<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1999
REGISTRATION NOS. 333-80547/811-4001
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. 2 [ ]
[ ]
POST-EFFECTIVE AMENDMENT NO.
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
[X]
AMENDMENT NO. 27
------------------------
METROPOLITAN LIFE SEPARATE ACCOUNT E
(EXACT NAME OF REGISTRANT)
METROPOLITAN LIFE INSURANCE COMPANY
(EXACT NAME OF DEPOSITOR)
1 MADISON AVENUE, NEW YORK, NEW YORK 10010
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(212) 578-5364
(DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE)
------------------------
GARY A. BELLER, ESQ.
SENIOR EXECUTIVE VICE-PRESIDENT AND GENERAL COUNSEL
METROPOLITAN LIFE INSURANCE COMPANY
1 MADISON AVENUE
NEW YORK, NEW YORK 10010
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
JOHN A. DUDLEY, ESQ.
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
------------------------
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, THE
REGISTRANT HAS REGISTERED AN INDEFINITE AMOUNT OF SECURITIES. REGISTRANT'S RULE
24F-2 NOTICE FOR THE YEAR ENDED DECEMBER 31, 1998 WAS FILED WITH THE COMMISSION
ON MARCH 31,1999.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of the Registration Statement. The Registrant hereby amends
this Registration Statement on such date or dates as may be necessary to delay
its effective date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or until
the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
FORM N-4
UNDER
THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940
CROSS REFERENCE SHEET
(PURSUANT TO RULE 481(A))
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PROSPECTUS HEADING
- -------- ------------------------------
<S> <C>
1. Cover Page............................. Cover Page
2. Definitions............................ Important Terms You Should
Know
3. Synopsis............................... Table of Expenses
4. Condensed Financial Information........ General
Information--Advertising
Performance; General
Information--Financial
Statements
5. General Description of Registrant,
Depositor, and Portfolio Companies... MetLife; Metropolitan Life
Separate Account E; Investment
Choices; General
Information--Voting Rights
6. Deductions and Expenses................ Table of Expenses; Contract
Fee; Assignment Fee; Premium
Taxes; Charges; General
Information--Who Sells the
Income Annuity; Appendix;
Premium Tax Table
7. General Description of Variable
Annuity.............................. The Income Annuity--Purchasing
an Income Annuity; Income
Annuity--Allocation; General
Information--
Administration/Changes to
the Income Annuity
8. Annuity Period......................... Important Terms You Should
Know; Income Annuity--Income
Payment Types/The Value of
Your Income Payments
9. Death Benefit.......................... Not Applicable
10. Purchases Values....................... MetLife; Metropolitan Life
Separate Account E; Income
Annuity/Allocation of
Purchase Payment/The Value
of Your Income Payments;
General Information--
Administration
11. Redemptions............................ General Information
12. Taxes.................................. Federal Tax Treatment
13. Legal Proceedings...................... Not Applicable
14. Table of Contents of the Statement of
Additional Information............... Table of Contents of the
Statement of Additional
Information
15. Cover Page............................. Cover Page
16. Table of Contents...................... Table of Contents
17. General Information and History........ Not Applicable
18. Services............................... Independent Auditors;
Services; Year 2000;
Distribution of Certificates
and Interests in the Income
Annuity
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PROSPECTUS HEADING
- -------- ------------------------------
<S> <C>
19. Purchase of Securities Being Offered... Not Applicable
20. Underwriters........................... Distribution of Certificates
and Interests in the Income
Annuity
21. Calculation of Performance Data........ Performance Data
22. Annuity Payments....................... Variable Income Payments
23. Financial Statements................... Financial Statements of the
Separate Account; Financial
Statements of MetLife
</TABLE>
<PAGE>
-----------------
November 1 , 1999
-----------------
MetLife Settlement Plus, A Variable Income Annuity Issued by Metropolitan Life
Insurance Company
This Prospectus describes an income annuity contract (the "Income Annuity")
which may be used to fund the financial obligations for periodic payments under
a structured settlement.
================================================================================
Money is allocated among the Income Annuity's available investment choices. The
choices may include the Fixed Income Option (not described in this Prospectus)
and investment divisions available through Metropolitan Life Separate Account E
which divisions, in turn, invest in the following corresponding portfolios of
the Metropolitan Series Fund, Inc. ("Metropolitan Fund"):
MetLife Stock Index Harris Oakmark Large Cap Value
State Street Research Growth Lehman Brothers Aggregate Bond Index
State Street Reseach Diversified T. Rowe Price Large Cap Growth
How to learn more:
Before agreeing to a structured settlement pursuant to which settlement money
may be invested in an Income Annuity read this Prospectus. The Prospectus
contains information about the Income Annuity and Metropolitan Life Separate
Account E which you should know before making your decision. Keep this
Prospectus for future reference. For more information, request a copy of the
Statement of Additional Information ("SAI"), dated November 1, 1999. The SAI is
considered part of this Prospectus as though it were included in the Prospectus.
The Table of Contents of the SAI appears on page 22 of this Prospectus. To
request a free copy of the SAI or to ask questions, write or call:
Metropolitan Life Insurance Company
Structured Settlement Group
200 Park Avenue [GRAPHIC OMITTED]
New York, NY 10166-0188 Area 5P
Attention: MetLife Settlement Plus
Phone: (800) 638-2704 ext. 0606
The Securities and Exchange Commission has a website (http://www.sec.gov) which
you may visit to view this Prospectus, SAI and other information. The Securities
and Exchange Commission has not approved or disapproved these securities or
determined if this Prospectus is truthful or complete. Any representation
otherwise is a criminal offense.
The current Metropolitan Fund Prospectus is attached to the back of this
Prospectus. You should also read the Metropolitan Fund Prospectus carefully
before agreeing to a structured settlement pursuant to which an Income Annuity
may be purchased. This Prospectus is not valid unless attached to a Metropolitan
Fund Prospectus.
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Income Annuity
This Income Annuity provides a stream of payments. Your income payments will
vary to reflect the performance of the portfolios underlying the selected
investment divisions. In addition, the amount of your income payment is also
based on the amount of the purchase payment, the income payment type and
personal factors such as your age.
A word about investment risk:
An investment in any variable annuity involves investment risk. As a result, the
value of your income payments will fluctuate and may decrease. Money invested is
NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or other financial institution.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Important Terms You Should Know ........................................... 4
Table of Expenses ......................................................... 6
MetLife ................................................................... 7
Metropolitan Life Separate Account E ...................................... 7
Settling Your Claim ....................................................... 8
The Income Annuity ........................................................ 9
Investment Choices ..................................................... 9
Income Payment Types ................................................... 10
Allocation of Purchase Payment ......................................... 11
The Value of Your Income Payments ...................................... 11
Annuity Units ........................................................ 11
AIR .................................................................. 12
Valuation ............................................................ 13
Contract Fee ........................................................... 13
Assignment Fee ......................................................... 13
Premium Taxes .......................................................... 14
Charges ................................................................ 14
Separate Account Charge .............................................. 14
Investment-Related Charge ............................................ 14
General Information ....................................................... 15
Administration ......................................................... 15
Purchase Payments .................................................... 15
Receiving Income and Information ..................................... 15
Advertising Performance ................................................ 16
Changes to the Income Annuity .......................................... 16
Voting Rights .......................................................... 17
Who Sells the Income Annuity ........................................... 18
Purchases in New York or North Carolina ................................ 18
Financial Statements ................................................... 18
<PAGE>
Federal Tax Treatment ..................................................... 19
Tax Treatment of Income Payments Received in Settlement
of Personal Physical Injury Claims .................................. 19
A Defendant May Assign Its Obligation to Make Income
Payments to You ..................................................... 19
Using the Income Annuity to Fund Qualified Assignments ................. 20
Owners Other than MIAC ................................................. 21
Table of Contents of the Statement of Additional Information ........... 22
Appendix for Premium Tax Table ............................................ 23
MetLife does not intend to offer the Income Annuity anywhere it may not lawfully
be offered and sold. MetLife has not authorized any information or
representations about the Income Annuity other than the information in this
Prospectus, the attached prospectus, supplements to the prospectuses or any
supplemental sales material we authorize.
[GRAPHIC OMITTED]
3
<PAGE>
[GRAPHIC OMITTED]
Important Terms You Should Know
Annuity Units
An annuity unit is the unit of measurement used to determine the amount of each
variable income payment. The initial variable income payment is converted into
annuity units established for a specific investment division by dividing the
initial variable income payment by the annuity unit value for that investment
division at the commencement of the contract. The resulting number of annuity
units under the Income Annuity remains constant for the life of the contract.
Annuity Unit Value
We determine the value of annuity units for each investment division each day
the New York Stock Exchange is open for regular trading. The values increase or
decrease based on the investment performance of the corresponding underlying
portfolios.
Assumed Investment Return (AIR)
Under the Income Annuity, the AIR is a hypothetical percentage rate of return
used to determine the amount of the initial variable income payment. The AIR is
also the benchmark that is used to measure the investment performance of a given
invest-ment division to determine the amount of all subsequent income payments
to you.
Claim
A claim is your request to be compensated or provided with other relief for a
loss because of a personal physical injury or physical sickness. Your claim may
be resolved in a number of ways including, for example, voluntary agreement of
the parties, as in a pre-trial settlement, operation of law, a court ordered
judgment, or an administrative ruling. For convenience, we use this term
regardless of whether or not a legal proceeding has been instituted.
Contract
A contract is the legal agreement between the owner and MetLife. Although you
are not the owner of the contract, usually you will receive a copy of the
contract and the income payments under the contract. The contract contains the
relevant provisions of the Income Annuity. MetLife issues the contract for the
Income Annuity described in this Prospectus. In some cases, you may receive a
certificate rather than the contract which contains the relevant provisions of
the Income Annuity. Throughout this Propectus we refer to either a contract or a
certificate as a contract.
Defendant
The defendant is the person or entity you allege is responsible for your claim.
The defendant's liability insurance company may make payments to you and/or may
assume the responsibility to respond to your claim or may also be a party to
your claim. For convenience, when we refer to the defendant, we also mean the
defendant's liability insurance company. We use the term "defendant" even if no
lawsuit has begun.
4
<PAGE>
Investment Division
Investment divisions are subdivisions of the Separate Account. When money is
allocated to an investment division, the investment division purchases shares of
a portfolio (with the same name) within the Metropolitan Fund.
MetLife
Metropolitan Life Insurance Company is the company that issues the Income
Annuity. Throughout this Prospectus, MetLife is also referred to as "we," "us"
or "our."
MetLife Designated Office
The MetLife Designated Office will handle the processing of all requests
concerning the Income Annuity. MetLife will notify you and provide you with the
address of the MetLife Designated Office.
Metropolitan Insurance and Annuity Company (MIAC)
MIAC is a wholly-owned subsidiary of MetLife. Typically, the liability for
making the payments to an injured party under a settlement of your claim is
assigned by the defendant to MIAC under a qualified assignment. MIAC assumes the
obligation to make income payments to you and may purchase the Income Annuity to
fund its obligation. MIAC owns the Income Annuity. However, another subsidiary
of MetLife may act as the assignee. For convenience, we use MIAC throughout this
Prospectus when discussing assignments to MIAC or any other MetLife affiliate.
Owner
The owner of the Income Annuity is the entity which purchases the Income Annuity
to provide for payments due to you under a settlement of your claim. The owner
exercises all rights of ownership. You are not the owner.
Separate Account
A separate account is an investment account. All assets contributed to
investment divisions under the Income Annuity are pooled in the Separate Account
and maintained for the benefit of investors in the Income Annuity.
You (Your)
In this Prospectus, "you" means the injured party(ies) for whom the Income
Annuity is purchased to provide the payments due to you under a settlement of
your claim.
Variable Annuity
A variable annuity is an annuity in which income payments are based upon the
performance of investments such as stocks and bonds held by one or more
underlying portfolios. You assume the investment risk in a variable annuity.
Your income payment will fluctuate based on the performance of the investment
divisions listed in the contract.
5
<PAGE>
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TABLE OF EXPENSES--INCOME ANNUITY
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The following table shows the Separate Account and Metropolitan Fund charges and
expenses applied to the Income Annuity. The numbers in the table for the
Separate Account are estimates for the current year and the numbers for the
Metropolitan Fund are based on past experience. The numbers in this table are
subject to change. It is not intended to show the actual total combined expenses
of the Separate Account and the Metropolitan Fund which may be higher or lower.
The table does not show premium taxes which may apply.
- --------------------------------------------------------------------------------
One Time Contractowner Transaction Expense
Contract Fee (1) ................................................ $350
Separate Account and Metropolitan Fund Annual Expenses
Separate Account Annual Expenses (estimated as a percentage of
average account value for the fiscal year ending
December 31, 1999) (2) ............................................. 1.25%
Metropolitan Fund Annual Expenses (as a percentage of average net
assets for the fiscal year ending December 31, 1998)
<TABLE>
<CAPTION>
------------------------------
OTHER EXPENSES TOTAL EXPENSES OTHER EXPENSES TOTAL EXPENSES
MANAGEMENT WITHOUT WITHOUT AFTER EXPENSE AFTER EXPENSE
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MetLife Stock Index Portfolio (3) ................... .25 .05 .30 .05 .30
State Street Research Diversified Portfolio (3)(4) .. .43 .05 .48 .05 .48
State Street Research Growth Portfolio (3)(4) ....... .48 .05 .53 .05 .53
Harris Oakmark Large Cap Value Portfolio (4)(5) ..... .75 .80 1.55 .20 .95
T. Rowe Price Large Cap Growth Portfolio (4)(5) ..... .70 1.18 1.88 .20 .90
Lehman Brothers Aggregate Bond Index Portfolio (5) .. .25 .32 .57 .23 .48
------------------------------
</TABLE>
Following are the expenses on a $1,000 investment in each investment division
listed below, assuming a 5% annual return on assets (6):
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MetLife Stock Index Portfolio ...................... $ 16 $ 49 $ 85 $185
State Street Research Diversified Portfolio ........ 18 55 95 206
State Street Research Growth Portfolio ............. 18 56 97 210
Harris Oakmark Large Cap Value Portfolio ........... 23 70 119 256
T. Rowe Price Large Cap Growth Portfolio ........... 22 68 117 250
Lehman Brothers Aggregate Bond Index Portfolio ..... 18 55 95 206
</TABLE>
(1) In addition, a one time assignment fee of $750 is assessed when the
defendant assigns its liability to make payments to you under the
structured settlement to one of our affiliates, like MIAC. The defendant
pays this fee.
(2) Pursuant to the terms of the contract, our total Separate Account Annual
Expenses will not exceed 1.25% of the average value of amounts in the
investment divisions.
(3) Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses).
(4) Each Portfolio's management fee decreases when its assets grow to certain
dollar amounts. The "break point" dollar amounts at which the management
fee declines are more fully explained in the prospectus for the
Metropolitan Fund.
(5) These Portfolios began operations on November 9, 1998. We pay all expenses
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or non-recurring expenses) in excess of .20% of the average
net assets for each of these Portfolios until the Portfolio's total assets
reach $100 million, or until November 8, 2000, whichever comes first. The
expense information in the Table are estimates for the current year as a
percentage of net assets based on this limited experience and are restated
as if they had been in effect for the entire year.
(6) The example assumes that no income payments were made during the period.
As a result, the numbers reflect the highest amount you would pay on a
$1,000 investment.
6
<PAGE>
[GRAPHIC OMITTED]
MetLife
Our main office is located at One Madison Avenue, New York, New York 10010.
MetLife was formed under the laws of New York State in 1868. Headquartered in
New York City, MetLife is one of the world's largest financial services
companies and a leader in life insurance sales in the United States. With
approximately $359 billion worth of assets under management as of December 31,
1998, MetLife provides individual insurance and investment products to
approximately 9 million households in the United States. MetLife also provides
group insurance and investment products to corporations and other institutions
employing over 33 million people.
