for-sale is stated at the lower of depreciated cost or estimated fair value less expected disposition costs. Real estate is not depreciated while it is classified as held-for-sale. The Company periodically reviews its properties held-for-investment for impairment and tests properties for recoverability whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable and the carrying value of the property exceeds its estimated fair value. Properties whose carrying values are greater than their undiscounted cash flows are written down to their estimated fair value, with the impairment loss included in net investment gains (losses). Impairment losses are based upon the estimated fair value of real estate, which is generally computed using the present value of expected future cash flows from the real estate discounted at a rate commensurate with the underlying risks. Real estate acquired upon foreclosure of commercial and agricultural mortgage loans is recorded at the lower of estimated fair value or the carrying value of the mortgage loan at the date of foreclosure. Real Estate Joint Ventures and Other Limited Partnership Interests. The Company uses the equity method of accounting for investments in real estate joint ventures and other limited partnership interests consisting of leveraged buy-out funds, hedge funds and other private equity funds in which it has more than a minor equity interest or more than a minor influence over the joint ventures or 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 investments in real estate joint ventures and other limited partnership interests in which it has a minor equity investment and virtually no influence over the joint ventures or the partnership's operations. The Company reports the distributions from real estate joint ventures and other limited partnership interests accounted for under the cost method and equity in earnings from real estate joint ventures and other limited partnership interests accounted for under the equity method in net investment income. In addition to the investees performing regular evaluations for the impairment of underlying investments, the Company routinely evaluates its investments in real estate joint ventures and other limited partnerships for impairments. The Company considers its cost method investments for other-than-temporary impairment when the carrying value of real estate joint ventures and other limited partnership interests exceeds the net asset value. The Company takes into consideration the severity and duration of this excess when deciding if the cost method investment is other-than-temporarily impaired. For equity method investees, the Company considers financial and other information provided by the investee, other known information and inherent risks in the underlying investments, as well as future capital commitments, in determining whether an impairment has occurred. When an other-than- temporary impairment is deemed to have occurred, the Company records a realized capital loss within net investment gains (losses) to record the investment at its estimated fair value. Short-term Investments. Short-term investments include investments with remaining maturities of one year or less, but greater than three months, at the time of acquisition and are stated at amortized cost, which approximates estimated fair value, or stated at estimated fair value, if available. Short-term investments also include investments in affiliated money market pools. Other Invested Assets. Other invested assets consist principally of freestanding derivatives with positive estimated fair values, leveraged leases, loans to affiliates, tax credit partnerships, funds withheld at interest and joint venture investments. F-12 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Freestanding derivatives with positive estimated fair values are more fully described in the derivatives accounting policy which follows. 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 recognizes income on the leveraged leases by applying the leveraged lease's estimated rate of return to the net investment in the lease. The Company regularly reviews residual values and impairs them to expected values as needed. Loans to affiliates consist of loans to the Company's affiliates, some of which are regulated, to meet their capital requirements. Such loans are carried at amortized cost. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits and are also accounted for on the equity method. Joint venture investments represent the Company's investments in entities that engage in insurance underwriting activities and are accounted for on the equity method. The Company reports the equity in earnings of joint venture investments and tax credit partnerships in net investment income. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. The Company records a funds withheld receivable rather than the underlying investments. The Company recognizes interest on funds withheld at rates defined by the terms of the agreement which may be contractually specified or directly related to the investment portfolio and records it in net investment income. Estimates and Uncertainties. The Company's investments are exposed to four primary sources of risk: credit, interest rate, liquidity risk, and market valuation. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of impairments, the recognition of income on certain investments, and the potential consolidation of VIEs. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the consolidated financial statements. When available, the estimated fair value of the Company's fixed maturity and equity securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. F-13 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. Certain mortgages have been designated as held-for-sale which are recorded at the lower of amortized cost or estimated fair value less expected disposition costs determined on an individual loan basis. For these loans, estimated fair value is determined using independent broker quotations or, when the loan is in foreclosure or otherwise determined to be collateral dependent, the estimated fair value of the underlying collateral estimated using internal models. Financial markets are susceptible to severe events evidenced by rapid depreciation in asset values accompanied by a reduction in asset liquidity. The Company's ability to sell securities, or the price ultimately realized for these securities, depends upon the demand and liquidity in the market and increases the use of judgment in determining the estimated fair value of certain securities. The determination of the amount of allowances and impairments, as applicable, is described previously by investment type. The determination of such allowances and impairments is highly subjective and is based upon the Company's periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects changes in allowances and impairments in operations as such evaluations are revised. The recognition of income on certain investments (e.g., loan-backed securities, including mortgage-backed and asset-backed securities, certain structured investment transactions, trading securities, etc.) is dependent upon market conditions, which could result in prepayments and changes in amounts to be earned. The accounting rules under FIN 46(r) for the determination of when an entity is a VIE and when to consolidate a VIE are complex. The determination of the VIE's primary beneficiary requires an 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 involved in the entity. FIN 46(r) defines the primary beneficiary as the entity that will absorb a majority of a VIE's expected losses, receive a majority of a VIE's expected residual returns if no single entity absorbs a majority of expected losses, or both. When determining the primary beneficiary for structured investment products such as asset-backed securitizations and collateralized debt obligations, the Company uses historical default probabilities based on the credit rating of each issuer and other inputs including maturity dates, industry classifications and geographic location. Using computational algorithms, the analysis simulates default scenarios resulting in a range of expected losses and the probability associated with each occurrence. For other investment structures such as trust preferred securities, joint ventures, limited partnerships and limited liability companies, the Company gains an understanding of the design of the VIE and generally uses a qualitative approach to determine if it is the primary beneficiary. This approach includes an analysis of all contractual rights and obligations held by all parties including profit and loss allocations, repayment or residual value guarantees, put and call options and other derivative instruments. If the primary beneficiary of a VIE can not be identified using this qualitative approach, the Company calculates the expected losses and expected residual returns of the VIE using a probability-weighted cash flow model. The use of different methodologies, assumptions and F-14 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) inputs in the determination of the primary beneficiary could have a material effect on the amounts presented within the consolidated financial statements. Derivative Financial Instruments Derivatives are financial instruments whose values are derived from interest rates, foreign currency 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 the risk associated with variability in cash flows or changes in estimated fair values related to the Company's financial instruments. The Company also uses derivative instruments to hedge its currency exposure associated with net investments in certain foreign operations. To a lesser extent, the Company uses credit derivatives, such as credit default swaps, to synthetically replicate investment risks and returns which are not readily available in the cash market. The Company also purchases certain securities, issues certain insurance policies and investment contracts and engages in certain reinsurance contracts that have embedded derivatives. Freestanding derivatives are carried on the Company's consolidated balance sheet either as assets within other invested assets or as liabilities within other liabilities at estimated fair value as determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on a net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate credit risk. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. The evaluation of the requirement to make an additional credit risk adjustments is performed by the Company each reporting period. F-15 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) If a derivative is not designated as an accounting hedge or its use in managing risk does not qualify for hedge accounting, changes in the estimated fair value of the derivative are generally reported in net investment gains (losses) except for those in net investment income for economic hedges of equity method investments in joint ventures, or for all derivatives held in relation to the trading portfolios. The fluctuations in estimated fair value of derivatives which have not been designated for hedge accounting can result in significant volatility in net income. 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 estimated 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. Assessments of hedge effectiveness and measurements of ineffectiveness are also subject to interpretation and estimation and different interpretations or estimates may have a material effect on the amount reported in net income. The accounting for derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. Judgment is applied in determining the availability and application of hedge accounting designations and the appropriate accounting treatment under these accounting standards. If it was determined that hedge accounting designations were not appropriately applied, reported net income could be materially affected. Differences in judgment as to the availability and application of hedge accounting designations and the appropriate accounting treatment may result in a differing impact on the consolidated financial statements of the Company from that previously reported. Under a fair value hedge, changes in the estimated fair value of the hedging derivative, including amounts measured as ineffectiveness, and changes in the estimated fair value of the hedged item related to the designated risk being hedged, are reported within net investment gains (losses). The estimated 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. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. Under a cash flow hedge, changes in the estimated fair value of the hedging derivative measured as effective are reported within other comprehensive income (loss), a separate component of stockholder'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 estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). The estimated 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. However, balances that are not scheduled to settle until maturity are included in the estimated fair value of derivatives. In a hedge of a net investment in a foreign operation, changes in the estimated 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 estimated fair value of the hedging instrument measured as ineffectiveness are reported within net investment gains (losses). F-16 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company discontinues hedge accounting prospectively when: (i) it is determined that the derivative is no longer highly effective in offsetting changes in the estimated 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 estimated fair value or cash flows of a hedged item, the derivative continues to be carried on the consolidated balance sheet at its estimated fair value, with changes in estimated 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 estimated 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 estimated 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 sheet at its estimated fair value, with changes in estimated fair value recognized currently in net investment gains (losses). Any asset or liability associated with a recognized firm commitment is derecognized from the consolidated balance sheet, and recorded currently in net investment gains (losses). Deferred gains and losses of a derivative recorded in other comprehensive income (loss) pursuant to the cash flow hedge of a forecasted transaction are recognized immediately in net investment gains (losses). In all other situations in which hedge accounting is discontinued, the derivative is carried at its estimated fair value on the consolidated balance sheet, with changes in its estimated 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. If the instrument would not be accounted for in its entirety at estimated 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 sheet at estimated fair value with the host contract and changes in their estimated 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 estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses). Additionally, the Company may elect to carry an entire contract on the balance sheet at estimated fair value, with changes in estimated fair value recognized in the current period in net investment gains (losses) if that contract contains an embedded derivative that requires bifurcation. There is a risk that embedded derivatives requiring bifurcation may not be identified and reported at estimated fair value in the consolidated financial statements and that their related changes in estimated fair value could materially affect reported net income. F-17 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE 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 $1.4 billion and $1.2 billion at December 31, 2008 and 2007, respectively. Accumulated depreciation and amortization of property, equipment and leasehold improvements was $720 million and $609 million at December 31, 2008 and 2007, respectively. Related depreciation and amortization expense was $111 million, $105 million and $97 million for the years ended December 31, 2008, 2007 and 2006, respectively. Computer software, which is included in other assets, is stated at cost, less accumulated amortization. Purchased software costs, as well as certain 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 $1.2 billion and $1.1 billion at December 31, 2008 and 2007, respectively. Accumulated amortization of capitalized software was $862 million and $742 million at December 31, 2008 and 2007, respectively. Related amortization expense was $117 million, $97 million and $90 million for the years ended December 31, 2008, 2007 and 2006, respectively. Deferred Policy Acquisition Costs and Value of Business Acquired The Company incurs significant costs in connection with acquiring new and renewal insurance business. Costs that vary with and relate to the production of new business are deferred as DAC. Such costs consist principally of commissions and agency and policy issuance expenses. VOBA is an intangible asset that 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 business 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. The recovery of DAC and VOBA is dependent upon the future profitability of the related business. DAC and VOBA are aggregated in the financial statements for reporting purposes. DAC and VOBA on life insurance or investment-type contracts are amortized in proportion to gross premiums, gross margins or gross profits, depending on the type of contract as described below. The Company amortizes DAC and VOBA related to non-participating and non- dividend-paying traditional contracts (term insurance, non-participating whole life insurance, non-medical health insurance, and traditional group life insurance) over the entire premium paying period in proportion to the present value of actual historic and expected future gross premiums. The present value of expected premiums is based upon the premium requirement of each policy and assumptions for mortality, morbidity, persistency, and investment returns at policy issuance, or policy acquisition, as it relates to VOBA, that include provisions for adverse deviation and are consistent with the assumptions used to calculate future policyholder benefit liabilities. These assumptions are not revised after policy issuance or acquisition unless the DAC or VOBA balance is deemed to be unrecoverable from future expected F-18 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) profits. Absent a premium deficiency, variability in amortization after policy issuance or acquisition is caused only by variability in premium volumes. The Company amortizes DAC and VOBA related to participating, dividend- paying traditional contracts over the estimated lives of the contracts in proportion to actual and expected future gross margins. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The future gross margins are dependent principally on investment returns, policyholder dividend scales, mortality, persistency, expenses to administer the business, creditworthiness of reinsurance counterparties, and certain economic variables, such as inflation. For participating contracts (dividend paying traditional contracts within the closed block) future gross margins are also dependent upon changes in the policyholder dividend obligation. Of these factors, the Company anticipates that investment returns, expenses, persistency, and other factor changes and policyholder dividend scales are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross margins with the actual gross margins for that period. When the actual gross margins change from previously estimated gross margins, the cumulative DAC and VOBA amortization is re- estimated and adjusted by a cumulative charge or credit to current operations. When actual gross margins exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross margins are below the previously estimated gross margins. Each reporting period, the Company also updates the actual amount of business in-force, which impacts expected future gross margins. When expected future gross margins are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross margins are above the previously estimated expected future gross margins. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross margins and the re-estimation of expected future gross margins. Each period, the Company also reviews the estimated gross margins for each block of business to determine the recoverability of DAC and VOBA balances. The Company amortizes DAC and VOBA related to fixed and variable universal life contracts and fixed and variable deferred annuity contracts over the estimated lives of the contracts in proportion to actual and expected future gross profits. The amortization includes interest based on rates in effect at inception or acquisition of the contracts. The amount of future gross profits is dependent principally upon returns in excess of the amounts credited to policyholders, mortality, persistency, interest crediting rates, expenses to administer the business, creditworthiness of reinsurance counterparties, the effect of any hedges used, and certain economic variables, such as inflation. Of these factors, the Company anticipates that investment returns, expenses, and persistency are reasonably likely to impact significantly the rate of DAC and VOBA amortization. Each reporting period, the Company updates the estimated gross profits with the actual gross profits for that period. When the actual gross profits change from previously estimated gross profits, the cumulative DAC and VOBA amortization is re-estimated and adjusted by a cumulative charge or credit to current operations. When actual gross profits exceed those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the actual gross profits are below the previously estimated gross profits. Each reporting period, the Company also updates the actual amount of business remaining in-force, which impacts expected future gross profits. When expected future gross profits are below those previously estimated, the DAC and VOBA amortization will increase, resulting in a current period charge to earnings. The opposite result occurs when the expected future gross profits are above the previously estimated expected future gross profits. Total DAC and VOBA amortization during a particular period may increase or decrease depending upon the relative size of the amortization change resulting from the adjustment to DAC and VOBA for the update of actual gross profits and the re-estimation of expected future gross profits. Each period, the Company also reviews the estimated gross profits for each block of business to determine the recoverability of DAC and VOBA balances. Separate account rates of return on variable universal life contracts and variable deferred annuity contracts affect in-force account balances on such contracts each reporting period which can result in significant fluctuations F-19 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) in amortization of DAC and VOBA. Returns that are higher than the Company's long-term expectation produce higher account balances, which increases the Company's future fee expectations and decreases future benefit payment expectations on minimum death and living benefit guarantees, resulting in higher expected future gross profits. The opposite result occurs when returns are lower than the Company's long-term expectation. The Company's practice to determine the impact of gross profits resulting from returns on separate accounts assumes that long-term appreciation in equity markets is not changed by short-term market fluctuations, but is only changed when sustained interim deviations are expected. The Company monitors these changes and only changes the assumption when its long-term expectation changes. The Company also reviews periodically other long-term assumptions underlying the projections of estimated gross margins and profits. These include investment returns, policyholder dividend scales, interest crediting rates, mortality, persistency, and expenses to administer business. Management annually updates assumptions used in the calculation of estimated gross margins and profits which may have significantly changed. If the update of assumptions causes expected future gross margins and profits to increase, DAC and VOBA amortization will decrease, resulting in a current period increase to earnings. The opposite result occurs when the assumption update causes expected future gross margins and profits to decrease. Prior to 2007, DAC related to any internally replaced contract was generally expensed at the date of replacement. As described more fully in "Adoption of New Accounting Pronouncements," effective January 1, 2007, the Company adopted Statement of Position ("SOP") 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts ("SOP 05-1"). Under SOP 05-1, an internal replacement is defined as a modification in product benefits, features, rights or coverages that occur by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by election or coverage within a contract. If the modification substantially changes the contract, the DAC is written off immediately through income and any new deferrable costs associated with the replacement contract are deferred. If the modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are expensed. 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. The amortization of sales inducements is included in interest credited to policyholder account balances. Each year the Company reviews the deferred sales inducements to determine the recoverability of these balances. Value of Distribution Agreements and Customer Relationships Acquired Value of distribution agreements ("VODA") is reported in other assets and represents the present value of future profits associated with the expected future business derived from the distribution agreements. Value of customer relationships acquired ("VOCRA") is also reported in other assets and represents the present value of the expected future profits associated with the expected future business acquired through existing customers of the acquired company or business. The VODA and VOCRA associated with past acquisitions are amortized over useful life ranging from 10 to 30 years and such amortization is included in other expenses. Each year the Company reviews VODA and VOCRA to determine the recoverability of these balances. F-20 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Goodwill Goodwill, which is included in other assets, is the excess of cost over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested 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. The Company performs its annual goodwill impairment testing during the third quarter of each year based upon data as of the close of the second quarter. 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 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, if the carrying value of a reporting unit's goodwill exceeds its estimated fair value, there is an indication of impairment and the implied fair value of the goodwill is determined in the same manner as the amount of goodwill that would be determined in a business acquisition. The excess of the carrying value of goodwill over the implied fair value of goodwill is recognized as an impairment and recorded as a charge against net income. In performing its goodwill impairment tests, when management believes meaningful comparable market data are available, the estimated fair values of the reporting units are determined using a market multiple approach. When relevant comparables are not available, the Company uses a discounted cash flow model. For reporting units which are particularly sensitive to market assumptions, such as the annuities and variable & universal life reporting units within the Individual segment, the Company may corroborate its estimated fair values by using additional valuation methodologies. The key inputs, judgments and assumptions necessary in determining estimated fair value include current book value (with and without accumulated other comprehensive income), the level of economic capital required to support the mix of business, long term growth rates, comparative market multiples, the level of interest rates, credit spreads, equity market levels and the discount rate management believes appropriate to the risk associated with the respective reporting unit. Estimates of fair value are inherently uncertain and represent only management's reasonable expectation regarding future developments. These estimates and the judgments and assumptions upon which the estimates are based will, in all likelihood, differ in some respects from actual future results. Declines in the estimated fair value of the Company's reporting units could result in goodwill impairments in future periods. Management continues to evaluate current market conditions that may affect the estimated fair value of the Company's reporting units to assess whether any goodwill impairment exists. Continued deteriorating or adverse market conditions for certain reporting units may have an impact on the estimated fair value of these reporting units and could result in future impairments of goodwill. See Note 6 for further consideration of goodwill impairment testing during 2008. Liability for Future Policy Benefits and Policyholder Account Balances 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 related liabilities are calculated as the present value of future expected benefits to be paid reduced by the present value of future expected premiums. Such liabilities are established based on methods and underlying F-21 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) assumptions in accordance with GAAP and applicable actuarial standards. Principal assumptions used in the establishment of liabilities for future policy benefits are mortality, morbidity, policy lapse, renewal, retirement, disability incidence, disability terminations, investment returns, inflation, expenses and other contingent events as appropriate to the respective product type. Utilizing these assumptions, liabilities are established on a block of business basis. 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. Future policy benefits for non-participating traditional life insurance policies are equal to the aggregate of the present value of expected future benefit payments and related expenses less the present value of expected future net premiums. Assumptions as to mortality and persistency are based upon the Company's experience when the basis of the liability is established. Interest rate assumptions for the aggregate future policy benefit liabilities range from 2% to 7%. Participating business represented approximately 8% and 9% of the Company's life insurance in-force, and 17% and 16% of the number of life insurance policies in-force, at December 31, 2008 and 2007, respectively. Participating policies represented approximately 32% and 33%, 36% and 36%, and 34% and 33% of gross and net life insurance premiums for the years ended December 31, 2008, 2007 and 2006, 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. Interest rate assumptions used in establishing such liabilities range from 2% 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 rate assumptions used in establishing such liabilities range from 4% 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 rate assumptions used in establishing such liabilities range from 3% to 8%. Liabilities for unpaid claims and claim expenses are included in future policyholder benefits and represent the amount estimated for claims that have been reported but not settled and claims incurred but not reported. Liabilities for unpaid claims are estimated based upon the Company's historical experience and other actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs. The effects of changes in such estimated liabilities are included in the results of operations in the period in which the changes occur. 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: - Guaranteed minimum death benefit ("GMDB") 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 GMDB liabilities are consistent with those used for amortizing DAC, and are thus subject to the same variability and risk. The assumptions of investment performance and volatility are consistent with F-22 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the historical experience of the Standard & Poor's ("S&P") 500 Index. The benefit assumptions used in calculating the liabilities are based on the average benefits payable over a range of scenarios. - Guaranteed minimum income benefit ("GMIB") liabilities are determined by estimating the expected value of the income benefits in excess of the projected account balance at any future 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 estimating the GMIB liabilities are consistent with those used for estimating the GMDB liabilities. In addition, the calculation of guaranteed annuitization benefit liabilities incorporates an assumption for the percentage of the potential annuitizations that may be elected by the contractholder. Certain GMIBs have settlement features that result in a portion of that guarantee being accounted for as an embedded derivative and are recorded in policyholder account balances as described below. 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, and are thus subject to the same variability and risk. 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 establishes policyholder account balances for guaranteed minimum benefit riders relating to certain variable annuity products as follows: - Guaranteed minimum withdrawal benefit riders ("GMWB") guarantee the contractholder a return of their purchase payment via partial withdrawals, even if the account value is reduced to zero, provided that the contractholder'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 (typically, the initial purchase payments plus applicable bonus amounts). The GMWB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. - Guaranteed minimum accumulation benefit riders ("GMAB") provide the contractholder, after a specified period of time determined at the time of issuance of the variable annuity contract, with a minimum accumulation of their purchase payments even if the account value is reduced to zero. The initial guaranteed accumulation amount is equal to the initial benefit base as defined in the contract (typically, the initial purchase payments plus applicable bonus amounts). The GMAB is an embedded derivative, which is measured at estimated fair value separately from the host variable annuity product. For GMWB, GMAB and certain GMIB, the initial benefit base is increased by additional purchase payments made within a certain time period and decreases by benefits paid and/or withdrawal amounts. After a specified period of time, the benefit base may also increase as a result of an optional reset as defined in the contract. At the inception, the GMWB, GMAB and certain GMIB are accounted for as embedded derivatives with changes in estimated fair value reported in net investment gains (losses). The Company attributes to the embedded derivative a portion of the expected future rider fees to be collected from the policyholder equal to the present value of expected future guaranteed benefits. Any additional fees represent "excess" fees and are reported in universal life and investment-type product policy fees. F-23 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. The projections of future benefits and future fees require capital market and actuarial assumptions including expectations concerning policyholder behavior. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Beginning in 2008, the valuation of these embedded derivatives now includes an adjustment for the Company's own credit and risk margins for non-capital market inputs. The Company's own credit adjustment is determined taking into consideration publicly available information relating to the Company's debt as well as its claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates, changes in the Company's own credit standing; and variations in actuarial assumptions regarding policyholder behavior, and risk margins related to non- capital market inputs may result in significant fluctuations in the estimated fair value of the riders that could materially affect net income. The Company periodically reviews its estimates of actuarial liabilities for future policy benefits and compares them with its actual experience. Differences between actual experience and the assumptions used in pricing these policies, guarantees and riders and in the establishment of the related 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. Policyholder account balances relate to investment-type contracts, universal life-type policies and certain guaranteed minimum benefit riders. Investment-type contracts principally include traditional individual fixed annuities in the accumulation phase and, non-variable group annuity contracts. Policyholder account balances for these contracts are equal to: (i) policy account values, which consist of an accumulation of gross premium payments; (ii) credited interest, ranging from 1% to 17%, less expenses, mortality charges, and withdrawals; and (iii) fair value adjustments relating to business combinations. Other Policyholder Funds Other policyholder funds include policy and contract claims, unearned revenue liabilities, premiums received in advance, policyholder dividends due and unpaid, and policyholder dividends left on deposit. The liability for policy and contract claims generally relates to incurred but not reported death, disability, long-term care and dental claims, as well as claims which have been reported but not yet settled. The liability for these claims is based on the Company's estimated ultimate cost of settling all claims. The Company derives estimates for the development of incurred but not reported claims principally from actuarial analyses of historical patterns of claims and claims development for each line of business. The methods used to determine these estimates are continually reviewed. Adjustments resulting from this continuous review process and differences between estimates and payments for claims are recognized in policyholder benefits and claims expense in the period in which the estimates are changed or payments are made. The unearned revenue liability relates to universal life-type and investment-type products and represents policy charges for services to be provided in future periods. The charges are deferred as unearned revenue and amortized using the product's estimated gross profits and margins, similar to DAC. Such amortization is recorded in universal life and investment-type product policy fees. F-24 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company accounts for the prepayment of premiums on its individual life, group life and health contracts as premium received in advance and applies the cash received to premiums when due. Also included in other policyholder funds are policyholder dividends due and unpaid on participating policies and policyholder dividends left on deposit. Such liabilities are presented at amounts contractually due to policyholders. Recognition of Insurance Revenue and Related Benefits Premiums related to traditional life and annuity policies with life contingencies are recognized as revenues when due from policyholders. Policyholder 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. Premiums, policy fees, policyholder benefits and expenses are presented net of reinsurance. The portion of fees allocated to embedded derivatives described previously is recognized within net investment gains (losses) as part of the estimated fair value of embedded derivative. Other Revenues Other revenues include, in addition to items described elsewhere herein, 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 Insurance Company 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 the insurance subsidiaries. Income Taxes The Company joins with MetLife, Inc. and its includable life insurance and non-life insurance subsidiaries in filing a consolidated U.S. federal income tax return in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The Company participates in a tax sharing agreement with MetLife, Inc. Under the agreement, current income tax expense (benefit) is computed on a separate return basis and provides that members shall make payments (receive reimbursement) to (from) MetLife, Inc. to the extent that their incomes (losses and other credits) contribute to (reduce) the consolidated income tax expense. The consolidating companies F-25 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) are reimbursed for net operating losses or other tax attributes they have generated when utilized in the consolidated return. The Company's accounting for income taxes represents management's best estimate of various events and transactions. Deferred tax assets and liabilities resulting from temporary differences between the financial reporting and tax bases of assets and liabilities are measured at the balance sheet date using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The realization of deferred tax assets depends upon the existence of sufficient taxable income within the carryback or carryforward periods under the tax law in the applicable tax jurisdiction. Valuation allowances are established when management determines, based on available information, that it is more likely than not that deferred income tax assets will not be realized. Significant judgment is required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. The Company may be required to change its provision for income taxes in certain circumstances. Examples of such circumstances include when the ultimate deductibility of certain items is challenged by taxing authorities (See also Note 12) or when estimates used in determining valuation allowances on deferred tax assets significantly change or when receipt of new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the consolidated financial statements in the year these changes occur. As described more fully in "Adoption of New Accounting Pronouncements," the Company adopted FIN No. 48, Accounting for Uncertainty in Income Taxes -- An Interpretation of FASB Statement No. 109 ("FIN 48") effective January 1, 2007. Under FIN 48, the Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Unrecognized tax benefits due to tax uncertainties that do not meet the threshold are included within other liabilities and are charged to earnings in the period that such determination is made. The Company classifies interest recognized as interest expense and penalties recognized as a component of income tax. Reinsurance The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by third parties. For each of its reinsurance agreements, the Company determines if the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. The Company reviews 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. F-26 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) For reinsurance of existing in-force blocks of long-duration contracts that transfer significant insurance risk, the difference, if any, between the amounts paid (received), and the liabilities ceded (assumed) related to the underlying contracts is considered the net cost of reinsurance at the inception of the reinsurance agreement. The net cost of reinsurance is recorded as an adjustment to DAC and recognized as a component of other expenses on a basis consistent with the way the acquisition costs on the underlying reinsured contracts would be recognized. Subsequent amounts paid (received) on the reinsurance of in-force blocks, as well as amounts paid (received) related to new business, are recorded as ceded (assumed) premiums and ceded (assumed) future policy benefit liabilities are established. For prospective reinsurance of short-duration contracts that meet the criteria for reinsurance accounting, amounts paid (received) are recorded as ceded (assumed) premiums and ceded (assumed) unearned premiums and are reflected as a component of premiums and other receivables (future policy benefits). Such amounts are amortized through earned premiums over the remaining contract period in proportion to the amount of protection provided. For retroactive reinsurance of short-duration contracts that meet the criteria of reinsurance accounting, amounts paid (received) in excess of (which do not exceed) the related insurance liabilities ceded (assumed) are recognized immediately as a loss. Any gains on such retroactive agreements are deferred and recorded in other liabilities. The gains are amortized primarily using the recovery method. The assumptions used to account for both long and short-duration reinsurance agreements are consistent with those used for the underlying contracts. Ceded policyholder and contract related liabilities, other than those currently due, are reported gross on the balance sheet. Amounts currently recoverable under reinsurance agreements are included in premiums and other receivables and amounts currently payable are included in other liabilities. Such assets and liabilities relating to reinsurance agreements with the same reinsurer may be recorded net on the balance sheet, if a right of offset exists within the reinsurance agreement. Premiums, fees and policyholder benefits and claims include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Amounts received from reinsurers for policy administration are reported in other revenues. If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Deposits received are included in other liabilities and deposits made are included within other assets. As amounts are paid or received, consistent with the underlying contracts, the deposit assets or liabilities are adjusted. Interest on such deposits is recorded as other revenues or other expenses, as appropriate. Periodically, the Company evaluates the adequacy of the expected payments or recoveries and adjusts the deposit asset or liability through other revenues or other expenses, as appropriate. 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. Employee Benefit Plans The Company sponsors and administers various qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering eligible employees and sales representatives who meet specified eligibility requirements of the sponsor and its participating affiliates. A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-27 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually based upon the average annual rate of interest on 30-year Treasury securities, for each account balance. At December 31, 2008, virtually all the obligations are calculated using the traditional formula. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired participants. Participants that were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for the Company, may become eligible for these other postretirement benefits, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement medical benefits. Participants hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. SFAS No. 87, Employers' Accounting for Pensions ("SFAS 87"), as amended, established the accounting for pension plan obligations. Under SFAS 87, the projected pension benefit obligation ("PBO") is defined as the actuarially calculated present value of vested and non-vested pension benefits accrued based on future salary levels. The accumulated pension benefit obligation ("ABO") is the actuarial present value of vested and non-vested pension benefits accrued based on current salary levels. Obligations, both PBO and ABO, of the defined benefit pension plans are determined using a variety of actuarial assumptions, from which actual results may vary, as described below. SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than Pensions, as amended, established the accounting for expected postretirement plan benefit obligations ("EPBO") which represents the actuarial present value of all other postretirement benefits expected to be paid after retirement to employees and their dependents. Unlike for pensions, the EPBO is not recorded in the financial statements but is used in measuring the periodic expense. The accumulated postretirement plan benefit obligations ("APBO") represents the actuarial present value of future other postretirement benefits attributed to employee services rendered through a particular date and is the valuation basis upon which liabilities are established. The APBO is determined using a variety of actuarial assumptions, from which actual results may vary, as described below. Prior to December 31, 2006, the funded status of the pension and other postretirement plans, which is the difference between the estimated fair value of plan assets and the PBO for pension plans and the APBO for other postretirement plans (collectively, the "Benefit Obligations"), was offset by the unrecognized actuarial gains or losses, prior service cost and transition obligations to determine prepaid or accrued benefit cost, as applicable. The net amount was recorded as a prepaid or accrued benefit cost, as applicable. Further, for pension plans, if the ABO exceeded the estimated fair value of the plan assets, that excess was recorded as an additional minimum pension liability with a corresponding intangible asset. Recognition of the intangible asset was limited to the amount of any unrecognized prior service cost. Any additional minimum pension liability in excess of the allowable intangible asset was charged, net of income tax, to accumulated other comprehensive income. As described more fully in "Adoption of New Accounting Pronouncements," effective December 31, 2006, the Company adopted SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans -- an amendment of FASB Statements No. 87, 88, 106, and SFAS No. 132(r) ("SFAS 158"). Effective with the adoption of SFAS 158 on December 31, 2006, the Company recognizes the funded status of the Benefit Obligations for each of its plans on the consolidated balance sheet. The actuarial gains or losses, prior service costs and credits, and the remaining net transition asset or obligation that had not yet been included in net periodic benefit costs at December 31, 2006 are now charged, net of income tax, to accumulated other comprehensive income. Additionally, these changes eliminated the additional minimum pension liability provisions of SFAS 87. F-28 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Net periodic benefit cost is determined using management estimates and actuarial assumptions to derive service cost, interest cost, and expected return on plan assets for a particular year. Net periodic benefit cost also includes the applicable amortization of any prior service cost (credit) arising from the increase (decrease) in prior years' benefit costs due to plan amendments or initiation of new plans. These costs are amortized into net periodic benefit cost over the expected service years of employees whose benefits are affected by such plan amendments. Actual experience related to plan assets and/or the benefit obligations may differ from that originally assumed when determining net periodic benefit cost for a particular period, resulting in gains or losses. To the extent such aggregate gains or losses exceed 10 percent of the greater of the benefit obligations or the market-related asset value of the plans, they are amortized into net periodic benefit cost over the expected service years of employees expected to receive benefits under the plans. The obligations and expenses associated with these plans require an extensive use of assumptions such as the discount rate, expected rate of return on plan assets, rate of future compensation increases, healthcare cost trend rates, as well as assumptions regarding participant demographics such as rate and age of retirements, withdrawal rates and mortality. Management, in consultation with its external consulting actuarial firm, determines these assumptions based upon a variety of factors such as historical performance of the plan and its assets, currently available market and industry data, and expected benefit payout streams. The assumptions used may differ materially from actual results due to, among other factors, changing market and economic conditions and changes in participant demographics. These differences may have a significant effect on the Company's consolidated financial statements and liquidity. The Company also sponsors defined contribution savings and investment plans ("SIP") for substantially all employees under which a portion of participant contributions are matched. Applicable matching contributions are made each payroll period. Accordingly, the Company recognizes compensation cost for current matching contributions. As all contributions are transferred currently as earned to the SIP trust, no liability for matching contributions is recognized in the consolidated balance sheets. Stock-Based Compensation Stock-based compensation recognized in the Company's consolidated results of operations is allocated from MetLife, Inc. The accounting policies described below represent those that MetLife, Inc. applies in determining such allocated expenses. Effective January 1, 2006, MetLife, Inc. adopted, using the modified prospective transition method, SFAS No. 123 (revised 2004), Share-Based Payment ("SFAS 123(r)"). In accordance with this guidance the cost of all stock-based transactions is measured at fair value and recognized over the period during which a grantee is required to provide goods or services in exchange for the award. Although the terms of MetLife, Inc.'s stock-based plans do not accelerate vesting upon retirement, or the attainment of retirement eligibility, the requisite service period subsequent to attaining such eligibility is considered nonsubstantive. Accordingly, MetLife, Inc. recognizes compensation expense related to stock-based awards over the shorter of the requisite service period or the period to attainment of retirement eligibility. Prior to January 1, 2006, MetLife, Inc. recognized stock-based compensation over the vesting period of the grant or award, including grants or awards to retirement-eligible employees. An estimation of future forfeitures of stock-based awards is incorporated into the determination of compensation expense when recognizing expense over the requisite service period. Prior to January 1, 2006, MetLife, Inc. recognized the corresponding reduction of stock compensation in the period in which the forfeitures occurred. Stock-based awards granted after December 31, 2002 but prior to January 1, 2006 were accounted for on a prospective basis using the 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. The fair value method prescribed by SFAS 123 required compensation expense to be measured based on the fair value of the equity instrument at the grant or award date. Stock-based compensation was recognized over the vesting period of the grant or award, including grants or awards to retirement-eligible employees. F-29 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 generally are the functional currencies unless the local economy is highly inflationary. Translation adjustments are charged or credited directly to other comprehensive income (loss). Gains and losses from foreign currency transactions are reported as net investment 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. Litigation Contingencies The Company is a party to a number of legal actions and is involved in a number of regulatory investigations. Given the inherent unpredictability of these matters, it is difficult to estimate the impact on the Company's 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. 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. It is possible that an adverse outcome in certain of the Company's litigation and regulatory investigations, 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. 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. Assets within the Company's separate accounts primarily include: mutual funds, fixed maturity and equity securities, mortgage loans, derivatives, hedge funds, other limited partnership interests, short-term investments, and cash and cash equivalents. The Company reports separately, as assets and liabilities, investments held in separate accounts and liabilities of the separate accounts if: (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from the Company's general account liabilities; (iii) investments are directed by the contractholder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contractholder. The Company reports separate account assets meeting such criteria at their fair value which is based on the estimated fair values of the underlying assets comprising the portfolios of an individual separate account. 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. 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 and the accounting for these investments is consistent with the methodologies described herein for similar financial instruments held within the general account. 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. F-30 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Fair Value Effective January 1, 2008, the Company adopted SFAS 157 which defines fair value, establishes a consistent framework for measuring fair value, establishes a fair value hierarchy based on the observability of inputs used to measure fair value, and requires enhanced disclosures about fair value measurements and applied the provisions of the statement prospectively to assets and liabilities measured at fair value. The adoption of SFAS 157 changed the valuation of certain freestanding derivatives by moving from a mid to bid pricing convention as it relates to certain volatility inputs as well as the addition of liquidity adjustments and adjustments for risks inherent in a particular input or valuation technique. The adoption of SFAS 157 also changed the valuation of the Company's embedded derivatives, most significantly the valuation of embedded derivatives associated with certain riders on variable annuity contracts. The change in valuation of embedded derivatives associated with riders on annuity contracts resulted from the incorporation of risk margins associated with non capital market inputs and the inclusion of the Company's own credit standing in their valuation. At January 1, 2008, the impact of adopting SFAS 157 on assets and liabilities measured at estimated fair value was $13 million ($8 million, net of income tax) and was recognized as a change in estimate in the accompanying consolidated statement of income where it was presented in the respective income statement caption to which the item measured at estimated fair value is presented. There were no significant changes in estimated fair value of items measured at fair value and reflected in accumulated other comprehensive income (loss). The addition of risk margins and the Company's own credit spread in the valuation of embedded derivatives associated with annuity contracts may result in significant volatility in the Company's consolidated net income in future periods. Note 19 presents the estimated fair value of all assets and liabilities required to be measured at estimated fair value as well as the expanded fair value disclosures required by SFAS 157. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities the option to measure most financial instruments and certain other items at fair value at specified election dates and to recognize related unrealized gains and losses in earnings. The fair value option is applied on an instrument-by-instrument basis upon adoption of the standard, upon the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election is an irrevocable election. Effective January 1, 2008, the Company did not elect the fair value option for any instruments. Effective January 1, 2008, the Company adopted FASB Staff Position ("FSP") No. FAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP 157- 1"). FSP 157-1 amends SFAS 157 to provide a scope out exception for lease classification and measurement under SFAS No. 13, Accounting for Leases. The Company also adopted FSP No. FAS 157-2, Effective Date of FASB Statement No. 157 which delays the effective date of SFAS 157 for certain nonfinancial assets and liabilities that are recorded at fair value on a nonrecurring basis. The effective date is delayed until January 1, 2009 and impacts balance sheet items including nonfinancial assets and liabilities in a business combination and the impairment testing of goodwill and long-lived assets. Effective September 30, 2008, the Company adopted FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active ("FSP 157-3"). FSP 157-3 provides guidance on how a company's internal cash flow and discount rate assumptions should be considered in the measurement of fair value when relevant market data does not exist, how observable market information in an inactive market affects fair value measurement and how the use of market quotes should be considered when assessing the relevance of observable and unobservable data available to measure fair value. The adoption of FSP 157-3 did not have a material impact on the Company's consolidated financial statements. F-31 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Investments Effective December 31, 2008, the Company adopted FSP No. FAS 140-4 and FIN 46(r)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities ("FSP 140-4 and FIN 46(r)-8"). FSP 140-4 and FIN 46(r)-8 requires additional qualitative and quantitative disclosures about a transferors' continuing involvement in transferred financial assets and involvement in VIEs. The exact nature of the additional required VIE disclosures vary and depend on whether or not the VIE is a qualifying special-purpose entity ("QSPE"). For VIEs that are QSPEs, the additional disclosures are only required for a non-transferor sponsor holding a variable interest or a non-transferor servicer holding a significant variable interest. For VIEs that are not QSPEs, the additional disclosures are only required if the Company is the primary beneficiary, and if not the primary beneficiary, only if the Company holds a significant variable interest or is the sponsor. The Company provided all of the material required disclosures in its consolidated financial statements. Effective December 31, 2008, the Company adopted FSP No. EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue No. 99-20 ("FSP EITF 99-20- 1"). FSP EITF 99-20-1 amends the guidance in EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets, to more closely align the guidance to determine whether an other-than-temporary impairment has occurred for a beneficial interest in a securitized financial asset with the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities for debt securities classified as available-for-sale or held-to-maturity. The adoption of FSP EITF 99-20-1 did not have an impact on the Company's consolidated financial statements. Derivative Financial Instruments Effective December 31, 2008, the Company adopted FSP No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees -- An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161 ("FSP 133-1 and FIN 45-4"). FSP 133-1 and FIN 45-4 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") to require certain enhanced disclosures by sellers of credit derivatives by requiring additional information about the potential adverse effects of changes in their credit risk, financial performance, and cash flows. It also amends FIN No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others -- An Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34, to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The Company provided all of the material required disclosures in its consolidated financial statements. Effective January 1, 2008, the Company adopted SFAS 133 Implementation Issue No. E-23, Clarification of the Application of the Shortcut Method ("Issue E-23"). Issue E-23 amended SFAS 133 by permitting interest rate swaps to have a non-zero fair value at inception when applying the shortcut method of assessing hedge effectiveness, as long as the difference between the transaction price (zero) and the fair value (exit price), as defined by SFAS 157, is solely attributable to a bid-ask spread. In addition, entities are not precluded from applying the shortcut method of assessing hedge effectiveness in a hedging relationship of interest rate risk involving an interest bearing asset or liability in situations where the hedged item is not recognized for accounting purposes until settlement date as long as the period between trade date and settlement date of the hedged item is consistent with generally established conventions in the marketplace. The adoption of Issue E-23 did not have an impact on the Company's consolidated financial statements. F-32 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 2006, the Company adopted prospectively 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) amends SFAS 140 to eliminate the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. The adoption of SFAS 155 did not have a material impact on the Company's consolidated financial statements. Effective October 1, 2006, the Company adopted SFAS 133 Implementation Issue No. B40, Embedded Derivatives: Application of Paragraph 13(b) to Securitized Interests in Prepayable Financial Assets ("Issue B40"). Issue B40 clarifies that a securitized interest in prepayable financial assets is not subject to the conditions in paragraph 13(b) of SFAS 133, if it meets both of the following criteria: (i) the right to accelerate the settlement if the securitized interest cannot be controlled by the investor; and (ii) the securitized interest itself does not contain an embedded derivative (including an interest rate-related derivative) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets. The adoption of Issue B40 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted prospectively 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 clarifies 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 133. Issue B39 clarifies 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 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. The adoption of Issues B38 and B39 did not have a material impact on the Company's consolidated financial statements. Income Taxes Effective January 1, 2007, the Company adopted FIN 48. FIN 48 clarifies the accounting for uncertainty in income tax recognized in a company's financial statements. FIN 48 requires companies to determine whether it is "more likely than not" that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. It also provides guidance on the recognition, measurement, and classification of income tax uncertainties, along with any related interest and penalties. Previously recorded income tax benefits that no longer meet this standard are required to be charged to earnings in the period that such determination is made. F-33 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As a result of the implementation of FIN 48, the Company recognized an $18 million increase in the liability for unrecognized tax benefits and a $16 million decrease in the interest liability for unrecognized tax benefits, as well as a $17 million increase in the liability for unrecognized tax benefits and a $5 million increase in the interest liability for unrecognized tax benefits which are included in liabilities of subsidiaries held-for-sale. The corresponding reduction to the January 1, 2007 balance of retained earnings was $13 million, net of $11 million of minority interest included in liabilities of subsidiaries held-for-sale. See also Note 12. Insurance Contracts Effective January 1, 2007, the Company adopted SOP 05-1 which provides guidance on accounting by insurance enterprises for DAC 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 and is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. In addition, in February 2007, the American Institute of Certified Public Accountants issued related Technical Practice Aids ("TPAs") to provide further clarification of SOP 05-1. The TPAs became effective concurrently with the adoption of SOP 05-1. As a result of the adoption of SOP 05-1 and the related TPAs, if an internal replacement modification substantially changes a contract, then the DAC is written off immediately through income and any new deferrable costs associated with the new replacement are deferred. If a contract modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are immediately expensed. The adoption of SOP 05-1 and the related TPAs resulted in a reduction to DAC and VOBA on January 1, 2007 and an acceleration of the amortization period relating primarily to the Company's group life and health insurance contracts that contain certain rate reset provisions. Prior to the adoption of SOP 05-1, DAC on such contracts was amortized over the expected renewable life of the contract. Upon adoption of SOP 05-1, DAC on such contracts is to be amortized over the rate reset period. The impact at January 1, 2007 was a cumulative effect adjustment of $202 million, net of income tax of $116 million, which was recorded as a reduction to retained earnings. Defined Benefit and Other Postretirement Plans Effective December 31, 2006, MetLife, Inc. adopted SFAS 158. The pronouncement revises financial reporting standards for defined benefit pension and other postretirement benefit plans by requiring the: (i) recognition in the statement of financial position of the funded status of defined benefit plans measured as the difference between the estimated fair value of plan assets and the benefit obligation, which is the projected benefit obligation for pension plans and the accumulated postretirement benefit obligation for other postretirement benefit plans; (ii) recognition as an adjustment to accumulated other comprehensive income (loss), net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and net asset or obligation at transition that have not yet been included in net periodic benefit costs at the end of the year of adoption; (iii) recognition of subsequent changes in funded status as a component of other comprehensive income; (iv) measurement of benefit plan assets and obligations at the date of the statement of financial position; and (v) disclosure of additional information about the effects on the employer's statement of financial position. F-34 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The adoption of SFAS 158 resulted in a reduction of $749 million, net of income tax, to accumulated other comprehensive income, which is included as a component of total consolidated stockholder's equity. As the Company's measurement date for its pension and other postretirement benefit plans is already December 31 there was no impact of adoption due to changes in measurement date. See also "Summary of Significant Accounting Policies and Critical Accounting Estimates" and Note 14. Stock Compensation Plans As described previously, effective January 1, 2006, MetLife, Inc. adopted SFAS 123(r) including supplemental application guidance issued by the U.S. Securities and Exchange Commission in Staff Accounting Bulletin ("SAB") No. 107, Share-Based Payment using the modified prospective transition method. In accordance with the modified prospective transition method, results for prior periods have not been restated. SFAS 123(r) requires that the cost of all stock- based transactions be measured at fair value and recognized over the period during which a grantee is required to provide goods or services in exchange for the award. MetLife, Inc. had previously adopted the fair value method of accounting for stock-based awards as prescribed by SFAS 123 on a prospective basis effective January 1, 2003. MetLife, Inc. did not modify the substantive terms of any existing awards prior to adoption of SFAS 123(r). Under the modified prospective transition method, compensation expense recognized during the year ended December 31, 2006 includes: (a) compensation expense for all stock-based awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (b) compensation expense for all stock- based awards granted beginning January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(r). The adoption of SFAS 123(r) did not have a significant impact on the Company's financial position or results of operations as all stock-based awards accounted for under the intrinsic value method prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees had vested prior to the adoption date and the Company, in conjunction with MetLife, Inc. had adopted the fair value recognition provisions of SFAS 123 on January 1, 2003. SFAS 123 allowed forfeitures of stock-based awards to be recognized as a reduction of compensation expense in the period in which the forfeiture occurred. Upon adoption of SFAS 123(r), MetLife, Inc. changed its policy and now incorporates an estimate of future forfeitures into the determination of compensation expense when recognizing expense over the requisite service period. The impact of this change in accounting policy was not significant to the Company's financial position or results of operations as of the date of adoption. Additionally, for awards granted after adoption, MetLife, Inc. changed its policy from recognizing expense for stock-based awards over the requisite service period to recognizing such expense over the shorter of the requisite service period or the period to attainment of retirement-eligibility. Prior to the adoption of SFAS 123(r), the Company presented tax benefits of deductions resulting from the exercise of stock options within operating cash flows in the consolidated statements of cash flows. SFAS 123(r) requires tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options be classified and reported as a financing cash inflow upon adoption of SFAS 123(r). Other Pronouncements Effective January 1, 2008, the Company adopted FSP No. FIN 39-1, Amendment of FASB Interpretation No. 39 ("FSP 39-1"). FSP 39-1 amends FASB Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts ("FIN 39"), to permit a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement that F-35 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) have been offset in accordance with FIN 39. FSP 39-1 also amends FIN 39 for certain terminology modifications. Upon adoption of FSP 39-1, the Company did not change its accounting policy of not offsetting fair value amounts recognized for derivative instruments under master netting arrangements. The adoption of FSP 39-1 did not have an impact on the Company's consolidated financial statements. Effective January 1, 2008, the Company adopted Emerging Issues Task Force ("EITF") Issue No. 07-6, Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause ("EITF 07-6") prospectively. EITF 07-6 addresses whether the existence of a buy-sell arrangement would preclude partial sales treatment when real estate is sold to a jointly owned entity. EITF 07-6 concludes that the existence of a buy-sell clause does not necessarily preclude partial sale treatment under current guidance. The adoption of EITF 07-6 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2007, the Company adopted FSP No. FAS 13-2, Accounting for a Change or Projected Change in the Timing of Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction ("FSP 13-2"). FSP 13-2 amends SFAS No. 13, Accounting for Leases, to require that a lessor review the projected timing of income tax cash flows generated by a leveraged lease annually or more frequently if events or circumstances indicate that a change in timing has occurred or is projected to occur. In addition, FSP 13-2 requires that the change in the net investment balance resulting from the recalculation be recognized as a gain or loss from continuing operations in the same line item in which leveraged lease income is recognized in the year in which the assumption is changed. The adoption of FSP 13-2 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2007, the Company adopted SFAS No. 156, Accounting for Servicing of Financial Assets -- an amendment of FASB Statement No. 140 ("SFAS 156"). Among other requirements, SFAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract in certain situations. The adoption of SFAS 156 did not have an impact on the Company's consolidated financial statements. Effective November 15, 2006, the Company adopted SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 provides guidance on how prior year misstatements should be considered when quantifying misstatements in current year financial statements for purposes of assessing materiality. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in quantifying a misstatement that, when relevant quantitative and qualitative factors are considered, is material. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording a cumulative effect adjustment to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings for errors that were previously deemed immaterial but are material under the guidance in SAB 108. The adoption of SAB 108 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted prospectively EITF 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. The adoption of EITF 05-7 did not have a material impact on the Company's consolidated financial statements. F-36 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Effective January 1, 2006, the Company adopted EITF 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 was 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. The adoption of EITF 05-8 did not have a material impact on the Company's consolidated financial statements. Effective January 1, 2006, the Company adopted SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3 ("SFAS 154"). SFAS 154 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. The adoption of SFAS 154 did not have a material impact on the Company's consolidated financial statements. FUTURE ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS Business Combinations In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations -- A Replacement of FASB Statement No. 141 ("SFAS 141(r)") and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements -- An Amendment of ARB No. 51 ("SFAS 160"). In April 2009, the FASB also issued FSP 141(r)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies ("FSP 141(r)-1"). Under these pronouncements: - All business combinations (whether full, partial or "step" acquisitions) result in all assets and liabilities of an acquired business being recorded at fair value, with limited exceptions. - Acquisition costs are generally expensed as incurred; restructuring costs associated with a business combination are generally expensed as incurred subsequent to the acquisition date. - The fair value of the purchase price, including the issuance of equity securities, is determined on the acquisition date. - Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized at fair value if the acquisition- date fair value can be reasonably determined. If the fair value is not estimable, an asset or liability is recorded if existence or incurrence at the acquisition date is probable and its amount is reasonably estimable. - Certain acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies. - Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. - Noncontrolling interests (formerly known as "minority interests") are valued at fair value at the acquisition date and are presented as equity rather than liabilities. - When control is attained on previously noncontrolling interests, the previously held equity interests are remeasured at fair value and a gain or loss is recognized. - Purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. F-37 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - When control is lost in a partial disposition, realized gains or losses are recorded on equity ownership sold and the remaining ownership interest is remeasured and holding gains or losses are recognized. The pronouncements are effective for fiscal years beginning on or after December 15, 2008 and apply prospectively to business combinations after that date. Presentation and disclosure requirements related to noncontrolling interests must be retrospectively applied. The Company will apply the guidance in SFAS 141(r), and FSP 141(r)-1 prospectively on its accounting for future acquisitions and does not expect the adoption of SFAS 160 to have a material impact on the Company's consolidated financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-6, Equity Method Investment Accounting Considerations ("EITF 08-6"). EITF 08-6 addresses a number of issues associated with the impact that SFAS 141(r) and SFAS 160 might have on the accounting for equity method investments, including how an equity method investment should initially be measured, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. EITF 08-6 is effective prospectively for fiscal years beginning on or after December 15, 2008. The Company does not expect the adoption of EITF 08-6 to have a material impact on the Company's consolidated financial statements. In November 2008, the FASB ratified the consensus on EITF Issue No. 08-7, Accounting for Defensive Intangible Assets ("EITF 08-7"). EITF 08-7 requires that an acquired defensive intangible asset (i.e., an asset an entity does not intend to actively use, but rather, intends to prevent others from using) be accounted for as a separate unit of accounting at time of acquisition, not combined with the acquirer's existing intangible assets. In addition, the EITF concludes that a defensive intangible asset may not be considered immediately abandoned following its acquisition or have indefinite life. The Company will apply the guidance of EITF 08-7 prospectively to its intangible assets acquired after fiscal years beginning on or after December 15, 2008. In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). This change is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(r) and other GAAP. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The requirement for determining useful lives and related disclosures will be applied prospectively to intangible assets acquired as of, and subsequent to, the effective date. Derivative Financial Instruments In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities -- An Amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires enhanced qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company will provide all of the material required disclosures in the appropriate future interim and annual periods. Other Pronouncements In December 2008, the FASB issued FSP No. FAS 132(r)-1, Employers' Disclosures about Postretirement Benefit Plan Assets ("FSP 132(r)-1"). FSP 132(r)-1 amends SFAS No. 132(r), Employers' Disclosures about Pensions and Other Postretirement Benefits to enhance the transparency surrounding the types of assets and associated risks in an employer's defined benefit pension or other postretirement plan. The FSP requires an employer to disclose information about the valuation of plan assets similar to that required under SFAS 157. FSP 132(r)-1 is effective for fiscal years ending after December 15, 2009. The Company will provide all of the material required disclosures in the appropriate future annual period. F-38 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In September 2008, the FASB ratified the consensus on EITF Issue No. 08-5, Issuer's Accounting for Liabilities Measured at Fair Value with a Third-Party Credit Enhancement ("EITF 08-5"). EITF 08-5 concludes that an issuer of a liability with a third-party credit enhancement should not include the effect of the credit enhancement in the fair value measurement of the liability. In addition, EITF 08-5 requires disclosures about the existence of any third-party credit enhancement related to liabilities that are measured at fair value. EITF 08-5 is effective in the first reporting period beginning after December 15, 2008 and will be applied prospectively, with the effect of initial application included in the change in fair value of the liability in the period of adoption. The Company does not expect the adoption of EITF 08-5 to have a material impact on the Company's consolidated financial statements. In February 2008, the FASB issued FSP No. FAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions ("FSP 140- 3"). FSP 140-3 provides guidance for evaluating whether to account for a transfer of a financial asset and repurchase financing as a single transaction or as two separate transactions. FSP 140-3 is effective prospectively for financial statements issued for fiscal years beginning after November 15, 2008. The Company does not expect the adoption of FSP 140-3 to have a material impact on its consolidated financial statements. 2. ACQUISITIONS AND DISPOSITIONS DISPOSITION OF REINSURANCE GROUP OF AMERICA, INCORPORATED On September 12, 2008, MetLife, Inc. completed a tax-free split-off of its majority-owned subsidiary, Reinsurance Group of America, Incorporated ("RGA"). In connection with this transaction, General American Life Insurance Company ("GALIC") dividended to Metropolitan Life Insurance Company and Metropolitan Life Insurance Company dividended to MetLife, Inc. substantially all of its interests in RGA at a value of $1,318 million. The net book value of RGA at the time of the dividend was $1,716 million. The loss recognized in connection with the dividend was $398 million. Metropolitan Life Insurance Company, through its investment in GALIC, retained 3,000,000 shares of RGA Class A common stock. These shares are marketable equity securities which do not constitute significant continuing involvement in the operations of RGA; accordingly, they have been classified within equity securities in the consolidated financial statements of the Company at a cost basis of $157 million which is equivalent to the net book value of the shares. The carrying value will be adjusted to fair value at each subsequent reporting date. The Company has agreed to dispose of the remaining shares of RGA within the next five years. In connection with the Company's agreement to dispose of the remaining shares, the Company also recognized, in its provision for income tax on continuing operations, a deferred tax liability of $16 million which represents the difference between the book and taxable basis of the remaining investment in RGA. The impact of the disposition of the Company's investment in RGA is reflected in the Company's consolidated financial statements as discontinued operations. The disposition of RGA results in the elimination of the Company's Reinsurance segment. The Reinsurance segment was comprised of the results of RGA, which at disposition became discontinued operations of Corporate & Other, and the interest on economic capital, which has been reclassified to the continuing operations of Corporate & Other. See Note 18 for reclassifications related to discontinued operations and Note 17 for segment information. OTHER ACQUISITIONS AND DISPOSITIONS See Note 15 for information on the contribution from MetLife, Inc. in the form of intangible assets related to VOCRA from a 2008 acquisition by MetLife, Inc. On October 20, 2006, MetLife, Inc. sold its subsidiary, Citicorp Life Insurance Company and its subsidiary, First Citicorp Life Insurance Company (collectively, "CLIC") to the Company for $135 million in cash consideration. The net assets of CLIC acquired by the Company were $154 million. The excess of the net assets of CLIC received over the purchase price resulted in an increase of $19 million in additional paid-in capital. In connection F-39 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) with the sale and merger of CLIC with and into Metropolitan Life Insurance Company, MetLife, Inc. contributed $17 million to the Company. See Note 15. On September 30, 2006, the Company acquired MetLife Retirement Services LLC (formerly, CitiStreet Retirement Services LLC), and its subsidiaries from an affiliate, Metropolitan Tower Life Insurance Company ("MTL") for approximately $58 million in cash consideration settled in the fourth quarter of 2006. The assets acquired are principally comprised of $52 million related to the VOCRA. Further information on VOCRA is described in Note 7. On July 1, 2005, MetLife, Inc. completed the acquisition of The Travelers Insurance Company, excluding certain assets, most significantly, Primerica, from Citigroup Inc. ("Citigroup"), and substantially all of Citigroup's international insurance business (collectively, "Travelers"). On September 30, 2006, the Company received a capital contribution, as described in Note 15, from MetLife, Inc. of $377 million in the form of intangible assets related to the VODA of $389 million, net of deferred income tax of $12 million, for which the Company receives the benefit. The VODA originated through MetLife, Inc.'s acquisition of Travelers and was transferred at its amortized cost basis. Further information on VODA is described in Note 7. See Note 18 for information on the disposition of SSRM Holdings, Inc ("SSRM"). 3. INVESTMENTS FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized gain and loss, estimated fair value of the Company's fixed maturity and equity securities, and the percentage that each sector represents by the respective total holdings at:
DECEMBER 31, 2008 ------------------------------------------------- COST OR GROSS UNREALIZED AMORTIZED ---------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ------- ---------- ----- (IN MILLIONS) U.S. corporate securities........... $ 49,334 $ 770 $ 6,352 $ 43,752 35.8% Residential mortgage-backed securities........................ 25,659 539 3,145 23,053 18.9 Foreign corporate securities........ 23,898 435 4,109 20,224 16.5 U.S. Treasury/agency securities..... 12,884 3,052 -- 15,936 13.0 Commercial mortgage-backed securities........................ 11,502 11 2,436 9,077 7.4 Asset-backed securities............. 8,490 14 2,193 6,311 5.2 Foreign government securities....... 2,436 464 125 2,775 2.3 State and political subdivision securities........................ 1,225 31 155 1,101 0.9 Other fixed maturity securities..... -- -- -- -- -- -------- ------ ------- -------- ----- Total fixed maturity securities (1), (2)....................... $135,428 $5,316 $18,515 $122,229 100.0% ======== ====== ======= ======== ===== Common stock........................ $ 1,358 $ 29 $ 96 $ 1,291 56.2% Non-redeemable preferred stock (1).. 1,573 1 567 1,007 43.8 -------- ------ ------- -------- ----- Total equity securities........... $ 2,931 $ 30 $ 663 $ 2,298 100.0% ======== ====== ======= ======== =====
F-40 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ------------------------------------------------ GROSS COST OR UNREALIZED AMORTIZED --------------- ESTIMATED % OF COST GAIN LOSS FAIR VALUE TOTAL --------- ------ ------ ---------- ----- (IN MILLIONS) U.S. corporate securities............ $ 50,087 $1,488 $1,195 $ 50,380 33.1% Residential mortgage-backed securities......................... 35,773 444 237 35,980 23.6 Foreign corporate securities......... 24,663 1,414 454 25,623 16.8 U.S. Treasury/agency securities...... 14,271 1,296 1 15,566 10.2 Commercial mortgage-backed securities......................... 12,481 204 100 12,585 8.3 Asset-backed securities.............. 7,034 32 309 6,757 4.5 Foreign government securities........ 3,855 850 18 4,687 3.1 State and political subdivision securities......................... 467 13 9 471 0.3 Other fixed maturity securities...... 234 12 29 217 0.1 -------- ------ ------ -------- ----- Total fixed maturity securities (1), (2)........................ $148,865 $5,753 $2,352 $152,266 100.0% ======== ====== ====== ======== ===== Common stock......................... $ 1,988 $ 540 $ 93 $ 2,435 58.4% Non-redeemable preferred stock (1)... 1,909 33 210 1,732 41.6 -------- ------ ------ -------- ----- Total equity securities............ $ 3,897 $ 573 $ 303 $ 4,167 100.0% ======== ====== ====== ======== =====
-------- (1) The Company classifies perpetual securities that have attributes of both debt and equity as fixed maturity securities if the security has a punitive interest rate step-up feature as it believes in most instances this feature will compel the issuer to redeem the security at the specified call date. Perpetual securities that do not have a punitive interest rate step-up feature are classified as non-redeemable preferred stock. Many of such securities have been issued by non-U.S. financial institutions that are accorded Tier 1 and Upper Tier 2 capital treatment by their respective regulatory bodies and are commonly referred to as "perpetual hybrid securities." Perpetual hybrid securities classified as non-redeemable preferred stock held by the Company at December 31, 2008 and 2007 had an estimated fair value of $885 million and $1,412 million, respectively. In addition, the Company held $122 million and $320 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, also included in non-redeemable preferred stock. Perpetual hybrid securities held by the Company and included within fixed maturity securities (primarily within foreign corporate securities) at December 31, 2008 and 2007 had an estimated fair value of $1,426 million and $2,769 million, respectively. In addition, the Company held $7 million and $20 million at estimated fair value, respectively, at December 31, 2008 and 2007 of other perpetual hybrid securities, primarily U.S. financial institutions, included in fixed maturity securities. (2) At December 31, 2008 and 2007 the Company also held $1,495 million and $2,557 million at estimated fair value, respectively, of redeemable preferred stock which have stated maturity dates which are included within fixed maturity securities. These securities are primarily issued by U.S. financial institutions, have cumulative interest deferral features and are commonly referred to as "capital securities" within U.S. corporate securities. The Company held foreign currency derivatives with notional amounts of $7.3 billion and $7.8 billion to hedge the exchange rate risk associated with foreign denominated fixed maturity securities at December 31, 2008 and 2007, respectively. Below Investment Grade or Non Rated Fixed Maturity Securities. The Company held fixed maturity securities at estimated fair values that were below investment grade or not rated by an independent rating agency F-41 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) that totaled $8.4 billion and $11.6 billion at December 31, 2008 and 2007, respectively. These securities had net unrealized gains (losses) of ($3,275) million and $94 million at December 31, 2008 and 2007, respectively. Non-Income Producing Fixed Maturity Securities. Non-income producing fixed maturity securities at estimated fair value were $59 million and $12 million at December 31, 2008 and 2007, respectively. Net unrealized gains (losses) associated with non-income producing fixed maturity securities were ($17) million and $11 million at December 31, 2008 and 2007, respectively. Fixed Maturity Securities Credit Enhanced by Financial Guarantee Insurers. At December 31, 2008, $2,438 million of the estimated fair value of the Company's fixed maturity securities were credit enhanced by financial guarantee insurers of which $1,463 million, $515 million, $426 million and $34 million are included within U.S. corporate securities, asset-backed securities, state and political subdivision securities, and residential mortgage-backed securities, respectively, and 11% and 74% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. Approximately, 68% of the asset-backed securities that are credit enhanced by financial guarantee insurers are asset-backed securities which are backed by sub-prime mortgage loans. Concentrations of Credit Risk (Fixed Maturity Securities). The following section contains a summary of the concentrations of credit risk related to fixed maturity securities holdings. The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's stockholder's equity, other than securities of the U.S. government and certain U.S. government agencies. At December 31, 2008 and 2007, the Company's holdings in U.S. Treasury and agency fixed maturity securities at estimated fair value were $15.9 billion and $15.6 billion, respectively. As shown in the sector table above, at December 31, 2008, the Company's three largest exposures in its fixed maturity security portfolio were U.S. corporate fixed maturity securities (35.8%), residential mortgage- backed securities (18.9%), and foreign corporate securities (16.5%); and at December 31, 2007, were U.S. corporate fixed maturity securities (33.1%), residential mortgage-backed securities (23.6%), and foreign corporate securities (16.8%). Concentrations of Credit Risk (Fixed Maturity Securities) -- U.S. and Foreign Corporate Securities. At December 31, 2008 and 2007, the Company's holdings in U.S. corporate and foreign corporate fixed maturity securities at estimated fair value were $64.0 billion and $76.0 billion, respectively. The Company maintains a diversified portfolio of corporate securities across industries and issuers. The portfolio does not have exposure to any single issuer in excess of 1% of total invested assets. The exposure to the largest single issuer of corporate fixed maturity securities held at December 31, 2008 and 2007 was $992 million and $830 million, respectively. At December 31, 2008 and 2007, the Company's combined holdings in the ten issuers to which it had the greatest exposure totaled $6.2 billion and $5.5 billion, respectively, the total of these ten issuers being less than 3% of the F-42 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's total invested assets at such dates. The table below shows the major industry types that comprise the corporate fixed maturity holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Foreign (1)................................. $20,224 31.6% $25,623 33.7% Industrial.................................. 10,240 16.0 11,782 15.5 Finance..................................... 9,660 15.1 13,034 17.2 Consumer.................................... 9,120 14.3 10,779 14.2 Utility..................................... 8,798 13.8 9,123 12.0 Communications.............................. 3,810 5.9 5,121 6.7 Other....................................... 2,124 3.3 541 0.7 ------- ----- ------- ----- Total..................................... $63,976 100.0% $76,003 100.0% ======= ===== ======= =====
-------- (1) Includes U.S. dollar-denominated debt obligations of foreign obligors, and other fixed maturity foreign investments. Concentrations of Credit Risk (Fixed Maturity Securities) -- Residential Mortgage-Backed Securities. The Company's residential mortgage-backed securities consist of the following holdings at:
DECEMBER 31, --------------------------------------- 2008 2007 ------------------ ------------------ ESTIMATED % OF ESTIMATED % OF FAIR VALUE TOTAL FAIR VALUE TOTAL ---------- ----- ---------- ----- (IN MILLIONS) Residential mortgage-backed securities: Collateralized mortgage obligations....... $17,343 75.2% $24,187 67.2% Pass-through securities................... 5,710 24.8 11,793 32.8 ------- ----- ------- ----- Total residential mortgage-backed securities................................ $23,053 100.0% $35,980 100.0% ======= ===== ======= =====