We are a mutual life insurance company. On September 28, 1999, MetLife
adopted a plan of reorganization to convert from a mutual life insurance company
to a stock life insurance company (the "plan"). Upon conversion, MetLife will
become a wholly owned subsidiary of a new publicly owned holding company,
MetLife, Inc. The plan is subject to approval by the New York State
Superintendent of Insurance after a public hearing. In addition, the plan cannot
go into effect unless it is approved by a vote of eligible MetLife policyholders
and contractholders whose policies or contracts were in force on September 28,
1999. Subject to these approvals and certain other conditions, we expect the
plan to become effective during the first quarter of the year 2000. Holders of
policies or contracts who are entitled to vote on the plan will be entitled to
receive certain compensation pursuant to the terms of the plan.
Our conversion to a stock company will have no effect on the rights or our
obligations under the Income Annuity, all of which remain exactly as stated in
the Income Annuity. Upon conversion, however, the contractholder will no longer
have rights by virtue of the Income Annuity as members of MetLife. (These rights
consist primarily of the right to vote on matters submitted to contractholders
for a vote, including the election of directors, and the right to receive a
portion of any remaining surplus if the company is liquidated.) In addition,
because the Income Annuity was issued after September 28, 1999, the New York
Insurance Law provides that the contractholder will not (by virtue of that
Income Annuity) be entitled to vote on the plan or to receive compensation
pursuant to the plan.
Because the Income Annuity was issued after September 28, 1999, the
contractholder will be receiving a Notice of Pendency of the plan. Upon receipt
of the Notice, the contractholder will have the right under New York Insurance
Law to rescind the Income Annuity and obtain a refund of any amounts paid as
stated in the Notice.
7
<PAGE>
Metropolitan Life Separate Account E
We established Metropolitan Life Separate Account E on September 27, 1983. The
purpose of the Separate Account is to hold the variable assets that underlie
some of the variable annuity contracts we issue. We have registered the Separate
Account with the Securities and Exchange Commission as a unit investment trust
under the Investment Company Act of 1940.
The Separate Account's assets are solely for the benefit of those who invest in
the Separate Account and no one else, including our creditors. We are obligated
to pay all money we owe under the Income Annuity even if that amount exceeds the
assets in the Separate Account. The assets of the Separate Account are held in
our name on behalf of the Separate Account and legally belong to us. All the
income, gains, and losses (realized or unrealized) resulting from these assets
are credited to or charged against the contracts issued from this Separate
Account without regard to our other business.
Settling Your Claim
If you have brought a claim for personal physical injury or physical sickness
(sometimes you are called the claimant or plaintiff), your claim may be resolved
to include a schedule of future payments to be made to you. Because the
frequency of the income payments, the period of time over which the payments are
made and the amount of each payment may be "structured" by you and the defendant
to meet your financial and medical needs, it is called a "Structured
Settlement."
This Structured Settlement is then generally reflected in a contract between you
and the defendant based on your mutual agreement (a settlement agreement) or in
an order issued by a court or administrative tribunal (judgment).
Customarily, as part of the Structured Settlement, the defendant will be
released from any further liability related to the claim provided that you
receive future income payments at the specified times. Often the defendant, with
your consent, will assign the liability to make your scheduled income payments
to another person or company (an assignee) through a "qualified assignment."
Under the qualified assignment, the assignee (also the purchaser) assumes the
obligation to pay you according to the schedule of payments contained in the
qualified assignment.
When the liability is assigned to another person or company, the assignee may
purchase the Income Annuity to use as the funding vehicle for making the income
payments to you. The Income Annuity provides a stream of periodic income
payments. MIAC (or other assignee) is the owner of the Income Annuity. As the
owner, MIAC has the right to designate the payee of each income payment we make
under the Income Annuity. Usually, you and/or your beneficiary are designated as
the payees to receive income payments.
You are the annuitant. An annuitant is the person whose life is the measure for
determining the timing and sometimes the dollar amount of payments under an
annuity. If the Income Annuity that is purchased so provides, upon your death,
your beneficiaries may receive continuing payments.
[GRAPHIC OMITTED]
8
<PAGE>
[GRAPHIC OMITTED]
The Income Annuity
An Income Annuity provides you with a stream of payments for either your
lifetime or over a specified period.
The variable annuity described in this Prospectus is an Income Annuity. The
annuity is "variable" because the value of your income payment varies based on
the investment performance of the investment divisions identified in the
Structured Settlement. In short, the value of your income payments under the
Income Annuity may go up or down. Since the investment performance is not
guaranteed, the money is at risk. The degree of risk will depend on the
investment divisions selected. The annuity unit value for each investment
division rises or falls relative to the AIR based on the investment performance
(or "experience") of the Portfolio with the same name.
The Income Annuity is purchased with one purchase payment. The amount of the
income payments you receive will depend on such things as personal factors such
as your age, the income payment type selected and the amount of the purchase
payment under the Structured Settlement intended to be allocated to the
investment divisions of the Income Annuity. The frequency you receive income
payments will be in accordance with the schedule of payments stipulated in the
Structured Settlement.
Certain versions of the Income Annuity have a fixed payment option called the
Fixed Income Option. Under the Fixed Income Option, we guarantee the amount of
your fixed income payments. The Fixed Income Option is not described in this
Prospectus although we occasionally refer to it.
Investment Choices
The Metropolitan Fund and each Portfolio are more fully described in the
Metropolitan Fund's prospectus and its SAI. The Metropolitan Fund's prospectus
is attached at the end of this Prospectus. You should read the Metropolitan Fund
prospectus carefully before agreeing to a Structured Settlement pursuant to
which it is contemplated that the Income Annuity will be purchased to fund the
obligation to make periodic payments to you. The SAI is available upon your
request.
The investment choices are:
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Diversified Portfolio
MetLife Stock Index Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
State Street Research Growth Portfolio
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
The degree of investment risk assumed will depend on the investment divisions
chosen. We have listed the choices in order of risk from the most conservative
to the most aggressive.
The investment divisions generally offer the opportunity for greater returns
over the long term than the Fixed Income Option. On the other hand, since your
income payments are subject to risks associated with investing in stocks and
bonds, income payments based upon amounts allocated to the investment divisions
will fluctuate and may be down as well as up.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
While the investment divisions and their comparably named Portfolios may have
names, investment objectives and management which are identical or similar to
publicly available mutual funds, these are not those mutual funds. The
Metropolitan Fund portfolios most likely will not have the same performance
experience as any publicly available mutual fund.
- --------------------------------------------------------------------------------
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are part of the Metropolitan Fund, invest in
stocks, bonds and other investments. All dividends declared by the Portfolios
are earned by the Separate Account and reinvested. Therefore, no dividends are
distributed under the Income Annuity. Dividends generally are reflected in an
increase in the annuity unit value. There are no transaction expenses (i.e.,
front-end sales load or back-end sales load charges) as a result of the Separate
Account's purchase or sale of these mutual fund shares. The Portfolios of the
Metropolitan Fund are available only by purchasing MetLife annuities and life
insurance policies and are never sold directly to the public.
The Metropolitan Fund is a "series" type fund registered with the Securities and
Exchange Commission as an "open-end management investment company" under the
Investment Company Act of 1940 (the "1940 Act"). A "series" fund means that each
Portfolio is one of several available through the Metropolitan Fund. Each
Portfolio is "diversified" under the 1940 Act.
The Portfolios of the Metropolitan Fund pay us a monthly fee for our services as
investment manager. These fees, as well as the operating expenses paid by each
Portfolio, are described in the Metropolitan Fund prospectus and SAI.
In addition, the Metropolitan Fund prospectus discusses other separate accounts
of MetLife and Metropolitan Tower Life Insurance Company that invest in the
Metropolitan Fund. The risks of these arrangements are also discussed.
Income Payment Types
Currently, we provide a wide variety of income payment types. Based on the terms
of the Structured Settlement, several of these options may be combined within
the provisions of the Income Annuity.
Your income payment amount will depend in large part on the type of income
payment type chosen. For example, if an "Income for Two Lives Annuity" is
selected, your income payments will typically be lower than if a "Your Lifetime
Annuity" is selected. The terms of the Structured Settlement will also determine
when your income payments will start and what frequency you will receive income
payments. For income payment types providing for a guaranteed period, we may
provide for payment of a commuted value upon your death if the Structured
Settlement so provides.
The following income payment types are available:
Your Lifetime Annuity: A variable income payable during your life. Upon your
death, payments stop.
Your Lifetime with a Guaranteed Period Annuity: A variable income payable during
your life with a guaranteed number of years. If, at your death, payments have
been made for less than the guaranteed period, payments are made to your
beneficiary for the rest of the guaranteed period.
- --------------------------------------------------------------------------------
Factors to consider when agreeing to the terms for your income payments in the
Structured Settlement are:
o The amount of income you need;
o The amount you expect to receive from other sources;
o The growth potential of other investments; and
o How long you would like your income to last.
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10
<PAGE>
Your Lifetime With Non-Guaranteed Period Annuity: A variable income payable
during your life or a number of years. Payments stop at your death or at the end
of the time period, whichever happens first.
Income for Two Lives Annuity: A variable income payable while either you and
another person are alive. After one of you dies, payments continue if the other
person is alive. Payments stop once both of you are no longer alive. Payments
after one of you dies may be the same as those paid while both were alive or may
be a lower percentage that is selected when the annuity is purchased (e.g. 75%,
66 2/3% or 50%).
Income for Two Lives with a Guaranteed Period Annuity: This is the same as the
Income for Two Lives Annuity described above, but we guarantee to pay the full
amount (not a reduced percentage) for the guaranteed period even if one or both
of you die. If, upon the death of both of you, payments have been made for less
than the guaranteed period, payments are made to your beneficiary for the rest
of the guaranteed period.
Income for a Guaranteed Period Annuity: If we agree to the guaranteed period,
you may receive a variable income payable for a guaranteed period (1-40 years).
As an administrative practice, we will consider factors such as your age and
life expectancy in determining whether to issue a contract with this income
payment type. Payments cease at the end of the guaranteed period (which is often
called a "term certain" period) even if you are still alive. If you die before
the end of the guaranteed period, payments are made to your beneficiary for the
rest of the guaranteed period.
Allocation of Purchase Payment
Money is allocated among the Fixed Income Option and the investment divisions
according to the terms of the Structured Settlement and, where applicable, the
qualified assignment agreement. We may require that a certain percentage of the
purchase payment be allocated to the Fixed Income Option. Under certain versions
of the Income Annuity, certain investment divisions or the Fixed Income Option
may not be available. You are not permitted to make transfers between the
investment divisions or between the Fixed Income Option and the investment
divisions.
The Value of Your Income Payments
Annuity Units
Annuity units are credited for that portion of the purchase payment allocated to
an investment division. Before we determine the number of annuity units credited
under the Income Annuity, we reduce the purchase payment by the contract fee and
premium taxes, if applicable. We then compute an initial variable income payment
amount using the Assumed Investment Return ("AIR"), the income payment type and
the age and sex of the annuitant which is the measuring life (or lives if income
payments are to be paid over the lives of more than one person). We then
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The initial variable income payment is a hypothetical payment which is
calculated based on the AIR. This initial variable income payment is used to
establish the number of annuity units. It is not the amount of your actual first
variable income payment unless your first income payment happens to be within 10
days after we issue the Income Annuity.
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divide the initial variable income payment amount by the Annuity Unit Value on
the date of the transaction. The result is the number of annuity units credited
for that investment division. The number of annuity units remains the same for
the life of the Income Annuity.
AIR
Your income payment is determined by using the AIR to benchmark the investment
experience of the chosen investment divisions. The higher the AIR, the higher
your initial variable income payment will be. Your subsequent payments will only
increase in proportion to the amount the actual investment experience of the
chosen investment divisions exceeds the AIR and Separate Account charges (the
net investment return). Likewise, your income payments will decrease to the
extent the actual investment experience of the chosen investment divisions is
less than the AIR and Separate Account charges. A lower AIR will result in a
lower initial variable income payment, but subsequent variable income payments
will increase more rapidly or decline more slowly than if you had a higher AIR
as changes occur in the actual investment experience of the investment
divisions.
The amount of each variable income payment is determined ten days prior to your
income payment date on the contract's issue date, if later than the income
payment date.
- --------------------------------------------------------------------------------
The AIR is stated in the contract and may range from 1% to 6%. The current
contract AIR is 5%. A contract could also reflect a different AIR negotiated by
the parties to the Structured Settlement.
- --------------------------------------------------------------------------------
Examples of the Effect of Different AIRs on Variable Income Payments
A. 5% AIR
Assume that the initial variable income payment for an investment division is
$1,000 and that at the time we calculate your actual first income payment the
investment experience for the investment division (minus charges) is up 10%
(exceeds the AIR). Your variable income payment attributed to that investment
division is $1,047.62. The percentage change between the initial variable income
payment and your actual income payment is 4.7%.
However, assume instead that the investment experience (minus charges) is down
10% (does not exceed the AIR). Your variable income payment is $857.14. Note
that the percentage change between the initial variable income payment and your
actual income payment is -14.3%.
B. 3% AIR
Assume that the initial variable income payment for an investment division is
$800 and that at the time we calculate your actual first income payment the
investment experience for the investment division (minus charges) is up 10%
(exceeds the AIR). Your variable income payment attributed to that investment
division is $854.37. The percentage change between the initial variable income
payment and your actual income payment is 6.8%.
However, assume instead that the investment experience (minus charges) is down
10% (does not exceed the AIR). Your variable income payment is $699.03. Note
that the percentage change between the initial variable income payment and your
actual income payment is -12.6%.
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Valuation
We separately determine the annuity unit value for each investment division once
each day when the New York Stock Exchange is open for trading. If permitted by
law, we may change the period between calculations, but we will give the owner
30 days' notice.
This is how we calculate the annuity unit value for each investment division:
o First, we determine the change in investment experience (including any
investment-related charge) for the underlying portfolio from the previous
trading day to the current trading day;
o Next, we subtract the daily equivalent of the Separate Account charge for
each day since the last day the annuity unit value was calculated. The
resulting number is the net investment return;
o Then, we multiply by a factor which is the daily equivalent of the AIR;
and
o Finally, we multiply the previous annuity unit value by this result.
Example: Calculating the Annuity Unit Value
Assume the following: yesterday's annuity unit value was $10.20; the
number we calculate for today's change in investment experience (minus the
investment-related charge) is 1.02 (up 2%); the daily equivalent of the
Separate Account charge is .000034035 and the daily equivalent of the AIR
for a 5% AIR is .99986634. The new annuity unit value is:
(1.02 - .000034035) x .99986634 x $10.20 = $10.40
However, now assume that today's change in investment experience (minus
the investment-related charge) is .98 (down 2%) instead of 1.02. The new
annuity unit value is:
(.98 - .000034035) x .99986634 x $10.20 = $9.99
Contract Fee
A one time $350 contract fee is taken from the purchase payment when an Income
Annuity is purchased prior to allocating the remainder of the purchase payment
to the investment divisions. This charge covers our administrative costs
including preparation of the Income Annuity, review of applications and
recordkeeping.
Assignment Fee
If the Income Annuity is purchased by MIAC, there is a one time assignment fee
of $750. You do not pay the fee. The defendant pays the fee only if the
obligation to pay you is assigned to MIAC. This charge covers MIAC's
administrative and recordkeeping costs associated with assuming the liability
for making payments to you and for being the owner of the Income Annuity.
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Premium Taxes
Some jurisdictions tax purchase payments for the Income Annuity. We deduct money
from the purchase payment to pay "premium" taxes (also known as "annuity"
taxes).
A chart in the Appendix shows the jurisdictions where premium taxes are
currently charged and the percentage amount which must be added to the purchase
payment to pay for the premium taxes. If an assignment is made and MIAC is the
owner, a premium tax is not applicable.
Charges
There are two types of charges paid if any of the purchase payment is allocated
to the investment divisions:
o Separate Account charge; and
o Investment-related charge.
Separate Account Charge
There is a Separate Account charge. This charge is no more than 1.25% annually
of the average value of amounts in the Separate Account. This charge includes
insurance-related charges for the risk that you may live longer than we
estimated. Then, we would be obligated to pay you more in payments than we
anticipated. The charge also includes the risk that our expenses in
administering the Income Annuity will be greater than we estimated. The Separate
Account charge also pays us for our miscellaneous administrative costs. These
costs which we incur include financial, actuarial, accounting and legal
expenses.
Investment-Related Charge
This charge pays us as the investment manager of the Metropolitan Fund for
managing money in the Portfolios and investment operating expenses. The
percentage paid depends on the selected investment divisions. The percentage
charge for each investment division is listed in the Table of Expenses.
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The charges paid will not reduce the number of annuity units credited under the
Income Annuity. Instead, we deduct the charges when calculating the annuity unit
value.
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General Information
Administration
All transactions will be processed in the manner described below. Generally,
administrative requests are effective the day we receive them at the MetLife
Designated Office.
Purchase Payments
The purchase payment is sent by check or wire made payable to "MetLife" to the
MetLife Designated Office. We will provide all necessary forms. We must have all
completed documents to credit the purchase payment.
Usually, the initial purchase payment is credited under the Income Annuity
within two days of receipt at the MetLife Designated Office of documentation
that an Income Annuity is to be purchased. However, if the forms are filled out
incorrectly or incompletely or other documentation is not completed properly, we
have up to five business days to credit the payment. If the problem cannot be
resolved by the fifth business day, we will notify the purchaser and give the
reasons for the delay. At that time, the purchaser will be asked whether to
agree to let us keep the money until the problem is resolved. If the purchaser
does not agree or we cannot reach the purchaser by the fifth business day, the
money will be returned.
Purchase payments are effective and valued as of 4:00 p.m. Eastern time, on the
day we receive them in good order at the MetLife Designated Office, except when
they are received:
o On a day when the annuity unit value is not calculated, or
o After 4:00 p.m. Eastern time.
In those cases, the purchase payments will be effective the next day the annuity
unit value, as applicable, is calculated.
Receiving Income Payments and Information
Based on the provisions of the Structured Settlement, the Income Annuity may
provide you with income payments that begin immediately after the issue date of
the Income Annuity and/or income payments that begin at some future date (i.e.,
delayed income payments). Each income payment stream, whether immediate or
delayed, will be paid from each of the investment divisions and/or Fixed Income
Option based on the allocation for that income payment described in the
Structured Settlement. However, lump sum income payments which are delayed to
some future date will be paid only from the Fixed Income Option.
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You may elect to have your payments sent to your residence or have us deposit
payments directly into your bank account. If you elect to have your payment
direct deposited, you will receive in the mail a stub statement for the payment.
Your stub statement will indicate information, such as the amount of your
payment, the number of units for each investment division and the corresponding
annuity unit value. Periodically, you may receive information from us about the
Income Annuity.
Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources including your statements,
the internet, annual reports and semiannual reports.
We may state performance in terms of "yield," "change in annuity unit value,"
"average annual total return," or some combination of these terms.
Yield is the net income generated by an investment in a particular investment
division for 30 days or a month. These figures are expressed as percentages.
This percentage yield is compounded semiannually.
Change in Annuity Unit Value is calculated by determining the percentage change
in the value of an annuity unit for a certain period. These numbers may also be
annualized. Change in annuity unit value may be used to demonstrate performance
for a hypothetical investment (such as $10,000) over a specified period. These
performance numbers reflect the deduction of the Separate Account charge.
Average annual total return calculations reflect the Separate Account charge.
These figures also assume a steady annual rate of return.
For purposes of presentation, we may assume that the Income Annuity was in
existence prior to its inception date. In these cases, we calculate performance
based on the historical performance of the underlying Metropolitan Fund
Portfolios. We use the actual annuity unit data after the inception date.
Changes to the Income Annuity
We have the right to make certain changes to the Income Annuity, but only as
permitted by law. We make changes when we think they would best serve the
interest of annuity owners or would be appropriate in carrying out the purposes
of the Income Annuity. If the law requires, we will also get the owner's
approval and the approval of any appropriate regulatory authorities. Examples of
the changes we may make include the right to:
o Operate the Separate Account in any form permitted by law.
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All performance numbers are based upon historical earnings. These numbers are
not intended to indicate future results.
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o Take any action necessary to comply with or obtain and continue any
exemptions under the law.
o Transfer any assets in an investment division to another investment
division, or to one or more separate accounts, or to our general account,
or to add, combine or remove investment divisions in the Separate Account.
o Substitute for the Portfolio shares in any investment division, the shares
of another class of the Metropolitan Fund or the shares of another
investment company or any other investment permitted by law.
o Change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account and any currently available
portfolio in connection with the Income Annuity.
o Make any necessary technical changes in the Income Annuity in order to
conform with any of the above-described actions.
If any changes result in a material change in the underlying investments of an
investment division for which annuity units have been credited, we will notify
the owner of the change. The Structured Settlement may provide for an alternate
choice of investment division in which an equivalent number of annuity units
will be credited if an investment division to which money has been allocated
becomes no longer available or for which there is a change in the underlying
Portfolio. Otherwise, you will not have any right to choose an alternate
investment division. Where required by law, we will ask the owner's approval
before making any technical changes.
Voting Rights
Based on our current view of applicable law, the owner has voting interests
under the Income Annuity concerning Metropolitan Fund proposals that are subject
to a shareholder vote. Therefore, the owner is entitled to give us instructions
for the number of shares which are deemed attributable to the Income Annuity.
We will vote the shares of each of the underlying Portfolios held by the
Separate Account based on instructions we receive from those having a voting
interest in the corresponding investment divisions. However, if the law or the
interpretation of the law changes, we may decide to exercise the right to vote
the Portfolio's shares based on our own judgment. In those cases where MIAC is
the owner of the Income Annuity, the shares of each underlying Portfolio will be
voted in the same proportion as the shares for which voting instructions are
received by the Separate Account.
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There are certain circumstances under which we may disregard voting
instructions. However, in this event, a summary of our action and the reasons
for such action will appear in the next semiannual report. If we do not receive
voting instructions, we will vote the interests under the Income Annuity in the
same proportion as represented by the voting instructions we receive from other
investors. Shares of the Metropolitan Fund that are owned by our general account
or by any of our unregistered separate accounts will be voted in the same
proportion as the aggregate of the shares:
o For which voting instructions are received, and
o That are voted in proportion to such voting instructions.
However, if the law or the interpretation of the law changes, we may decide to
exercise the right to vote the Portfolio's shares based on our judgment.
Who Sells the Income Annuity
The Income Annuity is sold through registered broker-dealers.
The licensed broker-dealers who sell the annuities may be compensated for these
sales by commissions that we pay. The commissions we pay range
from 0% to 5%. There is no front-end sales load or back-end
sales load deducted from purchase payments to pay sales commissions. The
Separate Account does not pay sales commissions. MetLife pays its distribution
expenses from its general account which includes any profits generated from its
Separate Account operations.
Purchases In New York or North Carolina
Although we may not cancel the Income Annuity, the owner may cancel the Income
Annuity within a certain time period if the Income Annuity is purchased in New
York or North Carolina.
Financial Statements
The financial statements and related notes for the Separate Account and MetLife
are in the SAI and are available from MetLife upon request. Deloitte & Touche,
LLP, who are independent auditors, audit these financial statements.
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Federal Tax Treatment
The following tax information is only a general discussion of the tax
consequences of use of the Income Annuity in connection with the settlement of a
claim. The Internal Revenue Code ("Code") is complex and changes regularly.
Because of the complexity of the Code, the applicability of the tax laws to the
Income Annuity and to the parties to a claim and/or an assignment are subject to
varying interpretations, each party should consult his/her own tax advisor about
his/her circumstances and how the tax law and any recent developments may affect
him/her if the Income Annuity is used in connection with the settlement of a
claim.
The Structured Settlement is an arrangement between you, the defendant and/or
the defendant's insurer. Neither we nor any of our affiliates assumes
responsibility for any legal, tax, or financial consequences of the Structured
Settlement to any of the parties to the claim or any assignee. In particular,
neither we nor any of our affiliates make any representations, warranties, or
guarantees as to the tax consequences of any decision you and other parties make
to settle your claim and to have income payments to you funded by an Income
Annuity.
Tax Treatment of Income Payments Received in Settlement of Personal Physical
Injury Claims
Section 104(a)(2) of the Code excludes from gross income any amounts received as
damages on account of personal physical injuries or physical sickness. Any
portion of a Structured Settlement that provides for punitive damages will not
qualify for exclusion under Section 104 (a)(2) of the Code. For qualifying
portions of a Structured Settlement, the treatment applies whether the amounts
are paid as lump sums or as periodic payments.
If the Income Annuity will be used to provide periodic payments to you as a
result of your claim, the periodic payments will be excludable from your income
only if the Income Annuity is owned by a person other than you. The Income
Annuity typically will be owned by MIAC.
We take no responsibility for determining if payments made to you as a result of
a claim, whether by use of the Income Annuity or otherwise, are excludable from
your income under Section 104(a)(2) of the Code.
A Defendant May Assign Its Obligation to Make Income Payments to You
Pursuant to Section 130 of the Code, the defendant or the defendant's insurer
may assign, with your consent, its obligation under the Structured Settlement to
make income payments to you. The entity, called the assignee, that assumes the
obligation to make income payments to you, typically will be MIAC. The
assignment by the defendant to MIAC of its
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obligation to make income payments to you will be treated as a "qualified
assignment" under Section 130(c) of the Code only if the following requirements
are met:
o The Structured Settlement provides that you will receive income payments
on specified dates to compensate you for your personal injury or sickness
(in a case involving physical injury or physical sickness);
o MIAC assumes the liability to make payments to you from a party to the
suit or the Structured Settlement;
o The income payments that will be made to you are fixed and determinable as
to amount and time of payment;
o You cannot accelerate, defer, increase, or decrease your income payments;
o The amount MIAC is obligated to pay you under the assignment is no greater
than the obligation of the person who assigned the liability to MIAC; and
o The income payments to you are excludable from your gross income under
Section 104(a)(1) or (2) of the Code.
If these requirements are satisfied, and the assignment to MIAC is treated as a
"qualified assignment," the defendant may deduct the full payment it makes to
MIAC in the year in which the payment is made. In addition, if these
requirements are satisfied and MIAC purchases one or more "qualified funding
assets" to fund its obligation to make income payments to you under the
assignment, the purchase payment MIAC receives from the defendant will be
excluded from MIAC's gross income to the extent the purchase payment does not
exceed the aggregate cost of the qualified funding assets.
Using the Income Annuity to Fund Qualified Assignments
If you and the defendant intend to have the Income Annuity fund a qualified
assignment, the amount of the purchase payment that is to be allocated to each
investment division, the formula for determining the number of annuity units to
be credited to each investment division, and the schedule for making the
variable income payments must be specified in the Structured Settlement.
The Internal Revenue Service (IRS) has issued a private letter ruling to MIAC as
the assignee of a defendant's obligation to make payments to a party that was
physically injured. In the private letter ruling, MIAC proposed to purchase a
variable income annuity as a "qualified funding asset." Under the settlement
agreement involved in the private ruling, at least 50 percent of the damages to
be applied to the purchase of the
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variable income annuity was to be allocated to a guaranteed income option. In
the private letter ruling, the IRS determined, among other things, that:
o Periodic payments of damages that are calculated pursuant to an objective
formula based on the performance of the S&P 500 Stock Index and/or a
mutual fund designed to achieve long-term growth of capital and moderate
income are fixed and determinable as to amount and time of payment; and
o A variable income annuity purchased by MIAC from MetLife would not fail to
qualify as a qualified funding asset within the meaning of Section 130(c)
of the Code solely because of the variable payments under the annuity,
which would be reasonably related to the periodic payments under the
qualified assignment.
Private letter rulings may be relied upon only by the taxpayer(s) who requested
the ruling and only with respect to the specific facts involved in the ruling.
However, the reasoning used by the IRS in reaching its determinations in the
ruling may be useful to defendants, defendant's liability insurers, and other
assignees considering the tax treatment of the Income Annuity in connection with
the settlement of a claim. Such persons should, of course, consult their own tax
advisors to determine the tax consequences of entering into a Structured
Settlement or assigning (or accepting an assignment of) liability in connection
with which the Income Annuity will be used to fund payments to the claimant.
Owners Other than MIAC
Entities (such as a corporation) that are considering purchasing an Income
Annuity should consult with their own tax advisors prior to the purchase to
determine the tax consequences of owning the Income Annuity.
In general, under Section 72(u) of the Code, if an annuity contract is owned by
a non-natural person, the contract is not treated as an annuity for income tax
purposes and the income under the contract is treated as ordinary income
received or accrued by the owner in each taxable year. There are exceptions to
this general rule. These exceptions include contracts that are "qualified
funding assets" within the meaning of Section 130(c) of the Code (without regard
to whether there is a qualified assignment) and contracts that are "immediate
annuities" within the meaning of Section 72(u)(4) of the Code. If a contract
satisfies one of these exceptions, the income under the contract generally is
not taxed until it is received.
In addition, pursuant to Section 264(f) of the Code, if an Income Annuity is
owned by a non-natural person, or held for the benefit of a non-natural person,
a portion of the owner's otherwise deductible interest may no longer be
deductible. Similar adverse income tax consequences may occur pursuant to
Sections 805, 807 and 832 of the Code, if an Income Annuity is owned by or for
the benefit of an insurance company.
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Table of Contents for the Statement of Additional Information
Page
Cover Page ................................................................. 1
Table of Contents .......................................................... 1
Independent Auditors ....................................................... 2
Year 2000 .................................................................. 2
Distribution of Certificates and Interests in the
Income Annuity ........................................................ 2
Experience Factor .......................................................... 2
Variable Income Payments ................................................... 2
Investment Management Fees ................................................. 4
Performance Data and Advertisement of
the Separate Account .................................................. 4
Financial Statements of the Separate Account ...............................
Financial Statements of MetLife ............................................
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Appendix
Premium Tax Table
If the owner is a resident of or domiciled in one of the following
jurisdictions, the percentage amount listed by that jurisdiction is the premium
tax rate which will be applied to the Income Annuity.
Income Annuities
California ............... 2.35%
Kentucky(1) .............. 2.00%
Maine .................... 2.00%
Nevada ................... 3.50%
Puerto Rico .............. 1.00%
South Dakota ............. 1.25%
West Virginia ............ 1.00%
Wyoming .................. 1.00%
Virgin Islands ........... 5.00%
(1) The premium tax in Kentucky is repealed effective January 1, 2000.
PEANUTS (Copyright) United Feature Syndicate, Inc.
(Copyright) 1999 Metropolitan Life Insurance Company
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METROPOLITAN LIFE INSURANCE COMPANY
METROPOLITAN LIFE SEPARATE ACCOUNT E
METLIFE SETTLEMENT PLUS,
A VARIABLE INCOME ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 PART B
November 1, 1999
This Statement of Additional Information is not a prospectus but contains
information in addition to and more detailed than that set forth in the
Prospectus for MetLife Settlement Plus, A Variable Income Annuity dated November
1, 1999 and should be read in conjunction with the Prospectus. Copies of the
Prospectus may be obtained from Metropolitan Life Insurance Company, One Madison
Avenue, New York, New York 10010.
A Statement of Additional Information for the Metropolitan Series Fund,
Inc. is attached at the end of this Statement of Additional Information.
Unless otherwise indicated, the Statement of Additional Information
continues the use of certain terms as set forth in the Section entitled
"Important Terms You Should Know" of the Prospectus for MetLife Settlement Plus,
A Variable Income Annuity dated November 1, 1999.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors................................. 2
Year 2000............................................ 2
Distribution of Certificates and Interests in the
Income Annuity..................................... 2
Experience Factor.................................... 2
Variable Income Payments............................. 2
Investment Management Fees........................... 4
Performance Data and Advertisement of the Separate
Account............................................ 4
Financial Statements of the Separate Account......... 35
Financial Statements of MetLife...................... 61
</TABLE>
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INDEPENDENT AUDITORS
The financial statements for the Separate Account for the period ended
December 31, 1998 included in this Statement of Additional Information have been
audited by Deloitte & Touche LLP, 555 Seventeenth Street, Denver, Colorado,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon such report given upon the authority of such firm
as experts in auditing and accounting.
YEAR 2000
MetLife depends on the smooth functioning of its computer systems to
administer its annuity contracts. Many computer software systems in use today
cannot distinguish the year 2000 from the year 1900 because of the way dates are
encoded and calculated. That failure could negatively impact and disrupt the
administration of the annuity contracts. MetLife is actively working on the
necessary changes to its computer systems to deal with this issue and expects
that its systems will be adapted in time for that event, although there cannot
be assurances of success.