Collateralized mortgage obligations are a type of mortgage-backed security that creates separate pools or tranches of pass-through cash flows for different classes of bondholders with varying maturities. Pass-through mortgage-backed securities are a type of asset-backed security that is secured by a mortgage or collection of mortgages. The monthly mortgage payments from homeowners pass from the originating bank through an intermediary, such as a government agency or investment bank, which collects the payments, and for fee, remits or passes these payments through to the holders of the pass-through securities. At December 31, 2008, the exposures in the Company's residential mortgage- backed securities portfolio consist of agency, prime, and alternative residential mortgage loans ("Alt-A") securities of 66%, 24%, and 10% of the total holdings, respectively. At December 31, 2008 and 2007, $21.3 billion and $35.8 billion, respectively, or 93% and 99% respectively of the residential mortgage-backed securities were rated Aaa/AAA by Moody's Investors Service ("Moody's"), S&P, or Fitch Ratings ("Fitch"). The majority of the agency residential mortgage-backed securities are guaranteed or otherwise supported by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Government National Mortgage Association. Prime residential mortgage lending includes the origination of residential mortgage loans to the most credit-worthy customers with high quality credit profiles. Alt-A residential mortgage loans are a classification of mortgage loans where the risk profile of the F-43 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) borrower falls between prime and sub-prime. At December 31, 2008 and 2007, the Company's Alt-A residential mortgage-backed securities exposure was $2.3 billion and $4.2 billion, respectively, with an unrealized loss of $1,315 million and $91 million, respectively. At December 31, 2008 and 2007, $1.5 billion and $4.2 billion, respectively, or 64% and 100%, respectively, of the Company's Alt-A residential mortgage-backed securities were rated Aa/AA or better by Moody's, S&P or Fitch. In December 2008, certain Alt-A residential mortgage-backed securities experienced ratings downgrades from investment grade to below investment grade, contributing to the decrease year over year cited above in those securities rated Aa/AA or better. At December 31, 2008 the Company's Alt-A holdings are distributed as follows: 24% 2007 vintage year, 26% 2006 vintage year; and 50% in the 2005 and prior vintage years. In January 2009, Moody's revised its loss projections for Alt-A residential mortgage-backed securities, and the Company anticipates that Moody's will be downgrading virtually all 2006 and 2007 vintage year Alt-A securities to below investment grade, which will increase the percentage of the Company's Alt-A residential mortgage-backed securities portfolio that will be rated below investment grade. Vintage year refers to the year of origination and not to the year of purchase. Concentrations of Credit Risk (Fixed Maturity Securities) -- Commercial Mortgage-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in commercial mortgage-backed securities was $9.1 billion and $12.6 billion, respectively, at estimated fair value. At December 31, 2008 and 2007, $8.5 billion and $11.1 billion, respectively, of the estimated fair value, or 94% and 88%, respectively, of the commercial mortgage-backed securities were rated Aaa/AAA by Moody's, S&P, or Fitch. At December 31, 2008, the rating distribution of the Company's commercial mortgage-backed securities holdings was as follows: 94% Aaa, 4% Aa, 1% A, and 1% Baa. At December 31, 2008, 83% of the holdings are in the 2005 and prior vintage years. At December 31, 2008, the Company had no exposure to CMBX securities and its holdings of commercial real estate collateralized debt obligations securities was $46 million at estimated fair value. Concentrations of Credit Risk (Fixed Maturity Securities) -- Asset-Backed Securities. At December 31, 2008 and 2007, the Company's holdings in asset- backed securities was $6.3 billion and $6.8 billion, respectively, at estimated fair value. The Company's asset-backed securities are diversified both by sector and by issuer. At December 31, 2008 and 2007, $4.8 billion and $3.8 billion, respectively, or 76% and 56%, respectively, of total asset-backed securities were rated Aaa/AAA by Moody's, S&P or Fitch. At December 31, 2008, the largest exposures in the Company's asset-backed securities portfolio were credit card receivables, residential mortgage-backed securities backed by sub-prime mortgage loans, automobile receivables and student loan receivables of 47%, 12%, 11% and 10% of the total holdings, respectively. Sub-prime mortgage lending is the origination of residential mortgage loans to customers with weak credit profiles. At December 31, 2008 and 2007, the Company had exposure to fixed maturity securities backed by sub-prime mortgage loans with estimated fair values of $0.7 billion and $1.2 billion, respectively, and unrealized losses of $457 million and $119 million, respectively. At December 31, 2008, 49% of the asset-backed securities backed by sub-prime mortgage loans have been guaranteed by financial guarantee insurers, of which 21% and 34% were guaranteed by financial guarantee insurers who were Aa and Baa rated, respectively. Concentrations of Credit Risk (Equity Securities). The Company is not exposed to any concentrations of credit risk of any single issuer greater than 10% of the Company's stockholder's equity in its equity securities holdings. F-44 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amortized cost and estimated fair value of fixed maturity securities, by contractual maturity date (excluding scheduled sinking funds), are as follows:
DECEMBER 31, ----------------------------------------------- 2008 2007 ---------------------- ---------------------- AMORTIZED ESTIMATED AMORTIZED ESTIMATED COST FAIR VALUE COST FAIR VALUE --------- ---------- --------- ---------- (IN MILLIONS) Due in one year or less................. $ 3,491 $ 3,500 $ 2,629 $ 2,726 Due after one year through five years... 21,495 19,741 26,725 27,473 Due after five years through ten years.. 27,411 24,402 24,349 24,739 Due after ten years..................... 37,380 36,145 39,874 42,006 -------- -------- -------- -------- Subtotal.............................. 89,777 83,788 93,577 96,944 Mortgage-backed and asset-backed securities............................ 45,651 38,441 55,288 55,322 -------- -------- -------- -------- Total fixed maturity securities....... $135,428 $122,229 $148,865 $152,266 ======== ======== ======== ========
Fixed maturity securities 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. NET UNREALIZED INVESTMENT GAINS (LOSSES) The components of net unrealized investment gains (losses), included in accumulated other comprehensive income (loss), are as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 2008 2007 2006 -------- ------- ------- (IN MILLIONS) Fixed maturity securities........................ $(13,199) $ 3,885 $ 4,685 Equity securities................................ (633) 251 483 Derivatives...................................... 14 (358) (238) Minority interest................................ -- (150) (159) Other............................................ 56 (22) -- -------- ------- ------- Subtotal....................................... (13,762) 3,606 4,771 -------- ------- ------- Amounts allocated from: Insurance liability loss recognition........... (1) (366) (806) DAC and VOBA................................... 2,000 (420) (239) Policyholder dividend obligation............... -- (789) (1,062) -------- ------- ------- Subtotal.................................... 1,999 (1,575) (2,107) -------- ------- ------- Deferred income tax.............................. 4,062 (689) (968) -------- ------- ------- Subtotal....................................... 6,061 (2,264) (3,075) -------- ------- ------- Net unrealized investment gains (losses)......... $ (7,701) $ 1,342 $ 1,696 ======== ======= =======
F-45 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The changes in net unrealized investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, ------------------------------ 2008 2007 2006 -------- -------- -------- (IN MILLIONS) Balance, at January 1,..................... $ 1,342 $ 1,696 $1,809 Unrealized investment gains (losses) during the year................................. (17,455) (1,165) (966) Unrealized investment losses of subsidiary at the date of dividend of interests..... 87 -- -- Unrealized investment gains (losses) relating to: Insurance liability gain (loss) recognition........................... 365 440 453 DAC and VOBA............................. 2,438 (181) (91) DAC and VOBA of subsidiary at date of dividend of interests................. (18) -- -- Policyholder dividend obligation......... 789 273 430 Deferred income tax...................... 4,797 279 61 Deferred income tax of subsidiary at date of dividend of interests.............. (46) -- -- --- ---- ------- ------ Balance, at December 31,................... $ (7,701) $ 1,342 $1,696 === ==== ======= ====== Change in net unrealized investment gains (losses)................................. $ (9,043) $ (354) $ (113) === ==== ======= ======
F-46 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the estimated fair value and gross unrealized loss of the Company's fixed maturity (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, 2008 ------------------------------------------------------------------------------------- EQUAL TO OR GREATER THAN LESS THAN 12 MONTHS 12 MONTHS TOTAL --------------------------- --------------------------- --------------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS ---------- --------------- ---------- --------------- ---------- --------------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities........ $20,927 $2,988 $11,002 $3,364 $31,929 $ 6,352 Residential mortgage-backed securities..................... 6,833 1,958 2,561 1,187 9,394 3,145 Foreign corporate securities..... 10,899 2,370 4,421 1,739 15,320 4,109 U.S. Treasury/agency securities.. 34 -- -- -- 34 -- Commercial mortgage-backed securities..................... 6,828 1,250 2,112 1,186 8,940 2,436 Asset-backed securities.......... 3,708 717 2,418 1,476 6,126 2,193 Foreign government securities.... 555 86 128 39 683 125 State and political subdivision securities..................... 586 117 106 38 692 155 Other fixed maturity securities.. -- -- -- -- -- -- ------- ------ ------- ------ ------- ------- Total fixed maturity securities.................. $50,370 $9,486 $22,748 $9,029 $73,118 $18,515 ======= ====== ======= ====== ======= ======= Equity securities................ $ 505 $ 199 $ 694 $ 464 $ 1,199 $ 663 ======= ====== ======= ====== ======= ======= Total number of securities in an unrealized loss position....... 4,556 2,038 ======= =======
DECEMBER 31, 2007 ------------------------------------------------------------------------------------- EQUAL TO OR GREATER THAN LESS THAN 12 MONTHS 12 MONTHS TOTAL --------------------------- --------------------------- --------------------------- ESTIMATED GROSS ESTIMATED GROSS ESTIMATED GROSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS FAIR VALUE UNREALIZED LOSS ---------- --------------- ---------- --------------- ---------- --------------- (IN MILLIONS, EXCEPT NUMBER OF SECURITIES) U.S. corporate securities........ $16,906 $ 834 $ 5,621 $361 $22,527 $1,195 Residential mortgage-backed securities..................... 9,116 174 3,730 63 12,846 237 Foreign corporate securities..... 6,594 286 3,119 168 9,713 454 U.S. Treasury/agency securities.. 124 1 279 -- 403 1 Commercial mortgage-backed securities..................... 1,613 54 2,200 46 3,813 100 Asset-backed securities.......... 4,584 242 740 67 5,324 309 Foreign government securities.... 357 13 136 5 493 18 State and political subdivision securities..................... 128 6 66 3 194 9 Other fixed maturity securities.. 74 29 -- -- 74 29 ------- ------ ------- ---- ------- ------ Total fixed maturity securities.................. $39,496 $1,639 $15,891 $713 $55,387 $2,352 ======= ====== ======= ==== ======= ====== Equity securities................ $ 1,778 $ 264 $ 281 $ 39 $ 2,059 $ 303 ======= ====== ======= ==== ======= ====== Total number of securities in an unrealized loss position....... 2,767 2,468 ======= =======
F-47 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) AGING OF GROSS UNREALIZED LOSS FOR FIXED MATURITY AND EQUITY SECURITIES AVAILABLE-FOR-SALE The following tables present the cost or amortized cost, gross unrealized loss and number of securities for fixed maturity and equity securities, where the estimated fair value had declined and remained below cost or amortized cost by less than 20%, or 20% or more at:
DECEMBER 31, 2008 -------------------------------------------------------------- COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSS 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) FIXED MATURITY SECURITIES: Less than six months.................. $22,435 $31,160 $1,677 $11,043 1,894 1,902 Six months or greater but less than nine months......................... 9,681 1,325 941 676 656 97 Nine months or greater but less than twelve months....................... 10,482 2,119 1,185 1,165 507 122 Twelve months or greater.............. 14,076 355 1,598 230 915 37 ------- ------- ------ ------- Total............................... $56,674 $34,959 $5,401 $13,114 ======= ======= ====== ======= EQUITY SECURITIES: Less than six months.................. $ 329 $ 757 $ 49 $ 336 229 410 Six months or greater but less than nine months......................... 15 301 2 146 5 22 Nine months or greater but less than twelve months....................... 2 340 -- 125 1 14 Twelve months or greater.............. 118 -- 5 -- 11 -- ------- ------- ------ ------- Total............................... $ 464 $ 1,398 $ 56 $ 607 ======= ======= ====== =======
F-48 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ------------------------------------------------------------ COST OR GROSS NUMBER OF AMORTIZED COST UNREALIZED LOSS 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) FIXED MATURITY SECURITIES: Less than six months................... $26,208 $819 $ 760 $232 1,865 80 Six months or greater but less than nine months.......................... 8,522 6 397 1 573 3 Nine months or greater but less than twelve months........................ 5,925 -- 344 -- 432 -- Twelve months or greater............... 16,249 10 614 4 1,236 6 ------- ---- ------ ---- Total................................ $56,904 $835 $2,115 $237 ======= ==== ====== ==== EQUITY SECURITIES: Less than six months................... $ 1,121 $296 $ 96 $ 97 963 394 Six months or greater but less than nine months.......................... 324 -- 37 -- 144 -- Nine months or greater but less than twelve months........................ 353 -- 44 -- 58 1 Twelve months or greater............... 268 -- 29 -- 74 -- ------- ---- ------ ---- Total................................ $ 2,066 $296 $ 206 $ 97 ======= ==== ====== ====
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. One of the criteria which the Company considers in its other-than-temporary impairment analysis is its intent and ability to hold securities for a period of time sufficient to allow for the recovery of their value to an amount equal to or greater than cost or amortized cost. The Company's intent and ability to hold securities considers broad portfolio management objectives such as asset/liability duration management, issuer and industry segment exposures, interest rate views and the overall total return focus. In following these portfolio management objectives, changes in facts and circumstances that were present in past reporting periods may trigger a decision to sell securities that were held in prior reporting periods. Decisions to sell are based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives including liquidity needs or duration targets on asset/liability managed portfolios. The Company attempts to anticipate these types of changes and if a sale decision has been made on an impaired security and that security is not expected to recover prior to the expected time of sale, the security will be deemed other-than- temporarily impaired in the period that the sale decision was made and an other- than-temporary impairment loss will be recognized. At December 31, 2008 and 2007, $5.4 billion and $2.1 billion, respectively, of unrealized losses related to fixed maturity securities with an unrealized loss position of less than 20% of cost or amortized cost, which represented 10% and 4%, respectively, of the cost or amortized cost of such securities. At December 31, 2008 and 2007, $56 million and $206 million, respectively, of unrealized losses related to equity securities with an unrealized loss position of less than 20% of cost, which represented 12% and 10%, respectively, of the cost of such securities. At December 31, 2008, $13.1 billion and $607 million of unrealized losses related to fixed maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 38% and 43% of the cost or amortized cost of such fixed maturity securities and equity securities, respectively. Of such unrealized losses of $13.1 billion and $607 million, $11.0 billion and $336 million related to fixed maturity securities and equity securities, respectively, that were in an unrealized loss position for a period of less than six months. At December 31, 2007, $237 million and $97 million of unrealized losses related to fixed F-49 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) maturity securities and equity securities, respectively, with an unrealized loss position of 20% or more of cost or amortized cost, which represented 28% and 33% of the cost or amortized cost of such fixed maturity securities and equity securities, respectively. Of such unrealized losses of $237 million and $97 million, $232 million and $97 million related to fixed maturity securities and equity securities, respectively, that were in an unrealized loss position for a period of less than six months. The Company held 440 fixed maturity securities and 28 equity securities, each with a gross unrealized loss at December 31, 2008 of greater than $10 million. These 440 fixed maturity securities represented 46% or $8.6 billion in the aggregate, of the gross unrealized loss on fixed maturity securities. These 28 equity securities represented 73% or $484 million in the aggregate, of the gross unrealized loss on equity securities. The Company held 13 fixed maturity securities and three equity securities, each with a gross unrealized loss at December 31, 2007 of greater than $10 million. These 13 fixed maturity securities represented 8% or $180 million in the aggregate, of the gross unrealized loss on fixed maturity securities. These three equity securities represented 15% or $44 million in the aggregate, of the gross unrealized loss on equity securities. The fixed maturity and equity securities, each with a gross unrealized loss greater than $10 million increased $8.8 billion during the year ended December 31, 2008. These securities were included in the regular evaluation of whether such securities are other-than-temporarily impaired. Based upon the Company's current evaluation of these securities in accordance with its impairment policy, the cause of the decline being primarily attributable to a rise in market yields caused principally by an extensive widening of credit spreads which resulted from a lack of market liquidity and a short-term market dislocation versus a long-term deterioration in credit quality, and the Company's current intent and ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover, the Company has concluded that these securities are not other-than- temporarily impaired. In the Company's impairment review process, the duration of, and severity of, an unrealized loss position, such as unrealized losses of 20% or more for equity securities, which was $607 million and $97 million at December 31, 2008 and 2007, respectively, is given greater weight and consideration, than for fixed maturity securities. An extended and severe unrealized loss position on a fixed maturity security may not have any impact on the ability of the issuer to service all scheduled interest and principal payments and the Company's evaluation of recoverability of all contractual cash flows, as well as the Company's ability and intent to hold the security, including holding the security until the earlier of a recovery in value, or until maturity. In contrast, for an equity security, greater weight and consideration is given by the Company to a decline in market value and the likelihood such market value decline will recover. Equity securities with an unrealized loss of 20% or more for six months or greater was $271 million at December 31, 2008, of which $269 million of the unrealized losses, or 99%, are for investment grade non-redeemable preferred securities. Of the $269 million of unrealized losses for investment grade non- redeemable preferred securities, $264 million of the unrealized losses, or 98%, was comprised of unrealized losses on investment grade financial services industry non-redeemable preferred securities, of which 86% are rated A or higher. Equity securities with an unrealized loss of 20% or more for less than six months was $336 million at December 31, 2008 of which $278 million of the unrealized losses, or 83%, are for non-redeemable preferred securities, of which $274 million, of the unrealized losses, or 99% are for investment grade non- redeemable preferred securities. All of the $274 million of unrealized losses for investment grade non-redeemable preferred securities are for financial services industry non-redeemable preferred securities, of which 87% are rated A or higher. There were no equity securities with an unrealized loss of 20% or more for twelve months or greater. In connection with the equity securities impairment review process during 2008, the Company evaluated its holdings in non-redeemable preferred securities, particularly those of financial services industry companies. The Company considered several factors including whether there has been any deterioration in credit of the issuer and the likelihood of recovery in value of non-redeemable preferred securities with a severe or an extended unrealized F-50 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) loss. With respect to common stock holdings, the Company considered the duration and severity of the securities in an unrealized loss position of 20% or more; and the duration of securities in an unrealized loss position of 20% or less with in an extended unrealized loss position (i.e., 12 months or more). At December 31, 2008, there are $607 million of equity securities with an unrealized loss of 20% or more, of which $547 million of the unrealized losses, or 90%, were for non-redeemable preferred securities. Through December 31, 2008, $543 million of the unrealized losses of 20% or more, or 99%, of the non- redeemable preferred securities were investment grade securities, of which, $538 million of the unrealized losses of 20% or more, or 99%, are investment grade financial services industry non-redeemable preferred securities; and all non- redeemable preferred securities with unrealized losses of 20% or more, regardless of rating, have not deferred any dividend payments. Also, the Company believes the unrealized loss position is not necessarily predictive of the ultimate performance of these securities, and with respect to fixed maturity securities, it has the ability and intent to hold until the earlier of the recovery in value, or until maturity, and with respect to equity securities, it has the ability and intent to hold until the recovery in value. Future other-than-temporary impairments will depend primarily on economic fundamentals, issuer performance, changes in collateral valuation, changes in interest rates, and changes in credit spreads. If economic fundamentals and other of the above factors continue to deteriorate, additional other-than- temporary impairments may be incurred in upcoming quarters. At December 31, 2008 and 2007, the Company's gross unrealized losses related to its fixed maturity and equity securities of $19.2 billion and $2.7 billion, respectively, were concentrated, calculated as a percentage of gross unrealized loss, as follows:
DECEMBER 31, ------------- 2008 2007 ---- ---- SECTOR: U.S. corporate securities.................................. 33% 45% Foreign corporate securities............................... 21 17 Residential mortgage-backed securities..................... 16 9 Commercial mortgage-backed securities...................... 13 4 Asset-backed securities.................................... 11 12 Other...................................................... 6 13 --- --- Total................................................... 100% 100% === === INDUSTRY: Mortgage-backed............................................ 29% 13% Finance.................................................... 24 34 Consumer................................................... 12 3 Asset-backed............................................... 11 12 Utility.................................................... 10 9 Communication.............................................. 5 1 Industrial................................................. 4 20 Other...................................................... 5 8 --- --- Total................................................... 100% 100% === ===
F-51 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NET INVESTMENT GAINS (LOSSES) The components of net investment gains (losses) are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS) Fixed maturity securities......................... $(1,062) $(284) $(575) Equity securities................................. (90) 133 67 Mortgage and consumer loans....................... (88) 4 (16) Real estate and real estate joint ventures........ (18) 45 38 Other limited partnership interests............... (131) 35 2 Freestanding derivatives.......................... 3,257 (526) (470) Embedded derivatives.............................. 1,744 15 5 Other............................................. (140) 291 115 ------- ----- ----- Net investment gains (losses)................... $ 3,472 $(287) $(834) ======= ===== =====
See "-- Related Party Investment Transactions" for discussion of affiliated net investment gains (losses) related to internal asset transfers included in other in the table above. See also Note 8 for discussion of affiliated net investment gains (losses) included in embedded derivatives in the table above. Proceeds from sales or disposals of fixed maturity and equity securities and the components of fixed maturity and equity securities net investment gains (losses) are as follows:
FIXED MATURITY SECURITIES EQUITY SECURITIES TOTAL -------------------------- -------------------------- -------------------------- 2008 2007 2006 2008 2007 2006 2008 2007 2006 -------- -------- -------- -------- -------- -------- -------- -------- -------- (IN MILLIONS) Proceeds.................... $42,785 $52,377 $55,090 $1,888 $760 $565 $44,673 $53,137 $55,655 ======== ======== ======== ======== ======== ======== ======== ======== ======== Gross investment gains...... 631 343 250 412 176 107 1,043 519 357 -------- -------- -------- -------- -------- -------- -------- -------- -------- Gross investment losses..... (911) (589) (812) (218) (27) (18) (1,129) (616) (830) -------- -------- -------- -------- -------- -------- -------- -------- -------- Writedowns.................. Credit-related......... (668) (38) (13) (38) -- -- (706) (38) (13) Other than credit- related (1).......... (114) -- -- (246) (16) (22) (360) (16) (22) -------- -------- -------- -------- -------- -------- -------- -------- -------- Total writedowns....... (782) (38) (13) (284) (16) (22) (1,066) (54) (35) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net investment gains (losses)............... $(1,062) $ (284) $ (575) $ (90) $133 $ 67 $(1,152) $ (151) $ (508) ======== ======== ======== ======== ======== ======== ======== ======== ========
-------- (1) Other-than credit-related writedowns include items such as equity securities where the primary reason for the writedown was the severity and/or the duration of an unrealized loss position and fixed maturity securities where an interest-rate related writedown was taken. 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, are attributable to declines in fair value occurring in the period of the disposition or are as a result of management's decision to sell securities based on current conditions or the Company's need to shift the portfolio to maintain its portfolio management objectives. Losses from fixed maturity and equity securities deemed other-than- temporarily impaired, included within net investment gains (losses), were $1,066 million, $54 million and $35 million for the years ended December 31, 2008, 2007 and 2006, respectively. The substantial increase in 2008 over 2007 was driven by writedowns totaling F-52 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $579 million of financial services industry securities holdings, comprised of $361 million of fixed maturity securities and $218 million of equity securities. Overall, of the $782 million of fixed maturity security writedowns in 2008, $361 million were on financial services industry services holdings; $180 million were on communication and consumer industries holdings; $61 million on asset- backed (substantially all are backed by or exposed to sub-prime mortgage loans); and $180 million in fixed maturity security holdings that the Company either lacked the intent to hold, or due to extensive credit spread widening, the Company was uncertain of its intent to hold these fixed maturity securities for a period of time sufficient to allow for recovery of the market value decline. Included within the $284 million of writedowns on equity securities in 2008 are $218 million related to the financial services industry holdings, (of which, $38 million related to the financial services industry non-redeemable preferred securities) and $66 million across several industries including consumer, communications, industrial and utility. NET INVESTMENT INCOME The components of net investment income are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS) Fixed maturity securities........................ $ 8,830 $ 9,671 $ 9,115 Equity securities................................ 174 169 42 Trading securities............................... (21) 6 32 Mortgage and consumer loans...................... 2,387 2,376 2,272 Policy loans..................................... 475 460 441 Real estate and real estate joint ventures....... 508 813 741 Other limited partnership interests.............. (92) 1,141 705 Cash, cash equivalents and short-term investments.................................... 134 144 196 Joint venture investments........................ (1) (6) (8) Other............................................ 202 182 202 ------- ------- ------- Total investment income........................ 12,596 14,956 13,738 Less: Investment expenses........................ 1,474 2,374 2,220 ------- ------- ------- Net investment income.......................... $11,122 $12,582 $11,518 ======= ======= =======
Net investment income from other limited partnership interests, including hedge funds, represents distributions from other limited partnership interests accounted for under the cost method and equity in earnings from other limited partnership interests accounted for under the equity method. Overall for 2008, the net amount recognized by the Company was a loss of $92 million resulting principally from losses on equity method investments. Such earnings and losses recognized for other limited partnership interests are impacted by volatility in the equity and credit markets. Net investment income from trading securities includes interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses) recognized on trading securities and the short sale agreements liabilities. In 2008, unrealized losses recognized on trading securities, due to the volatility in the equity and credit markets, were in excess of interest and dividends earned. For the years ended December 31, 2008, 2007 and 2006, affiliated net investment income included in the table above, was $29 million, $21 million and $20 million, respectively, related to fixed maturity securities; and less than $1 million, $12 million and less than $1 million, respectively, related to equity securities. For the years ended F-53 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) December 31, 2008 and 2007, there was no affiliated investment income related to mortgage loans. For the year ended December 31, 2006, affiliated investment income related to mortgage loans was $112 million, which included the prepayment fees discussed below. See "-- Related Party Investment Transactions" for discussion of affiliated net investment income related to short-term investments included in the table above. For the years ended December 31, 2008, 2007 and 2006, affiliated administrative service charges were $67 million, $66 million and $52 million, respectively, which reduced investment expense in the table above. In the fourth quarter of 2006, MTL sold its Peter Cooper Village and Stuyvesant Town properties for $5.4 billion. Upon the closing of the transaction, MTL repaid the mortgage of $770 million, including accrued interest, held by the Company on these properties and paid a prepayment fee of $68 million which was recognized as affiliated investment income related to mortgage loans included in the table above. SECURITIES LENDING The Company participates in securities lending programs whereby blocks of securities, which are included in fixed maturity securities and short-term investments are loaned to third parties, primarily major brokerage firms and commercial banks. The Company generally obtains collateral in an amount equal to 102% of the estimated fair value of the securities loaned. Securities with a cost or amortized cost of $13.4 billion and $26.9 billion and an estimated fair value of $14.7 billion and $27.9 billion were on loan under the program at December 31, 2008 and 2007, 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 $15.1 billion and $28.7 billion at December 31, 2008 and 2007, respectively. Of this $15.1 billion of cash collateral at December 31, 2008, $3.5 billion was on open terms, meaning that the related loaned security could be returned to the Company on the next business day requiring return of cash collateral, and $9.4 billion and $2.2 billion, respectively, were due within 30 days and 60 days. Of the $3.4 billion of estimated fair value of the securities related to the cash collateral on open at December 31, 2008, $3.0 billion were U.S. Treasury and agency securities which, if put to the Company, can be immediately sold to satisfy the cash requirements. The remainder of the securities on loan are primarily U.S. Treasury and agency securities, and very liquid residential mortgage-backed securities. The estimated fair value of the reinvestment portfolio acquired with the cash collateral was $13.1 billion at December 31, 2008, and consisted principally of fixed maturity securities (including residential mortgage-backed, asset-backed, U.S. corporate and foreign corporate securities). Security collateral of $95 million on deposit from counterparties in connection with the securities lending transactions at December 31, 2008 may not be sold or repledged and is not reflected in the consolidated financial statements. There was no security collateral on deposit from counterparties in connection with the securities lending transactions at December 31, 2007. ASSETS ON DEPOSIT, HELD IN TRUST AND PLEDGED AS COLLATERAL The Company had investment assets on deposit with regulatory agencies with an estimated fair value of $1.2 billion and $1.7 billion at December 31, 2008 and 2007, respectively, consisting primarily of fixed maturity and equity securities. The Company also held in trust cash and securities, primarily fixed maturity and equity securities with an estimated fair value of $45 million and $74 million at December 31, 2008 and 2007, respectively, to satisfy collateral requirements. The Company has pledged fixed maturity securities in support of its funding agreements with the Federal Home Loan Bank of New York ("FHLB of NY") of $17.8 billion and $4.8 billion at December 31, 2008 and 2007, respectively. The Company has also pledged certain agricultural real estate mortgage loans in connection with funding agreements with the Federal Agricultural Mortgage Corporation with a carrying value of $2.9 billion at F-54 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) both December 31, 2008 and 2007. The nature of these Federal Home Loan Bank and Federal Agricultural Mortgage Corporation arrangements are described in Note 7. Certain of the Company's invested assets are pledged as collateral for various derivative transactions as described in Note 4. Certain of the Company's trading securities are pledged to secure liabilities associated with short sale agreements in the trading securities portfolio as described in the following section. TRADING SECURITIES The Company has a trading securities portfolio to support investment strategies that involve the active and frequent purchase and sale of securities, the execution of short sale agreements and asset and liability matching strategies for certain insurance products. Trading securities and short sale agreement liabilities are recorded at estimated fair value with subsequent changes in estimated fair value recognized in net investment income. At December 31, 2008 and 2007, trading securities at estimated fair value were $277 million and $457 million, respectively, and liabilities associated with the short sale agreements in the trading securities portfolio, which were included in other liabilities, were $57 million and $107 million, respectively. The Company had pledged $346 million and $407 million of its assets, at estimated fair value, primarily consisting of trading securities, as collateral to secure the liabilities associated with the short sale agreements in the trading securities portfolio at December 31, 2008 and 2007, respectively. Interest and dividends earned on trading securities in addition to the net realized and unrealized gains (losses) recognized on the trading securities and the related short sale agreement liabilities included within net investment income totaled ($21) million, $6 million and $32 million for the years ended December 31, 2008, 2007 and 2006, respectively. Included within unrealized gains (losses) on such trading securities and short sale agreement liabilities are changes in estimated fair value of ($17) million, ($4) million and $3 million for the years ended December 31, 2008, 2007 and 2006, respectively. MORTGAGE AND CONSUMER LOANS Mortgage and consumer loans are categorized as follows:
DECEMBER 31, ------------------------------------- 2008 2007 ----------------- ----------------- AMOUNT PERCENT AMOUNT PERCENT ------- ------- ------- ------- (IN MILLIONS) Commercial mortgage loans................... $31,492 74.3% $30,313 77.0% Agricultural mortgage loans................. 10,826 25.7 8,985 22.8 Consumer loans.............................. 12 -- 63 0.2 ------- ----- ------- ----- Total..................................... 42,330 100.0% 39,361 100.0% ===== ===== Less: Valuation allowances.................. 244 181 ------- ------- Total mortgage and consumer loans held- for-investment......................... 42,086 39,180 Mortgage loans held-for-sale................ 19 -- ------- ------- Mortgage and consumer loans, net.......... $42,105 $39,180 ======= =======
At December 31, 2008, mortgage loans held-for-sale include $19 million of commercial and agricultural mortgage loans held-for-sale which are carried at the lower of amortized cost or estimated fair value. At December 31, 2007, there were no mortgage loans held-for-sale. F-55 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company diversifies its mortgage loans by both geographic region and property type to reduce risk of concentration. Mortgage loans are collateralized by properties primarily located in the United States. At December 31, 2008, 20%, 7% and 7% of the value of the Company's mortgage and consumer loans were located in California, Texas and Florida, respectively. Generally, the Company, as the lender, only loans up to 75% of the purchase price of the underlying real estate. As shown in the table above, commercial mortgage loans at December 31, 2008 and 2007 were $31,492 million and $30,313 million, respectively, or 74% and 77%, respectively, of total mortgage and consumer loans prior to valuation allowances. Net of valuation allowances commercial mortgage loans were $31,308 million and $30,158 million, respectively, at December 31, 2008 and 2007 and their diversity across geographic regions and property types is shown below at:
DECEMBER 31, DECEMBER 31, 2008 2007 ---------------- ---------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL -------- ----- -------- ----- (IN MILLIONS) REGION Pacific...................................... $ 7,586 24.3% $ 7,334 24.3% South Atlantic............................... 6,984 22.3 6,586 21.8 Middle Atlantic.............................. 5,173 16.5 4,336 14.4 International................................ 3,247 10.4 3,495 11.6 West South Central........................... 2,739 8.7 2,578 8.5 East North Central........................... 2,381 7.6 2,640 8.8 New England.................................. 1,095 3.5 1,022 3.4 Mountain..................................... 920 2.9 873 2.9 West North Central........................... 664 2.1 893 3.0 East South Central........................... 313 1.0 315 1.0 Other........................................ 206 0.7 86 0.3 ------- ----- ------- ----- Total...................................... $31,308 100.0% $30,158 100.0% ======= ===== ======= ===== PROPERTY TYPE Office....................................... $13,532 43.2% $13,612 45.1% Retail....................................... 7,011 22.4 6,537 21.7 Apartments................................... 3,305 10.6 3,476 11.5 Hotel........................................ 2,530 8.1 2,614 8.7 Industrial................................... 2,644 8.4 2,354 7.8 Other........................................ 2,286 7.3 1,565 5.2 ------- ----- ------- ----- Total...................................... $31,308 100.0% $30,158 100.0% ======= ===== ======= =====
Certain of the Company's real estate joint ventures have mortgage loans with the Company. The carrying values of such mortgages were $372 million and $373 million at December 31, 2008 and 2007, respectively. F-56 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding loan valuation allowances for mortgage and consumer loans held-for-investment is as follows:
YEARS ENDED DECEMBER 31, ------------------- 2008 2007 2006 ----- ---- ---- (IN MILLIONS) Balance at January 1,................................. $ 181 $160 $149 Additions............................................. 174 70 28 Deductions............................................ (111) (49) (17) ----- ---- ---- Balance at December 31,............................... $ 244 $181 $160 ===== ==== ====
A portion of the Company's mortgage and consumer loans held-for-investment was impaired and consisted of the following:
DECEMBER 31, ------------- 2008 2007 ---- ---- (IN MILLIONS) Impaired loans with valuation allowances................... $232 $552 Impaired loans without valuation allowances................ 15 8 ---- ---- Subtotal................................................. 247 560 Less: Valuation allowances on impaired loans............... 45 67 ---- ---- Impaired loans........................................... $202 $493 ==== ====
The average investment in impaired loans was $315 million, $399 million and $145 million for the years ended December 31, 2008, 2007 and 2006, respectively. Interest income on impaired loans was $10 million, $35 million and $1 million for the years ended December 31, 2008, 2007 and 2006, respectively. The investment in restructured loans was $1 million and $2 million at December 31, 2008 and 2007, respectively. Interest income recognized on restructured loans was $1 million or less for each of the years ended December 31, 2008, 2007 and 2006. Gross interest income that would have been recorded in accordance with the original terms of such loans also amounted to $1 million or less for each of the years ended December 31, 2008, 2007 and 2006. Mortgage and consumer loans with scheduled payments of 90 days or more past due on which interest is still accruing, had an amortized cost of $2 million and $1 million at December 31, 2008 and 2007, respectively. Mortgage and consumer loans on which interest is no longer accrued had an amortized cost of $10 million and $18 million at December 31, 2008 and 2007, respectively. Mortgage and consumer loans in foreclosure had an amortized cost of $23 million and $6 million at December 31, 2008 and 2007, respectively. F-57 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) REAL ESTATE HOLDINGS Real estate holdings consisted of the following:
DECEMBER 31, ----------------- 2008 2007 ------- ------- (IN MILLIONS) Real estate.............................................. $ 4,650 $ 4,384 Accumulated depreciation................................. (1,354) (1,195) ------- ------- Net real estate.......................................... 3,296 3,189 Real estate joint ventures............................... 2,959 2,295 ------- ------- Real estate and real estate joint ventures............. 6,255 5,484 Real estate held-for sale................................ 1 39 ------- ------- Total real estate holdings............................. $ 6,256 $ 5,523 ======= =======
Related depreciation expense on real estate was $120 million, $112 million and $107 million for the years ended December 31, 2008, 2007 and 2006, respectively. These amounts include less than $1 million, $2 million and $4 million of depreciation expense related to discontinued operations for the years ended December 31, 2008, 2007 and 2006, respectively. There were no impairments recognized on real estate held-for-sale for the year ended December 31, 2008 and 2007. Impairment losses recognized on real estate held-for-sale were $8 million for the year ended December 31, 2006. The carrying value of non-income producing real estate was $27 million and $8 million at December 31, 2008 and 2007, respectively. The Company did not own real estate acquired in satisfaction of debt at December 31, 2008 and 2007. The Company diversifies its real estate holdings by both geographic region and property type to reduce risk of concentration. The Company's real estate holdings are primarily located in the United States, and at December 31, 2008, 20%, 14%, 11% and 10% were located in California, Florida, New York and Texas, respectively. Property type diversification is shown in the table below. Real estate holdings were categorized as follows:
DECEMBER 31, ----------------------------------- 2008 2007 ---------------- ---------------- AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- (IN MILLIONS) Office........................................ $2,602 42% $2,627 48% Apartments.................................... 1,495 24 1,058 19 Real estate investment funds.................. 936 15 835 15 Industrial.................................... 483 8 443 8 Retail........................................ 453 7 423 8 Hotel......................................... 170 3 59 1 Land.......................................... 62 1 47 1 Agriculture................................... 9 -- 9 -- Other......................................... 46 -- 22 -- ------ --- ------ --- Total real estate holdings.................. $6,256 100% $5,523 100% ====== === ====== ===
F-58 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER LIMITED PARTNERSHIP INTERESTS The carrying value of other limited partnership interests (which primarily represent ownership interests in pooled investment funds that principally make private equity investments in companies in the United States and overseas) was $4.7 billion and $4.9 billion at December 31, 2008 and 2007, respectively. Included within other limited partnership interests at December 31, 2008 and 2007 are $943 million and $1,189 million, respectively, of hedge funds. For the years ended December 31, 2008, 2007 and 2006, net investment income (loss) from other limited partnership interests was ($92) million, $1,141 million and $705 million and included ($218) million, $71 million and $67 million, respectively of hedge funds. Net investment income (loss) from other limited partnership interests, including hedge funds, decreased by $1,233 million for the year ended 2008, due to volatility in the equity and credit markets. OTHER INVESTED ASSETS The following table presents the carrying value of the Company's other invested assets at:
DECEMBER 31, ----------------------------------- 2008 2007 ---------------- ---------------- CARRYING % OF CARRYING % OF VALUE TOTAL VALUE TOTAL -------- ----- -------- ----- (IN MILLIONS) Freestanding derivatives with positive fair values...................................... $6,646 67.0% $1,875 42.9% Leveraged leases, net of non-recourse debt.... 1,704 17.2 1,637 37.4 Loans to affiliates........................... 795 8.0 612 14.0 Tax credit partnerships....................... 476 4.8 -- -- Funds withheld................................ 44 0.5 57 1.3 Joint venture investment...................... 31 0.3 6 0.1 Other......................................... 220 2.2 188 4.3 ------ ----- ------ ----- Total......................................... $9,916 100.0% $4,375 100.0% ====== ===== ====== =====
See Note 4 regarding freestanding derivatives with positive estimated fair values. Loans to affiliates consist of loans to the Company's affiliates, some of which are regulated, to meet their capital requirements. The estimated fair values are determined by discounting expected future cash flows using capital market interest rates currently available for instruments with similar terms issued to companies of comparable credit quality of the respective affiliates. The joint venture investment is accounted for on the equity method and represents the Company's investment in an insurance underwriting joint venture in China. Tax credit partnerships are established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits, and are accounted for under the equity method. Funds withheld represent amounts contractually withheld by ceding companies in accordance with reinsurance agreements. F-59 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Leveraged Leases Investment in leveraged leases, included in other invested assets, consisted of the following:
DECEMBER 31, ---------------- 2008 2007 ------ ------- (IN MILLIONS) Rental receivables, net.................................. $1,478 $ 1,483 Estimated residual values................................ 1,217 1,185 ------ ------- Subtotal............................................... 2,695 2,668 Unearned income.......................................... (991) (1,031) ------ ------- Investment in leveraged leases......................... $1,704 $ 1,637 ====== =======
The Company's deferred income tax liability related to leveraged leases was $962 million and $798 million at December 31, 2008 and 2007, respectively. The rental receivables set forth above are generally due in periodic installments. The payment periods range from one to 15 years, but in certain circumstances are as long as 30 years. The components of net income from investment in leveraged leases are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Income from investment in leveraged leases (included in net investment income)........................... $ 95 $ 48 $ 55 Less: Income tax expense on leveraged leases.......... (33) (17) (18) ---- ---- ---- Net income from investment in leveraged leases........ $ 62 $ 31 $ 37 ==== ==== ====
VARIABLE INTEREST ENTITIES The following table presents the total assets and total liabilities relating to VIEs for which the Company has concluded that it is the primary beneficiary and which are consolidated in the Company's financial statements at December 31, 2008. Generally, creditors or beneficial interest holders of VIEs where the Company is the primary beneficiary have no recourse to the general credit of the Company.