DISTRIBUTION OF CERTIFICATES AND INTERESTS IN THE INCOME ANNUITY
MetLife is both the depositor and the underwriter (issuer) of the Income
Annuity.
The certificates and interests in the Income Annuity are sold through
registered broker-dealers.
The offering of the Income Annuity is continuous. In certain situations,
the Income Annuity may not include all investment choices or the Fixed Income
Option. Each contract will indicate the available choices.
EXPERIENCE FACTOR
We use the term "experience factor" to describe the investment performance
for an investment division. The experience factor changes from Valuation Period
(described later) to Valuation Period to reflect the upward or downward
performance of the assets in the underlying Portfolios. The experience factor is
calculated as of the end of each Valuation Period using the net asset value per
share of the underlying Portfolio. The net asset value includes the per share
amount of any dividend or capital gain distribution paid by the Portfolio during
the current Valuation Period, and subtracts any per share charges for taxes and
reserve for taxes. We then divide that amount by the net asset value per share
as of the end of the last Valuation Period to obtain a factor that reflects
investment performance. We then subtract a charge for each day in the valuation
period not to exceed .000034035 (the daily equivalent of an effective annual
rate of 1.25%).
VARIABLE INCOME PAYMENTS
"Variable income payments" include variable income payments made under the
various Income Annuities.
ASSUMED INVESTMENT RETURN (AIR)
The following discussion concerning the amount of variable income payments
is based on an Assumed Investment Return of 5% per year. It should not be
inferred that such rates will bear any relationship to the actual net investment
experience of the Separate Account.
AMOUNT OF INCOME PAYMENTS
The income payment you receive periodically from an investment division
(after your first payment if paid within 10 days of the issue date) will depend
upon the number of annuity units held in that investment division (described
below) and the Annuity Unit Value (described later) as of the 10th day prior to
a payment date.
The Income Annuity specifies the dollar amount of the initial variable
income payment for each investment division (this equals the first payment
amount if paid within 10 days of the issue date). This initial variable income
payment is computed based on the amount of the purchase payment applied to the
specific investment division (net any applicable premium tax owed or contract
charge), the AIR, the age and/or sex of the measuring lives and the income
payment type selected. The initial payment amount is then divided by the Annuity
Unit Value for the investment division to determine the number of annuity units
held in that investment division. The number of annuity units held remains fixed
for the duration of the contract.
The dollar amount of subsequent variable income payments will vary with the
amount by which investment performance is greater or less than the AIR and
Separate Account charges.
For example, on an annual basis, if an investment division has a cumulative
net investment performance of 6% over a one year period, the first variable
income payment in the next year will be approximately 1% greater than the
payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment experience of the investment division. If
such investment performance return is 4% over a one year period, the first
variable income payment in the next year will be approximately 1% less than the
payment on the same date in the preceding year, and subsequent payments will
continue to vary with the investment performance of the applicable division.
2
<PAGE>
ANNUITY UNIT VALUE
The Annuity Unit Value is based on the same change in investment
performance in the Separate Account. (See "The Value of Your Income Payment on
page 11 in the Prospectus.)
CALCULATING THE ANNUITY UNIT VALUE
We calculate Annuity Unit Values once a day on every day the New York Stock
Exchange is open for trading. We call the time between two consecutive Annuity
Unit Value calculations the "Valuation Period." We have the right to change the
basis for the Valuation Period, on 30 days' notice, as long as it is consistent
with the law. All purchase payments and transfers are valued as of the end of
the Valuation Period during which the transaction occurred. The Annuity Unit
Values can increase or decrease, based on the investment performance of the
corresponding underlying portfolios. If the investment performance is positive,
after payment of Separate Account expenses and the deduction for the AIR,
Annuity Unit Values will go up. Conversely, if the investment performance is
negative, after payment of Separate Account expenses and the deduction for the
AIR, Annuity Unit Values will go down.
To calculate an Annuity Unit Value, we first multiply the experience factor
for the period by a factor based on the AIR and the number of days in the
Valuation Period. For an AIR of 5% and a one day Valuation Period, the factor is
.99986634, which is the daily discount factor for an effective annual rate of
5%. (The AIR may be in the range of 1% to 6%, as defined in your Income Annuity
and the laws in the state.) The resulting number is then multiplied by the last
previously calculated Annuity Unit Value to produce the new annuity value.
The following examples show, by use of hypothetical examples, the method of
determining the Annuity Unit Value and the amount of variable income payments:
EXAMPLE OF CALCULATION OF ANNUITY UNIT VALUE
<TABLE>
<S> <C>
1. Annuity Unit Value, beginning of period........................ $ 10.20000
2. "Experience factor" for period................................. 1.023558
3. Daily adjustment for 5% of Assumed Investment Return........... .99986634
4. (2) X (3)...................................................... 1.023421
5. Annuity Unit Value, end of period (1) X (4).................... $ 10.43889
</TABLE>
DETERMINING THE VARIABLE INCOME PAYMENT
Variable income payments can go up or down based upon the investment
performance of the investment divisions in the Separate Account. AIR is the rate
used to determine the initial variable income payment and serves as a benchmark
against which the investment performance of the investment divisions is
compared. The higher the AIR, the higher the initial variable income payment
will be. Variable income payments will increase only to the extent that the
investment performance of the investment divisions exceeds the AIR (and Separate
Account charges). Variable income payments will decline if the investment
performance of the Separate Account does not exceed the AIR (and Separate
Account charges). A lower AIR will result in a lower initial variable income
payment, but variable income payments will increase more rapidly or decline more
slowly as changes occur in the investment performance of the investment
divisions.
EXAMPLE OF INCOME PAYMENTS
(ASSUMES THE FIRST MONTHLY PAYMENT IS MADE WITHIN 10 DAYS OF THE ISSUE DATE OF
THE INCOME ANNUITY)
Annuitant age 65, Life Annuity with 120 Payments Guaranteed
<TABLE>
<S> <C>
1. Net Purchase Payment........................................... $50,000.00
2. First monthly income payment per $1,000 of Annuity Value....... $ 7.71
3. First monthly income payment (1) X (2) divided by 1,000........ $ 385.50
4. Annuity Unit Value (see Example of Calculation of Annuity Unit
Value above as of Annuity Date)................................. $ 10.80000
5. Number of Annuity Units (3) divided by (4)..................... 35.69444
6. Assume Annuity Unit Value for the second month equal to (10
days prior to payment).......................................... $ 10.97000
7. Second monthly Annuity Payment (5) X (6)....................... $ 391.57
8. Assume Annuity Unit Value for third month equal to............. $ 10.52684
9. Next monthly Annuity Payment (5) X (8)......................... $ 375.75
</TABLE>
3
<PAGE>
INVESTMENT MANAGEMENT FEES
Each of the currently available Metropolitan Fund Portfolios pays us, the
investment manager of the Metropolitan Fund, an investment management fee. For
providing investment management services to the Lehman Brothers Aggregated Bond
Index and MetLife Stock Index, we receive monthly compensation from each
Portfolio at an annual rate of .25% of the average daily value of the aggregate
net assets of each Portfolio. For providing investment management services to
the State Street Research Growth Portfolio, we receive monthly compensation from
the Portfolio at an annual rate of .55% of the average daily value of the
aggregate net assets of the Portfolio up to $500 million, .50% of such assets on
the next $500 million and .45% of such assets on amounts over $1 billion. For
providing investment management services to the State Street Research
Diversified Portfolio, we receive monthly compensation from the Portfolio at an
annual rate of .50% of the average daily value of the aggregate net assets of
the Portfolio up to $500 million, .45% of such assets on the next $500 million
and .40% of such assets on amounts over $1 billion. We pay State Street Research
& Management Company, one of our subsidiaries, to provide us with sub-investment
management services for the State Street Research Diversified and State Street
Research Growth Portfolio.
For providing investment management services to the Harris Oakmark Large
Cap Value Portfolio, we receive monthly compensation from the Portfolio at an
annual rate of .75% of the average daily value of the aggregate net assets of
the Portfolio up to $250 million and .70% of such assets in excess of
$250 million. Harris Associates L.P., whose general partner is indirectly owned
by MetLife, is the sub-investment manager with respect to the Harris Oakmark
Large Cap Value Portfolio.
For providing investment management services to the T. Rowe Price Large Cap
Growth Portfolio, we receive monthly compensation from the Portfolio at an
annual rate of .70% of the average daily value of the aggregate net assets of
the Portfolio up to $50 million, and .60% of such assets over $50 million. T.
Rowe Price Associates, Inc. is the sub-investment manager for the T. Rowe Price
Large Cap Growth Portfolio.
PERFORMANCE DATA AND ADVERTISEMENT OF THE SEPARATE ACCOUNT
From time to time we advertise the performance of various Separate Account
investment divisions. Performance will be stated in terms of either yield,
"change in Annuity Unit Value" or "average annual total return" or some
combination of the foregoing. Yield, change in Annuity Unit Value and average
annual total return figures are based on historical earnings and are not
intended to indicate future performance. This income is then annualized, by
assuming that the same amount of income is generated each week over a 52 week
period, and the total income is shown as a percentage of the investment. The
effective yield is similarly calculated; however, when annualized, the earned
income in the investment division is assumed to be reinvested. Thus, the
effective yield figure will be slightly higher than the yield figure because of
the former's compounding effect. Other yield figures quoted in advertisements
will refer to the net income generated by an investment in a particular
investment division for a thirty-day period or month, which is specified in the
advertisement, and then expressed as a percentage yield of that investment. This
percentage yield is then compounded semiannually. Change in Annuity Unit Value
refers to the comparison between values of annuity units over specified periods
in which an investment division has been in operation, expressed as a percentage
and may also be expressed as an annualized figure. In addition, change in
Annuity Unit Value may be used to show performance for a hypothetical investment
(such as $10,000) over the time period specified.
Advertisements regarding the Separate Account may contain comparisons of
hypothetical after-tax returns of currently taxable investments versus returns
of tax deferred or tax-exempt investments. From time to time, the Separate
Account may compare the performance of its investment divisions with the
performance of common stocks, long-term government bonds, long-term corporate
bonds, intermediate-term government bonds, Treasury Bills, certificates of
deposit and savings accounts. The Separate Account may use the Consumer Price
Index in its advertisements as a measure of inflation for comparison purposes.
From time to time, the Separate Account may advertise its performance ranking
among similar investments or compare its performance to averages as compiled by
independent organizations, such as Lipper Analytical Services, Inc.,
Morningstar, Inc., VARDS(Registered) and The Wall Street Journal. The Separate
Account may also advertise its performance in comparison to appropriate indices,
such as the Standard & Poor's 500 Composite Stock Price Index, the Lehman
Brothers, Aggregate Bond Index, and/or the Lehman Brothers Government/
Corporate Bond Index, the Merrill Lynch High Yield Bond Index.
WHEN VOTING INSTRUCTIONS MAY BE DISREGARDED
MetLife may disregard voting instructions under the following circumstances
(1) to make or refrain from making any change in the investments or investment
policies for any portfolio if required by any insurance regulatory authority;
(2) to refrain from making any change in the investment policies or any
investment
4
<PAGE>
adviser or principal underwriter or any portfolio which may be initiated by
those having voting interests or the Metropolitan Fund's board of directors,
provided MetLife's disapproval of the change is reasonable and, in the case of a
change in investment policies or investment manager, based on a good faith
determination that such change would be contrary to state law or otherwise
inappropriate in light of the portfolio's objective and purposes; or (3) to
enter into or refrain from entering into any advisory agreement or underwriting
contract, if required by any insurance regulatory authority.
In the event that MetLife does disregard voting instructions, a summary of
the action and the reasons for such action will be included in the next
semiannual report.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Contractholders of
Metropolitan Life Separate Account E:
We have audited the accompanying statements of assets and liabilities of the
State Street Research Growth, State Street Research Income, State Street
Research Money Market, State Street Research Diversified, State Street
Research Aggressive Growth, MetLife Stock Index, Santander International
Stock, Loomis Sayles High Yield Bond, Janus Mid Cap, T. Rowe Price Small Cap
Growth, Scudder Global Equity, Harris Oakmark Large Cap Value,
Neuberger&Berman Partners Mid Cap Value, T. Rowe Price Large Cap Growth,
Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, Russell 2000
Index, Variable B, Variable C, Variable D, Fidelity Money Market, Fidelity
Equity-Income, Fidelity Growth, Fidelity Overseas, Fidelity Investment Grade
Bond, Fidelity Asset Manager, Calvert Social Balanced and Calvert Social Mid
Cap Growth Divisions of Metropolitan Life Separate Account E (the "Separate
Account") as of December 31, 1998 and the related statements of operations for
the year then ended and of changes in net assets for the years ended December
31, 1998 and 1997. These financial statements are the responsibility of the
Separate Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at December 31, 1998 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of the State Street Research Growth, State Street
Research Income, State Street Research Money Market, State Street Research
Diversified, State Street Research Aggressive Growth, MetLife Stock Index,
Santander International Stock, Loomis Sayles High Yield Bond, Janus Mid Cap,
T. Rowe Price Small Cap Growth, Scudder Global Equity, Harris Oakmark Large
Cap Value, Neuberger&Berman Partners Mid Cap Value, T. Rowe Price Large Cap
Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index,
Russell 2000 Index, Variable B, Variable C, Variable D, Fidelity Money Market,
Fidelity Equity-Income, Fidelity Growth, Fidelity Overseas, Fidelity
Investment Grade Bond, Fidelity Asset Manager, Calvert Social Balanced and
Calvert Social Mid Cap Growth Divisions of Metropolitan Life Separate Account
E at December 31, 1998 and the results of their operations for the year then
ended and the changes in their net assets for the years ended December 31,
1998 and 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 5, 1999
15
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
State Street
State Street State Street Research State Street
Research Research Money Research
Growth Income Market Diversified
Division Division Division Division
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in
Metropolitan Series
Fund, Inc. at Value
(Note 1A):
State Street Research
Growth Portfolio
(70,709,443 Shares;
cost $2,037,667,170)... $2,529,998,376 -- -- --
State Street Research
Income Portfolio
(35,153,943 Shares;
cost $450,385,594)..... -- $449,267,390 -- --
State Street Research
Money Market Portfolio
(1,379,587 Shares; cost
$14,668,207)........... -- -- $14,282,179 --
State Street Research
Diversified Portfolio
(124,227,823 Shares;
cost $2,012,591,007)... -- -- -- $2,284,549,657
State Street Research
Aggressive Growth
Portfolio (41,237,965
Shares; cost
$1,044,616,591)........ -- -- -- --
MetLife Stock Index
Portfolio (81,120,925
Shares; cost
$1,863,060,135)........ -- -- -- --
Santander International
Stock Portfolio
(17,677,867 Shares;
cost $230,781,888)..... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(4,622,343 Shares; cost
$47,480,459)........... -- -- -- --
Janus Mid Cap Portfolio
(19,530,743 Shares;
cost $265,587,440)..... -- -- -- --
T. Rowe Price Small Cap
Growth Portfolio
(13,817,278 Shares;
cost $161,927,995)..... -- -- -- --
Scudder Global Equity
Portfolio (8,237,416
Shares; cost
$96,456,139)........... -- -- -- --
Harris Oakmark Large Cap
Value Portfolio
(388,299 Shares; cost
$3,743,705)............ -- -- -- --
Neuberger&Berman
Partners Mid Cap Value
Portfolio (301,756
Shares; cost
$3,135,708)............ -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(409,436 Shares; cost
$4,308,905)............ -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio (809,288
Shares; cost
$8,174,683)............ -- -- -- --
Morgan Stanley EAFE
Index Portfolio
(354,734 Shares; cost
$3,736,611)............ -- -- -- --
Russell 2000 Index
Portfolio (613,868
Shares;
cost $6,146,811)....... -- -- -- --
-------------- ------------ ----------- --------------
Total investments.... 2,529,998,376 449,267,390 14,282,179 2,284,549,657
Cash.................... -- -- -- --
-------------- ------------ ----------- --------------
Total assets......... 2,529,998,376 449,267,390 14,282,179 2,284,549,657
LIABILITIES............. -- -- -- --
-------------- ------------ ----------- --------------
NET ASSETS.............. $2,529,998,376 $449,267,390 $14,282,179 $2,284,549,657
============== ============ =========== ==============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
State Street
Research MetLife Santander Loomis Sayles
Variable Variable Variable Aggressive Stock International High Yield
B C D Growth Index Stock Bond
Division Division Division Division Division Division Division
- ----------- ---------- -------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$90,026,386 $3,260,644 $34,942 -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- $1,217,757,111 -- -- --
-- -- -- -- $2,870,058,320 -- --
-- -- -- -- -- $249,965,034 --
-- -- -- -- -- -- $38,781,459
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
90,026,386 3,260,644 34,942 1,217,757,111 2,870,058,320 249,965,034 38,781,459
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
90,026,386 3,260,644 34,942 1,217,757,111 2,870,058,320 249,965,034 38,781,459
-- -- -- -- -- -- --
- ----------- ---------- ------- -------------- -------------- ------------ -----------
$90,026,386 $3,260,644 $34,942 $1,217,757,111 $2,870,058,320 $249,965,034 $38,781,459
=========== ========== ======= ============== ============== ============ ===========
</TABLE>
19
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Janus Small Cap Scudder Harris Oakmark
Mid Cap Growth Global Equity Large Cap Value
Division Division Division Division
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments in
Metropolitan Series
Fund, Inc. at Value
(Note 1A):
State Street Research
Growth Portfolio
(68,194,026 Shares;
cost $2,037,667,170)... -- -- -- --
State Street Research
Income Portfolio
(35,153,943 Shares;
cost $450,385,594)..... -- -- -- --
State Street Research
Money Market Portfolio
(1,379,587 Shares; cost
$14,668,207)........... -- -- -- --
State Street Research
Diversified Portfolio
(124,227,823 Shares;
cost $2,012,591,007)... -- -- -- --
State Street Research
Aggressive Growth
Portfolio (41,237,965
Shares; cost
$1,044,616,591)........ -- -- -- --
MetLife Stock Index
Portfolio (81,120,925
Shares;
cost $1,863,060,135)... -- -- -- --
Santander International
Stock Portfolio
(17,677,867 Shares;
cost $230,781,888)..... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(4,622,343 Shares; cost
$47,480,459)........... -- -- -- --
Janus Mid Cap Portfolio
(19,530,743 Shares;
cost $265,587,440)..... $340,420,858 -- -- --
T.Rowe Price Small Cap
Growth Portfolio
(13,817,278 Shares;
cost $161,927,995)..... -- $169,814,350 -- --
Scudder Global Equity
Portfolio (8,237,416
Shares; cost
$96,456,139)........... -- -- $101,979,213 --
Harris Oakmark Large Cap
Value Portfolio
(388,299 Shares; cost
$3,743,705)............ -- -- -- $3,766,498
Neuberger&Berman
Partners Mid Cap Value
Portfolio (301,756
Shares; cost
$3,135,708)............ -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(409,436 Shares; cost
$4,308,905)............ -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio (809,288
Shares; cost
$8,174,683)............ -- -- -- --
Morgan Stanley EAFE(R)
Index Portfolio
(354,734 Shares; cost
$3,736,611)............ -- -- -- --
Russell 2000(R) Index
Portfolio (613,868
Shares;
cost $6,146,811)....... -- -- -- --
------------ ------------ ------------ ----------
Total investments.... 340,420,858 169,814,350 101,979,213 3,766,498
Cash.................... -- 4 -- --
------------ ------------ ------------ ----------
Total assets......... 340,420,858 169,814,354 101,979,213 3,766,498
LIABILITIES............. -- -- -- --
------------ ------------ ------------ ----------
NET ASSETS.............. $340,420,858 $169,814,354 $101,979,213 $3,766,498
============ ============ ============ ==========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
Neuberger& T. Rowe Price Lehman Brothers Morgan
Berman Partners Large Cap Aggregate Stanley Russell
Mid Cap Value Growth Bond Index EAFE Index 2000 Index
Division Division Division Division Division
- --------------- ------------- --------------- ---------- ----------
<S> <C> <C> <C> <C>
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
$3,237,844 -- -- -- --
-- $4,511,985 -- -- --
-- -- $8,141,437 -- --
-- -- -- $3,831,132 --
-- -- -- -- $6,464,027
---------- ---------- ---------- ---------- ----------
3,237,844 4,511,985 8,141,437 3,831,132 6,464,027
-- -- -- -- --
---------- ---------- ---------- ---------- ----------
3,237,844 4,511,985 8,141,437 3,831,132 6,464,027
-- -- -- -- --
---------- ---------- ---------- ---------- ----------
$3,237,844 $4,511,985 $8,141,437 $3,831,132 $6,464,027
========== ========== ========== ========== ==========
</TABLE>
21
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Fidelity
Fidelity Equity- Fidelity Fidelity
Money Market Income Growth Overseas
Division Division Division Division
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Fidelity
Variable Insurance
Products Funds At Value
(Note 1A):
Fidelity Money Market
Portfolio (1,863,376
Shares; cost $1,863,376).. $1,863,376 -- -- --
Fidelity Equity-Income
Portfolio (5,012,213
Shares; cost
$101,649,666)............. -- $127,410,460 -- --
Fidelity Growth Portfolio
(3,497,446 Shares; cost
$105,858,708)............. -- -- $156,930,412 --
Fidelity Overseas Portfolio
(1,156,832 Shares; cost
$21,491,115).............. -- -- -- $23,194,484
Fidelity Investment Grade
Bond Portfolio (727,771
Shares; cost $8,880,208).. -- -- -- --
Fidelity Asset Manager
Portfolio (3,006,739
Shares; cost $46,546,485). -- -- -- --
Investments in Calvert
Variable Series, Inc. at
Value (Note 1A):
Calvert Social Balanced
Portfolio (21,133,273
Shares; cost $38,151,114). -- -- -- --
Calvert Social Mid Cap
Growth Portfolio (228,183
Shares; cost $6,073,395).. -- -- -- --
---------- ------------ ------------ -----------
Total investments....... 1,863,376 127,410,460 156,930,412 23,194,484
Cash....................... -- -- -- --
---------- ------------ ------------ -----------
Total assets............ 1,863,376 127,410,460 156,930,412 23,194,484
LIABILITIES................ -- 517 5,416 2,355
---------- ------------ ------------ -----------
NET ASSETS................. $1,863,376 $127,409,943 $156,924,996 $23,192,129
========== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Fidelity Calvert Calvert
Investment Fidelity Social Social Mid Cap
Grade Bond Asset Manager Balanced Growth
Division Division Division Division
- ---------- ------------- ----------- --------------
<S> <C> <C> <C>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$9,431,917 -- -- --
-- $54,602,386 -- --
-- -- $45,161,803 --
-- -- -- $6,943,606
- ---------- ----------- ----------- ----------
9,431,917 54,602,386 45,161,803 6,943,606
224 -- -- --
- ---------- ----------- ----------- ----------
9,432,141 54,602,386 45,161,803 6,943,606
-- 3,726 -- --
- ---------- ----------- ----------- ----------
$9,432,141 $54,598,660 $45,161,803 $6,943,606
========== =========== =========== ==========
</TABLE>
23
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
State Street
State Street State Street Research State Street
Research Research Money Research
Growth Income Market Diversified
Division Division Division Division
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2)..... $232,551,878 $34,039,105 $730,632 $212,338,252
Expenses (Note 3)...... 27,935,551 4,956,881 221,681 25,203,998
------------ ----------- -------- ------------
Net investment income
(loss).................. 204,616,327 29,082,224 508,951 187,134,254
------------ ----------- -------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions............ 26,298,215 1,273,744 34,837 5,466,303
Change in net unrealized
appreciation
(depreciation) of
investments for the
period.................. 280,912,929 (200,044) (5,989) 134,318,516
------------ ----------- -------- ------------
Net realized and
unrealized gain (loss)
on investments (Note
1B)..................... 307,211,144 1,073,700 28,848 139,784,819
------------ ----------- -------- ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... $511,827,471 $30,155,924 $537,799 $326,919,073
============ =========== ======== ============
</TABLE>
See Notes To Financial Statements.
24
<PAGE>
<TABLE>
<CAPTION>
State Street
Research MetLife Santander Loomis Sayles
Variable Variable Variable Aggressive Stock International High Yield
B C D Growth Index Stock Bond
Division Division Division Division Division Division Division
- ----------- -------- -------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 8,525,693 $312,967 $3,215 $ 70,493,184 $118,221,173 $ 2,828,105 $ 4,005,614
829,041 -- -- 14,321,888 29,095,218 2,973,351 437,463
- ----------- -------- ------ ------------ ------------ ----------- -----------
7,696,652 312,967 3,215 56,171,296 89,125,955 (145,246) 3,568,151
- ----------- -------- ------ ------------ ------------ ----------- -----------
5,782,962 441,254 -- 35,680,553 68,017,631 7,654,046 (343,705)
6,978,552 70,584 4,467 45,940,529 398,393,213 38,302,726 (7,314,238)
- ----------- -------- ------ ------------ ------------ ----------- -----------
12,761,514 511,838 4,467 81,621,082 466,410,844 45,956,772 (7,657,943)
- ----------- -------- ------ ------------ ------------ ----------- -----------
$20,458,166 $824,805 $7,682 $137,792,378 $555,536,799 $45,811,526 $(4,089,792)
=========== ======== ====== ============ ============ =========== ===========
</TABLE>
25
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
T. Rowe Price
Janus Small Cap Scudder Harris Oakmark
Mid Cap Growth Global Equity Large Cap Value
Division Division Division Division(/1/)
----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2).... $ 1,623,789 $ -- $1,572,951 $ 8,638
Expenses (Note 3)..... 2,531,536 1,596,579 1,021,316 1,984
----------- ----------- ---------- -------
Net investment income
(loss)................. (907,747) (1,596,579) 551,635 6,654
----------- ----------- ---------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain
(loss) from security
transactions......... 8,354,115 (1,844,850) 3,761,734 (192)
Change in net
unrealized
appreciation
(depreciation) of
investments for the
period............... 66,659,923 7,150,268 5,427,106 22,793
----------- ----------- ---------- -------
Net realized and
unrealized gain
(loss) on investments
(Note 1B)............ 75,014,038 5,305,418 9,188,840 22,601
----------- ----------- ---------- -------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $74,106,291 $ 3,708,839 $9,740,475 $29,255
=========== =========== ========== =======
</TABLE>
(1)For the period November 9, 1998 to December 31, 1998.
See Notes To Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
Neuberger& T. Rowe Price Lehman Brothers Morgan Fidelity Fidelity
Berman Partners Large Cap Aggregate Stanley Russell Money Equity-
Mid Cap Value Growth Bond Index EAFE Index 2000 Index Market Income
Division(/1/) Division(/1/) Division(/1/) Division(/1/) Division(/1/) Division Division
- --------------- ------------- --------------- ------------- ------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 3,483 $ 2,348 $ 47,923 $ 2,591 $ 7,732 $87,070 $ 6,959,731
2,021 2,612 4,926 1,896 3,488 16,254 1,110,289
-------- -------- -------- ------- -------- ------- -----------
1,462 (264) 42,997 695 4,244 70,816 5,849,442
-------- -------- -------- ------- -------- ------- -----------
5,610 481 8,661 2,965 299 -- 2,573,653
102,136 203,080 (33,246) 94,521 317,216 -- 3,204,174
-------- -------- -------- ------- -------- ------- -----------
107,746 203,561 (24,585) 97,486 317,515 -- 5,777,827
-------- -------- -------- ------- -------- ------- -----------
$109,208 $203,297 $ 18,412 $98,181 $321,759 $70,816 $11,627,269
======== ======== ======== ======= ======== ======= ===========
</TABLE>
27
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Calvert
Fidelity Fidelity Calvert Social
Fidelity Fidelity Investment Asset Social Mid Cap
Growth Overseas Grade Bond Manager Balanced Growth
Division Division Division Division Division Division
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2).... $14,813,607 $1,598,275 $354,170 $6,182,265 $3,265,563 $ 813,211
Expenses (Note 3)..... 1,180,765 208,936 74,755 463,773 461,646 50,060
----------- ---------- -------- ---------- ---------- ----------
Net investment income
(loss)................. 13,632,842 1,389,339 279,415 5,718,492 2,803,917 763,151
----------- ---------- -------- ---------- ---------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions........... 3,491,143 924,598 84,679 860,649 404,517 200,832
Change in net unrealized
appreciation
(depreciation) of
investments for the
period................. 24,850,739 42,139 234,217 149,631 2,341,578 395,768
----------- ---------- -------- ---------- ---------- ----------
Net realized and
unrealized gain (loss)
on investments
(Note 1B).............. 28,341,882 966,737 318,896 1,010,280 2,746,095 596,600
----------- ---------- -------- ---------- ---------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $41,974,724 $2,356,076 $598,311 $6,728,772 $5,550,012 $1,359,751
=========== ========== ======== ========== ========== ==========
</TABLE>
See Notes To Financial Statements.
28
<PAGE>
[INTENTIONALLY LEFT BLANK]
29
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
State Street Research State Street Research
Growth Division Income Division
------------------------------ --------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 204,616,327 $ 312,436,131 $ 29,082,224 $ 19,362,568
Net realized gain
(loss) from security
transactions.......... 26,298,215 6,497,968 1,273,744 (126,809)
Change in net
unrealized
appreciation
(depreciation) of
investments........... 280,912,929 48,676,440 (200,044) 7,592,639
-------------- -------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 511,827,471 367,610,539 30,155,924 26,828,398
-------------- -------------- ------------ ------------
From capital
transactions:
Purchases.............. 271,042,284 249,917,031 64,640,719 39,798,504
Redemptions............ (122,272,961) (77,812,386) (28,530,070) (24,359,461)
-------------- -------------- ------------ ------------
Total net purchase
payments
(redemptions)........ 148,769,323 172,104,645 36,110,649 15,439,043
Net portfolio
transfers............. (26,963,363) 95,147,417 33,277,896 (24,010,205)
Net other transfers.... (508,271) (546,518) (77,316) (143,664)
-------------- -------------- ------------ ------------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 121,297,689 266,705,544 69,311,229 (8,714,826)
-------------- -------------- ------------ ------------
NET CHANGE IN NET
ASSETS................. 633,125,160 634,316,083 99,467,153 18,113,572
NET ASSETS--BEGINNING OF
PERIOD................. 1,896,873,216 1,262,557,133 349,800,237 331,686,665
-------------- -------------- ------------ ------------
NET ASSETS--END OF
PERIOD................. $2,529,998,376 $1,896,873,216 $449,267,390 $349,800,237
============== ============== ============ ============
</TABLE>
See Notes To Financial Statements.