DECEMBER 31, 2008 --------------------- TOTAL TOTAL LIABILI- ASSETS TIES --------- --------- (IN MILLIONS) Real estate joint ventures (1).................. $ 26 $ 15 Other limited partnership interests (2)......... 20 3 Other invested assets (3)....................... 10 3 --------- --------- Total........................................... $56 $21 ========= =========
-------- (1) Real estate joint ventures include partnerships and other ventures which engage in the acquisition, development, management and disposal of real estate investments. Upon consolidation, the assets and liabilities are reflected at the VIE's carrying amounts. The assets consist of $20 million of real estate and real estate joint ventures held-for- investment, $5 million of cash and cash equivalents and $1 million of other assets. The liabilities of $15 million are included within other liabilities. (2) Other limited partnership interests include partnerships established for the purpose of investing in public and private debt and equity securities. Upon consolidation, the assets and liabilities are reflected at the VIE's F-60 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) carrying amounts. The assets of $20 million are included within other limited partnership interests while the liabilities of $3 million are included within other liabilities. (3) Other invested assets include tax-credit partnerships and other investments established for the purpose of investing in low-income housing and other social causes, where the primary return on investment is in the form of tax credits. Upon consolidation, the assets and liabilities are reflected at the VIE's carrying amounts. The assets of $10 million are included within other invested assets. The liabilities consist of $2 million of long-term debt and $1 million of other liabilities. The following table presents the carrying amount and maximum exposure to loss relating to VIEs for which the Company holds significant variable interests but is not the primary beneficiary and which have not been consolidated at December 31, 2008:
DECEMBER 31, 2008 ------------------------ MAXIMUM CARRYING EXPOSURE AMOUNT (1) TO LOSS (2) ---------- ----------- (IN MILLIONS) Fixed maturity securities available-for-sale:(3) Foreign corporate securities......................... $ 362 $ 362 U.S. Treasury/agency securities...................... 251 251 Other limited partnership interests.................... 2,538 2,965 Other invested assets.................................. 310 108 ------ ------ Total.................................................. $3,461 $3,686 ====== ======
-------- (1) See Note 1 for further discussion of the Company's significant accounting policies with regards to the carrying amounts of these investments. (2) The maximum exposure to loss relating to the fixed maturity securities available-for-sale is equal to the carrying amounts or carrying amounts of retained interests. The maximum exposure to loss relating to the other limited partnership interests is equal to the carrying amounts plus any unfunded commitments. Such a maximum loss would be expected to occur only upon bankruptcy of the issuer or investee. For certain of its investments in other invested assets, the Company's return is in the form of tax credits which are guaranteed by a creditworthy third party. For such investments, the maximum exposure to loss is equal to the carrying amounts plus any unfunded commitments, reduced by amounts guaranteed by third parties. (3) These assets are reflected at fair value within fixed maturity securities available-for-sale. As described in Note 13, the Company makes commitments to fund partnership investments in the normal course of business. Excluding these commitments, the Company did not provide financial or other support to investees designated as VIEs during the years ended December 31, 2008, 2007 and 2006. RELATED PARTY INVESTMENT TRANSACTIONS At December 31, 2008 and 2007, the Company held $229 million and $162 million, respectively, of total invested assets in the Metropolitan Money Market Pool, an affiliated partnership. These amounts are included in short-term investments. Net investment income from these invested assets was $4 million, $12 million and $10 million for the years ended December 31, 2008, 2007 and 2006, respectively. The MetLife Intermediate Income Pool (the "MIIP") was formed as a New York general partnership consisting solely of U.S. domestic insurance companies owned directly or indirectly by MetLife, Inc. and is managed by Metropolitan Life Insurance Company. Each partner's investment in the MIIP represents such partner's pro rata ownership interest in the pool. The affiliated companies' ownership interests in the pooled money market securities F-61 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) held by the MIIP was $29 million and $101 million at December 31, 2008 and 2007, respectively. Net investment income allocated to affiliates from the MIIP was $3 million, $7 million, and $8 million for the years ended December 31, 2008, 2007 and 2006, respectively. In the normal course of business, the Company transfers invested assets, primarily consisting of fixed maturity securities, to and from affiliates. Assets transferred to and from affiliates, inclusive of amounts related to reinsurance agreements, are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Estimated fair value of assets transferred to affiliates......................................... $230 $142 $ 97 Amortized cost of assets transferred to affiliates... $220 $145 $ 99 Net investment gains (losses) recognized on transfers.......................................... $ 10 $ (3) $ (2) Estimated fair value of assets transferred from affiliates......................................... $ 57 $778 $307
4. DERIVATIVE FINANCIAL INSTRUMENTS TYPES OF DERIVATIVE FINANCIAL INSTRUMENTS The following table presents the notional amount and current market or estimated fair value of derivative financial instruments, excluding embedded derivatives, held at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------- ------------------------------- CURRENT MARKET CURRENT MARKET OR FAIR VALUE OR FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Interest rate swaps......... $ 20,043 $3,188 $1,090 $ 48,445 $ 415 $ 614 Interest rate floors........ 32,855 1,082 -- 32,855 420 -- Interest rate caps.......... 21,130 10 -- 34,784 44 -- Financial futures........... 3,630 2 58 6,131 35 34 Foreign currency swaps...... 14,180 1,245 1,066 16,022 639 1,603 Foreign currency forwards... 1,467 47 21 1,799 41 11 Options..................... 2,365 939 35 1,423 123 -- Financial forwards.......... 2,087 -- 90 4,769 63 1 Credit default swaps........ 4,466 133 60 5,529 52 29 Synthetic GICs.............. 4,260 -- -- 3,670 -- -- Other....................... 250 -- 101 250 43 -- -------- ------ ------ -------- ------ ------ Total..................... $106,733 $6,646 $2,521 $155,677 $1,875 $2,292 ======== ====== ====== ======== ====== ======
F-62 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the notional amount of derivative financial instruments by maturity at December 31, 2008:
REMAINING LIFE ---------------------------------------------------------------- AFTER AFTER ONE YEAR FIVE YEARS ONE YEAR OR THROUGH THROUGH AFTER LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL ----------- -------------- ---------- --------- -------- (IN MILLIONS) Interest rate swaps.......... $ 774 $ 8,444 $ 6,950 $3,875 $ 20,043 Interest rate floors......... 12,743 325 19,787 -- 32,855 Interest rate caps........... 580 20,550 -- -- 21,130 Financial futures............ 3,630 -- -- -- 3,630 Foreign currency swaps....... 2,130 5,438 5,204 1,408 14,180 Foreign currency forwards.... 1,467 -- -- -- 1,467 Options...................... -- 324 1,967 74 2,365 Financial forwards........... -- -- -- 2,087 2,087 Credit default swaps......... 143 2,791 1,532 -- 4,466 Synthetic GICs............... 4,260 -- -- -- 4,260 Other........................ -- -- 250 -- 250 ------- ------- ------- ------ -------- Total...................... $25,727 $37,872 $35,690 $7,444 $106,733 ======= ======= ======= ====== ========
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 commenced the use of inflation swaps during the second quarter of 2008. Inflation swaps are used as an economic hedge to reduce inflation risk generated from inflation-indexed liabilities. Inflation swaps are included in interest rate swaps in the preceding table. 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) and equity futures transactions, the Company agrees to purchase or sell a specified number of contracts, the value of which is determined by the different classes of interest rate and equity securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. The Company enters into exchange-traded futures with regulated futures commission merchants that are members of the 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 F-63 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. The value of interest rate futures is substantially impacted by changes in interest rates and they can be used to modify or hedge existing interest rate risk. Exchange-traded equity futures are used primarily to hedge liabilities embedded in certain variable annuity products offered by the Company. 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 fixed exchange rate, generally set at inception, 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 to hedge interest rate risk associated with the Company's long-term liabilities, as well as 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 transactions between two parties whose underlying reference index is a forward starting interest rate swap 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 F-64 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 to synthetically create investments that are either more expensive to acquire or otherwise unavailable in the cash markets. These transactions are a combination of a derivative and a cash instrument such as a U.S. Treasury or Agency security. The Company also enters into certain credit default swaps held in relation to trading portfolios. A synthetic guaranteed interest contract ("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. 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 to synthetically create investments and are included in the other classification in the preceding table. HEDGING The following table presents the notional amount and the estimated fair value of derivatives by type of hedge designation at:
DECEMBER 31, 2008 DECEMBER 31, 2007 ------------------------------- ------------------------------- FAIR VALUE FAIR VALUE NOTIONAL -------------------- NOTIONAL -------------------- AMOUNT ASSETS LIABILITIES AMOUNT ASSETS LIABILITIES -------- ------ ----------- -------- ------ ----------- (IN MILLIONS) Fair value.................. $ 9,357 $1,737 $ 539 $ 9,301 $ 630 $ 94 Cash flow................... 2,541 365 137 3,084 23 311 Foreign operations.......... 164 1 1 488 -- 111 Non-qualifying.............. 94,671 4,543 1,844 142,804 1,222 1,776 -------- ------ ------ -------- ------ ------ Total..................... $106,733 $6,646 $2,521 $155,677 $1,875 $2,292 ======== ====== ====== ======== ====== ======
The following table presents the settlement payments recorded in income for the:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Qualifying hedges: Net investment income............................... $ 21 $ 24 $ 48 Interest credited to policyholder account balances.. 99 (28) (26) Non-qualifying hedges: Net investment income............................... (1) (5) -- Net investment gains (losses)....................... (38) 196 225 ---- ---- ---- Total............................................ $ 81 $187 $247 ==== ==== ====
F-65 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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) interest rate swaps to convert fixed rate liabilities to floating rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency fair value exposure of foreign currency denominated investments and liabilities. The Company recognized net investment gains (losses) representing the ineffective portion of all fair value hedges as follows:
YEARS ENDED DECEMBER 31, ------------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) Changes in the fair value of derivatives............ $ 336 $ 319 $ 278 Changes in the fair value of the items hedged....... (337) (308) (278) ----- ----- ----- Net ineffectiveness of fair value hedging activities........................................ $ (1) $ 11 $ -- ===== ===== =====
All components of each derivative's gain or loss were included in the assessment of hedge effectiveness. 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 to fixed rate liabilities; and (iii) foreign currency swaps to hedge the foreign currency cash flow exposure of foreign currency denominated investments and liabilities. For the years ended December 31, 2008, 2007, and 2006, the Company did not recognize any net investment gains (losses) 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 effectiveness. 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 losses for the years ended December 31, 2008, 2007 and 2006 related to such discontinued cash flow hedges were $12 million, $3 million and $3 million, respectively. There were no hedged forecasted transactions, other than the receipt or payment of variable interest payments for the years ended December 31, 2008, 2007, and 2006. The following table presents the components of other comprehensive income (loss), before income tax, related to cash flow hedges:
YEARS ENDED DECEMBER 31, ------------------------- 2008 2007 2006 ----- ----- ----- (IN MILLIONS) Other comprehensive income (loss) balance at January 1,................................................ $(262) $(238) $(207) Gains (losses) deferred in other comprehensive income (loss) on the effective portion of cash flow hedges....................................... 483 (185) (30) Amounts reclassified to net investment gains (losses).......................................... (93) 150 (15) Amounts reclassified to net investment income....... 9 12 15 Amortization of transition adjustment............... -- (1) (1) ----- ----- ----- Other comprehensive income (loss) balance at December 31,...................................... $ 137 $(262) $(238) ===== ===== =====
F-66 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) At December 31, 2008, $36 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, 2009. HEDGES OF NET INVESTMENTS IN FOREIGN OPERATIONS The Company uses forward exchange contracts, foreign currency swaps, options and non-derivative financial instruments to hedge portions of its net investments 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 for the years ended December 31, 2008, 2007 and 2006. The Company's consolidated statements of stockholder's equity for the years ended December 31, 2008, 2007 and 2006 include gains (losses) of $157 million, ($144) million and ($7) million, respectively, related to foreign currency contracts and non-derivative financial instruments used to hedge its net investments in foreign operations. At December 31, 2008 and 2007, the cumulative foreign currency translation loss recorded in accumulated other comprehensive income (loss) related to these hedges was $78 million and $235 million, respectively. When net investments in foreign operations are sold or substantially liquidated, the amounts in accumulated other comprehensive income (loss) 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 economically hedge its exposure to interest rates; (ii) foreign currency forwards, swaps and option contracts to economically hedge its exposure to adverse movements in exchange rates; (iii) credit default swaps to economically hedge exposure to adverse movements in credit; (iv) equity futures, interest rate futures and equity variance swaps to economically hedge liabilities embedded in certain variable annuity products; (v) swap spread locks to economically hedge invested assets against the risk of changes in credit spreads; (vi) financial forwards to buy and sell securities to economically hedge its exposure to interest rates; (vii) synthetic guaranteed interest contracts; (viii) credit default swaps and total rate of return swaps to synthetically create investments; (ix) basis swaps to better match the cash flows of assets and related liabilities; (x) credit default swaps held in relation to trading portfolios; (xi) swaptions to hedge interest rate risk; and (xii) inflation swaps to reduce risk generated from inflation-indexed liabilities. The following table presents changes in estimated fair value related to derivatives that do not qualify for hedge accounting:
YEARS ENDED DECEMBER 31, -------------------------- 2008 2007 2006 ------ ----- ----- (IN MILLIONS) Net investment gains (losses), excluding embedded derivatives...................................... $3,470 $(738) $(702) Net investment income (loss) (1)................... 54 20 -- ------ ----- ----- Total............................................ $3,524 $(718) $(702) ====== ===== =====
-------- (1) Changes in estimated fair value related to economic hedges of equity method investments in joint ventures that do not qualify for hedge accounting and changes in estimated fair value related to derivatives held in relation to trading portfolios. EMBEDDED DERIVATIVES The Company has certain embedded derivatives that are required to be separated from their host contracts and accounted for as derivatives. These host contracts principally include: variable annuities with guaranteed minimum F-67 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) withdrawal, guaranteed minimum accumulation and certain guaranteed minimum income riders; affiliated ceded reinsurance contracts related to guaranteed minimum withdrawal, guaranteed minimum accumulation and certain guaranteed minimum income riders; funds withheld on ceded reinsurance; and guaranteed interest contracts with equity or bond indexed crediting rates. The following table presents the estimated fair value of the Company's embedded derivatives at:
DECEMBER 31, ----------------- 2008 2007 ------- ------- (IN MILLIONS) Net embedded derivatives within asset host contracts: Ceded guaranteed minimum benefit riders................ $ 797 $ 34 Call options in equity securities...................... (72) (15) ------- ------- Net embedded derivatives within asset host contracts......................................... $ 725 $ 19 ======= ======= Net embedded derivatives within liability host contracts: Direct guaranteed minimum benefit riders............... $ 298 $ 9 Funds withheld on ceded reinsurance.................... (1,203) -- Other.................................................. (83) 52 ------- ------- Net embedded derivatives within liability host contracts......................................... $ (988) $ 61 ======= =======
The following table presents changes in the estimated fair value related to embedded derivatives:
YEARS ENDED DECEMBER 31, ------------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS) Net investment gains (losses) (1)............... $ 1,744 $ 15 $ 5
-------- (1) Effective January 1, 2008, upon adoption of SFAS 157, the valuation of the Company's guaranteed minimum benefit riders includes an adjustment for the Company's own credit. Included in net investment gains (losses) for the year ended December 31, 2008 are gains of $442 million in connection with this adjustment. 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 net positive estimated fair value of derivative contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to credit support annexes. 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. See Note 19 for a description of the impact of credit risk on the valuation of derivative instruments. F-68 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company enters into various collateral arrangements, which require both the pledging and accepting of collateral in connection with its derivative instruments. At December 31, 2008 and 2007, the Company was obligated to return cash collateral under its control of $3,564 million and $233 million, respectively. This unrestricted cash collateral is included in cash and cash equivalents or in short-term investments and the obligation to return it is included in payables for collateral under securities loaned and other transactions in the consolidated balance sheets. At December 31, 2008 and 2007, the Company had also accepted collateral consisting of various securities with a fair market value of $824 million and $98 million, respectively, which are held in separate custodial accounts. The Company is permitted by contract to sell or repledge this collateral, but at December 31, 2008, none of the collateral had been sold or repledged. At December 31, 2008 and 2007, the Company provided securities collateral for various arrangements in connection with derivative instruments of $220 million and $162 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. In addition, the Company has exchange-traded futures, which require the pledging of collateral. At December 31, 2008 and 2007, the Company pledged securities collateral for exchange-traded futures of $0 and $33 million, respectively, which is included in fixed maturity securities. The counterparties are permitted by contract to sell or repledge this collateral. At December 31, 2008 and 2007, the Company provided cash collateral for exchange-traded futures of $77 million and $0, respectively, which is included in premiums and other receivables. In connection with synthetically created investment transactions and credit default swaps held in relation to the trading portfolio, the Company writes credit default swaps for which it receives a premium to insure credit risk. If a credit event, as defined by the contract, occurs generally the contract will require the Company to pay the counterparty the specified swap notional amount in exchange for the delivery of par quantities of the referenced credit obligation. The Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $1,558 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. At December 31, 2008, the Company would have paid $35 million to terminate all of these contracts. The Company has also entered into credit default swaps to purchase credit protection on certain of the referenced credit obligations in the table below. As a result, the maximum amount of potential future recoveries available to offset the $1,558 million from the table below was $8 million at December 31, 2008. F-69 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the estimated fair value, maximum amount of future payments and weighted average years to maturity of written credit default swaps at December 31, 2008:
DECEMBER 31, 2008 ------------------------------------------------- MAXIMUM AMOUNT OF WEIGHTED FAIR VALUE OF FUTURE PAYMENTS AVERAGE RATING AGENCY DESIGNATION OF REFERENCED CREDIT DEFAULT UNDER CREDIT YEARS TO CREDIT OBLIGATIONS (1) SWAPS DEFAULT SWAPS (2) MATURITY (3) --------------------------------------- -------------- ----------------- ------------ (IN MILLIONS) Aaa/Aa/A Single name credit default swaps (corporate)....................... $ 1 $ 116 5.0 Credit default swaps referencing indices........................... (30) 1,112 4.1 ---- ------ Subtotal.......................... (29) 1,228 4.2 ---- ------ Baa Single name credit default swaps (corporate)....................... 1 100 2.3 Credit default swaps referencing indices........................... (5) 215 4.1 ---- ------ Subtotal.......................... (4) 315 3.5 ---- ------ Ba Single name credit default swaps (corporate)....................... -- 5 5.0 Credit default swaps referencing indices........................... -- -- -- ---- ------ Subtotal.......................... -- 5 5.0 ---- ------ B Single name credit default swaps (corporate)....................... -- -- -- Credit default swaps referencing indices........................... (2) 10 5.0 ---- ------ Subtotal.......................... (2) 10 5.0 ---- ------ Caa and lower Single name credit default swaps (corporate)....................... -- -- -- Credit default swaps referencing indices........................... -- -- -- ---- ------ Subtotal.......................... -- -- -- ---- ------ In or near default Single name credit default swaps (corporate)....................... -- -- -- Credit default swaps referencing indices........................... -- -- -- ---- ------ Subtotal.......................... -- -- -- ---- ------ $(35) $1,558 4.1 ==== ======
-------- (1) The rating agency designations are based on availability and the midpoint of the applicable ratings among Moody's, S&P, and Fitch. If no rating is available from a rating agency, then the MLIC rating is used. (2) Assumes the value of the referenced credit obligations is zero. (3) The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. F-70 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 5. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED Information regarding DAC and VOBA is as follows:
DAC VOBA TOTAL ------- ------ ------- (IN MILLIONS) Balance at January 1, 2006........................ $ 8,403 $ 220 $ 8,623 Capitalizations................................. 936 -- 936 ------- ------ ------- Subtotal..................................... 9,339 220 9,559 ------- ------ ------- Less: Amortization related to: Net investment gains (losses)................ (138) (2) (140) Other expenses............................... 757 (34) 723 ------- ------ ------- Total amortization......................... 619 (36) 583 ------- ------ ------- Less: Unrealized investment gains (losses)...... 105 (14) 91 Less: Other..................................... 17 (23) (6) ------- ------ ------- Balance at December 31, 2006...................... 8,598 293 8,891 Effect of SOP 05-1 adoption..................... (195) (123) (318) Capitalizations................................. 886 -- 886 ------- ------ ------- Subtotal..................................... 9,289 170 9,459 ------- ------ ------- Less: Amortization related to: Net investment gains (losses)................ (114) (1) (115) Other expenses............................... 735 23 758 ------- ------ ------- Total amortization......................... 621 22 643 ------- ------ ------- Less: Unrealized investment gains (losses)...... 110 71 181 Less: Other..................................... 7 -- 7 ------- ------ ------- Balance at December 31, 2007...................... 8,551 77 8,628 Capitalizations................................. 901 -- 901 ------- ------ ------- Subtotal................................... 9,452 77 9,529 ------- ------ ------- Less: Amortization related to: Net investment gains (losses)................ 157 (4) 153 Other expenses............................... 909 19 928 ------- ------ ------- Total amortization......................... 1,066 15 1,081 ------- ------ ------- Less: Unrealized investment gains (losses)...... (2,274) (146) (2,420) Less: Other..................................... (2) (1) (3) ------- ------ ------- Balance at December 31, 2008...................... $10,662 $ 209 $10,871 ======= ====== =======
The estimated future amortization expense allocated to other expenses for the next five years for VOBA is $19 million in 2009, $11 million in 2010, $11 million in 2011, $10 million in 2012, and $10 million in 2013. Amortization of VOBA and DAC is attributed to both investment gains and losses and to other expenses for the amount of gross margins or profits originating from transactions other than investment gains and losses. Unrealized F-71 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) investment gains and losses provide information regarding the amount of DAC and VOBA that would have been amortized if such gains and losses had been recognized. Information regarding DAC and VOBA by segment and reporting unit is as follows:
DAC VOBA TOTAL ---------------- --------------------- ---------------- DECEMBER 31, ----------------------------------------------------------- 2008 2007 2008 2007 2008 2007 ------- ------ --------- --------- ------- ------ (IN MILLIONS) Institutional: Group life................... $ 68 $ 74 $ 8 $ 8 $ 76 $ 82 Retirement & savings......... 31 32 -- -- 31 32 Non-medical health & other... 898 793 -- -- 898 793 ------- ------ --------- --------- ------- ------ Subtotal.................. 997 899 8 8 1,005 907 ------- ------ --------- --------- ------- ------ Individual: Traditional life............. 5,380 3,789 102 (11) 5,482 3,778 Variable & universal life.... 2,095 2,131 65 49 2,160 2,180 Annuities.................... 2,188 1,730 31 27 2,219 1,757 ------- ------ --------- --------- ------- ------ Subtotal.................. 9,663 7,650 198 65 9,861 7,715 ------- ------ --------- --------- ------- ------ Corporate & Other.............. 2 2 3 4 5 6 ------- ------ --------- --------- ------- ------ Total.......................... $10,662 $8,551 $209 $ 77 $10,871 $8,628 ======= ====== ========= ========= ======= ======
6. GOODWILL Goodwill, which is included in other assets, is the excess of cost over the estimated fair value of net assets acquired. Information regarding goodwill is as follows:
DECEMBER 31, -------------- 2008 2007 ---- ---- (IN MILLIONS) Balance at beginning of the period......................... $108 $106 Acquisitions............................................... 3 2 ---- ---- Balance at the end of the period........................... $111 $108 ==== ====
F-72 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding goodwill by segment and reporting unit is as follows:
DECEMBER 31, --------------- 2008 2007 ---- ---- (IN MILLIONS) Institutional: Group life................................................ $ 3 $ 3 Retirement & savings...................................... 2 2 Non-medical health & other................................ 65 62 ---- ---- Subtotal............................................... 70 67 ---- ---- Individual: Traditional life.......................................... 24 24 Variable & universal life................................. 3 3 Annuities................................................. 10 10 ---- ---- Subtotal............................................... 37 37 ---- ---- Corporate & Other........................................... 4 4 ---- ---- Total....................................................... $111 $108 ==== ====
As described in more detail in Note 1, the Company performed its annual goodwill impairment tests during the third quarter of 2008 based upon data as of June 30, 2008. Such tests indicated that goodwill was not impaired as of September 30, 2008. Current economic conditions, the sustained low level of equity markets and lower operating earnings projections, particularly for the Individual segment, required management of the Company to consider the impact of these events on the recoverability of its assets, in particular its goodwill. Management concluded it was appropriate to perform an interim goodwill impairment test at December 31, 2008. Based upon the tests performed management concluded no impairment of goodwill had occurred for any of the Company's reporting units at December 31, 2008. Management continues to evaluate current market conditions that may affect the estimated fair value of the Company's reporting units to assess whether any goodwill impairment exists. Continued deteriorating or adverse market conditions for certain reporting units may have an impact on the estimated fair value of these reporting units and could result in future impairments of goodwill. F-73 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 7. INSURANCE INSURANCE LIABILITIES Insurance liabilities are as follows:
OTHER FUTURE POLICY POLICYHOLDER POLICYHOLDER BENEFITS ACCOUNT BALANCES FUNDS ----------------- ----------------- --------------- DECEMBER 31, ------------------------------------------------------- 2008 2007 2008 2007 2008 2007 ------- ------- ------- ------- ------ ------ (IN MILLIONS) Institutional Group life.................. $ 3,345 $ 3,326 $12,975 $13,207 $2,527 $2,359 Retirement & savings........ 28,485 26,119 49,276 38,749 59 213 Non-medical health & other.. 11,436 10,430 501 501 595 595 Individual Traditional life............ 52,011 51,457 -- -- 1,381 1,431 Variable & universal life... 293 229 6,260 6,121 780 791 Annuities................... 2,041 1,817 21,761 20,056 17 14 Other....................... 1 -- 2,482 2,368 -- 1 Corporate & Other (1)......... 571 374 53 1 124 131 ------- ------- ------- ------- ------ ------ Total....................... $98,183 $93,752 $93,308 $81,003 $5,483 $5,535 ======= ======= ======= ======= ====== ======
-------- (1) Corporate & Other includes intersegment eliminations. Affiliated insurance liabilities included in the table above include reinsurance assumed and ceded. Affiliated future policy benefits, included in the table above, were $395 million and $406 million at December 31, 2008 and 2007, respectively. Affiliated policyholder account balances, included in the table above, were $606 million and $613 million at December 31, 2008 and 2007, respectively. Affiliated other policyholder funds, included in the table above, were ($205) million and ($251) million at December 31, 2008 and 2007, respectively. VALUE OF DISTRIBUTION AGREEMENTS AND CUSTOMER RELATIONSHIPS ACQUIRED Information regarding the VODA and VOCRA, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Balance at January 1,................................ $431 $439 $ -- Acquisitions......................................... 9 -- 441 Amortization......................................... (13) (8) (2) ---- ---- ---- Balance at December 31,.............................. $427 $431 $439 ==== ==== ====
The estimated future amortization expense allocated to other expenses for the next five years for VODA and VOCRA is $15 million in 2009, $19 million in 2010, $22 million in 2011, $25 million in 2012 and $27 million in 2013. See Note 2 for a description of acquisitions and dispositions. The value of the identifiable intangibles included in the table above reflects the estimated fair value of the Citigroup/Travelers distribution agreement and customer relationships acquired at the original acquisition date and will be amortized in relation to the expected economic benefits of the agreement. The weighted average F-74 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) amortization period of the intangible assets is 16 years. If actual experience under the distribution agreements or with customer relationships differs from expectations, the amortization of these intangibles will be adjusted to reflect actual experience. The use of discount rates was necessary to establish the fair value of the other identifiable intangible assets. In selecting the appropriate discount rates, management considered its weighted average cost of capital as well as the weighted average cost of capital required by market participants. A discount rate of 11.5% was used to value these intangible assets. SALES INDUCEMENTS Information regarding deferred sales inducements, which are reported in other assets, is as follows:
YEARS ENDED DECEMBER 31, -------------------------- 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Balance at January 1,................................ $132 $121 $ 95 Capitalization....................................... 40 29 31 Amortization......................................... (28) (18) (5) ---- ---- ---- Balance at December 31,.............................. $144 $132 $121 ==== ==== ====
SEPARATE ACCOUNTS Separate account assets and liabilities include two categories of account types: pass-through separate accounts totaling $48.2 billion and $71.4 billion at December 31, 2008 and 2007, 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 $24.1 billion and $18.3 billion at December 31, 2008 and 2007, respectively. The latter category consisted primarily of Met Managed GICs and participating close-out contracts. The average interest rate credited on these contracts was 4.40% and 4.73% at December 31, 2008 and 2007, 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 $1.3 billion, $1.3 billion and $1.2 billion for the years ended December 31, 2008, 2007 and 2006, respectively. The Company's proportional interest in separate accounts is included in the consolidated balance sheets as follows:
DECEMBER 31, -------------- 2008 2007 ---- ---- (IN MILLIONS) Fixed maturity securities................................... $ 5 $ 6 Equity securities........................................... $16 $35 Cash and cash equivalents................................... $ -- $ 1
For the years ended December 31, 2008, 2007 and 2006, there were no investment gains (losses) on transfers of assets from the general account to the separate accounts. OBLIGATIONS UNDER GUARANTEED INTEREST CONTRACT PROGRAM The Company issues fixed and floating rate obligations under its GIC program which are denominated in either U.S. dollars or foreign currencies. During the years ended December 31, 2008, 2007 and 2006, the Company issued F-75 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $5.7 billion, $4.6 billion and $5.2 billion, respectively, and repaid $7.6 billion, $3.7 billion and $1.5 billion, respectively, of GICs under this program. At December 31, 2008 and 2007, GICs outstanding, which are included in policyholder account balances, were $17.3 billion and $19.1 billion, respectively. During the years ended December 31, 2008, 2007 and 2006, interest credited on the contracts, which are included in interest credited to policyholder account balances, was $840 million, $917 million and $672 million, respectively. OBLIGATIONS UNDER FUNDING AGREEMENTS Metropolitan Life Insurance Company is a member of the FHLB of NY and holds $830 million and $339 million of common stock of the FHLB of NY at December 31, 2008 and 2007, respectively, which is included in equity securities. MLIC has also entered into funding agreements with the FHLB of NY whereby MLIC has issued such funding agreements in exchange for cash and for which the FHLB of NY has been granted a lien on certain MLIC assets, including residential mortgage- backed securities to collateralize MLIC's obligations under the funding agreements. MLIC maintains control over these pledged assets, and may use, commingle, encumber or dispose of any portion of the collateral as long as there is no event of default and the remaining qualified collateral is sufficient to satisfy the collateral maintenance level. Upon any event of default by MLIC, the FHLB of NY's recovery on the collateral is limited to the amount of MLIC's liability to the FHLB of NY. The amount of the Company's liability for funding agreements with the FHLB of NY was $15.2 billion and $4.6 billion at December 31, 2008 and 2007, respectively, which is included in policyholder account balances. The advances on these agreements are collateralized by mortgage-backed securities with estimated fair values of $17.8 billion and $4.8 billion at December 31, 2008 and 2007, respectively. Metropolitan Life Insurance Company has issued funding agreements to certain trusts that have issued securities guaranteed as to payment of interest and principal by the Federal Agricultural Mortgage Corporation, a federally chartered instrumentality of the United States. The obligations under these funding agreements are secured by a pledge of certain eligible agricultural real estate mortgage loans and may, under certain circumstances, be secured by other qualified collateral. The amount of the Company's liability for funding agreements issued to such trusts was $2.5 billion at both December 31, 2008 and 2007, which is included in policyholder account balances. The obligations under these funding agreements are collateralized by designated agricultural real estate mortgage loans with estimated fair values of $2.9 billion at both December 31, 2008 and 2007. Approximately $3.0 billion of the obligations outstanding at MLIC at December 31, 2008 are subject to a temporary contingent increase in MLIC's borrowing capacity which is scheduled to expire at December 31, 2009. The Company does not expect to have any difficulties in meeting the contingencies associated with the increased capacity. F-76 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) LIABILITIES FOR UNPAID CLAIMS AND CLAIM EXPENSES Information regarding the liabilities for unpaid claims and claim expenses relating to group accident and non-medical health policies and contracts, which are reported in future policy benefits and other policyholder funds, is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS) Balance at January 1,............................. $ 5,174 $ 4,500 $ 4,191 Less: Reinsurance recoverables.................. (265) (268) (295) ------- ------- ------- Net balance at January 1,......................... 4,909 4,232 3,896 ------- ------- ------- Incurred related to: Current year.................................... 4,063 3,743 2,997 Prior years..................................... (86) (104) (28) ------- ------- ------- 3,977 3,639 2,969 ------- ------- ------- Paid related to: Current year.................................... (2,481) (2,077) (1,814) Prior years..................................... (1,002) (885) (819) ------- ------- ------- (3,483) (2,962) (2,633) ------- ------- ------- Net balance at December 31,....................... 5,403 4,909 4,232 Add: Reinsurance recoverables................... 266 265 268 ------- ------- ------- Balance at December 31,........................... $ 5,669 $ 5,174 $ 4,500 ======= ======= =======
During 2008, 2007 and 2006, as a result of changes in estimates of insured events in the respective prior year, claims and claim adjustment expenses associated with prior years decreased by $86 million, $104 million and $28 million, respectively, due to improved loss ratios for non-medical health claim liabilities and improved claim management. 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. 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. F-77 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the types of guarantees relating to annuity contracts and universal and variable life contracts is as follows:
DECEMBER 31, --------------------------------------------------------------- 2008 2007 ------------------------------ ------------------------------ IN THE AT IN THE AT EVENT OF DEATH ANNUITIZATION EVENT OF DEATH ANNUITIZATION -------------- ------------- -------------- ------------- (IN MILLIONS) ANNUITY CONTRACTS (1) RETURN OF NET DEPOSITS Separate account value............. $ 3,177 N/A $ 3,937 N/A Net amount at risk (2)............. $ 706 (3) N/A $ 7 (3) N/A Average attained age of contractholders................. 60 years N/A 60 years N/A ANNIVERSARY CONTRACT VALUE OR MINIMUM RETURN Separate account value............. $ 28,448 $ 5,693 $ 36,404 $ 6,524 Net amount at risk (2)............. $ 6,081 (3) $ 2,399 (4) $ 399 (3) $ 86 (4) Average attained age of contractholders................. 62 years 58 years 62 years 57 years TWO TIER ANNUITIES General account value.............. N/A $ 283 N/A $ 286 Net amount at risk (2)............. N/A $ 50 (5) N/A $ 51 (5) Average attained age of contractholders................. N/A 60 years N/A 60 years
DECEMBER 31, ------------------------------------------------- 2008 2007 ----------------------- ----------------------- SECONDARY PAID-UP SECONDARY PAID-UP GUARANTEES GUARANTEES GUARANTEES GUARANTEES ---------- ---------- ---------- ---------- (IN MILLIONS) UNIVERSAL AND VARIABLE LIFE CONTRACTS (1) Account value (general and separate account)................................. $ 4,908 $ 1,349 $ 6,550 $ 1,403 Net amount at risk (2)..................... $ 102,690 (3)$ 12,485 (3)$ 103,219 (3)$ 13,482 (3) Average attained age of policyholders...... 49 years 55 years 47 years 54 years
-------- (1) 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. (2) The net amount at risk is based on the direct amount at risk (excluding reinsurance). (3) 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. (4) 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. (5) 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. F-78 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the liabilities for guarantees (excluding base policy liabilities) relating to annuity and universal and variable life contracts is as follows:
UNIVERSAL AND VARIABLE ANNUITY CONTRACTS LIFE CONTRACTS -------------------------- ----------------------- GUARANTEED GUARANTEED PAID DEATH ANNUITIZATION SECONDARY UP BENEFITS BENEFITS GUARANTEES GUARANTEES TOTAL ---------- ------------- ---------- ---------- ----- (IN MILLIONS) Balance at January 1, 2006...... $ 8 $ 7 $ 8 $10 $ 33 Incurred guaranteed benefits.... 1 -- 1 (1) 1 Paid guaranteed benefits........ (3) -- -- -- (3) --- --- --- --- ---- Balance at December 31, 2006.... 6 7 9 9 31 Incurred guaranteed benefits.... 4 8 4 3 19 Paid guaranteed benefits........ (2) -- -- -- (2) --- --- --- --- ---- Balance at December 31, 2007.... 8 15 13 12 48 Incurred guaranteed benefits.... 27 48 14 1 90 Paid guaranteed benefits........ (6) -- -- -- (6) --- --- --- --- ---- Balance at December 31, 2008.... $29 $63 $27 $13 $132 === === === === ====
Excluded from the table above are guaranteed death and annuitization benefit liabilities on the Company's annuity contracts of $66 million, $24 million and $21 million at December 31, 2008, 2007 and 2006, respectively, which were reinsured 100% to an affiliate and had corresponding recoverables from affiliated reinsurers related to such guarantee liabilities. Account balances of contracts with insurance guarantees are invested in separate account asset classes as follows:
DECEMBER 31, ----------------- 2008 2007 ------- ------- (IN MILLIONS) Mutual Fund Groupings Equity................................................ $12,973 $23,494 Balanced.............................................. 5,342 5,312 Bond.................................................. 2,837 3,430 Money Market.......................................... 419 350 Specialty............................................. 219 402 ------- ------- Total.............................................. $21,790 $32,988 ======= =======
8. REINSURANCE The Company's Individual segment 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 individual 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 certain individual life insurance policies. Amounts reinsured in prior years remain reinsured under the original reinsurance; however, under the new retention guidelines, the Company F-79 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) reinsures up to 90% of the mortality risk in excess of $1 million for most new individual 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 $20 million per life 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 individual 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. The Company's Individual segment also reinsures 90% of the new production of fixed annuities from several affiliates. The Company's Individual segment also reinsures 100% of the living and death benefit riders issued associated with its variable annuities issued since 2004 to an affiliated reinsurer and certain portions of the living and death benefit riders associated with its variable annuities issued prior to 2004 to affiliated and non-affiliated reinsurers. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on rider fees collected from policyholders and receives reimbursements for benefits paid or accrued in excess of account values, subject to certain limitations. The Company enters into similar agreements for new or in-force business depending on market conditions. The Institutional segment generally retains most of its risks and does not significantly utilize reinsurance. The Company may, on certain client arrangements, cede particular risks to reinsurers. In addition to reinsuring mortality risk as described previously, the Company reinsures other risks, as well as 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 retention and quota share reinsurance arrangements to provide greater diversification of risk and minimize exposure to larger risks. The Company reinsures its business through a diversified group of reinsurers. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, reinsurance balances recoverable could become uncollectible. Cessions under reinsurance arrangements do not discharge the Company's obligations as the primary insurer. F-80 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The amounts in the consolidated statements of income are presented net of reinsurance ceded. Information regarding the effect of reinsurance is as follows:
YEARS ENDED DECEMBER 31, --------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS) PREMIUMS: Direct premiums................................ $19,246 $17,411 $16,958 Reinsurance assumed............................ 1,334 951 694 Reinsurance ceded.............................. (2,136) (1,927) (1,716) ------- ------- ------- Net premiums................................ $18,444 $16,435 $15,936 ======= ======= ======= UNIVERSAL LIFE AND INVESTMENT-TYPE PRODUCT POLICY FEES: Direct universal life and investment-type product policy fees......................... $ 2,741 $ 2,589 $ 2,460 Reinsurance assumed............................ 7 2 1 Reinsurance ceded.............................. (463) (345) (278) ------- ------- ------- Net universal life and investment-type product policy fees....................... $ 2,285 $ 2,246 $ 2,183 ======= ======= ======= POLICYHOLDER BENEFITS AND CLAIMS: Direct policyholder benefits and claims........ $21,863 $19,454 $18,795 Reinsurance assumed............................ 1,018 530 645 Reinsurance ceded.............................. (2,182) (1,709) (1,793) ------- ------- ------- Net policyholder benefits and claims........ $20,699 $18,275 $17,647 ======= ======= =======
Information regarding ceded reinsurance recoverable balances, included in premiums and other receivables is as follows:
DECEMBER 31, ----------------- 2008 2007 ------- ------- (IN MILLIONS) UNAFFILIATED RECOVERABLES: Future policy benefit recoverables...................... $ 2,817 $ 1,808 Deposit recoverables.................................... 2,069 2,516 Claim recoverables...................................... 201 197 All other recoverables.................................. 290 27 ------- ------- Total................................................. $ 5,377 $ 4,548 ======= ======= AFFILIATED RECOVERABLES: Closed block recoverables............................... $15,862 $16,011 Future policy benefit recoverables...................... 2,847 1,866 Claim recoverables...................................... 156 6 All other recoverables.................................. 478 51 ------- ------- Total................................................. $19,343 $17,934 ======= =======
Reinsurance recoverable balances are stated net of allowances for uncollectible balances, which are immaterial. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with reinsurers. F-81 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company also monitors ratings and evaluates the financial strength of the Company's reinsurers by analyzing their financial statements. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. Included in the unaffiliated reinsurance recoverables are $1.2 billion at both December 31, 2008 and 2007, related to reinsurance of long-term GICs, structured settlement lump sum contracts and $0.6 billion and $1.1 billion at December 31, 2008 and 2007, respectively, related to the reinsurance of investment-type contracts held by small market defined benefit contribution plans. The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. At December 31, 2008, the Company has $1,811 million of unaffiliated reinsurance recoverable balances secured by funds held in trust as collateral, $353 million of unaffiliated reinsurance recoverable balances secured by funds withheld accounts and $284 million of unaffiliated reinsurance recoverable balances secured through irrevocable letters of credit issued by various financial institutions. All of the affiliated reinsurance recoverable balances except for $1,198 million of reserves and $8 million of other receivables are secured by funds withheld accounts, funds held in trust as collateral or irrevocable letters of credit issued by various financial institutions. The Company's five largest unaffiliated reinsurers account for $3,699 million, or 69%, of its total unaffiliated reinsurance recoverable balance of $5,377 million at December 31, 2008. Of these reinsurance recoverable balances, $1,736 million were secured by funds held in trust as collateral, $226 million were secured through irrevocable letters of credit issued by various financial institutions and $212 million of reinsurance recoverable balances were secured by funds withheld accounts. Reinsurance balances payable to unaffiliated reinsurers, included in other liabilities, were $1,509 million and $323 million at December 31, 2008 and 2007, respectively. Reinsurance balances payable to affiliated reinsurers, included in liabilities, were $21.0 billion and $20.1 billion at December 31, 2008 and 2007, respectively. The Company has reinsurance agreements with certain of MetLife, Inc.'s subsidiaries, including Exeter Reassurance Company, Ltd., Texas Life Insurance Company ("TLIC"), First MetLife Investors Insurance Company, MetLife Insurance Company of Connecticut, MetLife Investors USA Insurance Company, MetLife Investors Insurance Company, MetLife Reinsurance Company of Charleston ("MRC"), MetLife Reinsurance Company of Vermont, and MTL, all of which are related parties. The table below includes amounts related to transactions between these related parties and RGA through September 12, 2008, the date of the Company's dividend of interests in RGA. F-82 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table reflects related party reinsurance information:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Assumed premiums..................................... $ 28 $ 52 $ 42 Assumed fees, included in universal life and investment-type product policy fees................ $ 7 $ 2 $ 1 Interest earned on assumed reinsurance, included in other revenues..................................... $ (5) $ (4) $ (3) Assumed benefits, included in policyholder benefits and claims......................................... $ 99 $ 54 $ 86 Assumed benefits, included in interest credited on policyholder account balances...................... $ 22 $ 18 $ 11 Assumed acquisition costs, included in other expenses........................................... $128 $144 $322 Ceded premiums....................................... $ 46 $113 $116 Ceded fees, included in universal life and investment-type product policy fees................ $178 $112 $ 64 Income from deposit contracts, included in other revenues (1)....................................... $923 $ -- $ -- Ceded benefits, included in policyholder benefits and claims............................................. $133 $ 80 $ 69 Ceded benefits, included in interest credited to policyholder account balances...................... $ 70 $ 65 $ 49 Ceded benefits, included in policyholder dividends... $ 20 $ 29 $ 27 Interest costs on ceded reinsurance, included in other expenses (1)................................. $831 $ 5 $ (2)