30
<PAGE>
<TABLE>
<CAPTION>
State Street Research State Street Research
Money Market Division Diversified Division Variable B Division
- -------------------------- ------------------------------ --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
- ------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 508,951 $ 570,806 $ 187,134,254 $ 234,482,772 $ 7,696,652 $14,044,039
34,837 (61,502) 5,466,303 1,893,876 5,782,962 3,829,803
(5,989) 113,994 134,318,516 11,070,885 6,978,552 534,415
---------- ----------- -------------- -------------- ------------ -----------
537,799 623,298 326,919,073 247,447,533 20,458,166 18,408,257
---------- ----------- -------------- -------------- ------------ -----------
255,102 397,750 333,211,219 238,990,700 226,228 326,373
(3,418,636) (6,154,143) (117,752,204) (81,574,039) (11,306,407) (7,677,640)
---------- ----------- -------------- -------------- ------------ -----------
(3,163,534) (5,756,393) 215,459,015 157,416,661 (11,080,179) (7,351,267)
1,749,990 2,578,299 61,274,635 58,667,151 22 1,983
(3,315) (3,158) (673,377) (236,355) (2,764) (170,031)
---------- ----------- -------------- -------------- ------------ -----------
(1,416,859) (3,181,252) 276,060,273 215,847,457 (11,082,921) (7,519,315)
---------- ----------- -------------- -------------- ------------ -----------
(879,060) (2,557,954) 602,979,346 463,294,990 9,375,245 10,888,942
15,161,239 17,719,193 1,681,570,311 1,218,275,321 80,651,141 69,762,199
---------- ----------- -------------- -------------- ------------ -----------
$
14,282,179 $15,161,239 $2,284,549,657 $1,681,570,311 $ 90,026,386 $80,651,141
========== =========== ============== ============== ============ ===========
</TABLE>
31
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Variable C Division Variable D Division
------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 312,967 $ 611,101 $ 3,215 $ 4,904
Net realized gain (loss)
from security
transactions.............. 441,254 137,612 -- --
Change in net unrealized
appreciation
(depreciation) of
investments............... 70,584 36,345 4,467 1,175
---------- ---------- ------- -------
Net increase in net assets
resulting from operations. 824,805 785,058 7,682 6,079
---------- ---------- ------- -------
From capital transactions:
Purchases.................. 25,268 300 -- --
Redemptions................ (935,863) (319,697) -- --
---------- ---------- ------- -------
Total net purchase
payments (redemptions)... (910,595) (319,397) -- --
Net portfolio transfers.... (309) -- -- --
Net other transfers........ (11,069) 466 -- --
---------- ---------- ------- -------
Net increase (decrease) in
net assets resulting from
capital transactions...... (921,973) (318,931) -- --
---------- ---------- ------- -------
NET CHANGE IN NET ASSETS.... (97,168) 466,127 7,682 6,079
NET ASSETS--BEGINNING OF
PERIOD..................... 3,357,812 2,891,685 27,260 21,181
---------- ---------- ------- -------
NET ASSETS--END OF PERIOD... $3,260,644 $3,357,812 $34,942 $27,260
========== ========== ======= =======
</TABLE>
See Notes To Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
State Street Research MetLife Santander
Aggressive Growth Division Stock Index Division International Stock Division
- ------------------------------ ------------------------------ ------------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 56,171,296 $ 34,085,531 $ 89,125,955 $ 18,962,143 $ (145,246) $ (3,164,216)
35,680,553 15,321,830 68,017,631 8,877,389 7,654,046 (2,561,487)
45,940,529 13,987,705 398,393,213 342,650,486 38,302,726 (1,434,374)
- -------------- -------------- -------------- -------------- -------------- --------------
137,792,378 63,395,066 555,536,799 370,490,018 45,811,526 (7,160,077)
- -------------- -------------- -------------- -------------- -------------- --------------
108,436,372 171,573,548 403,472,148 308,799,941 25,765,813 33,496,666
(78,737,642) (72,387,858) (122,924,047) (68,325,409) (16,037,510) (15,919,233)
- -------------- -------------- -------------- -------------- -------------- --------------
29,698,730 99,185,690 280,548,101 240,474,532 9,728,303 17,577,433
(158,421,934) (119,817,089) 159,663,776 212,625,487 (33,426,187) (45,918,018)
(363,723) 63,854 (770,595) (335,284) (84,341) 60,592
- -------------- -------------- -------------- -------------- -------------- --------------
(129,086,927) (20,567,545) 439,441,282 452,764,735 (23,782,225) (28,279,993)
- -------------- -------------- -------------- -------------- -------------- --------------
8,705,451 42,827,521 994,978,081 823,254,753 22,029,301 (35,440,070)
1,209,051,660 1,166,224,139 1,875,080,239 1,051,825,486 227,935,733 263,375,803
- -------------- -------------- -------------- -------------- -------------- --------------
$1,217,757,111 $1,209,051,660 $2,870,058,320 $1,875,080,239 $ 249,965,034 $ 227,935,733
============== ============== ============== ============== ============== ==============
</TABLE>
33
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Loomis Sayles High Yield Janus Mid Cap
Bond Division Division
----------------------------- -----------------------------
For the Year For the Period For the Year For the Period
Ended March 3, 1997 Ended March 3, 1997
December 31, to December 31, December 31, to December 31,
1998 1997 1998 1997
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 3,568,151 $ 1,019,806 $ (907,747) $ 2,109
Net realized gain
(loss) from security
transactions.......... (343,705) 184,410 8,354,115 57,975
Change in net
unrealized
appreciation
(depreciation) of
investments........... (7,314,238) (1,384,762) 66,659,923 8,173,495
----------- ----------- ------------ -----------
Net increase (decrease)
in net assets
resulting from
operations............ (4,089,792) (180,546) 74,106,291 8,233,579
----------- ----------- ------------ -----------
From capital
transactions:
Purchases.............. 14,100,048 9,038,204 103,125,247 31,188,159
Redemptions............ (1,956,958) (326,516) (7,555,010) (611,183)
----------- ----------- ------------ -----------
Total net purchase
payments
(redemptions)........ 12,143,090 8,711,688 95,570,237 30,576,976
Net portfolio
transfers............. 5,001,434 17,193,951 73,431,163 58,809,887
Net other transfers.... 4,283 (2,649) (307,458) 183
----------- ----------- ------------ -----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 17,148,807 25,902,990 168,693,942 89,387,046
----------- ----------- ------------ -----------
NET CHANGE IN NET
ASSETS................. 13,059,015 25,722,444 242,800,233 97,620,625
NET ASSETS--BEGINNING OF
PERIOD................. 25,722,444 -- 97,620,625 --
----------- ----------- ------------ -----------
NET ASSETS--END OF
PERIOD................. $38,781,459 $25,722,444 $340,420,858 $97,620,625
=========== =========== ============ ===========
</TABLE>
See Notes To Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
Neuberger&
Harris Oakmark Berman Partners
T. Rowe Price Scudder Global Large Cap Mid Cap Value
Small Cap Growth Division Equity Division Value Division Division
- ------------------------------ ----------------------------- --------------- ---------------
For the Year For the Period For the Year For the Period For the Period For the Period
Ended March 3, 1997 Ended March 3, 1997 Nov. 9, 1998 to Nov. 9, 1998 to
December 31, to December 31, December 31, to December 31, December 31, December 31,
1998 1997 1998 1997 1998 1998
- ------------ --------------- ------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ (1,596,579) $ (353,457) $ 551,635 $ 285,663 $ 6,654 $ 1,462
(1,844,850) 2,457,885 3,761,734 719,374 (192) 5,610
7,150,268 736,087 5,427,106 95,969 22,793 102,136
- ------------ ----------- ------------ ----------- ---------- ----------
3,708,839 2,840,515 9,740,475 1,101,006 29,255 109,208
- ------------ ----------- ------------ ----------- ---------- ----------
59,726,669 24,330,706 27,935,594 17,723,159 1,011,345 528,225
(5,689,823) (606,809) (2,923,122) (497,060) (12,703) (8,079)
- ------------ ----------- ------------ ----------- ---------- ----------
54,036,846 23,723,897 25,012,472 17,226,099 998,642 520,146
24,916,661 60,568,369 12,284,725 36,602,047 2,738,739 2,608,509
(16,742) 35,969 14,374 (1,985) (138) (19)
- ------------ ----------- ------------ ----------- ---------- ----------
78,936,765 84,328,235 37,311,571 53,826,161 3,737,243 3,128,636
- ------------ ----------- ------------ ----------- ---------- ----------
82,645,604 87,168,750 47,052,046 54,927,167 3,766,498 3,237,844
87,168,750 -- 54,927,167 -- -- --
- ------------ ----------- ------------ ----------- ---------- ----------
$169,814,354 $87,168,750 $101,979,213 $54,927,167 $3,766,498 $3,237,844
============ =========== ============ =========== ========== ==========
</TABLE>
35
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
T. Rowe Price Lehman Brothers Morgan
Large Cap Aggregate Bond Stanley EAFE Russell 2000
Growth Division Index Division Index Division Index Division
--------------- --------------- --------------- ---------------
For the Period For the Period For the Period For the Period
Nov. 9, 1998 to Nov. 9, 1998 to Nov. 9, 1998 to Nov. 9, 1998 to
December 31, December 31, December 31, December 31,
1998 1998 1998 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ (264) $ 42,997 $ 695 $ 4,244
Net realized gain
(loss) from security
transactions.......... 481 8,661 2,965 299
Change in net
unrealized
appreciation
(depreciation) of
investments........... 203,080 (33,246) 94,521 317,216
---------- ---------- ---------- -----------
Net increase (decrease)
in net assets
resulting from
operations............ 203,297 18,412 98,181 321,759
---------- ---------- ---------- -----------
From capital
transactions:
Purchases.............. 1,011,671 2,383,753 939,109 1,458,407
Redemptions............ (15,197) (16,786) (4,888) (10,084)
---------- ---------- ---------- -----------
Total net purchase
payments
(redemptions)........ 996,474 2,366,967 934,221 1,448,323
Net portfolio
transfers............. 3,312,056 5,756,044 2,798,711 4,694,140
Net other transfers.... 158 14 19 (195)
---------- ---------- ---------- -----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 4,308,688 8,123,025 3,732,951 6,142,268
---------- ---------- ---------- -----------
NET CHANGE IN NET
ASSETS................. 4,511,985 8,141,437 3,831,132 6,464,027
NET ASSETS--BEGINNING OF
PERIOD................. -- -- -- --
---------- ---------- ---------- -----------
NET ASSETS--END OF
PERIOD................. $4,511,985 $8,141,437 $3,831,132 $ 6,464,027
========== ========== ========== ===========
</TABLE>
See Notes To Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
Fidelity Equity-
Fidelity Money Market Division Income Division Fidelity Growth Division
----------------------------------- -------------------------- --------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------ --------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 70,816 $ 51,686 $ 5,849,442 $ 5,880,062 $ 13,632,842 $ 1,847,830
-- -- 2,573,653 902,758 3,491,143 944,696
-- -- 3,204,174 12,283,740 24,850,739 14,542,481
--------------- --------------- ------------ ------------ ------------ ------------
70,816 51,686 11,627,269 19,066,560 41,974,724 17,335,007
--------------- --------------- ------------ ------------ ------------ ------------
1,265,510 1,709,406 24,530,054 25,190,127 23,670,952 24,392,152
(1,516,869) (625,611) (9,385,105) (3,436,986) (11,519,342) (4,446,973)
--------------- --------------- ------------ ------------ ------------ ------------
(251,359) 1,083,795 15,144,949 21,753,141 12,151,610 19,945,179
1,078,004 (1,377,016) (5,053,322) 3,353,825 (3,683,855) (655,169)
(571) (157) (64,670) (136,781) (105,446) (196,055)
--------------- --------------- ------------ ------------ ------------ ------------
826,074 (293,378) 10,026,957 24,970,185 8,362,309 19,093,955
--------------- --------------- ------------ ------------ ------------ ------------
896,890 (241,692) 21,654,226 44,036,745 50,337,033 36,428,962
966,486 1,208,178 105,755,717 61,718,972 106,587,963 70,159,001
--------------- --------------- ------------ ------------ ------------ ------------
$ 1,863,376 $ 966,486 $127,409,943 $105,755,717 $156,924,996 $106,587,963
=============== =============== ============ ============ ============ ============
</TABLE>
37
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fidelity Investment
Fidelity Overseas Division Grade Bond Division
----------------------------- -------------------------
For the Year For the Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)............... $ 1,389,339 $ 1,002,185 $ 279,415 $ 227,522
Net realized gain
(loss) from security
transactions......... 924,598 216,812 84,679 3,852
Change in net
unrealized
appreciation
(depreciation) of
investments.......... 42,139 257,625 234,217 189,479
------------- ------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
operations........... 2,356,076 1,476,622 598,311 420,853
------------- ------------- ---------- ----------
From capital
transactions:
Purchases............. 5,122,845 5,937,652 2,187,773 1,709,517
Redemptions........... (1,927,541) (998,231) (810,073) (322,055)
------------- ------------- ---------- ----------
Total net purchase
payments
(redemptions)....... 3,195,304 4,939,421 1,377,700 1,387,462
Net portfolio
transfers............ (3,286,287) 1,713,260 1,086,486 146,741
Net other transfers... (8,379) (55,988) (7,460) (6,024)
------------- ------------- ---------- ----------
Net increase
(decrease) in net
assets resulting from
capital transactions. (99,362) 6,596,693 2,456,726 1,528,179
------------- ------------- ---------- ----------
NET CHANGE IN NET
ASSETS................ 2,256,714 8,073,315 3,055,037 1,949,032
NET ASSETS--BEGINNING
OF PERIOD............. 20,935,415 12,862,100 6,377,104 4,428,072
------------- ------------- ---------- ----------
NET ASSETS--END OF
PERIOD................ $ 23,192,129 $ 20,935,415 $9,432,141 $6,377,104
============= ============= ========== ==========
</TABLE>
See Notes To Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
Fidelity Calvert Social Calvert Social
Asset Manager Division Balanced Division Mid Cap Growth Division
---------------------------- -------------------------- -------------------------
For the Year For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 5,718,492 $ 4,056,664 $ 2,803,917 $ 2,035,676 $ 763,151 $ 400,329
860,649 347,820 404,517 151,820 200,832 100,397
149,631 3,041,696 2,341,578 2,646,711 395,768 209,797
----------- ----------- ----------- ----------- ---------- ----------
6,728,772 7,446,180 5,550,012 4,834,207 1,359,751 710,523
----------- ----------- ----------- ----------- ---------- ----------
8,448,368 8,743,739 7,171,631 6,187,385 1,423,352 1,282,313
(3,988,838) (2,253,580) (1,653,370) (788,932) (451,262) (249,576)
----------- ----------- ----------- ----------- ---------- ----------
4,459,530 6,490,159 5,518,261 5,398,453 972,090 1,032,737
(2,379,056) (1,142,965) 80,963 153,472 485,270 (416,766)
(2,755,577) (216,127) (149,713) (38,181) (61,198) (7,471)
----------- ----------- ----------- ----------- ---------- ----------
(675,103) 5,131,067 5,449,511 5,513,744 1,396,162 608,500
----------- ----------- ----------- ----------- ---------- ----------
6,053,669 12,577,247 10,999,523 10,347,951 2,755,913 1,319,023
48,544,991 35,967,744 34,162,280 23,814,329 4,187,693 2,868,670
----------- ----------- ----------- ----------- ---------- ----------
$54,598,660 $48,544,991 $45,161,803 $34,162,280 $6,943,606 $4,187,693
=========== =========== =========== =========== ========== ==========
</TABLE>
39
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Metropolitan Life Separate Account E (the "Separate Account") is a multi-
division unit investment trust registered under the Investment Company Act of
1940. Seventeen investment divisions correspond to the State Street Research
Growth, State Street Research Income, State Street Research Money Market,
State Street Research Diversified, State Street Research Aggressive Growth,
MetLife Stock Index, Santander International Stock, Loomis Sayles High Yield
Bond, Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global Equity,
Harris Oakmark Large Cap Value, Neuberger&Berman Partners Mid Cap, T. Rowe
Price Large Cap Growth, Lehman Brothers Aggregate Bond Index, Morgan Stanley
EAFE Index, and Russell 2000 Index Portfolios of the Metropolitan Series Fund,
Inc. (the "Fund"). The assets in the Variable B, Variable C, and Variable D
Divisions are restricted to investing in the Growth Portfolio of the Fund. The
Fidelity Money Market, Fidelity Equity-Income, Fidelity Growth, Fidelity
Overseas, Fidelity Investment Grade Bond, and Fidelity Asset Manager Divisions
correspond to the Fidelity Money Market, Fidelity Equity-Income, Fidelity
Growth, Fidelity Overseas, Fidelity Investment Grade Bond, and Fidelity Asset
Manager Portfolios of Fidelity's Variable Insurance Products Fund and
Fidelity's Variable Insurance Products Fund II ("Fidelity"). The Calvert
Social Balanced Division and Calvert Social Mid Cap Growth Division correspond
to the Calvert Social Balanced Portfolio and Calvert Social Mid Cap Growth
Portfolio, respectively, of the Calvert Variable Series, Inc. ("Calvert").
Each portfolio has specific objectives relative to growth of capital and
income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on September 27, 1983, and registered as a unit
investment trust on April 6, 1984. The assets of the Separate Account are the
property of Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principals, is set forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. Valuation of Investments
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios. The method used to value the Fund's
investments at December 31, 1998 are described in the Fund's 1998 Annual
Report.
Investments in shares of Fidelity are valued at the reported net asset
values of the respective portfolios. The methods used to value Fidelity's
investments at December 31, 1998 are described in Fidelity's 1998 Annual
Report.
Investments in shares of Calvert are valued at the reported net asset value
of the Calvert Social Balanced Portfolio and Calvert Social Mid Cap Growth
Portfolio. The methods used to value Calvert's investments at December 31,
1998 are described in Calvert's 1998 Annual Report.
B. Security Transactions
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified cost.
C. Federal Income Taxes
In the opinion of counsel of Metropolitan Life, the Separate Account will be
treated as a part of Metropolitan Life and its operations, and the Separate
Account will not be taxed separately as a "regulated investment company" under
existing law. Metropolitan Life is taxed as a life insurance company. The
contracts permit Metropolitan Life to charge against the Separate Account any
taxes, attributable to the maintenance or operation of the Separate Account.
Metropolitan Life does not anticipate, under existing law, that any federal
income taxes will be charged against the Separate Account in determining the
value of amounts under a contract.
D. Purchase Payments
Purchase payments received by Metropolitan Life are credited as Accumulation
Units as of the end of the valuation period in which received, as provided in
the prospectus.
40
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
E. Accumulation Units
As of December 31, 1998, there were 365,726,292 Accumulation Units
outstanding, which consisted of 67,846,362 Accumulation Units in the State
Street Research Growth Division, 21,746,604 Accumulation Units in the State
Street Research Income Division, 789,036 Accumulation Units in the State
Street Research Money Market Division, 80,677,388 Accumulation Units in the
State Street Research Diversified Division, 41,476,716 Accumulation Units in
the State Street Research Aggressive Growth Division, 76,083,334 Accumulation
Units in the MetLife Stock Index Division, 15,405,742 Accumulation Units in
the Santander International Stock Division, 3,990,831 Accumulation Units in
the Loomis Sayles High Yield Bond Division, 19,247,722 Accumulation Units in
the Janus Mid Cap Division, 13,772,403 Accumulation Units in the T. Rowe Price
Small Cap Growth Division, 8,046,645 Accumulation Units in the Scudder Global
Equity Division, 376,751 Accumulation Units in the Harris Oakmark Large Cap
Value Division, 291,806 Accumulation Units in the Neuberger&Berman Partners
Mid Cap Division, 396,403 Accumulation Units in the T. Rowe Price Large Cap
Growth Division, 773,140 Accumulation Units in the Lehman Brothers Aggregate
Bond Index Division, 328,147 Accumulation Units in the Morgan Stanley EAFE
Index Division, 582,684 Accumulation Units in the Russell 2000 Index Division,
166,575 Accumulation Units in the Fidelity Money Market Division, 3,748,774
Accumulation Units in the Fidelity Equity-Income Division, 3,887,397
Accumulation Units in the Fidelity Growth Division, 1,163,136 Accumulation
Units in the Fidelity Overseas Division, 559,943 Accumulation Units in the
Fidelity Investment Grade Bond Division, 2,296,553 Accumulation Units in the
Fidelity Asset Manager Division, 1,809,577 Accumulation Units in the Calvert
Social Balanced Division and 262,623 Accumulation Units in the Calvert Social
Mid Cap Growth Division. In addition to the above mentioned Accumulation
Units, there were cash reserves of $3,344,048 and $34,942 applicable to
contracts receiving annuity payout under the Variable Account B Division and
Variable Account D Division, respectively, and $19,151,205 in cash reserves
for Preference Plus (PPA) Immediate Annuities.
2. DIVIDENDS
On May 5, 1998, and December 16, 1998, the Fund declared dividends for all
shareholders of record on May 7, 1998, and December 23, 1998. The amount of
dividends received by the Separate Account from the Fund was $687,319,273. The
dividends were paid to MetLife on May 8, 1998, and December 24, 1998 and were
immediately reinvested in additional shares of the portfolio in which each of
the investment divisions invest. As a result of these reinvestments, number of
shares of the Fund held by each of the nineteen investment divisions increased
by the following: State Street Research Growth Division 6,352,586 Shares,
State Street Research Income Division 2,686,983 Shares, State Street Research
Money Market Division 70,679 Shares, State Street Research Diversified
Division 11,639,768 Shares, Variable B Division 233,006 Shares, Variable C
Division 8,556 Shares, Variable D Division 88 Shares, State Street Research
Aggressive Growth Division 2,489,225 Shares, MetLife Stock Index Division
3,349,242 Shares, Santander International Stock Division 202,065 Shares,
Loomis Sayles High Yield Bond Division 480,652 Shares, Janus Mid Cap Division
100,049 Shares, Scudder Global Equity Division 128,680 Shares, Harris Oakmark
Large Cap Value Division 905 Shares, Neuberger&Berman Partners Mid Cap Value
Division 330 Shares, T. Rowe Price Large Cap Value Division 216 Shares, Lehman
Brothers Aggregate Bond Index Division 4,802 Shares, Morgan Stanley EAFE Index
Division 242 Shares, and Russell 2000 Index Division 766 Shares.
On the last working day of each month, Fidelity paid Metropolitan Life
dividends for the Fidelity Money Market Division. For 1998 the dividends
aggregated to $87,070. They were immediately reinvested and increased the
number of shares owned by the Fidelity Money Market Division by 87,070 shares.
On February 6, 1998, Fidelity paid Metropolitan Life a dividend of
$29,908,048 for the Fidelity Growth, Fidelity Overseas, Fidelity Investment
Grade Bond and Fidelity Asset Manager, and Fidelity Equity-Income Divisions.
The dividends were immediately reinvested and increased the number of shares
owned as follows: Fidelity Growth Division 440,226 shares, Fidelity Overseas
Division 84,924 shares, Fidelity Investment Grade Bond Division 29,441 shares,
Fidelity Asset Manager Division 382,329 shares, and Fidelity Equity-Income
Division 297,297 shares.
On December 30, 1998, Calvert paid Metropolitan Life dividends of $4,078,774
for the Calvert Social Balanced Division and for the Calvert Social Mid Cap
Growth Division, which were immediately reinvested, increasing the
41
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT E
NOTES TO FINANCIAL STATEMENTS--(Continued)
DECEMBER 31, 1998
number of shares owned by the Calvert Social Balanced Division and the Calvert
Social Mid Cap Growth Division by 1,536,013 and 27,344 shares, respectively.
3. EXPENSES
Metropolitan Life applies a daily charge against the Separate Account for
general administrative expenses, and for the mortality and expense risk
assumed by Metropolitan Life. This charge is equivalent to an effective annual
rate of 1.5% of the average daily values of the assets in the Separate Account
for VestMet contracts and 1.25% for Preference Plus contracts. Of this charge,
Metropolitan Life estimates .75% is for general administrative expenses for
VestMet contracts and .50% is for Preference Plus contracts and .75% is for
the mortality and expense risk on both contracts. However, for the enhanced
and Financial Freedom Account contracts, the charge is equivalent to an
effective annual rate of .95% of the average daily value of the assets for
these contracts. Of this charge, Metropolitan Life estimates .20% is for
general administrative expenses and .75% is for mortality and expense risk.
The Variable B, C, and D contracts are charged for administrative expenses and
mortality and expense risk according to the rates under their respective
contracts.
4. NEW DIVISIONS
On March 3, 1997, four divisions were added to the Separate Account: Loomis
Sayles High Yield Bond Division, Janus Mid Cap Division, T. Rowe Price Small
Cap Growth Division, and Scudder Global Equity Division.
On November 9, 1998, six divisions were added to the Separate Account:
Harris Oakmark Large Cap Value Division, Neuberger&Berman Partners Mid Cap
Value Division, T. Rowe Price Large Cap Growth Division, Lehman Brothers
Aggregate Bond Index Division, Morgan Stanley EAFE Index Division, and Russell
2000 Index Division.
5. PORTFOLIO NAME CHANGES
Effective January 1, 1998, the Acacia Capital Corporation was changed to the
Calvert Variable Series, Inc. Concurrently, the Calvert Responsibly Invested
Balanced Portfolio and the Calvert Responsibly Invested Capital Accumulation
Portfolio names were changed to the Calvert Social Balanced Portfolio and the
Calvert Social Mid Cap Growth Portfolio, respectively.
Effective November 9, 1998, the name of the State Street Research
International Stock Portfolio was changed to the Santander International Stock
Portfolio.
42
<PAGE>
Metropolitan Life Insurance Company
Consolidated Financial Statements
as of December 31, 1998 and 1997 and for the
Years Ended December 31, 1998, 1997 and 1996
and
Independent Auditors' Report
<PAGE>
Independent Auditors' Report
The Board of Directors and Policyholders 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,
1998 and 1997, and the related consolidated statements of income, equity and
cash flows for each of the three years in the period ended December 31, 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Metropolitan
Life Insurance Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1997 the
Company changed the method of accounting for investment income on certain
structured securities.
DELOITTE & TOUCHE LLP
New York, New York
February 4, 1999
2
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
REVENUES
Premiums............................................... $11,503 $11,278 $11,345
Universal life and investment-type product policy fees. 1,360 1,418 1,243
Net investment income.................................. 10,228 9,491 8,978
Other revenues......................................... 1,965 1,491 1,246
Net realized investment gains.......................... 2,021 787 231
------- ------- -------
27,077 24,465 23,043
------- ------- -------
EXPENSES
Policyholder benefits and claims....................... 12,488 12,234 12,286
Interest credited to policyholder account balances..... 2,731 2,884 2,868
Policyholder dividends................................. 1,653 1,742 1,728
Other expenses......................................... 8,118 5,934 4,755
------- ------- -------
24,990 22,794 21,637
------- ------- -------
Income before provision for income taxes, discontinued
operations and extraordinary item..................... 2,087 1,671 1,406
Provision for income taxes............................. 740 468 482
------- ------- -------
Income before discontinued operations and extraordinary
item.................................................. 1,347 1,203 924
Loss from discontinued operations...................... -- -- 71
------- ------- -------
Income before extraordinary item....................... 1,347 1,203 853
Extraordinary item--demutualization expense............ 4 -- --
------- ------- -------
Net income............................................. $ 1,343 $ 1,203 $ 853
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997 (In millions)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value......... $100,767 $ 92,630
Equity securities, at fair value........................... 2,340 4,250
Mortgage loans on real estate.............................. 16,827 20,193
Real estate and real estate joint ventures................. 6,287 7,080
Policy loans............................................... 5,600 5,846
Other limited partnership interests........................ 964 855
Short-term investments..................................... 1,369 679
Other invested assets...................................... 1,567 4,456
-------- --------
135,721 135,989
Cash and cash equivalents.................................... 3,301 2,911
Accrued investment income.................................... 1,994 1,860
Premiums and other receivables............................... 5,972 3,319
Deferred policy acquisition costs............................ 6,560 6,436
Other........................................................ 3,448 3,641
Separate account assets...................................... 58,350 48,620
-------- --------
$215,346 $202,776
======== ========
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits....................................... $ 72,701 $ 73,848
Policyholder account balances................................ 46,494 48,543
Other policyholder funds..................................... 4,061 3,998
Policyholder dividends payable............................... 947 969
Short-term debt.............................................. 3,585 4,587
Long-term debt............................................... 2,903 2,884
Income taxes payable, current and deferred................... 948 952
Other........................................................ 10,772 4,650
Separate account liabilities................................. 58,068 48,338
-------- --------
200,479 188,769
-------- --------
Commitments and contingencies (Note 9)
Equity:
Retained earnings............................................ 13,483 12,140
Accumulated other comprehensive income....................... 1,384 1,867
-------- --------
14,867 14,007
-------- --------
$215,346 $202,776
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
Accumulated Other Comprehensive Income
----------------------------------------------
Net Foreign Minimum
Unrealized Currency Pension
Comprehensive Retained Investment Translation Liability
Total Income Earnings Gains Adjustment Adjustment
------- ------------- -------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... $11,754 $10,084 $ 1,646 $ 24 $ --
Comprehensive income:
Net income............. 853 $ 853 853
------
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (618) (618)
Foreign currency
translation
adjustments......... (6) (6)
------
Other comprehensive
loss.................. (624) (624)
------
Comprehensive income. $ 229
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1996................... 11,983 10,937 1,028 18 --
Comprehensive income:
Net income............. 1,203 $1,203 1,203
------
Other comprehensive
income:
Unrealized investment
gains, net of
related offsets,
reclassification
adjustments and
income taxes........ 870 870
Foreign currency
translation
adjustments......... (49) (49)
------
Other comprehensive
income................ 821 821
------
Comprehensive income. $2,024
------- ====== ------- ------------- ------------ ------------
Balance at December 31,
1997................... 14,007 12,140 1,898 (31) --
Comprehensive income:
Net income............. 1,343 $1,343 1,343
Other comprehensive
loss:
Unrealized investment
losses, net of
related offsets,
reclassification
adjustments and
income taxes........ (358) (358)
Foreign currency
translation
adjustments......... (113) (113)
Minimum pension
liability
adjustment.......... (12) (12)
------
Other comprehensive
loss.................. (483) (483)
-------
------
Comprehensive income. $ 860
------- ------- ------------- ------------ ------------
======
Balance at December 31,
1998................... $14,867 $13,483 $ 1,540 $ (144) $ (12)
======= ======= ============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Metropolitan Life Insurance Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
(In millions)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net income....................................... $ 1,343 $ 1,203 $ 853
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization expenses....... 56 (36) (18)
Gains from sales of investments and
businesses, net............................. (2,629) (1,018) (428)
Change in undistributed income of real estate
joint ventures and other limited partnership
interests................................... (91) 157 (45)
Interest credited to policyholder account
balances.................................... 2,731 2,884 2,868
Universal life and investment-type product
policy fees................................. (1,360) (1,418) (1,243)
Change in accrued investment income.......... (181) (215) 350
Change in premiums and other receivables..... (2,681) (792) (125)
Change in deferred policy acquisition costs,
net......................................... (188) (159) (391)
Change in insurance related liabilities...... 1,493 2,364 2,349
Change in income taxes payable............... 211 (99) (134)
Change in other liabilities.................. 2,390 (206) 902
Other, net................................... (253) 207 (1,250)
-------- -------- --------
Net cash provided by operating activities........ 841 2,872 3,688
-------- -------- --------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturities............................. 57,857 75,346 76,117
Equity securities............................ 3,085 1,821 2,069
Mortgage loans on real estate................ 2,296 2,784 2,380
Real estate and real estate joint ventures... 1,122 2,046 2,358
Other limited partnership interests.......... 146 166 178
Purchases of:
Fixed maturities............................. (67,543) (76,603) (76,225)
Equity securities............................ (854) (2,121) (2,742)
Mortgage loans on real estate................ (2,610) (4,119) (4,225)
Real estate and real estate joint ventures... (423) (624) (989)
Other limited partnership interests.......... (723) (338) (307)
Net change in short-term investments........... (761) 63 1,028
Net change in policy loans..................... 133 17 (128)
Proceeds from sales of businesses.............. 7,372 274 --
Net change in investment collateral............ 3,769 -- --
Other, net..................................... (183) (378) (438)
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... 2,683 (1,666) (924)
-------- -------- --------
Cash flows from financing activities
Policyholder account balances:
Deposits..................................... $ 19,361 $ 16,061 $ 17,167
Withdrawals.................................. (21,706) (18,831) (19,321)
Short-term debt, net........................... (1,001) 1,265 69
Long-term debt issued.......................... 693 989 --
Long-term debt repaid.......................... (481) (104) (284)
-------- -------- --------
Net cash used in financing activities............ (3,134) (620) (2,369)
-------- -------- --------
Change in cash and cash equivalents.............. 390 586 395
Cash and cash equivalents, beginning of year..... 2,911 2,325 1,930
-------- -------- --------
Cash and cash equivalents, end of year........... $ 3,301 $ 2,911 $ 2,325
======== ======== ========
Supplemental disclosures of cash flow
information:
Interest....................................... $ 367 $ 422 $ 310
======== ======== ========
Income taxes................................... $ 579 $ 589 $ 497
======== ======== ========
</TABLE>
Cash paid during the year for:
See accompanying notes to consolidated financial statements.