-------- (1) In December 2007, the Company ceded a portion of its closed block liabilities on a coinsurance with funds withheld basis to MRC, an affiliate. In connection with this cession, the Company recognized $835 million of interest earned on the deposit included within premiums and other receivables, as well as certain administrative fees, at December 31, 2008. The Company also recognized $911 million of interest expense associated with the funds withheld included in other expenses for the year ended December 31, 2008. The Company has ceded risks to another affiliate related to guaranteed minimum benefit riders written by the Company. These ceded reinsurance agreements contain embedded derivatives and changes in their fair value are included within net investment gains (losses). The embedded derivatives ceded are included within premiums and other receivables and were assets of $797 million and $34 million at December 31, 2008 and 2007, respectively. For the years ended December 31, 2008, 2007 and 2006, net investment gains (losses) included $763 million, $42 million and ($18) million, respectively, in changes in estimated fair value of such embedded derivatives. Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at fair value on the Company's consolidated balance sheet. The embedded derivative related to the funds withheld associated with this reinsurance agreement is included within other liabilities and reduced the funds withheld balance by $1,203 million at December 31, 2008. The change in estimated fair value of the embedded derivative, included in net investment gains (losses), was $1,203 million for the year ended December 31, 2008. On December 1, 2006, TLIC, an affiliate of the Company, recaptured business previously ceded under a 2002 reinsurance treaty with the Company. The agreement required the Company to assume, on a co-insurance basis, certain structured settlement business from TLIC. On January 5, 2007, the Company transferred cash in the amount of $989 million, which represented $984 million for the fair value of the returned future policy benefits plus $5 million in interest. For the year ended December 31, 2006, as a result of this transaction, the Company recognized an expense of $184 million. F-83 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. CLOSED BLOCK On April 7, 2000, (the "Demutualization Date"), Metropolitan Life Insurance Company converted from a mutual life insurance company to a stock life insurance company and became a wholly-owned subsidiary of MetLife, Inc. The conversion was pursuant to an order by the New York Superintendent of Insurance (the "Superintendent") approving Metropolitan Life Insurance Company's plan of reorganization, as amended (the "Plan"). On the Demutualization Date, Metropolitan Life Insurance Company established a closed block for the benefit of holders of certain individual life insurance policies of Metropolitan Life Insurance Company. 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 Demutualization Date. However, the Company establishes a policyholder dividend obligation for earnings that will be paid to policyholders as additional dividends as described below. The excess of closed block liabilities over closed block assets at the effective date of the demutualization (adjusted to eliminate the impact of related amounts in accumulated other comprehensive income) represents the estimated maximum future earnings from the closed block expected to result from operations attributed to the closed block after income taxes. Earnings of the closed block are recognized in income over the period the policies and contracts in the closed block remain in-force. Management believes that over time the actual cumulative earnings of the closed block will approximately equal the expected cumulative earnings due to the effect of dividend changes. If, over the period the closed block remains in existence, the actual cumulative earnings of the closed block is greater than the expected cumulative earnings of the closed block, the Company will pay the excess of the actual cumulative earnings of the closed block over the expected cumulative earnings to closed block policyholders as additional policyholder dividends unless offset by future unfavorable experience of the closed block and, accordingly, will recognize only the expected cumulative earnings in income with the excess recorded as a policyholder dividend obligation. If over such period, the actual cumulative earnings of the closed block is less than the expected cumulative earnings of the closed block, the Company will recognize only the actual earnings in income. However, the Company may change policyholder dividend scales in the future, which would be intended to increase future actual earnings until the actual cumulative earnings equal the expected cumulative earnings. Recent experience within the closed block, in particular mortality and investment yields, as well as realized and unrealized losses, has resulted in a reduction of the policyholder dividend obligation to zero during the year F-84 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ended December 31, 2008. The reduction of the policyholder dividend obligation to zero and the Company's decision to revise the expected policyholder dividend scales, which are based upon statutory results, has resulted in reduction to both actual and expected cumulative earnings of the closed block. This change in the timing of the expected cumulative earnings of the closed block combined with a policyholder dividend obligation of zero has resulted in a reduction in the DAC associated with closed block, which resides outside of the closed block, and a corresponding decrease in the Company's net income of $127 million, net of income tax, for the year ended December 31, 2008. Amortization of the closed block DAC will be based upon actual cumulative earnings rather than expected cumulative earnings of the closed block until such time as the actual cumulative earnings of the closed block exceed the expected cumulative earnings, at which time the policyholder dividend obligation will be reestablished. Actual cumulative earnings less than expected cumulative earnings will result in future reductions to DAC and net income of the Company and increase sensitivity of the Company's net income to movements in closed block results. See also Note 5 for further information regarding DAC. F-85 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block liabilities and assets designated to the closed block is as follows:
DECEMBER 31, ----------------- 2008 2007 ------- ------- (IN MILLIONS) CLOSED BLOCK LIABILITIES Future policy benefits.................................. $43,520 $43,362 Other policyholder funds................................ 315 323 Policyholder dividends payable.......................... 711 709 Policyholder dividend obligation........................ -- 789 Payables for collateral under securities loaned and other transactions.................................... 2,852 5,610 Other liabilities....................................... 254 290 ------- ------- Total closed block liabilities........................ 47,652 51,083 ------- ------- ASSETS DESIGNATED TO THE CLOSED BLOCK Investments: Fixed maturity securities available-for-sale, at estimated fair value (amortized cost: $27,947 and $29,631, respectively)............................. 26,205 30,481 Equity securities available-for-sale, at estimated fair value (cost: $280 and $1,555, respectively)... 210 1,875 Mortgage loans on real estate......................... 7,243 7,472 Policy loans.......................................... 4,426 4,290 Real estate and real estate joint ventures held-for- investment......................................... 381 297 Short-term investments................................ 52 14 Other invested assets................................. 952 829 ------- ------- Total investments.................................. 39,469 45,258 Cash and cash equivalents............................... 262 333 Accrued investment income............................... 484 485 Deferred income tax assets.............................. 1,632 640 Premiums and other receivables.......................... 98 151 ------- ------- Total assets designated to the closed block........ 41,945 46,867 ------- ------- Excess of closed block liabilities over assets designated to the closed block........................ 5,707 4,216 ------- ------- Amounts included in accumulated other comprehensive income (loss): Unrealized investment gains (losses), net of income tax of ($633) and $424, respectively............... (1,174) 751 Unrealized gains (losses) on derivative instruments, net of income tax of ($8) and ($19), respectively.. (15) (33) Allocated $284, net of income tax, to policyholder dividend obligation at December 31, 2007........... -- (505) ------- ------- Total amounts included in accumulated other comprehensive income (loss)........................... (1,189) 213 ------- ------- Maximum future earnings to be recognized from closed block assets and liabilities.......................... $ 4,518 $ 4,429 ======= =======
F-86 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Information regarding the closed block policyholder dividend obligation is as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 2008 2007 2006 ----- ------ ------ (IN MILLIONS) Balance at January 1,............................... $ 789 $1,063 $1,607 Impact on revenues, net of expenses and income tax.. -- -- (114) Change in unrealized investment and derivative gains (losses).......................................... (789) (274) (430) ----- ------ ------ Balance at December 31,............................. $ -- $ 789 $1,063 ===== ====== ======
Information regarding the closed block revenues and expenses is as follows:
YEARS ENDED DECEMBER 31, ------------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) REVENUES Premiums............................................ $2,787 $2,870 $2,959 Net investment income and other revenues............ 2,248 2,350 2,355 Net investment gains (losses)....................... (84) 28 (130) ------ ------ ------ Total revenues................................... 4,951 5,248 5,184 ------ ------ ------ EXPENSES Policyholder benefits and claims.................... 3,393 3,457 3,474 Policyholder dividends.............................. 1,498 1,492 1,479 Change in policyholder dividend obligation.......... -- -- (114) Other expenses...................................... 217 231 247 ------ ------ ------ Total expenses................................... 5,108 5,180 5,086 ------ ------ ------ Revenues, net of expenses before income tax........... (157) 68 98 Income tax............................................ (68) 21 34 ------ ------ ------ Revenues, net of expenses and income tax from continuing operations............................... (89) 47 64 Revenues, net of expenses and income tax from discontinued operations............................. -- -- 1 ------ ------ ------ Revenues, net of expenses, income taxes and discontinued operations............................. $ (89) $ 47 $ 65 ====== ====== ======
The change in the maximum future earnings of the closed block is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Balance at December 31,............................. $4,518 $4,429 $4,480 Less: Cumulative effect of a change in accounting principle, net of income tax................... -- (4) -- Balance at January 1,............................... 4,429 4,480 4,545 ------ ------ ------ Change during year.................................. $ 89 $ (47) $ (65) ====== ====== ======
Metropolitan Life Insurance Company 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 F-87 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) closed block as provided in the Plan. Metropolitan Life Insurance Company also charges the closed block for expenses of maintaining the policies included in the closed block. 10. LONG-TERM AND SHORT-TERM DEBT Long-term and short-term debt outstanding is as follows:
INTEREST RATES ----------------------- DECEMBER 31, WEIGHTED --------------- RANGE AVERAGE MATURITY 2008 2007 ------------ -------- --------- ------ ------ (IN MILLIONS) Surplus notes -- affiliated.... 3.89%-7.38% 5.66% 2009-2037 $1,394 $1,394 Surplus notes.................. 7.63%-7.88% 7.86% 2015-2025 698 697 Capital notes -- affiliated.... 7.13% 7.13% 2032-2033 500 500 Other notes with varying interest rates............... 4.45%-12.00% 7.95% 2009-2016 66 45 Secured demand note -- affiliated........... 0.50% 0.50% 2011 25 -- Capital lease obligations...... 39 51 ------ ------ Total long-term debt........... 2,722 2,687 Total short-term debt.......... 414 357 ------ ------ Total........................ $3,136 $3,044 ====== ======
The aggregate maturities of long-term debt at December 31, 2008 for the next five years are $710 million in 2009, $66 million in 2010, $25 million in 2011, $1 million in 2012, less than $1 million in 2013 and $1,920 million thereafter. Capital lease obligations are collateralized and rank highest in priority, followed by unsecured senior debt which consists of other notes with varying interest rates. Payments of interest and principal on the Company's surplus notes, which are subordinate to all other obligations, may be made only with the prior approval of the insurance department of the state of domicile. Long-term debt, credit facilities and letters of credit of MetLife, Inc. and its subsidiaries contain various covenants. The Company has certain administrative, reporting, legal and financial covenants in several of these arrangements. The Company was in compliance with all covenants at December 31, 2008 and 2007. SURPLUS NOTES -- AFFILIATED In December 2007, the Company repaid the $800 million surplus note issued in December 2005 with an interest rate of 5.00% to MetLife, Inc. and then issued to MetLife, Inc. a $700 million surplus note with an interest rate of LIBOR plus 1.15%. In December 2007, the Company issued a $694 million surplus note to MetLife Capital Trust IV, an affiliate, with an interest rate of 7.38%. SECURED DEMAND NOTE -- AFFILIATED Effective September 30, 2008, the Company entered into a secured demand note collateral agreement with an affiliate pursuant to which the affiliate pledged securities to the Company to collateralize its obligation to lend $25 million to the Company. The Company has not exercised its right to sell or repledge the collateral. F-88 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SHORT-TERM DEBT Short-term debt was $414 million and $357 million at December 31, 2008 and 2007, respectively, which consisted entirely of commercial paper. During the years ended December 31, 2008, 2007 and 2006, the weighted average interest rate of short-term debt was 2.4%, 5.1% and 5.1%, respectively. During the years ended December 31, 2008, 2007 and 2006, the average daily balance of short-term debt was $421 million, $927 million and $768 million, respectively, and was outstanding for an average of 25 days, 25 days and 53 days, respectively. INTEREST EXPENSE Interest expense related to the Company's indebtedness included in other expenses was $192 million, $190 million and $184 million for the years ended December 31, 2008, 2007 and 2006, respectively, and does not include interest expense on shares subject to mandatory redemption. See Note 11. These amounts include $120 million, $78 million and $76 million of interest expense related to affiliated debt for the years ended December 31, 2008, 2007 and 2006, respectively. CREDIT AND COMMITTED FACILITIES AND LETTERS OF CREDIT Credit Facility. MetLife Funding, Inc., a subsidiary of the Company, maintains a committed and unsecured credit facility of $2.9 billion at December 31, 2008. When drawn upon, this facility bears interest at varying rates in accordance with the agreement as specified below. This facility can be used for general corporate purposes and, at December 31, 2008, the facility also served as a back-up line of credit for the Company's commercial paper program. This agreement contains various administrative, reporting, legal and financial covenants, including a covenant requiring MetLife, Inc. to maintain a specified minimum consolidated net worth. Management has no reason to believe that its lending counterparties are unable to fulfill their respective contractual obligations. Total fees associated with this credit facility were $17 million, of which $11 million related to deferred amendment fees, for the year ended December 31, 2008. Information on this credit facility at December 31, 2008 is as follows:
LETTER OF CREDIT UNUSED BORROWER(S) EXPIRATION CAPACITY ISSUANCES DRAWDOWNS COMMITMENTS ----------- ------------ -------- --------- --------- ----------- (IN MILLIONS) MetLife, Inc. and MetLife Funding, Inc. ............................... June 2012 (1) $2,850 $2,313 $ -- $537 ------ ------ ---- ---- Total............................... $2,850 $2,313 $-- $537 ====== ====== ==== ====
-------- (1) In December 2008, MetLife, Inc. and MetLife Funding, Inc. entered into an amended and restated $2.85 billion credit agreement with various financial institutions. The agreement amended and restated the $3.0 billion credit agreement entered into in June 2007. Proceeds are available to be used for general corporate purposes, to support their commercial paper programs and for the issuance of letters of credit. All borrowings under the credit agreement must be repaid by June 2012, except that letters of credit outstanding upon termination may remain outstanding until June 2013. The borrowers and the lenders under this facility may agree to extend the term of all or part of the facility to no later than June 2014, except that letters of credit outstanding upon termination may remain outstanding until June 2015. Fees for this agreement include a 0.25% facility fee, 0.075% fronting fee, a letter of credit fee between 1% and 5% based on certain market rates and a 0.05% utilization fee, as applicable, and may vary based on MetLife, Inc.'s senior unsecured ratings. MetLife, Inc. and MetLife Funding, Inc. incurred amendment costs of $11 million related to the $2,850 million amended and restated credit agreement, which have been capitalized and included in other assets. These costs will be amortized over the term of the agreement. MetLife, Inc. did not have any deferred financing costs associated with the original June 2007 credit agreement. F-89 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Committed Facility. Missouri Reinsurance (Barbados), Inc., a subsidiary of the Company, maintains a committed facility of $500 million at December 31, 2008. When drawn upon, this facility bears interest at varying rates in accordance with the agreement as specified below. The facility is used for collateral for certain of the Company's reinsurance reserves. This facility contains various administrative, reporting, legal and financial covenants. Management has no reason to believe that its lending counterparties are unable to fulfill their respective contractual obligations. Total fees associated with this committed facility were $4 million for the year ended December 31, 2008. Information on the committed facility at December 31, 2008 is as follows:
LETTER OF CREDIT UNUSED MATURITY ACCOUNT PARTY/BORROWER(S) EXPIRATION CAPACITY DRAWDOWNS ISSUANCES COMMITMENTS (YEARS) ------------------------- ------------ -------- --------- --------- ----------- -------- (IN MILLIONS) Exeter Reassurance Company Ltd., MetLife, Inc., & Missouri Reinsurance (Barbados), Inc. ......... June 2016 (1) $500 $-- $490 $10 7 ---- --- ---- --- Total..................... $500 $-- $490 $10 ==== === ==== ===
-------- (1) Letters of credit and replacements or renewals thereof issued under this facility of $280 million, $10 million and $200 million are set to expire no later than December 2015, March 2016 and June 2016, respectively. Letters of Credit. At December 31, 2008, the Company had outstanding $2.8 billion in letters of credit from various financial institutions, of which $490 million and $2.3 billion were part of committed and credit facilities, respectively. As 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. 11. 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. In October 2007, GenAmerica redeemed these securities which were due to mature on June 30, 2027. As a result of this redemption, the Company recognized additional interest expense of $10 million. Interest expense on these instruments is included in other expenses and was $20 million and $11 million for the years ended December 31, 2007 and 2006, respectively. F-90 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. INCOME TAX The provision for income tax from continuing operations is as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 2008 2007 2006 ------ ------ ---- (IN MILLIONS) Current: Federal............................................ $ (58) $1,067 $492 State and local.................................... 2 22 5 Foreign............................................ 17 9 8 ------ ------ ---- Subtotal........................................... (39) 1,098 505 ------ ------ ---- Deferred: Federal............................................ 1,689 (53) 43 State and local.................................... -- 18 19 Foreign............................................ 1 (9) (10) ------ ------ ---- Subtotal........................................... 1,690 (44) 52 ------ ------ ---- Provision for income tax............................. $1,651 $1,054 $557 ====== ====== ====
The reconciliation of the income tax provision at the U.S. statutory rate to the provision for income tax as reported for continuing operations is as follows:
YEARS ENDED DECEMBER 31, ----------------------------- 2008 2007 2006 ------ ------ ----- (IN MILLIONS) Tax provision at U.S. statutory rate................ $1,759 $1,157 $ 780 Tax effect of: Tax-exempt investment income...................... (116) (160) (167) State and local income tax........................ 1 33 19 Prior year tax.................................... 52 38 (26) Foreign tax rate differential and change in valuation allowance............................ (14) (18) (21) Other, net........................................ (31) 4 (28) ------ ------ ----- Provision for income tax............................ $1,651 $1,054 $ 557 ====== ====== =====
F-91 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income tax represents 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, --------------- 2008 2007 ------ ------ (IN MILLIONS) Deferred income tax assets: Policyholder liabilities and receivables................ $3,312 $3,005 Net operating loss carryforwards........................ 24 47 Employee benefits....................................... 616 120 Tax credit carryforwards................................ 298 -- Net unrealized investment losses........................ 4,062 -- Litigation-related and government mandated.............. 264 45 Other................................................... 111 202 ------ ------ 8,687 3,419 Less: Valuation allowance................................. 14 8 ------ ------ 8,673 3,411 ------ ------ Deferred income tax liabilities: Investments, including derivatives...................... 3,918 1,493 DAC..................................................... 2,167 2,207 Net unrealized investment gains......................... -- 689 Other................................................... 31 7 ------ ------ 6,116 4,396 ------ ------ Net deferred income tax asset/(liability)................. $2,557 $ (985) ====== ======
Domestic net operating loss carryforwards amount to $29 million at December 31, 2008 and will expire beginning in 2024. Foreign net operating loss carryforwards amount to $51 million at December 31, 2008 and were generated in various foreign countries with expiration periods of five years to indefinite expiration. Tax credit carryforwards amount to $298 million at December 31, 2008. 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 be not 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 2008, the Company recorded an increase to the deferred tax valuation allowance of $6 million related to certain foreign net operating loss carryforwards. The Company has not established a valuation allowance against the deferred tax asset of $4,062 million recognized in connection with unrealized losses at December 31, 2008. A valuation allowance was not considered necessary based upon the Company's intent and ability to hold such securities until their recovery or maturity and the existence of tax-planning strategies that include sources of future taxable income against which such losses could be offset. The Company files income tax returns with the U.S. federal government and various state and local jurisdictions, as well as foreign jurisdictions. 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. With a few exceptions, the Company is no F-92 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities for years prior to 2000. In 2005, the IRS commenced an examination of the Company's U.S. income tax returns for 2000 through 2002 that is anticipated to be completed in 2009. As a result of the implementation of FIN 48 on January 1, 2007, the Company recognized a $18 million increase in the liability for unrecognized tax benefits and a $16 million decrease in the interest liability for unrecognized tax benefits, as well as a $17 million increase in the liability for unrecognized tax benefits and a $5 million increase in the interest liability for unrecognized tax benefits which are included in liabilities of subsidiaries held-for-sale. The corresponding reduction to the January 1, 2007 balance of retained earnings was $13 million, net of $11 million of minority interest included in liabilities of subsidiaries held-for-sale. The Company's total amount of unrecognized tax benefits upon adoption of FIN 48 was $797 million. The Company reclassified, at adoption, $568 million of current income tax payables to the liability for unrecognized tax benefits included within other liabilities. The Company also reclassified, at adoption, $211 million of deferred income tax liabilities, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility, to the liability for unrecognized tax benefits. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. The total amount of unrecognized tax benefits at January 1, 2007 that would affect the effective tax rate, if recognized, was $586 million. The Company also had $198 million of accrued interest, included within other liabilities, as of January 1, 2007. The Company classifies interest accrued related to unrecognized tax benefits in interest expense, while penalties are included within income tax expense. At December 31, 2007, the Company's total amount of unrecognized tax benefits was $655 million and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, was $475 million. The total amount of unrecognized tax benefits decreased by $142 million from the date of adoption primarily due to settlements reached with the IRS with respect to certain significant issues involving demutualization, post-sale purchase price adjustments and reinsurance offset by additions for tax positions of the current year. As a result of the settlements, items within the liability for unrecognized tax benefits, in the amount of $171 million, were reclassified to current and deferred income taxes, as applicable, and a payment of $156 million was made in December of 2007, with $6 million to be paid in 2009 and the remaining $9 million to be paid in future years. At December 31, 2008, the Company's total amount of unrecognized tax benefits was $593 million and the total amount of unrecognized tax benefits that would affect the effective tax rate, if recognized, is $485 million. The total amount of unrecognized tax benefits decreased by $62 million from December 31, 2007 primarily due to settlements reached with the IRS with respect to certain significant issues involving demutualization, leasing and tax credits offset by additions for tax positions of the current year. As a result of the settlements, items within the liability for unrecognized tax benefits, in the amount of $135 million, were reclassified to current and deferred income taxes, as applicable. Of the $135 million reclassified to current and deferred income taxes, $2 million was paid in 2008 and $133 million will be paid in 2009. The Company's liability for unrecognized tax benefits will change in the next 12 months pending the outcome of remaining issues associated with the current IRS audit including tax-exempt income and tax credits. Management is working to resolve the remaining audit items directly with IRS auditors as well as through available accelerated IRS resolution programs and may protest any unresolved issues through the IRS appeals process and, possibly, litigation, the timing and extent of which is uncertain. At this time, a reasonable estimate of the range of a payment or change in the liability is between $40 million and $50 million; however, the Company continues to believe that the ultimate resolution of the issues will not result in 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-93 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2008 and December 31, 2007, is as follows:
DECEMBER 31, ------------- 2008 2007 ----- ----- (IN MILLIONS) Balance as of beginning of the period...................... $ 655 $ 797 Additions for tax positions of prior years................. 4 32 Reductions for tax positions of prior years................ (33) (51) Additions for tax positions of current year................ 120 52 Reductions for tax positions of current year............... (12) -- Settlements with tax authorities........................... (135) (171) Lapses of statutes of limitations.......................... (6) (4) ----- ----- Balance as of end of the period............................ $ 593 $ 655 ===== =====
During the year ended December 31, 2007, the Company recognized $72 million in interest expense associated with the liability for unrecognized tax benefits. At December 31, 2007, the Company had $197 million of accrued interest associated with the liability for unrecognized tax benefits. The $1 million increase, from the date of adoption, in accrued interest associated with the liability for unrecognized tax benefits resulted from an increase of $72 million of interest expense and a $73 million decrease primarily resulting from the aforementioned IRS settlements. During 2007, the $73 million resulting from IRS settlements was reclassified to current income tax payable and will be paid in 2009. During the year ended December 31, 2008, the Company recognized $33 million in interest expense associated with the liability for unrecognized tax benefits. At December 31, 2008, the Company had $156 million of accrued interest associated with the liability for unrecognized tax benefits. The $41 million decrease from December 31, 2007 in accrued interest associated with the liability for unrecognized tax benefits resulted from an increase of $33 million of interest expense and a $74 million decrease primarily resulting from the aforementioned IRS settlements. Of the $74 million decrease, $73 million has been reclassified to current income tax payable and the remaining $1 million reduced interest expense. Of the $73 million reclassified to current income tax payable, $4 million was paid in 2008 and the remainder of $69 million will be paid in 2009. On September 25, 2007, the IRS issued Revenue Ruling 2007-61, which announced its intention to issue regulations with respect to certain computational aspects of the Dividends Received Deduction ("DRD") on separate account assets held in connection with variable annuity contracts. Revenue Ruling 2007-61 suspended a revenue ruling issued in August 2007 that would have changed accepted industry and IRS interpretations of the statutes governing these computational questions. Any regulations that the IRS ultimately proposes for issuance in this area will be subject to public notice and comment, at which time insurance companies and other interested parties will have the opportunity to raise legal and practical questions about the content, scope and application of such regulations. As a result, the ultimate timing and substance of any such regulations are unknown at this time. For the years ended December 31, 2008 and 2007, the Company recognized an income tax benefit of $104 million and $113 million, respectively, related to the separate account DRD. F-94 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. 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. 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 annual basis, the Company reviews relevant information with respect to litigation and contingencies to be reflected in the Company's consolidated financial statements. In 2007, the Company received $39 million upon the resolution of an indemnification claim associated with the 2000 acquisition of GALIC, and the Company reduced legal liabilities by $31 million after the settlement of certain cases. The review includes senior legal and financial personnel. Unless stated below, estimates of possible 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; in 2007 the Company increased legal liabilities for pending sales practices, employment, and intellectual property litigation matters against the Company. 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 at December 31, 2008. Demutualization Actions Several lawsuits were brought in 2000 challenging the fairness of the Plan and the adequacy and accuracy of Metropolitan Life Insurance Company's disclosure to policyholders regarding the Plan. The actions discussed below name as defendants some or all of Metropolitan Life Insurance Company, MetLife, Inc., and individual directors. Metropolitan Life Insurance Company, MetLife, Inc., and the individual directors believe they have meritorious defenses to the plaintiffs' claims and are contesting vigorously all of the plaintiffs' claims in these actions. Fiala, et al. v. Metropolitan Life Ins. Co., et al. (Sup. Ct., N.Y. County, filed March 17, 2000). The plaintiffs in the consolidated state court class action seek compensatory relief and punitive damages against Metropolitan Life Insurance Company, MetLife, Inc., and individual directors. The court has certified a litigation class of present and former policyholders on plaintiffs' claim that defendants violated section 7312 of the New York Insurance Law. Pursuant to the court's order, plaintiffs have given notice to the class of the pendency of this action. Defendants' motion for summary judgment is pending. F-95 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In re MetLife Demutualization Litig. (E.D.N.Y., filed April 18, 2000). In this class action against Metropolitan Life Insurance Company and MetLife, Inc., plaintiffs served a second consolidated amended complaint in 2004. 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. By orders dated July 19, 2005 and August 29, 2006, the federal trial court certified a litigation class of present and former policyholders. The court has directed the manner and form of notice to the class, but plaintiffs have not yet distributed the notice. Metropolitan Life Insurance Company and MetLife, Inc. have moved for summary judgment, and plaintiffs have moved for partial summary judgment. The court heard oral argument on the parties' motions for summary judgment on September 19, 2008. Asbestos-Related Claims Metropolitan Life Insurance Company is and has been a defendant in a large number of asbestos-related suits filed primarily in state courts. These suits principally allege that the plaintiff or plaintiffs suffered personal injury resulting from exposure to asbestos and seek both actual and punitive damages. Metropolitan Life Insurance Company has never engaged in the business of manufacturing, producing, distributing or selling asbestos or asbestos- containing products nor has Metropolitan Life Insurance Company issued liability or workers' compensation insurance to companies in the business of manufacturing, producing, distributing or selling asbestos or asbestos- containing products. The lawsuits principally have focused on allegations with respect to certain research, publication and other activities of one or more of Metropolitan Life Insurance Company's employees during the period from the 1920's through approximately the 1950's and allege that Metropolitan Life Insurance Company 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 Insurance Company believes that it should not have legal liability in these cases. The outcome of most asbestos litigation matters, however, is uncertain and can be impacted by numerous variables, including differences in legal rulings in various jurisdictions, the nature of the alleged injury, and factors unrelated to the ultimate legal merit of the claims asserted against Metropolitan Life Insurance Company. Metropolitan Life Insurance Company employs a number of resolution strategies to manage its asbestos loss exposure, including seeking resolution of pending litigation by judicial rulings and settling individual or groups of claims or lawsuits under appropriate circumstances. Claims asserted against Metropolitan Life Insurance Company have included negligence, intentional tort and conspiracy concerning the health risks associated with asbestos. Metropolitan Life Insurance Company's defenses (beyond denial of certain factual allegations) include that: (i) Metropolitan Life Insurance Company 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 did not rely on any actions of Metropolitan Life Insurance Company; (iii) Metropolitan Life Insurance Company's conduct was not the cause of the plaintiffs' injuries; (iv) plaintiffs' exposure occurred after the dangers of asbestos were known; and (v) the applicable time with respect to filing suit has expired. During the course of the litigation, certain trial courts have granted motions dismissing claims against Metropolitan Life Insurance Company, while other trial courts have denied Metropolitan Life Insurance Company's motions to dismiss. There can be no assurance that Metropolitan Life Insurance Company will receive favorable decisions on motions in the future. While most cases brought to date have settled, Metropolitan Life Insurance Company intends to continue to defend aggressively against claims based on asbestos exposure, including defending claims at trials. The approximate total number of asbestos personal injury claims pending against Metropolitan Life Insurance Company as of the dates indicated, the approximate number of new claims during the years ended on those dates and F-96 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the approximate total settlement payments made to resolve asbestos personal injury claims at or during those years are set forth in the following table:
DECEMBER 31, --------------------------- 2008 2007 2006 ------- ------- ------- (IN MILLIONS, EXCEPT NUMBER OF CLAIMS) Asbestos personal injury claims at year end...... 74,027 79,717 87,070 Number of new claims during the year............. 5,063 7,161 7,870 Settlement payments during the year (1).......... $ 99.0 $ 28.2 $ 35.5
-------- (1) Settlement payments represent payments made by Metropolitan Life Insurance Company during the year in connection with settlements made in that year and in prior years. Amounts do not include Metropolitan Life Insurance Company's attorneys' fees and expenses and do not reflect amounts received from insurance carriers. In 2005, Metropolitan Life Insurance Company received approximately 18,500 new claims, ending the year with a total of approximately 100,250 claims, and paid approximately $74.3 million for settlements reached in 2005 and prior years. In 2004, Metropolitan Life Insurance Company received approximately 23,900 new claims, ending the year with a total of approximately 108,000 claims, and paid approximately $85.5 million for settlements reached in 2004 and prior years. In 2003, Metropolitan Life Insurance Company received approximately 58,750 new claims, ending the year with a total of approximately 111,700 claims, and paid approximately $84.2 million for settlements reached in 2003 and prior years. The number of asbestos cases that may be brought, the aggregate amount of any liability that Metropolitan Life Insurance Company may incur, and the total amount paid in settlements in any given year are uncertain and may vary significantly from year to year. The ability of Metropolitan Life Insurance Company to estimate its ultimate asbestos exposure is subject to considerable uncertainty, and the conditions impacting its liability can be dynamic and subject to change. The availability of reliable data is limited and it is difficult to predict with any certainty the 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 in pending and future claims, the impact of the number of new claims filed in a particular jurisdiction and variations in the law in the jurisdictions in which claims are filed, the possible impact of tort reform efforts, the willingness of courts to allow plaintiffs to pursue claims against Metropolitan Life Insurance Company when exposure to asbestos took place after the dangers of asbestos exposure were well known, and the impact of any possible future adverse verdicts and their amounts. The ability to make estimates regarding ultimate asbestos exposure declines significantly as the estimates relate to years further in the future. In the Company's judgment, there is a future point after which losses cease to be probable and reasonably estimable. It is reasonably possible that the Company's total exposure to asbestos claims may be materially greater than the asbestos liability currently accrued and that future charges to income may be necessary. While the potential future charges could be material in the 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 financial position. During 1998, Metropolitan Life Insurance Company paid $878 million in premiums for excess insurance policies for asbestos-related claims. The excess insurance policies for asbestos-related claims provided for recovery of losses up to $1.5 billion in excess of a $400 million self-insured retention. The Company's initial option to commute the excess insurance policies for asbestos- related claims would have arisen at the end of 2008. On September 29, 2008, Metropolitan Life Insurance Company entered into agreements commuting the excess insurance policies as of September 30, 2008. As a result of the commutation of the policies, Metropolitan Life Insurance Company received cash and securities totaling $632 million. Of this total, Metropolitan Life Insurance Company received $115 million in fixed maturity securities on September 26, 2008, $200 million in cash on F-97 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) October 29, 2008, and $317 million in cash on January 29, 2009. Metropolitan Life Insurance Company recognized a loss on commutation of the policies in the amount of $35.3 million during 2008. In the years prior to commutation, the excess insurance policies for asbestos-related claims were subject to annual and per claim sublimits. Amounts exceeding the sublimits during 2007, 2006 and 2005 were approximately $16 million, $8 million and $0, respectively. Amounts were recoverable under the policies annually with respect to claims paid during the prior calendar year. Each asbestos-related policy contained an experience fund and a reference fund that provided for payments to Metropolitan Life Insurance Company at the commutation date if the reference fund was greater than zero at commutation or pro rata reductions from time to time in the loss reimbursements to Metropolitan Life Insurance Company if the cumulative return on the reference fund was less than the return specified in the experience fund. The return in the reference fund was tied to performance of the S&P 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 each year from 2003 through 2008 for the amounts paid with respect to asbestos litigation in excess of the retention. The foregone loss reimbursements were approximately $62.2 million with respect to claims for the period of 2002 through 2007. Because the policies were commuted as of September 30, 2008, there will be no claims under the policies or forgone loss reimbursements with respect to payments made in 2008 and thereafter. The Company believes adequate provision has been made in its consolidated financial statements for all probable and reasonably estimable losses for asbestos-related claims. Metropolitan Life Insurance Company's recorded asbestos liability is based on its estimation of the following elements, as informed by the facts presently known to it, its understanding of current law, and its past experiences: (i) the probable and reasonably estimable liability for asbestos claims already asserted against Metropolitan Life Insurance Company, including claims settled but not yet paid; (ii) the probable and reasonably estimable liability for asbestos claims not yet asserted against Metropolitan Life Insurance Company, but which Metropolitan Life Insurance Company believes are reasonably probable of assertion; and (iii) the legal defense costs associated with the foregoing claims. Significant assumptions underlying Metropolitan Life Insurance Company's analysis of the adequacy of its recorded liability with respect to asbestos litigation include: (i) the number of future claims; (ii) the cost to resolve claims; and (iii) the cost to defend claims. Metropolitan Life Insurance Company reevaluates on a quarterly and annual basis its exposure from asbestos litigation, including studying its claims experience, reviewing external literature regarding asbestos claims experience in the United States, assessing relevant trends impacting asbestos liability and considering numerous variables that can affect its asbestos liability exposure on an overall or per claim basis. These variables include bankruptcies of other companies involved in asbestos litigation, legislative and judicial developments, the number of pending claims involving serious disease, the number of new claims filed against it and other defendants, and the jurisdictions in which claims are pending. As previously disclosed, in 2002 Metropolitan Life Insurance Company increased its recorded liability for asbestos-related claims by $402 million from approximately $820 million to $1,225 million. Based upon its regular reevaluation of its exposure from asbestos litigation, Metropolitan Life Insurance Company has updated its liability analysis for asbestos-related claims through December 31, 2008. Regulatory Matters The Company receives and responds to subpoenas or other inquiries from state regulators, including state insurance commissioners; state attorneys general or other state governmental authorities; federal regulators, including the SEC; federal governmental authorities, including congressional committees; and the Financial Industry Regulatory Authority seeking a broad range of information. The issues involved in information requests and regulatory matters vary widely. Certain regulators have requested information and documents regarding contingent commission payments to brokers, the Company's awareness of any "sham" bids for business, bids and quotes that the Company submitted to potential customers, incentive agreements entered into with brokers, or compensation paid to intermediaries. Regulators also have requested information relating to market timing and late F-98 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) trading of mutual funds and variable insurance products and, generally, the marketing of products. The Company 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 Company has been cooperating fully with these inquiries. Regulatory authorities in a small number of states have had investigations or inquiries relating to sales of individual life insurance policies or annuities or other products by Metropolitan Life Insurance Company; New England Mutual Life Insurance Company, New England Life Insurance Company and New England Securities Corporation (collectively "New England"); and GALIC. 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. In June 2008, the Environmental Protection Agency issued a Notice of Violation ("NOV") regarding the operations of the Homer City Generating Station, an electrical generation facility. The NOV alleges, among other things, that the electrical generation facility is being operated in violation of certain federal and state Clean Air Act requirements. Homer City OL6 LLC, an entity owned by Metropolitan Life Insurance Company, is a passive investor with a minority interest in the electrical generation facility, which is solely operated by the lessee, EME Homer City Generation L.P. ("EME Homer"). Homer City OL6 LLC and EME Homer are among the respondents identified in the NOV. EME Homer has been notified of its obligation to indemnify Homer City OL6 LLC and Metropolitan Life Insurance Company for any claims resulting from the NOV and has expressly acknowledged its obligation to indemnify Homer City OL6 LLC. Other Litigation Jacynthe Evoy-Larouche v. Metropolitan Life Ins. Co. (Que. Super. Ct., filed March 1998). This putative class action lawsuit involving sales practices claims was filed against Metropolitan Life Insurance Company in Canada. Plaintiff alleged misrepresentations regarding dividends and future payments for life insurance policies and seeks unspecified damages. Pursuant to a judgment dated March 11, 2009, this lawsuit was dismissed. The American Dental Association, et al. v. MetLife Inc., et al. (S.D. Fla., filed May 19, 2003). The American Dental Association and three individual providers have sued MetLife, Inc., Metropolitan Life Insurance Company and other non-affiliated insurance companies in a putative class action lawsuit. 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. On February 10, 2009, the district court granted the Company's motion to dismiss plaintiffs' second amended complaint, dismissing all of plaintiffs' claims except for breach of contract claims. Plaintiffs had been provided with an opportunity to re-plead the dismissed claims by February 26, 2009. Since plaintiffs never amended these claims, they were dismissed with prejudice on March 2, 2009. By order dated March 20, 2009, the court declined to retain jurisdiction over the remaining breach of contract claims and dismissed the lawsuit. In Re Ins. Brokerage Antitrust Litig. (D. N.J., filed February 24, 2005). In this multi-district class action proceeding, plaintiffs' complaint alleged that MetLife, Inc., Metropolitan Life Insurance Company, several non- affiliated insurance companies and several insurance brokers violated the Racketeer Influenced and Corrupt Organizations Act ("RICO"), the Employee Retirement Income Security Act of 1974 ("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. In August and September 2007 and January 2008, the court issued orders granting defendants' motions to dismiss with prejudice the federal antitrust, the RICO, and the ERISA claims. In February 2008, the court dismissed the remaining state law claims on jurisdictional grounds. Plaintiffs' appeal from the orders dismissing their RICO and federal antitrust claims is pending with the U.S. Court of Appeals for the Third Circuit. A putative class action alleging that MetLife, Inc. and other non-affiliated defendants violated F-99 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) state laws was transferred to the District of New Jersey but was not consolidated with other related actions. Plaintiffs' motion to remand this action to state court in Florida is pending. Metropolitan Life Insurance Company v. Park Avenue Securities, et. al. (FINRA Arbitration, filed May 2006). Metropolitan Life Insurance Company commenced an action against Park Avenue Securities LLC., a registered investment adviser and broker-dealer that is an indirect wholly-owned subsidiary of The Guardian Life Insurance Company of America, alleging misappropriation of confidential and proprietary information and use of prohibited methods to solicit Metropolitan Life Insurance Company customers and recruit Metropolitan Life Insurance Company financial services representatives. On February 12, 2009, a FINRA arbitration panel awarded Metropolitan Life Insurance Company $21 million in damages, including punitive damages and attorneys' fees. Park Avenue Securities may appeal the award. Thomas, et al. v. Metropolitan Life Ins. Co., et al. (W.D. Okla., filed January 31, 2007). A putative class action complaint was filed against Metropolitan Life Insurance Company and MetLife Securities, Inc. Plaintiffs assert legal theories of violations of the federal securities laws and violations of state laws with respect to the sale of certain proprietary products by the Company's agency distribution group. Plaintiffs seek rescission, compensatory damages, interest, punitive damages and attorneys' fees and expenses. In January and May 2008, the court issued orders granting the defendants' motion to dismiss in part, dismissing all of plaintiffs' claims except for claims under the Investment Advisers Act. Defendants' motion to dismiss claims under the Investment Advisers Act was denied. The Company will vigorously defend against the remaining claims in this matter. Sales Practices Claims. Over the past several years, Metropolitan Life Insurance Company, New England and GALIC have faced numerous claims, including class action lawsuits, alleging improper marketing or sales of individual life insurance policies, annuities, mutual funds or other products. Some of the current cases seek substantial damages, including punitive and treble damages and attorneys' fees. At December 31, 2008, there were approximately 125 sales practices litigation matters pending against the Company. The Company continues to vigorously defend against the claims in these matters. 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 Insurance Company, New England, GALIC, MetLife Securities, Inc. and Walnut Street Securities. Summary Putative or certified class action litigation and other litigation and claims and assessments against the Company, in addition to those discussed previously 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. It is not possible to predict the ultimate outcome of all pending investigations and legal proceedings or provide reasonable ranges of potential losses, except as noted previously in connection with specific matters. In some of the matters referred to previously, 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 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-100 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INSOLVENCY ASSESSMENTS Most of the jurisdictions in which the Company is admitted to transact business require 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 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. Assets and liabilities held for insolvency assessments are as follows:
DECEMBER 31, -------------- 2008 2007 ---- ---- (IN MILLIONS) Other Assets: Premium tax offset for future undiscounted assessments..... $37 $24 Premium tax offsets currently available for paid assessments............................................. 5 5 --- --- $42 $29 === === Other Liabilities: Insolvency assessments..................................... $57 $41 === ===
Assessments levied against the Company were $2 million, less than $1 million and $1 million for the years ended December 31, 2008, 2007 and 2006, respectively. COMMITMENTS LEASES In accordance with industry practice, certain of the Company's income from lease agreements with retail tenants are 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 are as follows:
GROSS RENTAL SUBLEASE RENTAL INCOME INCOME PAYMENTS ------ -------- -------- (IN MILLIONS) 2009............................................... $390 $12 $ 189 2010............................................... $347 $ 8 $ 190 2011............................................... $270 $ 8 $ 168 2012............................................... $209 $ 8 $ 143 2013............................................... $170 $ 8 $ 129 Thereafter......................................... $534 $33 $1,061
During the fourth quarter of 2008, MetLife, Inc. moved certain of its operations in New York from Long Island City to New York City. As a result of this movement of operations and current market conditions, which precluded the immediate and complete sublet of all unused space in both Long Island City and New York City, the Company incurred a lease impairment charge of $38 million which is included within other expenses in Corporate & Other. The impairment charge was determined based upon the present value of the gross rental payments less sublease income discounted at a risk-adjusted rate over the remaining lease terms which range from 15-20 years. The F-101 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company has made assumptions with respect to the timing and amount of future sublease income in the determination of this impairment charge. Additional impairment charges could be incurred should market conditions deteriorate further or last for a period significantly longer than anticipated. 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 $2.9 billion and $2.8 billion at December 31, 2008 and 2007, 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 $2.2 billion and $3.3 billion at December 31, 2008 and 2007, respectively. COMMITMENTS TO FUND BANK CREDIT FACILITIES, BRIDGE LOANS AND PRIVATE CORPORATE BOND INVESTMENTS The Company commits to lend funds under bank credit facilities, bridge loans and private corporate bond investments. The amounts of these unfunded commitments were $611 million and $667 million at December 31, 2008 and 2007, respectively. GUARANTEES In the normal course of its business, the Company has provided certain indemnities, guarantees and commitments to third parties pursuant to which it may be required to make payments now or in the future. In the context of acquisition, disposition, investment and other transactions, the Company has provided indemnities and guarantees, including those related to tax, environmental and other specific liabilities, and other indemnities and guarantees that are triggered by, among other things, breaches of representations, warranties or covenants provided by the Company. In addition, in the normal course of business, the Company provides indemnifications to counterparties in contracts with triggers similar to the foregoing, as well as for certain other liabilities, such as third party lawsuits. These obligations are often subject to time limitations that vary in duration, including contractual limitations and those that arise by operation of law, such as applicable statutes of limitation. In some cases, the maximum potential obligation under the indemnities and guarantees is subject to a contractual limitation ranging from less than $1 million to $800 million, with a cumulative maximum of $1.1 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 that could become due under these guarantees in the future. Management believes that it is unlikely the Company will have to make any material payments under these indemnities, guarantees or commitments. In addition, the Company indemnifies its directors and officers as provided in its charters and by-laws. Also, the Company indemnifies 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 that could become due under these indemnities in the future. During the year ended December 31, 2008, the Company recorded $7 million of additional liabilities for guarantees related to certain investment transactions. The term for these guarantees and their associated liabilities varies, with a maximum of 18 years. The maximum potential amount of future payments the Company could be required to pay under these guarantees is $202 million. During the year ended December 31, 2008, the Company reduced $3 million of previously recorded liabilities related to these investment transactions. The Company's F-102 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recorded liability was $4 million at December 31, 2008 for indemnities, guarantees and commitments. The Company had no liability for indemnities, guarantees and commitments at December 31, 2007. In connection with synthetically created investment transactions, the Company writes credit default swap obligations that generally require payment of principal outstanding due in exchange for the referenced credit obligation. If a credit event, as defined by the contract, occurs the Company's maximum amount at risk, assuming the value of all referenced credit obligations is zero, was $1,558 million at December 31, 2008. The Company can terminate these contracts at any time through cash settlement with the counterparty at an amount equal to the then current fair value of the credit default swaps. As of December 31, 2008, the Company would have paid $35 million to terminate all of these contracts. See Note 4 for further disclosures related to credit default swap obligations. 14. EMPLOYEE BENEFIT PLANS PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company sponsors and administers various qualified and non-qualified defined benefit pension plans and other postretirement employee benefit plans covering employees and sales representatives who meet specified eligibility requirements of the sponsor and its participating affiliates. Participating affiliates are allocated a proportionate share of net expense related to the plans as well as contributions made to the plans. Pension benefits are provided utilizing either a traditional formula or cash balance formula. The traditional formula provides benefits based upon years of credited service and either final average or career average earnings. The cash balance formula utilizes hypothetical or notional accounts which credit participants with benefits equal to a percentage of eligible pay, as well as earnings credits, determined annually, based upon the average annual rate of interest on 30-year U.S. Treasury securities, for each account balance. At December 31, 2008, the majority of active participants are accruing benefits under the cash balance formula; however, approximately 95% of the Company's obligations result from benefits calculated with the traditional formula. The non-qualified pension plans provide supplemental benefits, in excess of amounts permitted by governmental agencies, to certain executive level employees. The Company's proportionate share of net pension expense related to its sponsored pension plans was $49 million for the year ended December 31, 2008. The Company also provides certain postemployment benefits and certain postretirement medical and life insurance benefits for retired employees. The other postretirement plans cover eligible employees of the sponsor and its participating affiliates who were hired prior to 2003 (or, in certain cases, rehired during or after 2003) and meet age and service criteria while working for the Company or its participating affiliates, at various levels, in accordance with the applicable plans. Virtually all retirees, or their beneficiaries, contribute a portion of the total cost of postretirement medical benefits. Participating affiliates are allocated a proportionate share of net expense and contributions related to the postemployment and other postretirement plans. Employees hired after 2003 are not eligible for any employer subsidy for postretirement medical benefits. The Company's proportionate share of net other postretirement expense related to its sponsored other postretirement plans was ($8) million for the year ended December 31, 2008. As described more fully in Note 1, effective December 31, 2006, MetLife, Inc. adopted SFAS 158. The adoption of SFAS 158 required the recognition of the funded status of defined benefit pension and other postretirement benefit plans and eliminated the additional minimum pension liability provision of SFAS 87. The Company's additional minimum pension liability was $78 million, and the intangible asset was $12 million, at December 31, 2005. The excess of the additional minimum pension liability over the intangible asset of $66 million, $41 million net of income tax, was recorded as a reduction of accumulated other comprehensive income. At December 31, 2006, immediately prior to adopting SFAS 158, the Company's additional minimum pension liability was $92 million. The additional minimum pension liability of $59 million, net of income tax of $33 million, was F-103 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) recorded as a reduction of accumulated other comprehensive income. The change in the additional minimum pension liability of $18 million, net of income tax, was reflected as a component of comprehensive income for the year ended December 31, 2006. Upon adoption of SFAS 158, the Company eliminated the additional minimum pension liability and recognized as an adjustment to accumulated other comprehensive income (loss), net of income tax, those amounts of actuarial gains and losses, prior service costs and credits, and the remaining net transition asset or obligation that had not yet been included in net periodic benefit cost at the date of adoption. The following table summarizes the adjustments to the December 31, 2006 consolidated balance sheet as a result of recognizing the funded status of the defined benefit plans:
DECEMBER 31, 2006 ------------------------------------------------- ADDITIONAL MINIMUM PRE PENSION ADOPTION OF POST SFAS 158 LIABILITY SFAS 158 SFAS 158 BALANCE SHEET CAPTION ADJUSTMENTS ADJUSTMENT ADJUSTMENT ADJUSTMENTS ----------------------------------------------- ----------- ---------- ----------- ----------- (IN MILLIONS) Other assets: Prepaid pension benefit cost..... $1,878 $ -- $ (999) $ 879 Other assets: Intangible asset................. $ 12 (12) -- $ -- Other liabilities: Accrued pension benefit cost......................................... $ (474) (14) (66) $ (554) Other liabilities: Accrued other postretirement benefit plan cost............................ $ (688) -- (96) $ (784) ---- ------- Subtotal..................................... (26) (1,161) Net liability of subsidiary held-for-sale...... -- (17) ---- ------- Accumulated other comprehensive income (loss), before income tax: Defined benefit plans.......................... $ (66) (26) (1,178) $(1,270) Minority interest.............................. -- 8 Deferred income tax............................ 8 421 ---- ------- Accumulated other comprehensive income (loss), net of income tax: Defined benefit plans.......................... $ (41) $(18) $ (749) $ (808) ==== =======
A December 31 measurement date is used for all of the Company's defined benefit pension and other postretirement benefit plans. F-104 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OBLIGATIONS, FUNDED STATUS AND NET PERIODIC BENEFIT COSTS
DECEMBER 31, --------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS --------------- --------------- 2008 2007 2008 2007 ------ ------ ------ ------ (IN MILLIONS) Change in benefit obligation: Benefit obligation at beginning of year............ $5,668 $5,854 $1,581 $2,043 Service cost..................................... 159 158 20 26 Interest cost.................................... 375 348 101 102 Plan participants' contributions................. -- -- 31 31 Net actuarial (gains) losses..................... 139 (383) 19 (464) Change in benefits............................... 1 39 -- -- Prescription drug subsidy........................ -- -- 10 13 Benefits paid.................................... (349) (348) (146) (170) ------ ------ ------ ------ Benefit obligation at end of year.................. 5,993 5,668 1,616 1,581 ------ ------ ------ ------ Change in plan assets: Fair value of plan assets at beginning of year..... 6,467 6,228 1,181 1,169 Actual return on plan assets..................... (943) 539 (149) 58 Employer contribution............................ 341 48 1 1 Benefits paid.................................... (349) (348) (23) (47) ------ ------ ------ ------ Fair value of plan assets at end of year......... 5,516 6,467 1,010 1,181 ------ ------ ------ ------ Funded status at end of year..................... $ (477) $ 799 $ (606) $ (400) ====== ====== ====== ====== Amounts recognized in the consolidated balance sheet consist of: Other assets..................................... $ 208 $1,382 $ -- $ -- Other liabilities................................ (685) (583) (606) (400) ------ ------ ------ ------ Net amount recognized............................ $ (477) $ 799 $ (606) $ (400) ====== ====== ====== ====== Accumulated other comprehensive (income) loss: Net actuarial (gains) losses..................... $2,196 $ 633 $ 146 $ (112) Prior service cost (credit)...................... 44 63 (157) (194) ------ ------ ------ ------ Accumulated other comprehensive (income) loss.... $2,240 $ 696 $ (11) $ (306) ====== ====== ====== ======
F-105 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans were as follows:
DECEMBER 31, ------------------------------------------------- NON-QUALIFIED QUALIFIED PLAN PLAN TOTAL --------------- ------------- --------------- 2008 2007 2008 2007 2008 2007 ------ ------ ----- ----- ------ ------ (IN MILLIONS) Aggregate fair value of plan assets (principally Company contracts)....... $5,516 $6,467 $ -- $ -- $5,516 $6,467 Aggregate projected benefit obligation.. 5,308 5,085 685 583 5,993 5,668 ------ ------ ----- ----- ------ ------ Over (under) funded..................... $ 208 $1,382 $(685) $(583) $ (477) $ 799 ====== ====== ===== ===== ====== ======
The accumulated benefit obligation for all defined benefit pension plans was $5,583 million and $5,256 million at December 31, 2008 and 2007, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
DECEMBER 31, -------------- 2008 2007 ---- ---- (IN MILLIONS) Projected benefit obligation................................ $685 $583 Accumulated benefit obligation.............................. $577 $508 Fair value of plan assets................................... $ -- $ --
Information for pension and other postretirement benefit plans with a projected benefit obligation in excess of plan assets is as follows:
DECEMBER 31, --------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS --------------- --------------- 2008 2007 2008 2007 ------ ------ ------ ------ (IN MILLIONS) Projected benefit obligation................. $685 $583 $1,616 $1,581 Fair value of plan assets.................... $ -- $ -- $1,010 $1,181
F-106 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of net periodic benefit cost and other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) were as follows:
YEARS ENDED DECEMBER 31, --------------------------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ------------------------ ------------------------ 2008 2007 2006 2008 2007 2006 ------ ------ ------ ------ ------ ------ (IN MILLIONS) NET PERIODIC BENEFIT COST Service cost............................ $ 159 $ 158 $ 155 $ 20 $ 26 $ 35 Interest cost........................... 375 348 328 101 102 116 Expected return on plan assets.......... (517) (501) (447) (88) (87) (80) Amortization of net actuarial (gains) losses............................... 24 68 131 -- -- 21 Amortization of prior service cost (credit)............................. 15 17 7 (36) (36) (37) ------ ------ ------ ------ ------ ------ Net periodic benefit cost............ 56 90 $ 174 (3) 5 $ 55 ====== ====== Net periodic benefit cost of subsidiary held-for-sale........... -- 4 -- 1 ------ ------ ------ ------ 56 94 (3) 6 ------ ------ ------ ------ OTHER CHANGES IN PLAN ASSETS AND BENEFIT OBLIGATIONS RECOGNIZED IN OTHER COMPREHENSIVE INCOME (LOSS) Net actuarial (gains) losses............ 1,563 (424) 258 (440) Prior service cost (credit)............. (19) 40 37 -- Amortization of net actuarial (gains) losses............................... (24) (68) -- -- Amortization of prior service cost (credit)............................. (15) (17) 36 36 -- --- ----- ---- ----- Total recognized in other comprehensive income (loss)........ 1,505 (469) 331 (404) -- --- ----- ---- ----- Total recognized in net periodic benefit cost and other comprehensive income (loss)........ $1,561 $(375) $328 $(398) ====== ====== ====== ======
The estimated net actuarial losses and prior service cost for the pension plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are $198 million and $9 million, respectively. The estimated net actuarial losses and prior service credit for the defined benefit other postretirement benefit plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are $10 million and ($36) million, respectively. In 2004, the Company adopted the guidance in FSP No. 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003, to account for future subsidies to be received under the Prescription Drug Act. The Company began receiving these subsidies during F-107 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2006. A summary of the reduction to the APBO and related reduction to the components of net periodic other postretirement benefit plan cost is as follows:
DECEMBER 31, ------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Cumulative reduction in benefit obligation: Balance, beginning of year........................... $299 $328 $298 Service cost......................................... 5 7 6 Interest cost........................................ 20 19 19 Net actuarial gains (losses)......................... 3 (42) 15 Prescription drug subsidy............................ (10) (13) (10) ---- ---- ---- Balance, end of year.............................. $317 $299 $328 ==== ==== ====
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Reduction in net periodic benefit cost: Service cost.......................................... $ 5 $ 7 $ 6 Interest cost......................................... 20 19 19 Amortization of net actuarial gains (losses).......... -- 5 30 --- --- --- Total reduction in net periodic benefit cost....... $25 $31 $55 === === ===
The Company received subsidies of $12 million and $10 million for the years ended December 31, 2008 and 2007, respectively. ASSUMPTIONS Assumptions used in determining benefit obligations were as follows:
DECEMBER 31, ------------------------------------------- OTHER PENSION POSTRETIREMENT BENEFITS BENEFITS ------------------- --------------------- 2008 2007 2008 2007 --------- ------- -------- -------- Weighted average discount rate....... 6.60% 6.65% 6.62% 6.65% Rate of compensation increase........ 3.5%-7.5% 4.0%-8% N/A N/A
Assumptions used in determining net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------------------------- OTHER POSTRETIREMENT PENSION BENEFITS BENEFITS --------------------------- --------------------------- 2008 2007 2006 2008 2007 2006 ------- ------- ------- ------- ------- ------- Weighted average discount rate........................ 6.65% 6.00% 5.80% 6.65% 6.00% 5.79% Weighted average expected rate of return on plan assets.... 8.25% 8.25% 8.25% 7.33% 7.48% 7.42% Rate of compensation increase.................... 3.5%-8% 4.0%-8% 4.0%-8% N/A N/A N/A
F-108 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The discount rate is determined annually based on the yield, measured on a yield to worst basis, of a hypothetical portfolio constructed of high quality debt instruments available on the valuation date, which would provide the necessary future cash flows to pay the aggregate projected benefit obligation when due. The expected rate of return on plan assets is based on anticipated performance of the various asset sectors in which the plan invests, weighted by target allocation percentages. Anticipated future performance is based on long- term historical returns of the plan assets by sector, adjusted for the Company's long-term expectations on the performance of the markets. While the precise expected return derived using this approach will fluctuate from year to year, the Company's policy is to hold this long-term assumption constant as long as it remains within reasonable tolerance from the derived rate. The weighted average expected return on plan assets for use in that plan's valuation in 2009 is currently anticipated to be 8.25% for pension benefits and postretirement medical benefits and 6.25% for postretirement life benefits. The assumed healthcare cost trend rates used in measuring the APBO and net periodic benefit cost were as follows:
DECEMBER 31, --------------------------------------------------------------- 2008 2007 ------------------------------ ------------------------------ Pre-Medicare eligible claims.. 8.8% down to 5.8% in 2018 and 8.5% down to 5% in 2014 and gradually decreasing until remaining constant thereafter 2079 reaching the ultimate rate of 4.1% Medicare eligible claims...... 8.8% down to 5.8% in 2018 and 10.5% down to 5% in 2018 and gradually decreasing until remaining constant thereafter 2079 reaching the ultimate rate of 4.1%
Assumed healthcare cost trend rates may have a significant effect on the amounts reported for healthcare plans. A one-percentage point change in assumed healthcare 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......................................... $ 6 $ (6) Effect of accumulated postretirement benefit obligation......................................... $76 $(86)
PLAN ASSETS The Company has issued group annuity and life insurance contracts supporting approximately 99% of all pension and other postretirement benefit plans assets. The account values of the group annuity and life insurance contracts issued by the Company and held as assets of the pension and other postretirement benefit plans were $6,451 million and $7,565 million at December 31, 2008 and 2007, respectively. The majority of such account values are held in separate accounts established by the Company. Total revenue from these contracts recognized in the consolidated statements of income was $42 million, $47 million and $48 million for the years ended December 31, 2008, 2007 and 2006, respectively, and includes policy charges, net investment income from investments backing the contracts and administrative fees. Total investment income (loss), including realized and unrealized gains and losses, credited to the account balances were ($1,090) million, $603 million and $818 million for the years ended December 31, 2008, 2007 and 2006, respectively. The terms of these contracts are consistent in all material respects with those the Company offers to unaffiliated parties that are similarly situated. F-109 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The weighted-average allocations of pension plan and other postretirement benefit plan assets were as follows:
DECEMBER 31, --------------------------- OTHER POSTRETIRE- PENSION MENT BENEFITS BENEFITS ----------- ------------- 2008 2007 2008 2007 ---- ---- ---- ---- ASSET CATEGORY Equity securities.................................. 28% 38% 27% 37% Fixed maturity securities.......................... 51 44 71 58 Other (Real Estate and Alternative Investments).... 21 18 2 5 --- --- --- --- Total............................................ 100% 100% 100% 100% === === === ===
The weighted-average target allocations of pension plan and other postretirement benefit plan assets for 2009 are as follows:
PENSION OTHER ------- ------- ASSET CATEGORY Equity securities..................................... 25%-45% 30%-45% Fixed maturity securities............................. 35%-55% 55%-85% Other (Real Estate and Alternative Investments)....... 5%-32% 0%-10%
Target allocations of assets are determined with the objective of maximizing returns and minimizing volatility of net assets through adequate asset diversification. Adjustments are made to target allocations based on an assessment of the impact of economic factors and market conditions. CASH FLOWS It is the Company's practice to make contributions to the qualified pension plans to comply with minimum funding requirements of ERISA. In accordance with such practice, no contributions were required for the years ended December 31, 2008 or 2007. No contributions will be required for 2009. The Company made discretionary contributions of $286 million to the qualified pension plans during the year ended December 31, 2008 and did not make discretionary contributions for the year ended December 31, 2007. The Company expects to make additional discretionary contributions of $143 million in 2009. Benefit payments due under the non-qualified pension plans are funded from the Company's general assets as they become due under the provision of the plans. These payments totaled $41 million and $48 million for the years ended December 31, 2008 and 2007, respectively. These payments are expected to be at approximately the same level in 2009. Other postretirement benefits represent a non-vested, non-guaranteed obligation of the Company and current regulations do not require specific funding levels for these benefits. While the Company has partially funded such plans in advance, it has been the Company's practice to primarily use their general assets, net of participant's contributions, to pay postretirement medical claims as they come due in lieu of utilizing plan assets. Total payments equaled $146 million and $170 million for the years ended December 31, 2008 and 2007, respectively. The Company expects to make contributions of $118 million, net of participant's contributions, toward the other postretirement plan obligations in 2009. As noted previously, the Company expects to receive subsidies under the Prescription Drug Act to partially offset such payments. F-110 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Gross benefit payments for the next ten years, which reflect expected future service where appropriate, and gross subsidies to be received under the Prescription Drug Act are expected to be as follows:
OTHER POSTRETIREMENT BENEFITS --------------------------- PRESCRIPTION PENSION DRUG BENEFITS GROSS SUBSIDIES NET -------- ----- ------------ ---- (IN MILLIONS) 2009......................................... $ 379 $133 $ (15) $118 2010......................................... $ 393 $138 $ (16) $122 2011......................................... $ 402 $144 $ (16) $128 2012......................................... $ 418 $148 $ (17) $131 2013......................................... $ 431 $152 $ (18) $134 2014-2018.................................... $2,368 $836 $(107) $729
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 $63 million, $66 million and $71 million for the years ended December 31, 2008, 2007 and 2006, respectively. 15. EQUITY CAPITAL CONTRIBUTIONS During the year ended December 31, 2008, MetLife, Inc. contributed and paid $4 million in the form of line of credit fees on the Company's behalf. During the year ended December, 31, 2008, in connection with an acquisition by MetLife, Inc., MetLife, Inc. contributed $9 million to the Company in the form of intangible assets and the associated deferred income tax liability, for which the Company receives the benefit. See Note 7. On December 12, 2007, MetLife, Inc. contributed $7 million to the Company in connection with the Company's issuance of a surplus note to MetLife Capital Trust IV. See Note 10. On October 20, 2006, MetLife, Inc. contributed $17 million to the Company in connection with the sale and merger of CLIC. See Note 2. On September 30, 2006, MetLife, Inc. contributed $377 million to the Company in the form of intangible assets. See Note 2. On May 1, 2006, GALIC, an indirect insurance subsidiary of the Company, sold its wholly-owned insurance subsidiary, Paragon Life Insurance Company ("Paragon"), to its ultimate parent, MetLife, Inc. Immediately following the sale, MetLife, Inc. merged Paragon, an affiliate of the Company, with and into the Company. In connection with the transaction, MetLife, Inc. contributed $76 million to the Company. EXCESS PROCEEDS RECEIVED ON SALE OF INTERESTS IN AFFILIATES On November 1, 2007, the Company sold its interests in MetLife Mexico, S.A. and MetLife Pensiones, S.A., both affiliates, to MetLife International Holdings, Inc. ("MIHI"), also an affiliate, at their approximate aggregate fair value of $34 million. The Company's carrying value of the interests at the time of sale was $4 million. The excess cash consideration received from MIHI over the Company's carrying value resulted in an increase of $30 million in additional paid-in capital. F-111 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) STOCK-BASED COMPENSATION PLANS Overview As described more fully in Note 1, effective January 1, 2006, in conjunction with MetLife, Inc., the Company adopted SFAS 123(r), using the modified prospective transition method. The adoption of SFAS 123(r) did not have a significant impact on the Company's financial position or results of operations. The stock-based compensation expense recognized by the Company is related to awards under incentive plans of MetLife, Inc., as described herein. Description of Plans The MetLife, Inc. 2000 Stock Incentive Plan, as amended (the "Stock Incentive Plan"), authorized the granting of awards in the form of options to buy shares of MetLife, Inc.'s common stock ("Stock Options") that either qualify as incentive Stock Options under Section 422A of the Internal Revenue Code or are non-qualified. Under the MetLife, Inc. 2005 Stock and Incentive Compensation Plan, as amended (the "2005 Stock Plan"), awards granted may be in the form of Stock Options, 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." The aggregate number of shares of MetLife, Inc. common stock reserved for issuance under the 2005 Stock Plan and the LTPCP 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. Additional shares of MetLife, Inc. common stock carried forward from the Stock Incentive Plan and available for issuance under the 2005 Stock Plan were 12,584,119 at December 31, 2008. 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. At December 31, 2008, the aggregate number of shares of MetLife, Inc. common stock remaining available for issuance pursuant to the 2005 Stock Plan was 55,654,550. Stock Option exercises and other stock-based awards to employees settled in shares are satisfied through the issuance of shares held in treasury by MetLife, Inc. The Company does not issue any of its own shares in satisfaction of stock- based compensation awards to employees. MetLife, Inc. allocated 89%, 88% and 90% of stock-based compensation to the Company for the years ended December 31, 2008, 2007 and 2006, respectively. This allocation represents substantially all stock-based compensation recognized in the Company's consolidated results of operations. Accordingly, the discussion herein addresses MetLife, Inc.'s practices for recognizing expense for awards under the Incentive Plans. Underlying awards are expressed in their entirety with related expense amounts representing the resulting allocation to the Company. Compensation expense related to awards under the Incentive Plans is recognized based on the number of awards expected to vest, which represents the awards granted less expected forfeitures over the life of the award, as estimated at the date of grant. Unless a material deviation from the assumed rate is observed during the term in which the awards are expensed, any adjustment necessary to reflect differences in actual experience is recognized in the period the award becomes payable or exercisable. Compensation expense of $108 million, $128 million and $130 million, and income tax benefits of $38 million, $45 million and $46 million, related to the Incentive Plans was allocated to the Company for the years ended December 31, 2008, 2007 and 2006, respectively. Compensation expense is principally related to the issuance of Stock Options, Performance Shares and LTPCP arrangements. F-112 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Stock Options All Stock Options granted had an exercise price equal to the closing price of MetLife, Inc.'s common stock as reported on the New York Stock Exchange on the date of grant, and have a maximum term of ten years. Certain Stock Options granted under the Stock Incentive Plan and the 2005 Stock Plan have or will become exercisable over a three year period commencing with the date of grant, while other Stock Options have or will become exercisable three years after the date of grant. A summary of the activity related to Stock Options for the year ended December 31, 2008 is presented below. The aggregate intrinsic value was computed using the closing share price on December 31, 2008 of $34.86 and December 31, 2007 of $61.62, as applicable.
WEIGHTED AVERAGE REMAINING AGGREGATE SHARES UNDER WEIGHTED AVERAGE CONTRACTUAL INTRINSIC OPTION EXERCISE PRICE TERM VALUE ------------ ---------------- ----------- ------------- (YEARS) (IN MILLIONS) Outstanding at January 1, 2008......... 24,362,746 $38.85 6.18 $555 ====== ==== ==== Granted.............................. 3,464,075 $59.48 Exercised............................ (1,372,254) $32.76 Cancelled/Expired.................... (142,145) $44.62 Forfeited............................ (219,330) $51.44 ---------- Outstanding at December 31, 2008....... 26,093,092 $41.75 5.73 $ -- ========== ====== ==== ==== Aggregate number of stock options expected to vest at December 31, 2008................................. 25,503,025 $41.38 5.66 $ -- ========== ====== ==== ==== Exercisable at December 31, 2008....... 19,405,732 $35.84 4.80 $ -- ========== ====== ==== ====
The fair value of Stock Options is estimated on the date of grant using a binomial lattice model. Significant assumptions used in MetLife, Inc.'s binomial lattice model, which are further described below, include: expected volatility of the price of MetLife, Inc.'s common stock; risk-free rate of return; expected dividend yield on MetLife, Inc.'s common stock; exercise multiple; and the post- vesting termination rate. Expected volatility is based upon an analysis of historical prices of MetLife, Inc.'s common stock and call options on that common stock traded on the open market. MetLife, Inc. uses a weighted-average of the implied volatility for publicly traded call options with the longest remaining maturity nearest to the money as of each valuation date and the historical volatility, calculated using monthly closing prices of its common stock. MetLife, Inc. 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 underlying shares rather than on daily price movements. The binomial lattice model used by MetLife, Inc. incorporates different risk-free rates based on the imputed forward rates for U.S. Treasury Strips for each year over the contractual term of the option. The table below presents the full range of rates that were used for options granted during the respective periods. Dividend yield is determined based on historical dividend distributions compared to the price of the underlying common stock as of the valuation date and held constant over the life of the Stock Option. The binomial model used by MetLife, Inc. incorporates the contractual term of the Stock Options and then factors in 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 F-113 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the binomial lattice model used by MetLife, Inc. is expressed using an exercise multiple, which reflects the ratio of exercise price to the strike price of Stock Options granted at which holders of the Stock Options are expected to exercise. The exercise multiple is derived from actual historical exercise activity. The post-vesting termination rate is determined from actual historical exercise experience and expiration activity under the Incentive Plans. The following weighted average assumptions, with the exception of risk-free rate, which is expressed as a range, were used to determine the fair value of Stock Options issued during the:
YEARS ENDED DECEMBER 31, --------------------------------------- 2008 2007 2006 ----------- ----------- ----------- Dividend yield............................... 1.21% 0.94% 1.04% Risk-free rate of return..................... 1.91%-7.21% 4.30%-5.32% 4.17%-4.96% Expected volatility.......................... 24.85% 19.54% 22.00% Exercise multiple............................ 1.73 1.66 1.52 Post-vesting termination rate................ 3.05% 3.66% 4.09% Contractual term (years)..................... 10 10 10 Expected life (years)........................ 6 6 6 Weighted average exercise price of stock options granted............................ $59.47 $62.86 $50.21 Weighted average fair value of stock options granted.................................... $17.51 $17.76 $13.84
Compensation expense related to Stock Option awards expected to vest and granted prior to January 1, 2006 is recognized ratably over the requisite service period, which equals the vesting term. Compensation expense related to Stock Option awards expected to vest and granted on or after January 1, 2006 is recognized ratably over the requisite service period or the period to retirement eligibility, if shorter. Compensation expense of $44 million, $49 million and $51 million related to Stock Options was allocated to the Company for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008, MetLife, Inc. had $43 million of total unrecognized compensation costs related to Stock Options. It is expected that these costs will be recognized over a weighted average period of 1.81 years. The Company's allocated portion of Stock Option expense was 88%. MetLife, Inc. allocated to its subsidiaries the tax benefit associated with the deduction allowed for Stock Option exercises. The Company's consolidated results of operations include $12 million, $41 million, and $22 million of such tax benefits for the years ended December 31, 2008, 2007, and 2006, respectively. Performance Shares Beginning in 2005, MetLife, Inc. awarded certain members of management Performance Shares under (and as defined in) 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 MetLife, Inc.'s performance with respect to: (i) the change in annual net operating earnings per share, as defined; and (ii) the proportionate total shareholder return, as defined, with reference to the three-year performance period relative to other companies in the S&P 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 MetLife, Inc.'s common stock. F-114 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a summary of Performance Share activity for the year ended December 31, 2008:
WEIGHTED AVERAGE GRANT DATE PERFORMANCE SHARES FAIR VALUE ------------------ ---------------- Outstanding at January 1, 2008................ 2,690,125 $48.39 Granted....................................... 954,075 $57.17 Forfeited..................................... (89,125) $57.43 Paid.......................................... (968,425) $36.87 --------- Outstanding at December 31, 2008.............. 2,586,650 $55.63 ========= Performance Shares expected to vest at December 31, 2008........................... 2,535,784 $55.56 =========
Performance Share amounts above represent aggregate initial target awards and do not reflect potential increases or decreases resulting from the final performance factor to be determined at the end of the respective performance period. At December 31, 2008, the three year performance period for the 2006 Performance Share grants was completed. Included in the immediately preceding table are 812,975 outstanding Performance Shares to which the final performance factor will be applied. The calculation of the performance factor is expected to be finalized during the second quarter of 2009 after all data necessary to perform the calculation is publicly available. Performance Share awards are accounted for as equity awards but are not credited with dividend-equivalents for actual dividends paid on MetLife, Inc.'s common stock during the performance period. Accordingly, the estimated fair value of Performance Shares is based upon the closing price of MetLife, Inc.'s common stock on the date of grant, reduced by the present value of estimated dividends to be paid on that stock during the performance period. Compensation expense related to initial Performance Shares granted prior to January 1, 2006 and expected to vest is recognized ratably during the performance period. Compensation expense related to initial Performance Shares granted on or after January 1, 2006 and expected to vest is recognized ratably over the performance period or the period to retirement eligibility, if shorter. Performance Shares expected to vest and the related compensation expenses may be further adjusted by the performance factor most likely to be achieved, as estimated by management, at the end of the performance period. Compensation expense of $64 million, $79 million and $67 million, related to Performance Shares was allocated to the Company for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008, MetLife, Inc. had $57 million of total unrecognized compensation costs related to Performance Share awards. It is expected that these costs will be recognized over a weighted average period of 1.65 years. The Company's allocated portion of Performance Share expense was 90%. Long-Term Performance Compensation Plan Prior to January 1, 2005, MetLife, Inc. granted stock-based compensation to certain members of management under the LTPCP. Each participant was assigned a target compensation amount (an "Opportunity Award") at the inception of the performance period with the final compensation amount determined based on the total shareholder return on MetLife, Inc.'s common stock over the three-year performance period, subject to limited further adjustment approved by MetLife, Inc.'s Board of Directors. Payments on the Opportunity Awards were normally payable in their entirety (subject to certain contingencies) at the end of the three-year performance period, and were paid in whole or in part with shares of MetLife, Inc.'s common stock, as approved by MetLife, Inc.'s Board of Directors. There were no new grants under the LTPCP during the years ended December 31, 2008, 2007 and 2006. A portion of each Opportunity Award under the LTPCP was settled in shares of MetLife, Inc.'s common stock while the remainder was settled in cash. The portion of the Opportunity Award settled in shares of MetLife, Inc.'s F-115 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) common stock was accounted for as an equity award with the fair value of the award determined based upon the closing price of its common stock on the date of grant. The compensation expense associated with the equity award, based upon the grant date fair value, was recognized into expense ratably over the respective three-year performance period. The portion of the Opportunity Award settled in cash was accounted for as a liability and was remeasured using the closing price of MetLife, Inc.'s common stock on the final day of each subsequent reporting period during the three-year performance period. The final LTPCP performance period concluded during the six months ended June 30, 2007. Final Opportunity Awards in the amount of 618,375 shares of MetLife, Inc.'s common stock and $16 million in cash were paid on April 18, 2007. No significant compensation expense related to LTPCP was recognized during the year ended December 31, 2008 and 2007. Compensation expense of $12 million related to LTPCP Opportunity Awards was allocated to the Company for the year ended December 31, 2006. STATUTORY EQUITY AND INCOME Each insurance company's state of domicile imposes minimum risk-based capital ("RBC") requirements that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of RBC 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 RBC, 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 Insurance Company and each of its U.S. insurance subsidiaries exceeded the minimum RBC requirements for all periods presented herein. The NAIC has adopted the Codification of Statutory Accounting Principles ("Codification"). Codification is 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 (the "Department") 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 Insurance Company and its insurance subsidiaries. Statutory accounting principles 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. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus. The most significant assets not admitted by the Company are net deferred income tax assets resulting from temporary differences between statutory accounting principles basis and tax basis not expected to reverse and become recoverable within a year. Further, statutory accounting principles do not give recognition to purchase accounting adjustments. Statutory net income (loss) of Metropolitan Life Insurance Company, a New York domiciled insurer, was ($338) million, $2.1 billion and $1.0 billion for the years ended December 31, 2008, 2007 and 2006, respectively. Statutory capital and surplus, as filed with the Department, was $11.6 billion and $13.0 billion at December 31, 2008 and 2007, respectively. DIVIDEND RESTRICTIONS Under New York State Insurance Law, Metropolitan Life Insurance Company is permitted, without prior insurance regulatory clearance, to pay stockholder dividends to MetLife, Inc. 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 end F-116 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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 Insurance Company will be permitted to pay a cash dividend to MetLife, Inc. in excess of the lesser of such two amounts only if it files notice of its intention to declare such a dividend and the amount thereof with the Superintendent and the Superintendent does not disapprove the distribution 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 Department 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 year ended December 31, 2008, Metropolitan Life Insurance Company distributed shares of RGA stock to MetLife, Inc. as an in-kind extraordinary dividend of $1,318 million. During the year ended December 31, 2007, Metropolitan Life Insurance Company paid to MetLife, Inc. $500 million in ordinary dividends. The maximum amount of dividends which Metropolitan Life Insurance Company may pay to MetLife, Inc. in 2009 without prior regulatory approval is $552 million. Stockholder dividends or other distributions proposed to be paid by New England Life Insurance Company ("NELICO") to its parent, Metropolitan Life Insurance Company, must be approved by the Massachusetts Commissioner of Insurance (the "Commissioner") if such dividends or distributions made within the preceding calendar year, exceed the greater of (i) 10% of NELICO's statutory surplus as of the end of the immediately preceding calendar year or (ii) NELICO's statutory net gains 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. During the year ended December 31, 2008, NELICO paid a common stockholder dividend of $94 million. During the year ended December 31, 2007, NELICO did not pay any common stockholder dividends. The maximum amount of the dividend which NELICO may pay to Metropolitan Life Insurance Company in 2009 without prior regulatory approval is $19 million. For the years ended December 31, 2008, 2007 and 2006, Metropolitan Life Insurance Company received dividends from subsidiaries of $48 million, $60 million and $34 million, respectively. F-117 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) OTHER COMPREHENSIVE INCOME (LOSS) The following table sets forth the reclassification adjustments required for the years ended December 31, 2008, 2007 and 2006 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 years:
YEARS ENDED DECEMBER 31, --------------------------------- 2008 2007 2006 --------- --------- --------- (IN MILLIONS) Holding gains (losses) on investments arising during the year............................. $(18,165) $(499) $(926) Income tax effect of holding gains (losses)... 6,273 221 324 Reclassification adjustments: Recognized holding (gains) losses included in current year income................... 1,214 (173) 403 Amortization of premiums and accretion of discounts associated with investments.... (504) (493) (443) Income tax effect............................. (245) 293 14 Allocation of holding losses on investments relating to other policyholder amounts...... 3,592 532 792 Income tax effect of allocation of holding losses to other policyholder amounts........ (1,231) (235) (277) Unrealized investment loss on dividend of interests in subsidiary..................... 69 -- -- Deferred income tax on unrealized investment loss on dividend of interests in subsidiary.................................. (46) -- -- -------- --------- --------- Net unrealized investment gains (losses), net of income tax............................... (9,043) (354) (113) Foreign currency translation adjustment....... (140) 139 7 Minimum pension liability adjustment, net of income tax.................................. -- -- (18) Defined benefit plan adjustment, net of income tax......................................... (1,153) 524 -- -------- --------- --------- Other comprehensive income (loss)............. $(10,336) $ 309 $(124) ======== ========= =========
F-118 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 16. OTHER EXPENSES Information on other expenses is as follows:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Compensation........................................ $2,616 $2,693 $2,661 Commissions......................................... 914 827 790 Interest and debt issue costs....................... 226 289 244 Interest costs related to funds withheld on ceded reinsurance....................................... 911 -- -- Amortization of DAC and VOBA........................ 1,081 643 583 Capitalization of DAC............................... (901) (886) (936) Rent, net of sublease income........................ 363 282 259 Minority interest................................... 4 85 14 Insurance tax....................................... 289 297 305 Other............................................... 1,079 897 1,176 ------ ------ ------ Total other expenses.............................. $6,582 $5,127 $5,096 ====== ====== ======
Amortization and Capitalization of DAC and VOBA See Note 5 for deferred acquisition costs by segment and a rollforward of deferred acquisition costs including impacts of amortization and capitalization. See also Note 9 for a description of the DAC amortization impact associated with the closed block. Interest and Debt Issue Costs See Notes 10 and 11 for attribution of interest expense by debt issuance. Lease Impairments See Note 13 for description of lease impairments included within other expenses. Affiliated Expenses See Notes 8 and 20 for description of affiliated expenses included within other expenses. Restructuring Charges MetLife Inc. has initiated an enterprise-wide cost reduction and revenue enhancement initiative. This initiative is focused on reducing complexity, leveraging scale, increasing productivity, and improving the effectiveness of MetLife Inc.'s and its subsidiaries' operations, as well as providing a foundation for future growth. During the third quarter of 2008, overall severance related restructuring charge of $58 million associated with the termination of certain employees was allocated to the Company in connection with this enterprise-wide initiative. During the fourth quarter of 2008, further severance related restructuring costs of $9 million offset by a $6 million reduction to its third quarter restructuring charge attributable to lower than anticipated costs for variable incentive compensation and for employees whose severance status changed was allocated to the Company. Total restructuring charges incurred in connection with this enterprise-wide initiative during the year ended December 31, 2008 were $61 million and were reflected within Corporate & Other. Estimated restructuring costs may change as management F-119 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) continues to execute its restructuring plans. Restructuring charges associated with this enterprise-wide initiative were as follows:
YEAR ENDED DECEMBER 31, 2008 ----------------- (IN MILLIONS) Balance as of beginning of the period..................... $-- Severance charges.................................... 67 Change in severance charge estimates................. (6) --- Balance as of end of the period........................... $61 === Total restructuring charges incurred...................... $61 ===
Management anticipates further restructuring charges including severance, lease and asset impairments will be incurred during the years ended December 31, 2009 and 2010. However, such restructuring plans are not sufficiently developed to enable MetLife Inc. to make an estimate of such restructuring charges at December 31, 2008. 17. BUSINESS SEGMENT INFORMATION The Company is a leading provider of individual insurance, employee benefits and financial services with operations throughout the United States. Subsequent to the disposition of RGA and the elimination of the Reinsurance segment as described in Notes 2 and 18, the Company's business is divided into two operating segments: Institutional and Individual, as well as Corporate & Other. These segments are managed separately because they provide different products and services, require different strategies and have different technology requirements. Institutional offers a broad range of group insurance and retirement & savings products and services, including group life insurance, non-medical health insurance, such as short and long-term disability, long-term care, and dental insurance, and other insurance products and services. Individual offers a wide variety of protection and asset accumulation products, including life insurance, annuities and mutual funds. Corporate & Other contains the excess capital not allocated to the business segments, various start-up and run-off entities, as well as interest expense related to the majority of the Company's outstanding debt, expenses associated with certain legal proceedings and income tax audit issues and certain reinsurance agreements with affiliates. 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. The operations of RGA are also reported in Corporate & Other as discontinued operations. 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 18 for disclosures regarding discontinued operations, including real estate. 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. 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, 2008, 2007 and 2006. 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 equity to each segment based upon the economic capital model that allows the Company to effectively manage its capital. F-120 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company evaluates the performance of each segment based upon net income excluding net investment gains (losses), net of income tax, adjustments related to net investment gains (losses), net of income tax, the impact from the cumulative effect of changes in accounting, net of income tax and discontinued operations, other than discontinued real estate, net of income tax. The Company allocates certain non-recurring items, such as expenses associated with certain legal proceedings, to Corporate & Other.
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2008 INSTITUTIONAL INDIVIDUAL OTHER TOTAL ------------------------------------ ------------- ---------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: REVENUES Premiums........................................ $ 14,351 $ 4,083 $ 10 $ 18,444 Universal life and investment-type product policy fees................................... 844 1,441 -- 2,285 Net investment income........................... 6,189 5,047 (114) 11,122 Other revenues.................................. 764 152 966 1,882 Net investment gains (losses)................... 643 634 2,195 3,472 -------- -------- ------- -------- Total revenues............................. 22,791 11,357 3,057 37,205 -------- -------- ------- -------- EXPENSES Policyholder benefits and claims................ 15,537 5,147 15 20,699 Interest credited to policyholder account balances...................................... 2,136 1,038 7 3,181 Policyholder dividends.......................... -- 1,709 7 1,716 Other expenses.................................. 2,306 2,737 1,539 6,582 -------- -------- ------- -------- Total expenses................................ 19,979 10,631 1,568 32,178 -------- -------- ------- -------- Income from continuing operations before provision for income tax...................... 2,812 726 1,489 5,027 Provision for income tax........................ 968 233 450 1,651 -------- -------- ------- -------- Income from continuing operations............... 1,844 493 1,039 3,376 Income (loss) from discontinued operations, net of income tax................................. 3 4 (296) (289) -------- -------- ------- -------- Net income...................................... $ 1,847 $ 497 $ 743 $ 3,087 ======== ======== ======= ======== BALANCE SHEET: Total assets.................................... $166,594 $132,527 $35,098 $334,219 DAC and VOBA.................................... $ 1,005 $ 9,861 $ 5 $ 10,871 Separate account assets......................... $ 45,514 $ 26,745 $ -- $ 72,259 Policyholder liabilities........................ $109,199 $ 88,050 $ 748 $197,997 Separate account liabilities.................... $ 45,514 $ 26,745 $ -- $ 72,259
F-121 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2007 INSTITUTIONAL INDIVIDUAL OTHER TOTAL ------------------------------------ ------------- ---------- ----------- -------- (IN MILLIONS) STATEMENT OF INCOME: REVENUES Premiums.................................... $ 12,358 $ 4,073 $ 4 $ 16,435 Universal life and investment-type product policy fees............................... 763 1,483 -- 2,246 Net investment income....................... 6,664 5,552 366 12,582 Other revenues.............................. 712 152 70 934 Net investment gains (losses)............... (269) (81) 63 (287) -------- -------- ------- -------- Total revenues......................... 20,228 11,179 503 31,910 -------- -------- ------- -------- EXPENSES Policyholder benefits and claims............ 13,332 4,924 19 18,275 Interest credited to policyholder account balances.................................. 2,451 1,064 -- 3,515 Policyholder dividends...................... -- 1,685 2 1,687 Other expenses.............................. 2,391 2,290 446 5,127 -------- -------- ------- -------- Total expenses............................ 18,174 9,963 467 28,604 -------- -------- ------- -------- Income from continuing operations before provision (benefit) for income tax........ 2,054 1,216 36 3,306 Provision (benefit) for income tax.......... 699 431 (76) 1,054 -------- -------- ------- -------- Income from continuing operations........... 1,355 785 112 2,252 Income from discontinued operations, net of income tax................................ 10 -- 170 180 -------- -------- ------- -------- Net income.................................. $ 1,365 $ 785 $ 282 $ 2,432 ======== ======== ======= ======== BALANCE SHEET: Total assets................................ $170,540 $167,257 $36,580 $374,377 DAC and VOBA................................ $ 907 $ 7,715 $ 6 $ 8,628 Separate account assets..................... $ 49,577 $ 40,143 $ (17) $ 89,703 Policyholder liabilities.................... $ 95,499 $ 86,065 $ 506 $182,070 Separate account liabilities................ $ 49,577 $ 40,143 $ (17) $ 89,703
F-122 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CORPORATE & FOR THE YEAR ENDED DECEMBER 31, 2006 INSTITUTIONAL INDIVIDUAL OTHER TOTAL ------------------------------------ ------------- ---------- ----------- ------- (IN MILLIONS) STATEMENT OF INCOME: REVENUES Premiums..................................... $11,801 $ 4,129 $ 6 $15,936 Universal life and investment-type product policy fees................................ 750 1,433 -- 2,183 Net investment income........................ 5,810 5,480 228 11,518 Other revenues............................... 677 114 42 833 Net investment gains (losses)................ (348) (394) (92) (834) ------- ------- ----------- ------- Total revenues.......................... 18,690 10,762 184 29,636 ------- ------- ----------- ------- EXPENSES Policyholder benefits and claims............. 12,918 4,712 17 17,647 Interest credited to policyholder account balances................................... 1,944 1,049 -- 2,993 Policyholder dividends....................... -- 1,669 2 1,671 Other expenses............................... 2,483 2,213 400 5,096 ------- ------- ----------- ------- Total expenses............................. 17,345 9,643 419 27,407 ------- ------- ----------- ------- Income (loss) from continuing operations before provision (benefit) for income tax.. 1,345 1,119 (235) 2,229 Provision (benefit) for income tax........... 443 400 (286) 557 ------- ------- ----------- ------- Income from continuing operations............ 902 719 51 1,672 Income from discontinued operations, net of income tax................................. 45 19 190 254 ------- ------- ----------- ------- Net income................................... $ 947 $ 738 $ 241 $ 1,926 ======= ======= =========== =======
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 equity. 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 for the years ended December 31, 2008, 2007 and 2006. Substantially all of the Company's revenues originated in the United States. 18. 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 estimated fair value less expected disposition costs. F-123 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following information presents the components of income from discontinued real estate operations:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Investment income...................................... $ 6 $16 $ 35 Investment expense..................................... (3) (6) (16) Net investment gains (losses).......................... 8 7 91 --- --- ---- Total revenues....................................... 11 17 110 Provision for income tax............................... 4 8 38 --- --- ---- Income from discontinued operations, net of income tax.................................................. $ 7 $ 9 $ 72 === === ====
The carrying value of real estate related to discontinued operations was $1 million and $39 million at December 31, 2008 and 2007, respectively. The following table presents the discontinued real estate operations by segment:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Net investment income Institutional....................................... $ 4 $ 8 $15 Individual.......................................... (1) -- 4 Corporate & Other................................... -- 2 -- --- --- --- Total net investment income...................... $ 3 $10 $19 === === === Net investment gains (losses) Institutional....................................... $ 2 $ 7 $58 Individual.......................................... 6 -- 23 Corporate & Other................................... -- -- 10 --- --- --- Total net investment gains (losses).............. $ 8 $ 7 $91 === === ===
OPERATIONS As more fully described in Note 2, on September 12, 2008, MetLife, Inc. completed a tax-free split-off of its majority-owned subsidiary, RGA. In connection with this transaction, GALIC dividended to Metropolitan Life Insurance Company and Metropolitan Life Insurance Company dividended to MetLife, Inc. substantially all of its interests in RGA. As a result of the dividend of interests in RGA, the Reinsurance segment was eliminated. (See also Note 17). RGA's assets and liabilities were reclassified to assets and liabilities of subsidiaries held-for-sale and its operating results were reclassified to discontinued operations for all periods presented. Interest on economic capital associated with the Reinsurance segment has been reclassified to the continuing operations of Corporate & Other. F-124 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables present the amounts related to the operations and financial position of RGA that have been reflected as discontinued operations in the consolidated statements of income:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ------ ------ ------ (IN MILLIONS) Premiums............................................ $3,535 $4,910 $4,348 Net investment income............................... 597 908 781 Other revenues...................................... 69 77 66 Net investment gains (losses)....................... (249) (177) 7 ------ ------ ------ Total revenues.................................... 3,952 5,718 5,202 ------ ------ ------ Policyholder benefits and claims.................... 2,989 3,989 3,490 Interest credited to policyholder account balances.. 108 262 254 Other expenses...................................... 699 1,226 1,227 ------ ------ ------ Total expenses.................................... 3,796 5,477 4,971 ------ ------ ------ Income before provision for income tax.............. 156 241 231 Provision for income tax............................ 53 84 81 ------ ------ ------ Income from discontinued operations, net of income tax............................................... 103 157 150 Loss in connection with the dividend of interests in subsidiary, net of income tax..................... (398) -- -- ------ ------ ------ Income (loss) from discontinued operations, net of income tax........................................ $ (295) $ 157 $ 150 ====== ====== ======
F-125 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2007 ----------------- (IN MILLIONS) Fixed maturity securities................................. $ 9,398 Equity securities......................................... 137 Mortgage and consumer loans............................... 832 Policy loans.............................................. 1,059 Short-term investments.................................... 75 Other invested assets..................................... 4,897 ------- Total investments....................................... 16,398 Cash and cash equivalents................................. 404 Accrued investment income................................. 78 Premiums and other receivables............................ 1,440 Deferred policy acquisition costs and VOBA................ 3,513 Goodwill.................................................. 96 Other assets.............................................. 91 Separate account assets................................... 17 ------- Total assets held-for-sale.............................. $22,037 ======= Future policy benefits.................................... $ 6,159 Policyholder account balances............................. 6,657 Other policyholder funds.................................. 2,297 Long-term debt............................................ 528 Collateral financing arrangements......................... 850 Junior subordinated debt securities....................... 399 Shares subject to mandatory redemption.................... 159 Current income tax payable................................ 33 Deferred income tax liability............................. 941 Other liabilities......................................... 1,918 Separate account liabilities.............................. 17 ------- Total liabilities held-for-sale......................... $19,958 =======
The operations of RGA include direct policies and reinsurance agreements with Metropolitan Life Insurance Company and some of its subsidiaries. These agreements are generally terminable by either party upon 90 days written notice with respect to future new business. Agreements related to existing business generally are not terminable, unless the underlying policies terminate or are recaptured. These direct policies and reinsurance agreements do not constitute significant continuing involvement by the Company with RGA. Included in continuing operations in the Company's consolidated statements of operations are amounts related to these transactions, including ceded amounts that reduced premiums and fees by $117 million, $185 million and $183 million and ceded amounts that reduced policyholder benefits and claims by $90 million, $185 million and $147 million for the years ended December 31, 2008, 2007 and 2006, respectively, that have not been eliminated as these transactions are expected to continue after the RGA disposition. Related amounts included in the Company's consolidated balance sheets include assets totaling $739 million, and liabilities totaling $463 million at December 31, 2007. F-126 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On January 31, 2005, the Company completed the sale of SSRM to a third party for $328 million in cash and stock. The Company reported the operations of SSRM in discontinued operations. Under the terms of the sale agreement, the Company had an opportunity to receive additional payments based on, among other things, certain revenue retention and growth measures. The purchase price was also subject to reduction over five years, depending on retention of certain Company-related business. In the second quarter of 2008, the Company paid $3 million, net of income tax, of which $2 million was accrued in the fourth quarter of 2007, related to the termination 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. Upon finalization of the computation, the Company received a payment of $30 million, net of income tax, in the second quarter of 2006 due to the retention of these specific customer accounts. In the first quarter of 2007, the Company received a payment of $16 million, net of income tax, as a result of the revenue retention and growth measure provision in the sales agreement. In the fourth quarter of 2006, the Company eliminated $4 million of a liability that was previously recorded with respect to the indemnities provided in connection with the sale of SSRM, resulting in a benefit to the Company of $2 million, net of income tax. The Company believes that future payments relating to these indemnities are not probable. The following table presents the amounts related to operations of SSRM that have been reflected as discontinued operations in the consolidated statements of income:
YEARS ENDED DECEMBER 31, ------------------------ 2008 2007 2006 ---- ---- ---- (IN MILLIONS) Revenues............................................. $-- $-- $-- Expenses............................................. -- -- -- --- --- --- Income from discontinued operations before provision for income tax..................................... -- -- -- Provision for income tax............................. -- -- -- Net investment gain (loss), net of income tax........ (1) 14 32 --- --- --- Income from discontinued operations, net of income tax................................................ $(1) $14 $32 === === ===
19. FAIR VALUE FAIR VALUE OF FINANCIAL INSTRUMENTS As described in Note 1, the Company prospectively adopted the provisions of SFAS 157 effective January 1, 2008. As a result, the methodologies used to determine the estimated fair value for certain financial instruments at December 31, 2008 may have been modified from those utilized at December 31, 2007, which, while being deemed appropriate under existing accounting guidance, may not have produced an exit value as defined in SFAS 157. Accordingly, the estimated fair value of financial instruments, and the description of the methodologies used to derive those estimated fair values, are presented separately at December 31, 2007 and December 31, 2008. Considerable judgment is often required in interpreting market data to develop estimates of fair value and the use of different assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. F-127 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Amounts related to the Company's financial instruments are as follows:
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 2007 AMOUNT VALUE FAIR VALUE ----------------- -------- -------- ---------- (IN MILLIONS) Assets: Fixed maturity securities..................... $152,266 $152,266 Equity securities............................. $ 4,167 $ 4,167 Trading securities............................ $ 457 $ 457 Mortgage and consumer loans................... $ 39,180 $ 39,720 Policy loans.................................. $ 7,677 $ 7,677 Short-term investments........................ $ 603 $ 603 Cash and cash equivalents..................... $ 1,927 $ 1,927 Accrued investment income..................... $ 2,451 $ 2,451 Assets of subsidiaries held-for-sale.......... $ 11,983 $ 11,992 Liabilities: Policyholder account balances................. $ 70,586 $ 70,913 Short-term debt............................... $ 357 $ 357 Long-term debt................................ $ 2,687 $ 2,763 Payables for collateral under securities loaned and other transactions.............. $ 28,952 $ 28,952 Liabilities of subsidiaries held-for-sale..... $ 6,915 $ 6,044 Commitments: (1) Mortgage loan commitments..................... $3,272 $ -- $ (32) Commitments to fund bank credit facilities, bridge loans and private corporate bond investments................................ $ 667 $ -- $ (25)
-------- (1) Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities, Equity Securities and Trading Securities -- The estimated fair values of publicly held fixed maturity securities and publicly held equity securities are based on quoted market prices or estimates from independent pricing services. However, in cases where quoted market prices are not available, such as for private fixed maturity securities, fair values are estimated using present value or valuation techniques. The determination of estimated fair values is based on: (i) market standard valuation methodologies; (ii) securities the Company deems to be comparable; and (iii) assumptions deemed appropriate given the circumstances. The fair value estimates based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty. Factors considered in estimating fair value include: coupon rate, maturity, estimated duration, call provisions, sinking fund requirements, credit rating, industry sector of the issuer, and quoted market prices of comparable securities. Mortgage and Consumer Loans, Mortgage Loan Commitments and Commitments to Fund Bank Credit Facilities, Bridge Loans, and Private Corporate Bond 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 F-128 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) credit risk. For mortgage loan commitments and commitments to fund bank credit facilities, bridge loans, and private corporate bond investments the estimated fair value is the net premium or discount of the commitments. Policy Loans -- The estimated fair values for policy loans approximate carrying values. Cash and Cash Equivalents and Short-term Investments -- The estimated fair values for cash and cash equivalents and short-term investments approximate carrying values due to the short-term maturities of these instruments. Accrued Investment Income -- The estimated fair value for accrued investment income approximates carrying value. 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 estimated fair value of policyholder account balances without final contractual maturities are assumed to equal their current net surrender value. Short-term and Long-term Debt -- The estimated fair values of short-term and long-term debt are determined by discounting expected future cash flows using risk rates currently available for debt with similar terms and remaining maturities. Payables for Collateral Under Securities Loaned and Other Transactions -- The estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. Assets and Liabilities of Subsidiaries Held-For-Sale -- The carrying values of assets and liabilities of subsidiaries held-for-sale reflect those assets and liabilities which were previously determined to be financial instruments and which were reflected in other financial statement captions in the table above in previous periods but have been reclassified to this caption to reflect the discontinued nature of the operations. The estimated fair value of the assets and liabilities of subsidiaries held-for-sale have been determined on a basis consistent with similar instruments as described herein. Derivative Financial Instruments -- The estimated fair value of derivative financial instruments, including financial futures, financial forwards, interest rate, credit default and foreign currency swaps, foreign currency forwards, caps, floors, and options are based upon quotations obtained from dealers or other reliable sources. See Note 4 for derivative fair value disclosures. F-129 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTIONAL CARRYING ESTIMATED DECEMBER 31, 2008 AMOUNT VALUE FAIR VALUE ----------------- -------- -------- ---------- (IN MILLIONS) Assets: Fixed maturity securities..................... $122,229 $122,229 Equity securities............................. $ 2,298 $ 2,298 Trading securities............................ $ 277 $ 277 Mortgage and consumer loans, net.............. $ 42,105 $ 41,110 Policy loans.................................. $ 7,881 $ 9,675 Real estate joint ventures (1)................ $ 67 $ 75 Other limited partnership interests (1)....... $ 1,697 $ 2,008 Short-term investments........................ $ 7,598 $ 7,598 Other invested assets: (1) Derivative assets.......................... $71,514 $ 6,646 $ 6,646 Other...................................... $ 875 $ 691 Cash and cash equivalents..................... $ 10,279 $ 10,279 Accrued investment income..................... $ 2,079 $ 2,079 Premiums and other receivables (1)............ $ 17,856 $ 18,088 Separate account assets....................... $ 72,259 $ 72,259 Net embedded derivatives within asset host contracts (2).............................. $ 797 $ 797 Liabilities: Policyholder account balances (1)............. $ 70,799 $ 66,232 Short-term debt............................... $ 414 $ 414 Long-term debt (1)............................ $ 2,684 $ 1,995 Payables for collateral under securities loaned and other transactions.............. $ 18,649 $ 18,649 Other liabilities: (1) Derivative liabilities..................... $35,219 $ 2,521 $ 2,521 Trading liabilities........................ $ 57 $ 57 Other...................................... $ 16,163 $ 16,163 Separate account liabilities (1).............. $ 26,214 $ 26,214 Net embedded derivatives within liability host contracts (2).............................. $ (988) $ (988) Commitments: (3) Mortgage loan commitments..................... $ 2,191 $ -- $ (114) Commitments to fund bank credit facilities, bridge loans and private corporate bond investments................................ $ 611 $ -- $ 4
-------- (1) Carrying values presented herein differ from those presented on the consolidated balance sheet because certain items within the respective financial statement caption are not considered financial instruments. Financial statement captions omitted from the table above are not considered financial instruments. (2) Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities. Equity securities also include embedded derivatives of ($72) million. F-130 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) Commitments are off-balance sheet obligations. Negative estimated fair values represent off-balance sheet liabilities. The methods and assumptions used to estimate the fair value of financial instruments are summarized as follows: Fixed Maturity Securities, Equity Securities and Trading Securities -- When available, the estimated fair value of the Company's fixed maturity, equity and trading securities are based on quoted prices in active markets that are readily and regularly obtainable. Generally, these are the most liquid of the Company's securities holdings and valuation of these securities does not involve management judgment. When quoted prices in active markets are not available, the determination of estimated fair value is based on market standard valuation methodologies. The market standard valuation methodologies utilized include: discounted cash flow methodologies, matrix pricing or other similar techniques. The assumptions and inputs in applying these market standard valuation methodologies include, but are not limited to: interest rates, credit standing of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, sinking fund requirements, maturity, estimated duration and management's assumptions regarding liquidity and estimated future cash flows. Accordingly, the estimated fair values are based on available market information and management's judgments about financial instruments. The significant inputs to the market standard valuation methodologies for certain types of securities with reasonable levels of price transparency are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Such observable inputs include benchmarking prices for similar assets in active, liquid markets, quoted prices in markets that are not active and observable yields and spreads in the market. When observable inputs are not available, the market standard valuation methodologies for determining the estimated fair value of certain types of securities that trade infrequently, and therefore have little or no price transparency, rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs can be based in large part on management judgment or estimation, and cannot be supported by reference to market activity. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities. The use of different methodologies, assumptions and inputs may have a material effect on the estimated fair values of the Company's securities holdings. Mortgage and Consumer Loans -- The Company originates mortgage and consumer loans principally for investment purposes. These loans are primarily carried at amortized cost within the consolidated financial statements. The fair value for mortgage and consumer loans is primarily determined by estimating expected future cash flows and discounting those using current interest rates for similar loans with similar credit risk. Certain mortgage and consumer loans have been impaired to their estimated fair value which is determined using independent broker quotations or, when the loan is in foreclosure or otherwise determined to be collateral dependent, the fair value of the underlying collateral estimated using internal models. Policy Loans -- For policy loans with fixed interest rates, estimated fair values are determined using a discounted cash flow model applied to groups of similar policy loans determined by the nature of the underlying insurance liabilities. Cash flow estimates are developed applying a weighted-average interest rate to the outstanding principal balance of the respective group of loans and an estimated average maturity determined through experience studies of the past performance of policyholder repayment behavior for similar loans. These cash flows are discounted using current risk-free interest rates with no adjustment for borrower credit risk as these loans are fully collateralized by the cash surrender value of the underlying insurance policy. The estimated fair value for policy F-131 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) loans with variable interest rates approximates carrying value due to the absence of borrower credit risk and the short time period between interest rate resets, which presents minimal risk of a material change in estimated fair value due to changes in market interest rates. Real Estate Joint Ventures and Other Limited Partnership Interests -- Other limited partnerships and real estate joint ventures included in the preceding table consist of those investments accounted for using the cost method. The remaining carrying value recognized in the consolidated balance sheet represents investments in real estate or real estate joint ventures and other limited partnerships accounted for using the equity method, which do not satisfy the definition of financial instruments for which fair value is required to be disclosed. The estimated fair values for other limited partnership interests and real estate joint ventures accounted for under the cost method are generally based on the Company's share of the net asset value ("NAV") as provided in the financial statements of the investees. In certain circumstances, management may adjust the NAV by a premium or discount when it has sufficient evidence to support applying such adjustments. Short-term Investments -- Certain short term investments do not qualify as securities and are recognized at amortized cost in the consolidated balance sheet. For these instruments, the Company believes that there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, short-term investments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality and the Company has determined additional adjustment is not required. Short-term investments that meet the definition of a security are recognized at fair value in the consolidated balance sheet in the same manner described above for similar instruments that are classified within captions of other major investment classes. Other Invested Assets -- Other invested assets in the consolidated balance sheet is principally comprised of freestanding derivatives with positive estimated fair values, leveraged leases, investments in tax credit partnerships, joint venture investments, loans to affiliates and funds withheld at interest. Leveraged leases, investments in tax credit partnerships and joint venture investments, which are accounted for under the equity method, are not financial instruments subject to fair value disclosure. Accordingly, they have been excluded from the preceding table. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. For funds withheld at interest, the Company evaluates the specific facts and circumstances of each instrument to determine the appropriate estimated fair values. These estimated fair values were not materially different from the recognized carrying values. The estimated fair value of loans to affiliates is determined by discounting expected future cash flows using market interest rates currently available for instruments with similar terms and remaining maturities. Cash and Cash Equivalents -- Due to the short term maturities of cash and cash equivalents, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value generally approximates carrying value. In light of recent market conditions, cash and cash equivalent instruments have been monitored to ensure there is sufficient demand and maintenance of issuer credit quality, or sufficient solvency in the case of depository institutions, and the Company has determined additional adjustment is not required. Accrued Investment Income -- Due to the short-term until settlement of accrued investment income, the Company believes there is minimal risk of material changes in interest rates or credit of the issuer such that estimated fair value approximates carrying value. In light of recent market conditions, the Company has monitored the credit quality of the issuers and has determined additional adjustment is not required. F-132 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Premiums and Other Receivables -- Premiums and other receivables in the consolidated balance sheet is principally comprised of premiums due and unpaid for insurance contracts, amounts recoverable under reinsurance contracts, amounts on deposit with financial institutions to facilitate daily settlements related to certain derivative positions, amounts receivable for securities sold but not yet settled, fees and general operating receivables, and embedded derivatives related to the ceded reinsurance of certain variable annuity riders. Premiums receivable and those amounts recoverable under reinsurance treaties determined to transfer sufficient risk are not financial instruments subject to disclosure and thus have been excluded from the amounts presented in the preceding table. Amounts recoverable under ceded reinsurance contracts which the Company has determined do not transfer sufficient risk such that they are accounted for using the deposit method of accounting have been included in the preceding table with the estimated fair value determined as the present value of expected future cash flows under the related contracts discounted using an interest rate determined to reflect the appropriate credit standing of the assuming counterparty. The amounts on deposit for derivative settlements essentially represent the equivalent of demand deposit balances and amounts due for securities sold are generally received over very short periods such that the estimated fair values approximate their carrying value. In light of recent market conditions, the Company has monitored the solvency position of the financial institutions and has determined additional adjustments are not required. Embedded derivatives recognized in connection with ceded reinsurance of certain variable annuity riders are included in this caption in the consolidated financial statements but excluded from this caption in the preceding table as they are separately presented. The estimated fair value of these embedded derivatives is described in the respectively labeled section which follows. Other Assets -- Other assets in the consolidated balance sheet is principally comprised of prepaid expenses, amounts held under corporate owned life insurance, fixed assets, capitalized software, deferred sales inducements, VODA and VOCRA, all of which are not considered financial instruments subject to disclosure. Separate Account Assets -- Separate account assets are carried at estimated fair value and reported as a summarized total on the consolidated balance sheet in accordance with Statement of Position ("SOP") 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). The estimated fair value of separate account assets are based on the estimated fair value of the underlying assets owned by the separate account. Assets within the Company's separate accounts include: mutual funds, fixed maturity securities, equity securities, mortgage loans, derivatives, hedge funds, other limited partnership interests, short-term investments and cash and cash equivalents. The estimated fair value of mutual funds is based upon quoted prices or reported net assets values provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. The estimated fair values of fixed maturity securities, equity securities, derivatives, short-term investments and cash and cash equivalents held by separate accounts are determined on a basis consistent with the methodologies described herein for similar financial instruments held within the general account. The estimated fair value of hedge funds is based upon NAVs provided by the fund manager and are reviewed by management to determine whether such values require adjustment to represent exit value. The estimated fair value of mortgage loans is determined by discounting expected future cash flows, using current interest rates for similar loans with similar credit risk. Other limited partnership interests are valued giving consideration to the value of the underlying holdings of the partnerships and by applying a premium or discount, if appropriate, for factors such as liquidity, bid/ask spreads, the performance record of the fund manager or other relevant variables which may impact the exit value of the particular partnership interest. Policyholder Account Balances -- Policyholder account balances in the table above include investment contracts. Embedded derivatives on investment contracts and certain variable annuity riders accounted for as embedded derivatives are included in this caption in the consolidated financial statements but excluded from this F-133 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) caption in the table above as they are separately presented therein. The remaining difference between the amounts reflected as policyholder account balances in the preceding table and those recognized in the consolidated balance sheet represents those amounts due under contracts that satisfy the definition of insurance contracts and are not considered financial instruments. The investment contracts primarily include guaranteed interest contracts, certain funding arrangements, fixed deferred annuities, modified guaranteed annuities, fixed term payout annuities, and total control accounts. The fair values for these investment contracts are estimated by discounting best estimate future cash flows using current market risk-free interest rates and adding a spread for the Company's own credit determined using market standard swap valuation models and observable market inputs that take into consideration publicly available information relating to the Company's debt as well as its claims paying ability. Short-term and Long-term Debt -- The estimated fair value for short-term debt approximates carrying value due to the short-term nature of these obligations. The estimated fair values of long-term debt securities are generally determined by discounting expected future cash flows using market rates currently available for debt with similar remaining maturities and reflecting the credit risk of the Company including inputs, when available, from actively traded debt of the Company or other companies with similar types of borrowing arrangements. Risk-adjusted discount rates applied to the expected future cash flows can vary significantly based upon the specific terms of each individual arrangement, including, but not limited to: subordinated rights; contractual interest rates in relation to current market rates; the structuring of the arrangement; and the nature and observability of the applicable valuation inputs. Use of different risk-adjusted discount rates could result in different estimated fair values. The carrying value of long-term debt presented in the table above differs from the amounts presented in the consolidated balance sheet as it does not include capital leases which are not required to be disclosed at estimated fair value. Payables for Collateral Under Securities Loaned and Other Transactions -- The estimated fair value for payables for collateral under securities loaned and other transactions approximates carrying value. The related agreements to loan securities are short-term in nature such that the Company believes there is limited risk of a material change in market interest rates. Additionally, because borrowers are cross-collateralized by the borrowed securities, the Company believes no additional consideration for changes in its own credit are necessary. Other Liabilities -- Other liabilities in the consolidated balance sheet is principally comprised of funds withheld at interest related to certain ceded reinsurance; embedded derivatives within these funds withheld at interest related to certain ceded reinsurance; freestanding derivatives with negative estimated fair values; securities trading liabilities; tax and litigation contingency liabilities; obligations for employee-related benefits; interest due on the Company's debt obligations and on cash collateral held in relation to securities lending; interest and dividends payable; amounts due for securities purchased but not yet settled; amounts due under assumed reinsurance contracts; and general operating accruals and payables. The estimated fair value of derivatives -- with positive and negative estimated fair values -- is described in the respectively labeled section which follows. The fair value of the embedded derivatives within funds withheld at interest related to certain ceded reinsurance are included in this caption in the consolidated financial statements but excluded from this caption in the preceding table as they are separately presented. The estimated fair value of these embedded derivatives is described in the respectively labeled section which follows. The remaining other amounts included in the table above reflect those other liabilities that satisfy the definition of financial instruments subject to disclosure. These items consist primarily of securities trading liabilities; interest and dividends payable; amounts due for securities purchased but not yet settled; and amounts payable under certain ceded reinsurance contracts recognized using the deposit method of accounting. The Company evaluates the F-134 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) specific terms, facts and circumstances of each instrument to determine the appropriate estimated fair values, which were not materially different from the recognized carrying values. Separate Account Liabilities -- Separate account liabilities included in the table above represent those balances due to policyholders under contracts that are classified as investment contracts. The difference between the separate account liabilities reflected above and the amounts presented in the consolidated balance sheet represents those contracts classified as insurance contracts which do not satisfy the criteria of financial instruments for which estimated fair value is to be disclosed. Separate account liabilities classified as investment contracts primarily represent variable annuities with no significant mortality risk to the Company such that the death benefit is equal to the account balance; funding arrangements related to institutional group life contracts; and certain contracts that provide for benefit funding under institutional retirement & savings products. Separate account liabilities, whether related to investment or insurance contracts, are recognized in the consolidated balance sheet at an equivalent summary total of the separate account assets as prescribed by SOP 03-1. Separate account assets, which equal net deposits, net investment income and realized and unrealized capital gains and losses, are fully offset by corresponding amounts credited to the contractholders' liability which is reflected in separate account liabilities. Since separate account liabilities are fully funded by cash flows from the separate account assets which are recognized at estimated fair value as described above, the Company believes the value of those assets approximates the estimated fair value of the related separate account liabilities. Derivatives -- The estimated fair value of derivatives is determined through the use of quoted market prices for exchange-traded derivatives or through the use of pricing models for over-the-counter derivatives. The determination of estimated fair value, when quoted market values are not available, is based on market standard valuation methodologies and inputs that are assumed to be consistent with what other market participants would use when pricing the instruments. Derivative valuations can be affected by changes in interest rates, foreign currency exchange rates, financial indices, credit spreads, default risk (including the counterparties to the contract), volatility, liquidity and changes in estimates and assumptions used in the pricing models. The significant inputs to the pricing models for most over-the-counter derivatives are inputs that are observable in the market or can be derived principally from or corroborated by observable market data. Significant inputs that are observable generally include: interest rates, foreign currency exchange rates, interest rate curves, credit curves and volatility. However, certain over-the-counter derivatives may rely on inputs that are significant to the estimated fair value that are not observable in the market or cannot be derived principally from or corroborated by observable market data. Significant inputs that are unobservable generally include: independent broker quotes, credit correlation assumptions, references to emerging market currencies and inputs that are outside the observable portion of the interest rate curve, credit curve, volatility or other relevant market measure. These unobservable inputs may involve significant management judgment or estimation. Even though unobservable, these inputs are based on assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such instruments. The credit risk of both the counterparty and the Company are considered in determining the estimated fair value for all over-the-counter derivatives after taking into account the effects of netting agreements and collateral arrangements. Credit risk is monitored and consideration of any potential credit adjustment is based on a net exposure by counterparty. This is due to the existence of netting agreements and collateral arrangements which effectively serve to mitigate risk. The Company values its derivative positions using the standard swap curve which includes a credit risk adjustment. This credit risk adjustment is appropriate for those parties that execute trades at pricing levels consistent with the standard swap curve. As the Company and its significant derivative counterparties consistently execute trades at such pricing levels, additional credit risk adjustments are not currently required in the valuation process. The need for such additional credit risk adjustments is monitored by the Company. The F-135 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company's ability to consistently execute at such pricing levels is in part due to the netting agreements and collateral arrangements that are in place with all of its significant derivative counterparties. Most inputs for over-the-counter derivatives are mid market inputs but, in certain cases, bid level inputs are used when they are deemed more representative of exit value. Market liquidity as well as the use of different methodologies, assumptions and inputs, may have a material effect on the estimated fair values of the Company's derivatives and could materially affect net income. Embedded Derivatives within Asset and Liability Host Contracts -- Embedded derivatives principally include certain direct variable annuity riders, certain affiliated ceded reinsurance contracts related to such variable annuity riders, certain guaranteed interest contracts with equity or bond indexed crediting rates and those related to ceded funds withheld on reinsurance. Embedded derivatives are recorded in the financial statements at estimated fair value with changes in estimated fair value adjusted through net income. The Company issues certain variable annuity products with guaranteed minimum benefit riders. GMWB, GMAB and certain GMIB riders are embedded derivatives, which are measured at estimated fair value separately from the host variable annuity contract, with changes in estimated fair value reported in net investment gains (losses). These embedded derivatives are classified within policyholder account balances. The fair value for these riders is estimated using the present value of future benefits minus the present value of future fees using actuarial and capital market assumptions related to the projected cash flows over the expected lives of the contracts. A risk neutral valuation methodology is used under which the cash flows from the riders are projected under multiple capital market scenarios using observable risk free rates. Effective January 1, 2008, upon adoption of SFAS 157, the valuation of these riders now includes an adjustment for the Company's own credit and risk margins for non-capital market inputs. The Company's own credit adjustment is determined taking into consideration publicly available information relating to the Company's debt as well as its claims paying ability. Risk margins are established to capture the non-capital market risks of the instrument which represent the additional compensation a market participant would require to assume the risks related to the uncertainties of such actuarial assumptions as annuitization, premium persistency, partial withdrawal and surrenders. The establishment of risk margins requires the use of significant management judgment. These riders may be more costly than expected in volatile or declining equity markets. Market conditions including, but not limited to, changes in interest rates, equity indices, market volatility and foreign currency exchange rates; changes in the Company's own credit standing; and variations in actuarial assumptions regarding policyholder behavior and risk margins related to non- capital market inputs may result in significant fluctuations in the estimated fair value of the riders that could materially affect net income. The Company cedes the risks associated with certain of the GMIB, GMAB and GMWB riders described in the preceding paragraph. These reinsurance contracts contain embedded derivatives which are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the embedded derivatives on the ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. In addition to ceding risks associated with riders that are accounted for as embedded derivatives, the Company also cedes to an affiliated reinsurance company certain directly written GMIB riders that are accounted for as insurance (i.e., not as embedded derivatives) but where the reinsurance contract contains an embedded derivative. These embedded derivatives are included in premiums and other receivables with changes in estimated fair value reported in net investment gains (losses). The value of the embedded derivatives on these ceded risks is determined using a methodology consistent with that described previously for the riders directly written by the Company. Because the direct rider is not accounted for at fair value, significant fluctuations in net income may occur as the change in fair value of the embedded derivative on the ceded risk is being recorded in net income without a corresponding and offsetting change in fair value of the direct rider. F-136 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The estimated fair value of the embedded equity and bond indexed derivatives contained in certain guaranteed interest contracts is determined using market standard swap valuation models and observable market inputs, including an adjustment for the Company's own credit that takes into consideration publicly available information relating to the Company's debt as well as its claims paying ability. The estimated fair value of these embedded derivatives are included, along with their guaranteed interest contract host, within policyholder account balances with changes in estimated fair value recorded in net investment gains (losses). Changes in equity and bond indices, interest rates and the Company's credit standing may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income. The estimated fair value of the embedded derivatives within funds withheld at interest liabilities related to certain ceded reinsurance is determined based on the change in estimated fair value of the underlying assets held by the Company in a reference portfolio backing the funds withheld liability. The estimated fair value of the underlying assets is determined as described above in "Fixed Maturity Securities, Equity Securities and Trading Securities" and "Short-term Investments." The fair value of these embedded derivatives is included, along with their funds withheld hosts, in other liabilities with changes in estimated fair value recorded in net investment gains (losses). Changes in the credit spreads on the underlying assets, interest rates and market volatility may result in significant fluctuations in the estimated fair value of these embedded derivatives that could materially affect net income. The accounting for embedded derivatives is complex and interpretations of the primary accounting standards continue to evolve in practice. If interpretations change, there is a risk that features previously not bifurcated may require bifurcation and reporting at estimated fair value in the consolidated financial statements and respective changes in estimated fair value could materially affect net income. Mortgage Loan Commitments and Commitments to Fund Bank Credit Facilities, Bridge Loans, and Private Corporate Bond Investments -- The estimated fair values for mortgage loan commitments and commitments to fund bank credit facilities, bridge loans and private corporate bond investments reflected in the above table represent the difference between the discounted expected future cash flows using interest rates that incorporate current credit risk for similar instruments on the reporting date and the principal amounts of the original commitments. F-137 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) ASSETS AND LIABILITIES MEASURED AT FAIR VALUE RECURRING FAIR VALUE MEASUREMENTS The fair value of assets and liabilities measured at estimated fair value on a recurring basis, are determined as described in the preceding section. These estimated fair values and their corresponding fair value hierarchy are summarized as follows:
DECEMBER 31, 2008 ------------------------------------------------------------------ FAIR VALUE MEASUREMENTS AT REPORTING DATE USING ----------------------------------------------------- QUOTED PRICES IN ACTIVE MARKETS FOR SIGNIFICANT IDENTICAL ASSETS SIGNIFICANT OTHER UNOBSERVABLE TOTAL AND LIABILITIES OBSERVABLE INPUTS INPUTS ESTIMATED (LEVEL 1) (LEVEL 2) (LEVEL 3) FAIR VALUE ------------------ ----------------- ------------ ---------- (IN MILLIONS) ASSETS Fixed maturity securities: U.S. corporate securities.............. $ -- $ 38,663 $ 5,089 $ 43,752 Residential mortgage-backed securities.......................... -- 22,680 373 23,053 Foreign corporate securities........... -- 16,857 3,367 20,224 U.S. Treasury/agency securities........ 7,427 8,461 48 15,936 Commercial mortgage-backed securities.. -- 8,939 138 9,077 Asset-backed securities................ -- 4,824 1,487 6,311 Foreign government securities.......... -- 2,573 202 2,775 State and political subdivision securities.......................... -- 1,025 76 1,101 ------- -------- ------- -------- Total fixed maturity securities..... 7,427 104,022 10,780 122,229 ------- -------- ------- -------- Equity securities: Common stock........................... 238 994 59 1,291 Non-redeemable preferred stock......... -- 89 918 1,007 ------- -------- ------- -------- Total equity securities............. 238 1,083 977 2,298 ------- -------- ------- -------- Trading securities..................... -- 161 116 277 Short-term investments (1)............. 6,812 695 75 7,582 Derivative assets (2).................. 2 6,505 139 6,646 Net embedded derivatives within asset host contracts (3).................. -- -- 797 797 Separate account assets (4)............ 39,767 31,006 1,486 72,259 ------- -------- ------- -------- Total assets........................ $54,246 $143,472 $14,370 $212,088 ======= ======== ======= ======== LIABILITIES Derivative liabilities (2)............. $ 58 $ 2,305 $ 158 $ 2,521 Net embedded derivatives within liability host contracts (3)........ -- (83) (905) (988) Trading liabilities (5)................ 57 -- -- 57 ------- -------- ------- -------- Total liabilities................... $ 115 $ 2,222 $ (747) $ 1,590 ======= ======== ======= ========
-------- (1) Short-term investments as presented in the table above differ from the amounts presented in the consolidated balance sheet because certain short-term investments are not measured at estimated fair value (e.g., time deposits, money market funds, etc.). (2) Derivative assets are presented within other invested assets and derivatives liabilities are presented within other liabilities. The amounts are presented gross in the table above to reflect the presentation in the consolidated balance sheet, but are presented net for purposes of the rollforward in the following tables. F-138 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (3) Net embedded derivatives within asset host contracts are presented within premiums and other receivables. Net embedded derivatives within liability host contracts are presented within policyholder account balances and other liabilities. Equity securities also includes embedded derivatives of ($72) million. (4) Separate account assets are measured at estimated fair value. Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. Separate account liabilities are set equal to the estimated fair value of separate account assets as prescribed by SOP 03-1. (5) Trading liabilities are presented within other liabilities. The Company has categorized its assets and liabilities into the three-level fair value hierarchy, as defined in Note 1, based upon the priority of the inputs to the respective valuation technique. The following summarizes the types of assets and liabilities included within the three-level fair value hierarchy presented in the preceding table. Level 1 This category includes certain U.S. Treasury and agency fixed maturity securities, exchange-traded common stock and certain short-term money market securities. As it relates to derivatives, this level includes financial futures including exchange-traded equity and interest rate futures. Separate account assets classified within this level principally include mutual funds. Also included are assets held within separate accounts which are similar in nature to those classified in this level for the general account. Level 2 This category includes fixed maturity and equity securities priced principally by independent pricing services using observable inputs. These fixed maturity securities include most U.S. Treasury and agency securities as well as the majority of U.S. and foreign corporate securities, residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, foreign government securities and state and political subdivision securities. Equity securities classified as Level 2 securities consist principally of non-redeemable preferred stock and certain equity securities where market quotes are available but are not considered actively traded. Short-term investments and trading securities included within Level 2 are of a similar nature to these fixed maturity and equity securities. As it relates to derivatives, this level includes all types of derivative instruments utilized by the Company with the exception of exchange-traded futures included within Level 1 and those derivative instruments with unobservable inputs as described in Level 3. Separate account assets classified within this level are generally similar to those classified within this level for the general account. Hedge funds owned by separate accounts are also included within this level. Embedded derivatives classified within this level include embedded equity derivatives contained in certain guaranteed interest contracts. Level 3 This category includes fixed maturity securities priced principally through independent broker quotations or market standard valuation methodologies using inputs that are not market observable or cannot be derived principally from or corroborated by observable market data. This level consists of less liquid fixed maturity securities with very limited trading activity or where less price transparency exists around the inputs to the valuation methodologies including: U.S. and foreign corporate securities -- including below investment grade private placements; residential mortgage-backed securities; commercial mortgage-backed securities; asset backed securities -- including all of those supported by sub-prime mortgage loans; foreign government; U.S. Treasury and agency; and state and political subdivision securities. Equity securities classified as Level 3 securities consist principally of common stock of privately held companies and non-redeemable preferred stock where there has been very limited trading activity or where less price transparency exists around the inputs to the valuation. Short-term investments and trading securities included within Level 3 are of a similar nature to these fixed maturity and equity securities. As it relates to derivatives this category includes: financial forwards including swap spread locks with maturities which extend beyond F-139 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) observable periods; equity variance swaps with unobservable volatility inputs or that are priced via independent broker quotations; foreign currency swaps which are cancelable and priced through independent broker quotations; interest rate swaps with maturities which extend beyond the observable portion of the yield curve; credit default swaps based upon baskets of credits having unobservable credit correlations as well as credit default swaps with maturities which extend beyond the observable portion of the credit curves and credit default swaps priced through independent broker quotes; equity options with unobservable volatility inputs; and interest rate floors referencing unobservable yield curves and/or which include liquidity and volatility adjustments. Separate account assets classified within this level are generally similar to those classified within this level for the general account; however, they also include mortgage loans, and other limited partnership interests. Embedded derivatives classified within this level include embedded derivatives associated with certain variable annuity riders as well as those on the cession of the risks associated with those riders to affiliates; as well as embedded derivatives related to funds withheld on ceded reinsurance. A rollforward of all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable (Level 3) inputs for year ended December 31, 2008 is as follows:
FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) --------------------------------------------------------------------------------------------------------- TOTAL REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN: ----------------------------- PURCHASES, BALANCE, IMPACT OF BALANCE, OTHER SALES, TRANSFER IN BALANCE, DECEMBER 31, SFAS 157 BEGINNING COMPREHENSIVE ISSUANCES AND AND/OR OUT END OF 2007 ADOPTION (1) OF PERIOD EARNINGS (2, 3) INCOME (LOSS) SETTLEMENTS (4) OF LEVEL 3 (5) PERIOD ------------ ------------ --------- --------------- ------------- --------------- -------------- -------- (IN MILLIONS) Fixed maturity securities............. $15,066 $-- $15,066 $ (674) $(3,763) $(530) $681 $10,780 Equity securities........ 1,527 -- 1,527 (128) (346) (54) (22) 977 Trading securities....... 174 -- 174 (26) -- (32) -- 116 Short-term investments... 149 -- 149 (2) -- (72) -- 75 Net derivatives (6)...... 134 (1) 133 (60) -- (92) -- (19) Separate account assets (7).................... 1,170 -- 1,170 (86) -- (22) 424 1,486 Net embedded derivatives (8).................... 25 30 55 1,631 -- 16 -- 1,702
-------- (1) Impact of SFAS 157 adoption represents the amount recognized in earnings as a change in estimate upon the adoption of SFAS 157 associated with Level 3 financial instruments held at January 1, 2008. The net impact of adoption on Level 3 assets and liabilities presented in the table above was a $29 million increase to net assets. Such amount was also impacted by a decrease to DAC of $9 million. The impact of adoption of SFAS 157 on RGA -- not reflected in the table above as a result of the reflection of RGA in discontinued operations -- was a net increase of $2 million (i.e., a decrease in Level 3 net embedded derivative liabilities of $17 million offset by a DAC decrease of $15 million) for a total impact of $22 million on Level 3 assets and liabilities. This impact of $22 million along with a $9 million reduction in the estimated fair value of Level 2 freestanding derivatives, results in a total net impact of adoption of SFAS 157 of $13 million as described in Note 1. (2) Amortization of premium/discount is included within net investment income which is reported within the earnings caption of total gains/losses. Impairments are included within net investment gains (losses) which is reported within the earnings caption of total gains/losses. Lapses associated with embedded derivatives are included with the earnings caption of total gains/losses. (3) Interest and dividend accruals, as well as cash interest coupons and dividends received, are excluded from the rollforward. (4) The amount reported within purchases, sales, issuances and settlements is the purchase/issuance price (for purchases and issuances) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased/issued or sold/settled. Items purchased/issued and sold/settled in the same period are excluded F-140 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) from the rollforward. For embedded derivatives, attributed fees are included within this caption along with settlements, if any. (5) Total gains and losses (in earnings and other comprehensive income (loss)) are calculated assuming transfers in (out) of Level 3 occurred at the beginning of the period. Items transferred in and out in the same period are excluded from the rollforward. (6) Freestanding derivative assets and liabilities are presented net for purposes of the rollforward. (7) Investment performance related to separate account assets is fully offset by corresponding amounts credited to contractholders whose liability is reflected within separate account liabilities. (8) Embedded derivative assets and liabilities are presented net for purposes of the rollforward. (9) Amounts presented do not reflect any associated hedging activities. Actual earnings associated with Level 3, inclusive of hedging activities, could differ materially. The table below summarizes both realized and unrealized gains and losses for the year ended December 31, 2008 due to changes in fair value recorded in earnings for Level 3 assets and liabilities:
TOTAL GAINS AND LOSSES ------------------------------------ CLASSIFICATION OF REALIZED/UNREALIZED GAINS (LOSSES) INCLUDED IN EARNINGS ------------------------------------ NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ---------- -------------- ------ (IN MILLIONS) Fixed maturity securities...................... $ 9 $ (683) $ (674) Equity securities.............................. -- (128) (128) Trading securities............................. (26) -- (26) Short-term investments......................... 1 (3) (2) Net derivatives................................ -- (60) (60) Net embedded derivatives....................... -- 1,631 1,631
The table below summarizes the portion of unrealized gains and losses recorded in earnings for the year ended December 31, 2008 for Level 3 assets and liabilities that are still held at December 31, 2008.
CHANGES IN UNREALIZED GAINS (LOSSES) RELATING TO ASSETS AND LIABILITIES HELD AT DECEMBER 31, 2008 ------------------------------------ NET NET INVESTMENT INVESTMENT INCOME GAINS (LOSSES) TOTAL ---------- -------------- ------ (IN MILLIONS) Fixed maturity securities...................... $ 5 $ (466) $ (461) Equity securities.............................. -- (114) (114) Trading securities............................. (18) -- (18) Net derivatives................................ -- (93) (93) Net embedded derivatives....................... -- 1,632 1,632
NON-RECURRING FAIR VALUE MEASUREMENTS At December 31, 2008, the Company held $204 million in mortgage loans which are carried at estimated fair value based on independent broker quotations or, if the loans were in foreclosure or are otherwise determined to be collateral dependent, on the value of the underlying collateral of which $188 million was related to impaired mortgage loans held-for-investment and $16 million to certain mortgage loans held-for-sale. These impaired F-141 METROPOLITAN LIFE INSURANCE COMPANY (A Wholly-Owned Subsidiary of MetLife, Inc.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) mortgage loans were recorded at estimated fair value and represent a nonrecurring fair value measurement. The estimated fair value was categorized as Level 3. Included within net investment gains (losses) for such impaired mortgage loans are net impairments of $56 million for the year ended December 31, 2008. At December 31, 2008, the Company held $131 million in cost basis other limited partnership interests which were impaired during the year ended December 31, 2008 based on the underlying limited partnership financial statements. These other limited partnership interests were recorded at estimated fair value and represent a nonrecurring fair value measurement. The estimated fair value was categorized as Level 3. Included within net investment gains (losses) for such other limited partnerships are impairments of $99 million for the year ended December 31, 2008. 20. RELATED PARTY TRANSACTIONS The Company entered into a service agreement with MetLife Group, Inc. ("MetLife Group"), a wholly-owned subsidiary of MetLife Inc., under which MetLife Group provides personnel services, as needed, to support the activities of the Company. MetLife Group charged the Company $2.2 billion, $2.0 billion and $1.9 billion, included in other expenses, for services performed under the service agreement for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include distribution services and administrative functions. Expenses incurred by the Company related to these agreements were $667 million, $574 million and $34 million for the years ended December 31, 2008, 2007 and 2006, respectively. The Company has entered into agreements with affiliates to provide additional services necessary to conduct their activities. Typical services provided under these agreements include management, policy administrative functions, investment advice and distribution services. Expenses incurred by the Company related to these agreements were $815 million, $791 million and $657 million for the years ended December 31, 2008, 2007 and 2006, respectively, and were reimbursed to the Company by these affiliates. Revenues received from affiliates related to these agreements and recorded in other revenues was $17 million for both years ended December 31, 2008 and 2007. There was no revenue received from affiliates related to these agreements for the year ended December 31, 2006. Revenues received from affiliates related to these agreements and recorded in universal life and investment-type product policy fees was $16 million, $16 million and $17 million for the years ended December 31, 2008, 2007 and 2006, respectively. The Company had net payables to affiliates of $229 million and $116 million at December 31, 2008 and 2007, respectively, related to the items discussed above. These payables exclude affiliated reinsurance balances discussed in Note 8. See Notes 3, 7 and 10 for discussion of additional related party transactions. F-142 Metropolitan Life Separate Account UL PART C: OTHER INFORMATION ITEM 26. EXHIBITS (a) Resolution of the Board of Directors of Metropolitan Life effecting the establishment of Metropolitan Life Separate Account UL 3 (b) None (c) (i) Form of Broker Agreement 2 (ii) Schedule of Sales Commissions 1 (iii) Forms of Selling Agreement 7 (iv) Form of Retail Sales Agreement 11 (v) Principal Underwriting Agreement with MLIDC 13 (d) (i) Specimen Group Variable Universal Life Insurance Policy (including any alternative pages as required by state law) with form of riders, if any 2 (ii) Specimen of Group Variable Universal Life Insurance Certificate (including any alternative pages required by state law) with forms of riders 2 (e) (i) Application for Policy and Form of Receipt 2 (ii) Enrollment Form for Certificate and Form of Receipt 2 (iii) Request for Systematic Transfer Option Form 2 (iv) Enterprise Application for Policy 7 (f) (i) Restated Charter and By-Laws of Metropolitan Life 4 (ii) Amended and Restated Charter and By-laws of Metropolitan Life 6 (iii) Amended and Restated By-laws of Metropolitan Life 13 (g) Reinsurance Contracts 7 (h) (i) Participation Agreement with Met Investors Series Trust 6 (ii) Participation Agreement among Metropolitan Series Fund, Inc., MetLife Advisers, LLC and Metropolitan Life Insurance Company (8/31/07) 12 (iii) Amended and Restated Participation Agreement and First Amendment Metropolitan Life Insurance Company and Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable Insurance Products Fund III, Variable Insurance Products Fund IV, Variable Insurance Products Fund V and Fidelity Distributors Corp. 14 (iv) First & Second Amendments to the Participation Agreement with Met Investors Series Trust 15 (i) None (j) None (k) Opinion and Consent of Marie C. Swift as to the legality of the securities being registered 9 (l) None (m) None (n) Consent of Independent Registered Public Accounting Firm (o) None (p) None (q) (i) Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii) 2 (ii) Addendum to Memoranda describing certain procedures filed pursuant to Rule 6e-3(T)(b)(12)(iii) 5 (r) Powers of Attorney 1 Incorporated by reference from sections entitled "Distribution of the Group Policies and Certificates" in the Prospectuses included herein and "Distribution of the Policies" in the Statement of Additional Information. 2 Incorporated herein by reference to Pre-Effective Amendment No. 1 of this Registration Statement of Separate Account UL (File No. 033-91226) on September 8, 1995. 3 Incorporated herein by reference to Post-Effective Amendment No. 5 to the Registration Statement of Separate Account UL (File No. 033-47927) filed April 30, 1997. 4 Incorporated herein by reference to Post-Effective Amendment No. 11 to the Registration Statement (File No. 033-47927) filed on April 6, 2000. 5 Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement (File No. 033-47927) filed on April 10, 2001. 6 Incorporated herein by reference to the Registration Statement for MetLife Separate Account E (File No. 333-83716) filed on March 5, 2002. 7 Incorporated herein by reference to Post-Effective Amendment No. 18 to the Registration Statement (File No. 033-47927) filed on April 30, 2004. 8 Incorporated herein by reference to the Registration Statement for MetLife Separate Account E (File No. 333-122883) filed on February 17, 2005. 9 Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement (File No. 033-91226) filed on April 29, 2005. 10 Incorporated herein by reference to the Registration Statement on Form N-6 (File No. 033-91226) filed on February 8, 2006. 11 Incorporated herein by reference to Post-Effective Amendment No. 20 to the Registration Statement on Form N-6 (File No. 033-47927) filed on April 25, 2006. 12 Incorporation herein by reference to Post-Effective Amendment No. 9 to Metropolitan Life Separate Account E's Registration Statement on Form N-4 (File No. 333-83716) filed September 10, 2007. 13 Incorporation herein by reference to Post-Effective Amendment No. 3 to Paragon Separate Account B's Registration Statement on Form N-6 (File No. 333-133675) filed January 16, 2008. 14 Incorporation herein by reference to Post-Effective Amendment No. 15 to Registrant's Registration Statement on Form N-6 (File No. 033-91226) filed April 18, 2008. 15 Incorporation herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement on Form N-6 (File No. 033-57320) filed April 16, 2009. ITEM 27. DIRECTORS AND OFFICERS OF DEPOSITOR
Name and Principal Business Address Position and Offices with Depositor -------------------------------------------- ------------------------------------------- C. Robert Henrikson Chairman of the Board, President and Chief MetLife, Inc and Metropolitan Life Insurance Executive Officer Company 1095 Avenue of the Americas New York, NY 10036 Sylvia Mathews Burwell Director President, Global Development Program The Bill and Melinda Gates Foundation 1551 Eastlake Avenue East Seattle, WA 98102 Eduardo Castro-Wright Director President and Chief Executive Officer Wal-Mart Stores, USA 702 Southwest 8th Street Bentonville, AK 72716 Burton A. Dole, Jr. Director Retired Chairman, Dole/Neal, LLC Pauma Valley Country Club Pauma Valley Drive Pauma Valley, CA 92061
Name and Principal Business Address Position and Offices with Depositor -------------------------------------------- ------------------------------------------- Cheryl W. Grise Director Retired Executive Vice President Northeast Utilities 24 Stratford Road West Hartford, CT 06117 R. Glenn Hubbard Director Dean and Russell L. Carson Professor of Finance and Economics Graduate School of Business Columbia University Uris Hall 3022 Broadway New York, NY 10027-6902 John M. Keane Director Co-Founder and Senior Managing Director Keane Advisors, LLC 2020 K St., N.W. Washington, DC 20006 James M. Kilts Director Partner Centerview Partners Management, LLC 16 School Street Rye, NY 10580 Hugh B. Price Director Senior Fellow Brookings Institution 1775 Massachusetts Avenue, N.W.
Name and Principal Business Address Position and Offices with Depositor -------------------------------------------- ------------------------------------------- Washington, DC 20036 David Satcher Director Director of Satcher Health Leadership Institute and Center of Excellence on Health Disparities Morehouse School of Medicine 720 Westview Drive, S.W. Atlanta, GA 30310-1495 Kenton J. Sicchitano Director Retired Global Managing Partner PricewaterhouseCoopers, LLC 25 Phillips Pond Road Natick, MA 01760 William C. Steere, Jr. Director Retired Chairman of the Board and Chief Executive Officer Pfizer, Inc. 235 East 42nd Street, 22nd Floor New York, NY 10017 Lulu C. Wang Director Chief Executive Officer Tupelo Capital Management LLC 12 E. 49th Street, #17 New York, NY 10017 Set forth below is a list of certain principal officers of MetLife. The principal business address of each officer of MetLife is 200 Park Avenue, New York, NY 10066.
Name Position with MetLife -------------------------------------------- ---------------------------------------------- C. Robert Henrikson Chairman of the Board, President and Chief Executive Officer Gwenn L. Carr Senior Vice President and Secretary Steven A. Kandarian Executive Vice President and Chief Investment Officer James L. Lipscomb Executive Vice President and General Counsel Maria R. Morris Executive Vice President, Technology and Operations William J. Mullaney President, Institutional Business Joseph J. Prochaska, Jr. Executive Vice President and Chief Accounting Officer William J. Toppeta President, International Lisa Weber President, Individual Business William J. Wheeler Executive Vice President and Chief Financial Officer
ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR THE REGISTRANT The registrant is a separate account of Metropolitan Life Insurance Company under the New York Insurance law. Under said law the assets allocated to the separate account are the property of Metropolitan Life Insurance Company. Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife, Inc. a publicly traded company. The following outline indicates those persons who are controlled by or under common control with Metropolitan Life Insurance Company: ORGANIZATIONAL STRUCTURE OF METLIFE, INC. AND SUBSIDIARIES AS OF DECEMBER 31, 2008 The following is a list of subsidiaries of MetLife, Inc. updated as of December 31, 2008. Those entities which are listed at the left margin (labeled with capital letters) are direct subsidiaries of MetLife, Inc. Unless otherwise indicated, each entity which is indented under another entity is a subsidiary of that other entity and, therefore, an indirect subsidiary of MetLife, Inc. Certain inactive subsidiaries have been omitted from the MetLife, Inc. organizational listing. The voting securities (excluding directors' qualifying shares, (if any)) of the subsidiaries listed are 100% owned by their respective parent corporations, unless otherwise indicated. The jurisdiction of domicile of each subsidiary listed is set forth in the parenthetical following such subsidiary. A. MetLife Group, Inc. (NY) B. MetLife Bank National Association (USA) C. Exeter Reassurance Company, Ltd. (Bermuda) D. MetLife Taiwan Insurance Company Limited (Taiwan) E. Metropolitan Tower Life Insurance Company (DE) 1. TH Tower NGP, LLC (DE) 2. Partners Tower, L.P. (DE) - a 99% limited partnership interest of Partners Tower, L.P. is held by Metropolitan Tower Life Insurance Company and 1% general partnership interest is held by TH Tower NGP, LLC (DE) 3. TH Tower Leasing, LLC (DE) 4. MetLife Reinsurance Company of Vermont (VT) 5. EntreCap Real Estate II LLC (DE) a) PREFCO Dix-Huit LLC (CT) b) PREFCO X Holdings LLC (CT) c) PREFCO Ten Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Ten Limited Partnership is held by EntreCap Real Estate II LLC and 0.1% general partnership is held by PREFCO X Holdings LLC. d) PREFCO Vingt LLC (CT) e) PREFCO Twenty Limited Partnership (CT) - a 99% limited partnership interest of PREFCO Twenty Limited Partnership is held by EntreCap Real Estate II LLC and 1% general partnership is held by PREFCO Vingt LLC. 6. Plaza Drive Properties, LLC (DE) 7. MTL Leasing, LLC (DE) a) PREFCO IX Realty LLC (CT) b) PREFCO XIV Holdings LLC (CT) c) PREFCO Fourteen Limited Partnership (CT) - a 99.9% limited partnership interest of PREFCO Fourteen Limited Partnership is held by MTL Leasing, LLC and 0.1% general partnership is held by PREFCO XIV Holdings LLC. F. MetLife Pensiones Mexico S.A. (Mexico)- 97.4738% is owned by MetLife, Inc. and 2.5262% is owned by MetLife International Holdings, Inc. G. MetLife Chile Inversiones Limitada (Chile)- 99.9999999% is owned by MetLife, Inc. and 0.0000001% is owned by Natiloportem Holdings, Inc. 1. MetLife Chile Seguros de Vida S.A. (Chile)- 99.99% is owned by MetLife Chile Inversiones Limitada and 0.01% is owned by MetLife International Holdings, Inc. a) MetLife Chile Administradora de Mutuos Hipotecarios S.A. (Chile)- 99.99% is owned by MetLife Chile Seguros de Vida S.A. and 0.01% is owned by MetLife Chile Inversiones Limitada. H. MetLife Mexico S.A. (Mexico)- 98.70541% is owned by MetLife, Inc., 1.29459% is owned by MetLife International Holdings, Inc. 1. MetLife Afore, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Mexico S.A. and 0.01% is owned by MetLife Pensiones Mexico S.A. a) Met1 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. b) Met2 SIEFORE, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and 0.01% is owned by MetLife Mexico S.A. c) MetA SIEFORE Adicional, S.A. de C.V. (Mexico)- 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. d) Met3 SIEFORE Basica, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. e) Met4 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. f) Met5 SIEFORE, S.A. de C.V. (Mexico) - 99.99% is owned by MetLife Afore, S.A. de C.V. and .01% is owned by MetLife Mexico S.A. 2. ML Capacitacion Comercial S.A. de C.V. (Mexico) - 99% is owned by MetLife Mexico S.A. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. I. MetLife Mexico Servicios, S.A. de C.V. (Mexico)- 98% is owned by MetLife, Inc. and 2% is owned by MetLife International Holdings, Inc. J. Metropolitan Life Seguros de Vida S.A. (Uruguay) K. MetLife Securities, Inc. (DE) L. Enterprise General Insurance Agency, Inc. (DE) 1. MetLife General Insurance Agency of Texas, Inc. (DE) 2. MetLife General Insurance Agency of Massachusetts, Inc. (MA) 1 M. Metropolitan Property and Casualty Insurance Company (RI) 1. Metropolitan General Insurance Company (RI) 2. Metropolitan Casualty Insurance Company (RI) 3. Metropolitan Direct Property and Casualty Insurance Company (RI) 4. Met P&C Managing General Agency, Inc. (TX) 5. MetLife Auto & Home Insurance Agency, Inc. (RI) 6. Metropolitan Group Property and Casualty Insurance Company (RI) a) Metropolitan Reinsurance Company (U.K.) Limited (United Kingdom) 7. Metropolitan Lloyds, Inc. (TX) a) Metropolitan Lloyds Insurance Company of Texas (TX)- Metropolitan Lloyds Insurance Company of Texas, an affiliated association, provides automobile, homeowner and related insurance for the Texas market. It is an association of individuals designated as underwriters. Metropolitan Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company, serves as the attorney-in-fact and manages the association. 8. Economy Fire & Casualty Company (IL) a) Economy Preferred Insurance Company (IL) b) Economy Premier Assurance Company (IL) N. Cova Corporation (MO) 1. Texas Life Insurance Company (TX) O. MetLife Investors Insurance Company (MO) P. First MetLife Investors Insurance Company (NY) Q. Walnut Street Securities, Inc. (MO) R. Newbury Insurance Company, Limited (BERMUDA) S. MetLife Investors Group, Inc. (DE) 1. MetLife Investors Distribution Company (MO) 2. Met Investors Advisory, LLC (DE) 3. MetLife Investors Financial Agency, Inc. (TX) 2 T. MetLife International Holdings, Inc. (DE) 1. MetLife Mexico Cares, S.A. de C.V. (Mexico) a) Fundacion MetLife Mexico, A.C. (Mexico) 2. Natiloportem Holdings, Inc. (DE) a) Servicios Administrativos Gen, S.A. de C.V. (Mexico) i) MLA Comercial, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. ii) MLA Servicios, S.A. de C.V. (Mexico) 99% is owned by Servicios Administrativos Gen, S.A. de C.V. and 1% is owned by MetLife Mexico Cares, S.A. de C.V. 3. MetLife India Insurance Company Limited (India)- 26% is owned by MetLife International Holdings, Inc. and 74% is owned by third parties. 4. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)- 99.99924% is owned by MetLife International Holdings, Inc. and 0.00076% is owned by Natiloporterm Holdings, Inc. 5. MetLife Seguros de Vida S.A. (Argentina)- 95.2499% is owned by MetLife International Holdings, Inc. and 4.7473% is owned by Natiloportem Holdings, Inc. 6. MetLife Insurance Company of Korea Limited (South Korea)- 14.64% of MetLife Insurance Company of Korea Limited is owned by MetLife, Mexico, S.A. and 85.36% is owned by Metlife International Holdings, Inc. 7. Metropolitan Life Seguros e Previdencia Privada S.A. (Brazil)- 66.6617540% is owned by MetLife International Holdings, Inc. and 33.3382457% is owned by MetLife Worldwide Holdings, Inc. and 0.0000003% is owned by Natiloportem Holdings, Inc. 8. MetLife Global, Inc. (DE) 9. MetLife Administradora de Fundos Multipatrocinados Ltda (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. 10. MetLife Insurance Limited (United Kingdom) 11. MetLife General Insurance Limited (Australia) 12. MetLife Limited (United Kingdom) 13. MetLife Insurance S.A./NV (Belgium) 14. MetLife Services Limited (United Kingdom) 15. MetLife Insurance Limited (Australia) a) MetLife Investments Pty Limited (Australia) i) MetLife Insurance and Investment Trust (Australia) - MetLife Insurance and Investment Trust is a trust vehicle, the trustee of which is MetLife Investment Pty Limited. MetLife Investments Pty Limited is a wholly owned subsidiary of MetLife Insurance Limited. b) MetLife Services (Singapore) PTE Limited (Australia) 16. MetLife Seguros de Retiro S.A. (Argentina) - 96.8819% is owned by MetLife International Holdings, Inc. and 3.1180% is owned by Natiloportem Holdings, Inc. 17. Best Market S.A. (Argentina) - 5% of the shares are held by Natiloportem Holdings, Inc. and 94.9999% is owned by MetLife International Holdings Inc. 18. Compania Previsional MetLife S.A. (Brazil) - 95.4635% is owned by MetLife International Holdings, Inc. and 4.5364% is owned by Natiloportem Holdings, Inc. (a) Met AFJP S.A. (Argentina) - 75.4088% of the shares of Met AFJP S.A. are held by Compania Previsional MetLife SA, 19.5912% is owned by MetLife Seguros de Vida SA, 3.9689% is held by Natiloportem Holdings, Inc. and 1.0310% is held by MetLife Seguros de Retiro SA. 19. MetLife Worldwide Holdings, Inc. (DE) a) MetLife Towarzystwo Ubezpieczen na Zycie Spolka Akcyjna. (Poland) b) MetLife Direct Co., Ltd. (Japan) c) MetLife Limited (Hong Kong) U. Metropolitan Life Insurance Company (NY) 1. 334 Madison Euro Investments, Inc. (DE) a) Park Twenty Three Investments Company (United Kingdom)- 1% voting control of Park Twenty Three Investments Company is held by St. James Fleet Investments Two Limited. 1% of the shares of Park Twenty Three Investments Company is held by Metropolitan Life Insurance Company. 99% is owned by 334 Madison Euro Investment, Inc. i) Convent Station Euro Investments Four Company (United Kingdom)- 1% voting control of Convent Station Euro Investments Four Company is held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty Three Investments Company. 99% is owned by Park Twenty Three Investments Company. 2. St. James Fleet Investments Two Limited (Cayman Islands)- 34% of the shares of St. James Fleet Investments Two Limited is held by Metropolitan Life Insurance Company. 3. One Madison Investments (Cayco) Limited (Cayman Islands)- 10.1% voting control of One Madison Investments (Cayco) Limited is held by Convent Station Euro Investments Four Company. 89.9% of the shares of One Madison Investments (Cayco) Limited is held by Metropolitan Life Insurance Company. 4. CRB Co, Inc. (MA)- AEW Real Estate Advisors, Inc. holds 49,000 preferred non-voting shares and AEW Advisors, Inc. holds 1,000 preferred non-voting shares of CRB, Co., Inc. 5. GA Holding Corp. (MA) 3 6. Thorngate, LLC (DE) 7. Alternative Fuel I, LLC (DE) 8. Transmountain Land & Livestock Company (MT) 9. MetPark Funding, Inc. (DE) 10. HPZ Assets LLC (DE) 11. Missouri Reinsurance (Barbados), Inc. (Barbados) 12. Metropolitan Tower Realty Company, Inc. (DE) a) Midtown Heights, LLC (DE) 13. MetLife Real Estate Cayman Company (Cayman Islands) 14. Metropolitan Marine Way Investments Limited (Canada) 15. MetLife Private Equity Holdings, LLC (DE) 16. 23rd Street Investments, Inc. (DE) a) Mezzanine Investment Limited Partnership-BDR (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. b) Mezzanine Investment Limited Partnership-LG (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. c) MetLife Capital Credit L.P. (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. d) MetLife Capital Limited Partnership (DE)- 1% General Partnership interest is held by 23rd Street Investments, Inc., 99% Limited Partnership Interest is held by Metropolitan Life Insurance Company. 17. Hyatt Legal Plans, Inc. (DE) a) Hyatt Legal Plans of Florida, Inc. (FL) 18. MetLife Holdings, Inc. (DE) a) MetLife Credit Corp. (DE) b) MetLife Funding, Inc. (DE) 4 19. Bond Trust Account A (MA) 20. MetLife Investments Asia Limited (Hong Kong). 21. MetLife Investments Limited (United Kingdom)- 23rd Street Investments, Inc. holds one share of MetLife Investments Limited. 22. MetLife Latin America Asesorias e Inversiones Limitada (Chile)- 23rd Street Investments, Inc. holds 0.01% of MetLife Latin America Asesorias e Inversiones Limitada. 23. New England Life Insurance Company (MA) a) MetLife Advisers, LLC (MA) b) New England Securities Corporation (MA) 24. GenAmerica Financial, LLC (MO) a) GenAmerica Capital I (DE) b) General American Life Insurance Company (MO) i) GenAmerica Management Corporation (MO) 5 25. Corporate Real Estate Holdings, LLC (DE) 26. Ten Park SPC (CAYMAN ISLANDS ) - 1% voting control of Ten Park SPC is held by 23rd Street Investments, Inc. 27. MetLife Tower Resources Group, Inc. (DE) 28. Headland - Pacific Palisades, LLC (CA) 29. Headland Properties Associates (CA) - 1% is owned by Headland - Pacific Palisades, LLC and 99% is owned by Metropolitan Life Insurance Company. 30. Krisman, Inc. (MO) 31. Special Multi-Asset Receivables Trust (DE) 32. White Oak Royalty Company (OK) 33. 500 Grant Street GP LLC (DE) 34. 500 Grant Street Associates Limited Partnership (CT) - 99% of 500 Grant Street Associates Limited Partnership is held by Metropolitan Life Insurance Company and 1% by 500 Grant Street GP LLC 35. MetLife Canada/MetVie Canada (Canada) 36. MetLife Retirement Services LLC (NJ) a) MetLife Investment Funds Services LLC (NJ) (i) MetLife Investment Funds Management LLC (NJ) (ii) MetLife Associates LLC (DE) 37. Euro CL Investments LLC (DE) 38. MEX DF Properties, LLC (DE) 39. MSV Irvine Property, LLC (DE) - 4% of MSV Irvine Property, LLC is owned by Metropolitan Tower Realty Company, Inc. and 96% is owned by Metropolitan Life Insurance Company 40. MetLife Properties Ventures, LLC (DE) a) Citypoint Holdings II Limited (UK) 41. Housing Fund Manager, LLC (DE) a) MTC Fund I, LLC (DE) 0.01% of MTC Fund I, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. b) MTC Fund II, LLC (DE) - 0.01% of MTC Fund II, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. c) MTC Fund III, LLC (DE) - 0.01% of MTC Fund III, LLC is held by Housing Fund Manager, LLC. - Housing Fund Manager, LLC is the managing member LLC and the remaining interests are held by a third party member. 42. MLIC Asset Holdings, LLC (DE) 43. 85 Brood Street LLC (CT) 44. The Building at 575 LLC (DE) V. MetLife Capital Trust III (DE) W. MetLife Capital Trust IV (DE) X. MetLife Insurance Company of Connecticut (CT) 1. MetLife Property Ventures Canada ULC (Canada) 2. Pilgrim Alternative Investments Opportunity Fund I, LLC (DE) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party. 3. Pilgrim Alternative Investments Opportunity Fund III Associates, LLC (CT) - 67% is owned by MetLife Insurance Company of Connecticut, and 33% is owned by third party. 4. Pilgrim Investments Highland Park, LLC (DE) 5. Metropolitan Connecticut Properties Ventures, LLC (DE) 6. MetLife Canadian Property Ventures LLC (NY) 7. Euro TI Investments LLC (DE) 8. Greenwich Street Investments, LLC (DE) a) Greenwich Street Capital Offshore Fund, Ltd. (Virgin Islands) b) Greenwich Street Investments, L.P. (DE) 9. One Financial Place Corporation (DE) - 100% is owned in the aggregate by MetLife Insurance Company of Connecticut. 10. Plaza LLC (CT) a) Tower Square Securities, Inc. (CT) 11. TIC European Real Estate LP, LLC (DE) 12. MetLife European Holdings, Inc. (UK) a) MetLife Europe Limited (IRELAND) i) MetLife Pensions Trustees Limited (UK) b) MetLife Assurance Limited (UK) 13. Travelers International Investments Ltd. (Cayman Islands) 14. Euro TL Investments LLC (DE) 15. Corrigan TLP LLC (DE) 16. TLA Holdings LLC (DE) a) The Prospect Company (DE) i) Panther Valley, Inc. (NJ) 17. TRAL & Co. (CT) - TRAL & Co. is a general partnership. Its partners are MetLife Insurance Company of Connecticut and Metropolitan Life Insurance Company. 18. Tribeca Distressed Securities, L.L.C. (DE) 19. MetLife Investors USA Insurance Comapny (DE) Y. MetLife Reinsurance Company of South Carolina (SC) Z. MetLife Investment Advisors Company, LLC (DE) AA. MetLife Standby I, LLC (DE) 1. MetLife Exchange Trust I (DE) BB. MetLife Services and Solutions, LLC (DE) 1. MetLife Solutions Pte. Ltd. (Singapore) i) MetLife Services East Private Limited (India) ii) MetLife Global Operations Support Center Private Limited - 99.99999% is owned by MetLife Solutions Pte. Ltd. and 0.00001% is owned by Natiloportem Holdings, Inc. CC. SafeGuard Health Enterprises, Inc. (DE) 1. SafeGuard Dental Services, Inc. (DE) 2. SafeGuard Health Plans, Inc. (CA) 3. SafeHealth Life Insurance Company (CA) 4. SafeGuard Health Plans, Inc. (FL) 5. SafeGuard Health Plans, Inc. (NV) 6. SafeGuard Health Plans, Inc. (TX) DD. MetLife Capital Trust X (DE) EE. Cova Life Management Company (DE) FF. MetLife Reinsurance Company of Charleston (SC) GG. Federal Flood Certification Corp (TX) HH. MetLife Planos Odontologicos Ltda. (Brazil) II. Metropolitan Realty Management, Inc. (DE) The voting securities (excluding directors' qualifying shares, if any) of each subsidiary shown on the organizational chart are 100% owned by their respective parent corporation, unless otherwise indicated. In addition to the entities shown on the organizational chart, MetLife, Inc. (or where indicated, a subsidiary) also owns interests in the following entities: 1) Metropolitan Life Insurance Company owns varying interests in certain mutual funds distributed by its affiliates. These ownership interests are generally expected to decrease as shares of the funds are purchased by unaffiliated investors. 2) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited partnerships, are investment vehicles through which investments in certain entities are held. A wholly owned subsidiary of Metropolitan Life Insurance Company serves as the general partner of the limited partnerships and Metropolitan Life Insurance Company directly owns a 99% limited partnership interest in each MILP. The MILPs have various ownership and/or debt interests in certain companies. 3) The Metropolitan Money Market Pool and MetLife Intermediate Income Pool are pass-through investment pools, of which Metropolitan Life Insurance Company and/or its subsidiaries and/or affiliates are general partners. NOTE: THE METLIFE, INC. ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE JOINT ---- VENTURES AND PARTNERSHIPS OF WHICH METLIFE, INC. AND/OR ITS SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE SUBSIDIARIES HAVE ALSO BEEN OMITTED. 6 ITEM 29. INDEMNIFICATION MetLife, Inc. has secured a Financial Institutions Bond in the amount of $50,000,000 subject to a $5,000,000 deductible. MetLife also maintains Directors' and Officers' Liability insurance coverage with limits of $400 million. The Directors and Officers of Metropolitan Life Insurance Company ("Metropolitan"), as well as certain other subsidiaries of MetLife, Inc., are covered under the Financial Institutions Bond as well as under the Directors' and Officers' Liability Policy. A provision in Metropolitan's by-laws provides for the indemnification (under certain circumstances) of individuals serving as directors or officers of Metropolitan. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan Life Insurance Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Metropolitan of expenses incurred or paid by a director, officer or controlling person or Metropolitan Life Insurance Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Metropolitan will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 30. PRINCIPAL UNDERWRITERS (a) MetLife Investors Distribution Company is the principal underwriter and distributor of the Policies. MetLife Investors Distribution Company is the principal underwriter for the following investment companies: Met Investors Series Trust, Metropolitan Series Fund, Inc., Metropolitan Life Separate Account E, MetLife Investors USA Separate Account A, MetLife Investors Variable Annuity Account One, MetLife Investors Variable Annuity Account Five, MetLife Investors Variable Life Account One, MetLife Investors Variable Life Account Five, First MetLife Investors Variable Annuity Account One, General American Separate Account Eleven, General American Separate Account Twenty- Eight, General American Separate Account Twenty- Nine, General American Separate Account Two, Security Equity Separate Account 26, Security Equity Separate Account 27, MetLife of CT Separate Account Eleven for Variable Annuities, MetLife of CT Separate Account QPN for Variable Annuities, MetLife of CT Fund UL for Variable Life Insurance, MetLife of CT Fund UL III for Variable Life Insurance, Metropolitan Life Variable Annuity Separate Account I and Metropolitan Life Variable Annuity Separate Account II, Paragon Separate Account A, Paragon Separate Account B, Paragon Separate Account C, and Paragon Separate Account D. (b) The following persons are the officers and directors of MetLife Investors Distribution Company. The principal business address for MetLife Investors Distribution Company is 5 Park Plaza, Suite 1900, Irvine, CA 92614.
Name and Principal Business Address Positions and Offices with Depositor ----------------------------------- ------------------------------------ Michael K. Farrell *** Director Elizabeth M. Forget ** Executive Vice President, Investment Fund Management & Marketing Peter Gruppuso ***** Vice President, Chief Financial Officer Paul A. LaPiana * Executive Vice President, National Sales Manager-Life Craig W. Markham ***** Director Richard C. Pearson * Executive Vice President, General Counsel and Secretary Paul A. Sylvester * President, National Sales Manager-Annuities & LTC William J. Toppeta **** Director
* MetLife Investors, 5 Park Plaza, Suite 1900, Irvine, CA 92614 ** MetLife, 260 Madison Avenue, New York, NY 10016 *** MetLife, 10 Park Avenue, Morristown, NJ 07962 **** MetLife, 1095 Avenue of the Americas, New York, NY 10036 ***** MetLife, 485-E US Highway 1 South, Iselin, NJ 08830 (c) Compensation from the Registrant.
(1) (2) (3) (4) (5) Compensation on Events Net Underwriting Occasioning the Name of Principal Discounts and Deduction of a Deferred Brokerage Other Underwriter Commissions Sales Load Commissions Compensation ----------------- ---------------- ----------------------- ----------- ------------ MetLife Investors Distribution Company $228,240.31 $0 $0 $0
Commissions are paid by the Company directly to agents who are registered representatives of the Principal Underwriter or to broker-dealers that have entered into a selling agreement with the principal underwriter with respect to sales of the Contracts. ITEM 31. LOCATION OF ACCOUNTS AND RECORDS The following companies will maintain possession of the documents required by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder: (a) Registrant (b) Metropolitan Life Insurance Company 200 Park Avenue New York, NY 10166 (c) MetLife Investors Distribution Company 5 Park Plaza, Suite 1900 Irvine, CA 92614 ITEM 32. MANAGEMENT SERVICES Not applicable ITEM 33. FEE REPRESENTATION Metropolitan Life represents that the fees and charges deducted under the Policies offered and sold pursuant to this amended Registration Statement, in the aggregate, are reasonable in relation to the services rendered, the expenses to be incurred, and the risks assumed by Metropolitan Life under the Policies. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Metropolitan Life Separate Account UL, certifies that it meets all of the requirements for effectiveness of this amended Registration Statement under Rule 485(b) under the Securities Act and has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 15th day of April, 2009. Metropolitan Life Separate Account UL By: Metropolitan Life Insurance Company By: /s/ Paul G. Cellupica ------------------------------------ Paul G. Cellupica, Esq. Chief Counsel, Securities Regulation and Corporate Services SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, Metropolitan Life Insurance Company certifies that it meets all of the requirements for effectiveness of this amended Registration Statement under Rule 485(b) under the Securities Act and has caused this Amendment to the Registration Statement to be signed on its behalf, in the City of New York, and the State of New York on the 15th day of April, 2009. Metropolitan Life Insurance Company By: /s/ Paul G. Cellupica ------------------------------------ Paul G. Cellupica, Esq. Chief Counsel, Securities Regulation and Corporate Services Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons, in the capacities indicated, on April 15, 2009. SIGNATURE TITLE --------- ----- * Chairman, Chief Executive Officer ------------------------------------- and President C. Robert Henrikson * Executive Vice President and ------------------------------------- Chief Accounting Officer Joseph J. Prochaska, Jr. * ------------------------------------- Sylvia Mathews Burwell Director * ------------------------------------- Eduardo Castro-Wright Director * ------------------------------------- Burton A. Dole, Jr. Director * ------------------------------------- Cheryl W. Grise Director * ------------------------------------- R. Glenn Hubbard Director * ------------------------------------- John M. Keane Director * ------------------------------------- James M. Kilts Director * ------------------------------------- Hugh B. Price Director * ------------------------------------- David Satcher Director * ------------------------------------- Kenton J. Sicchitano Director * ------------------------------------- William C. Steere, Jr. Director * ------------------------------------- Lulu C. Wang Director * Executive Vice President and ------------------------------------- Chief Financial Officer William J. Wheeler By: /s/ Marie C. Swift --------------------------------- Marie C. Swift, Esq. Attorney- in - fact * Executed by Marie C. Swift, Esq. on behalf of those indicated pursuant to Powers of Attorney filed herewith. Exhibit Index (n) Consent of Independent Registered Public Accounting Firm (r) Powers of Attorney