6
<PAGE>
Metropolitan Life Insurance Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts are in millions unless otherwise stated)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Metropolitan Life Insurance Company ("MetLife") and its subsidiaries (the
"Company") is a leading provider of insurance and financial services to a
broad section of institutional and individual customers. The Company offers
life insurance, annuities and mutual funds to individuals and group insurance
and retirement and savings products and services to corporations and other
institutions.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP"). The New
York State Insurance Department (the "Department") recognizes only statutory
accounting practices for determining and reporting the financial condition and
results of operations of an insurance company for determining solvency under
the New York Insurance Law. No consideration is given by the Department to
financial statements prepared in accordance with GAAP in making such
determination.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates include those used
in determining deferred policy acquisition costs, investment allowances and
the liability for future policyholder benefits. Actual results could differ
from those estimates.
During 1997, management changed to the retrospective interest method of
accounting for investment income on structured notes in accordance with
authoritative guidance issued in late 1996. As a result, net investment income
increased by $175. The cumulative effect of this accounting change on prior
years' income was not material.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
MetLife and its subsidiaries, partnerships and joint ventures in which MetLife
has a controlling interest. All material intercompany accounts and
transactions have been eliminated.
The Company accounts for its investments in real estate joint ventures and
other limited partnership interests in which it does not have a controlling
interest, but more than a minimal interest, under the equity method of
accounting.
Minority interest relating to consolidated entities included in other
liabilities was $274 and $277 at December 31, 1998 and 1997, respectively.
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1998 presentation.
Investments
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of other comprehensive income, net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as realized losses on investments. Realized gains and
losses on sales of securities are determined on a specific identification
basis. All security transactions are recorded on a trade date basis.
Mortgage loans on real estate are stated at amortized cost, net of valuation
allowances. Valuation allowances are established for the excess carrying value
of the mortgage loan over its estimated fair value when it is probable that,
based upon current information and events, the Company will be unable to
collect all amounts due under the
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
contractual terms of the loan agreement. Valuation allowances are based upon
the present value of expected future cash flows discounted at the loan's
original effective interest rate or the collateral value if the loan is
collateral dependent. Interest income earned on impaired loans is accrued on
the net carrying value amount of the loan based on the loan's effective
interest rate.
Real estate, including related improvements, is stated at cost less
accumulated depreciation. Depreciation is provided on a straight-line basis
over the estimated useful life of the asset (typically 20 to 40 years). Cost
is adjusted for impairment whenever events or changes in circumstances
indicate the carrying amount of the asset may not be recoverable. Impaired
real estate is written down to estimated fair value with the impairment loss
being included in realized losses on investments. 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 in satisfaction of debt is recorded at estimated fair value at the
date of foreclosure. Valuation allowances on real estate held-for-sale are
computed using the lower of depreciated cost or estimated fair value, net of
disposition costs.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates fair
value.
Derivative Instruments
The Company uses derivative instruments to manage market risk through one of
four principal risk management strategies: the hedging of invested assets,
liabilities, portfolios of assets or liabilities and anticipated transactions.
The Company's derivative strategy employs a variety of instruments including
financial futures, financial forwards, interest rate and foreign currency
swaps, floors, foreign exchange contracts, caps and options.
The Company's derivative program is monitored by senior management. The
Company's risk of loss is typically limited to the fair value of its
derivative instruments and not to the notional or contractual amounts of these
derivatives. Risk arises from changes in the fair value of the underlying
instruments and, with respect to over-the-counter transactions, from the
possible inability of counterparties to meet the terms of the contracts. The
Company has strict policies regarding the financial stability and credit
standing of its major counterparties.
The Company's derivative instruments are designated as hedges and are highly
correlated to the underlying risk at contract inception. The Company monitors
the effectiveness of its hedges throughout the contract term using an offset
ratio of 80 to 125 percent as its minimum acceptable threshold for hedge
effectiveness. Derivative instruments that lose their effectiveness are marked
to market through net investment income.
Gains or losses on financial futures contracts entered into in anticipation
of investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, recorded as an adjustment to the basis of
the purchased assets or to the proceeds on disposition. Gains or losses on
financial futures used in asset risk management are deferred and amortized
into net investment income over the remaining term of the investment. Gains or
losses on financial futures used in portfolio risk management are deferred and
amortized into net investment income or policyholder benefits over the
remaining life of the hedged sector of the underlying portfolio.
Financial forward contracts that are entered into to purchase securities are
marked to fair value through other comprehensive income, similar to the
accounting for the investment security. Such contracts are accounted for at
settlement by recording the purchase of the specified securities at fair
value. Gains or losses resulting from the termination of forward contracts are
recognized immediately as a component of net investment income.
Interest rate and certain foreign currency swaps involve the periodic
exchange of payments without the exchange of underlying principal or notional
amounts. Net receipts or payments are accrued and recognized over the term of
the swap agreement as an adjustment to net investment income or other expense.
Gains or losses resulting from swap terminations are amortized over the
remaining term of the underlying asset or liability. Gains and losses on swaps
and certain foreign forward exchange contracts entered into in anticipation of
investment transactions are deferred and, at the time of the ultimate
investment purchase or disposition, reflected as an adjustment to the basis of
the purchased
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
assets or to the proceeds of disposition. In the event the asset or liability
underlying a swap is disposed of, the swap position is closed immediately and
any gain or loss is recorded as an adjustment to the proceeds from
disposition.
The Company periodically enters into collars, which consist of purchased put
and written call options, to lock in unrealized gains on equity securities.
Collars are marked to market through other comprehensive income, similar to
the accounting for the underlying equity securities. Purchased interest rate
caps and floors are used to offset the risk of interest rate changes related
to insurance liabilities. Premiums paid on floors, caps and options are split
into two components, time value and intrinsic value. Time value is amortized
over the life of the applicable derivative instrument. The intrinsic value and
any gains or losses relating to these derivative instruments adjust the basis
of the underlying asset or liability and are recognized as a component of net
investment income over the term of the underlying asset or liability being
hedged as an adjustment to the yield.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Property, Equipment and Leasehold Improvements
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. Estimated lives
range from 20 to 40 years for real estate and 5 to 15 years for all other
property and equipment. Accumulated depreciation on property and equipment and
accumulated amortization of leasehold improvements was $1,048 at both December
31, 1998 and 1997. Related depreciation and amortization expense was $95, $103
and $78 for the years ended December 31, 1998, 1997 and 1996, respectively.
Deferred Policy Acquisition Costs
The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions, agency and policy issue expenses,
are amortized over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality,
expense margins and surrender charges. Actual gross margins or profits can
vary from management's estimates resulting in increases or decreases in the
rate of amortization. Management periodically updates these estimates and
evaluates the recoverability of deferred policy acquisition costs. When
appropriate, management revises its assumptions of the estimated gross margins
or profits of these contracts, and the cumulative amortization is re-estimated
and adjusted by a cumulative charge or credit to current operations.
Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized
in proportion to anticipated premiums. Assumptions as to anticipated premiums
are made at the date of policy issuance and are consistently applied during
the life of the contracts. Deviations from estimated experience are reflected
in operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Deferred policy acquisition costs for property and liability insurance
contracts, which are primarily comprised of commissions and certain
underwriting expenses, are deferred and amortized on a pro rata basis over the
applicable contract term or reinsurance treaty.
Other Intangible Assets
The excess of cost over the fair value of net assets acquired ("goodwill")
and the value of business acquired are included in other assets. Goodwill is
amortized on a straight-line basis over a period ranging from 10 to 30 years.
The Company continually reviews goodwill to assess recoverability from future
operations using undiscounted cash flows.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Impairments are recognized in operating results if a permanent diminution in
value is deemed to have occurred. The value of business acquired is amortized
over the expected policy or contract duration in relation to the present value
of estimated gross profits from such policies and contracts.
<TABLE>
<CAPTION>
Value of Business Acquired Goodwill
-------------------------- ----------------
Years Ended December 31 1998 1997 1996 1998 1997 1996
- ----------------------- -------- -------- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Balance at January 1........ $ 498 $ 358 $ 381 $884 $544 $377
Acquisitions.................... 32 176 7 80 387 197
Amortization.................... (55) (36) (30) (59) (47) (30)
-------- -------- -------- ---- ---- ----
Net Balance at December 31...... $ 475 $ 498 $ 358 $905 $884 $544
======== ======== ======== ==== ==== ====
<CAPTION>
December 31 1998 1997 1998 1997
- ----------- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Accumulated Amortization........ $ 142 $ 87 $207 $148
======== ======== ==== ====
</TABLE>
Future Policy Benefits and Policyholder Account Balances
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (a) net level premium
reserves for death and endowment policy benefits (calculated based upon the
nonforfeiture interest rate, ranging from 2% to 7%, and mortality rates
guaranteed in calculating the cash surrender values described in such
contracts), (b) the liability for terminal dividends, and (c) premium
deficiency reserves, which are established when the liabilities for future
policy benefits plus the present value of expected future gross premiums are
insufficient to provide for expected future policy benefits and expenses after
deferred policy acquisition costs are written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and
the present value of expected future payments after annuitization. Interest
rates used in establishing such liabilities range from 5% to 8%. Future policy
benefit liabilities for non-medical health insurance are calculated using the
net level premium method and assumptions as to future morbidity, withdrawals
and interest, which provide a margin for adverse deviation. Interest rates
used in establishing such liabilities range from 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 rates used in establishing such liabilities
range from 4% to 8%.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 3%
to 17%, less expenses, mortality charges and withdrawals.
The liability for unpaid claims and claim expenses for property and casualty
insurance represents the amount estimated for claims that have been reported
but not settled and claims incurred but not reported. Liabilities for unpaid
claims are estimated based upon the Company's historical experience and other
actuarial assumptions that consider the effects of current developments,
anticipated trends and risk management programs. Revisions of these estimates
are reflected in operations in the year such refinements are made.
Recognition of Insurance Revenue and Related Benefits
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives
of the policies. When premiums are due over a significantly shorter period
than the period over which benefits are provided, any excess profit is
deferred and recognized into operations in a constant relationship to
insurance in-force or, for annuities, the amount of expected future policy
benefit payments.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Premiums related to non-medical health contracts are recognized on a pro
rata basis over the applicable contract term.
Premiums related to universal life and investment-type contracts 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. Amounts that are
charged to operations include interest credited and benefit claims incurred in
excess of related policyholder account balances.
Premiums related to property and casualty contracts are recognized as
revenue on a pro rata basis over the applicable contract term. Unearned
premiums are included in other liabilities.
Dividends to Policyholders
Dividends to policyholders are determined annually by the Board of
Directors. The aggregate amount of policyholders' 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 Company.
Participating Business
Participating business represented approximately 21% and 22% of the
Company's life insurance in-force, and 81% and 87% of the number of life
insurance policies in-force, at December 31, 1998 and 1997, respectively.
Participating policies represented approximately 39% and 40%, 41% and 41%, and
40% and 44% of gross and net life insurance premiums for the years ended
December 31, 1998, 1997 and 1996, respectively.
Income Taxes
MetLife and its includable life insurance and non-life insurance
subsidiaries file a consolidated U.S. Federal income tax return in accordance
with the provisions of the Internal Revenue Code, as amended ("the Code").
Under the Code, the amount of Federal income tax expense incurred by mutual
life insurance companies includes an equity tax calculated based upon a
prescribed formula that incorporates a differential earnings rate between
stock and mutual life insurance companies. The future tax consequences of
temporary differences between financial reporting and tax bases of assets and
liabilities are measured as of the balance sheet dates and are recorded as
deferred income tax assets and liabilities.
Reinsurance
The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from reinsurers are estimated based upon assumptions
consistent with those used in establishing the liabilities related to the
underlying reinsured contracts. Policy and contract liabilities are reported
gross of reinsurance credits.
Separate Accounts
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business
of the Company. Separate account assets are subject to general account claims
only to the extent the value of such assets exceeds the separate account
liabilities. Investments (stated at estimated fair value) and liabilities of
the separate accounts are reported separately as assets and liabilities.
Deposits to separate accounts, investment income and realized and unrealized
gains and losses on the investments of the separate accounts accrue directly
to contractholders and, accordingly, are not reflected in the Company's
consolidated statements of income and cash flows. Mortality, policy
administration and surrender charges to all separate accounts are included in
revenues.
Foreign Currency Translation
Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are
translated at the average rates of exchange prevailing during the year. The
local currencies of foreign operations are generally the functional
currencies. Translation adjustments are charged or
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
credited directly to other comprehensive income. Gains and losses from foreign
currency transactions are reported in other expenses and were insignificant
for all years presented.
Extraordinary Item--Demutualization Expense
On November 24, 1998, the Board of Directors authorized management to
develop a plan to convert from a mutual life insurance company to a stock life
insurance company (the "demutualization"). A final plan to convert to a
publicly traded stock company is subject to the approval of the Board of
Directors, the policyholders and the New York Superintendent of Insurance
("Superintendent"). The Department has not yet reviewed or approved any
materials relating to the demutualization.
The accompanying consolidated statements of income reflect an extraordinary
charge of $4 (net of income taxes of $2) for the year ended December 31, 1998
related to costs associated with the demutualization.
Application of Accounting Pronouncements
In October 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-7, Accounting for Insurance
and Reinsurance Contracts That Do Not Transfer Insurance Risk ("SOP 98-7").
SOP 98-7 provides guidance on the method of accounting for insurance and
reinsurance contracts that do not transfer insurance risk, defined in the SOP
as the deposit method. SOP 98-7 classifies insurance and reinsurance contracts
for which the deposit method is appropriate into those that 1) transfer only
significant timing risk, 2) transfer only significant underwriting risk, 3)
transfer neither significant timing or underwriting risk and 4) have an
indeterminate risk. The Company is required to adopt SOP 98-7 as of January 1,
2000. Adoption of SOP 98-7 is not expected to have a material effect on the
Company's consolidated financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires,
among other things, that all derivatives be recognized in the consolidated
balance sheets as either assets or liabilities and measured at fair value. The
corresponding derivative gains and losses should be reported based upon the
hedge relationship, if such a relationship exists. Changes in the fair value
of derivatives that are not designated as hedges or that do not meet the hedge
accounting criteria in SFAS 133 are required to be reported in income. The
Company is required to adopt SFAS 133 as of January 1, 2000. The Company is in
the process of quantifying the impact of SFAS 133 on its consolidated
financial statements.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-Up
Activities ("SOP 98-5"). SOP 98-5 broadly defines start-up activities. SOP 98-
5 requires costs of start-up activities and organization costs to be expensed
as incurred. The Company is required to adopt SOP 98-5 as of January 1, 1999.
Adoption of SOP 98-5 is not expected to have a material effect on the
Company's consolidated financial statements.
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-
1 provides guidance for determining when an entity should capitalize or
expense external and internal costs of computer software developed or obtained
for internal use. The Company is required to adopt SOP 98-1 as of January 1,
1999. Adoption of SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial statements.
In December 1997, the AICPA issued SOP 97-3, Accounting for Insurance and
Other Enterprises for Insurance Related Assessments ("SOP 97-3"). SOP 97-3
provides guidance on accounting by insurance and other enterprises for
assessments related to insurance activities including recognition, measurement
and disclosure of guaranty fund and other insurance related assessments. The
Company is required to adopt SOP 97-3 as of January 1, 1999. Adoption of SOP
97-3 is not expected to have a material effect on the Company's consolidated
financial statements.
In 1998, the Company adopted SFAS 131, Disclosures About Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes
standards for reporting financial information and related disclosures about
products and services, geographic areas and major customers relating to
operating segments in annual financial statements. Adoption of SFAS 131 had no
effect on the Company's consolidated financial statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
In 1998, the Company adopted SFAS 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 establishes standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements. Adoption of
SFAS 130 had no effect on the Company's consolidated financial statements.
In 1998, the Company adopted the provisions of SFAS 125 which were deferred
by SFAS No. 127, Deferral of the Effective Date of Certain Provisions of FASB
Statement No. 125. The deferred provisions provide accounting and reporting
standards related to repurchase agreements, dollar rolls, securities lending
and similar transactions. Adoption of the provisions had the effect of
increasing assets and liabilities by $3,769 at December 31, 1998 and
increasing revenues and expenses by $266 for the year ended December 31, 1998.
2. INVESTMENTS
The components of net investment income were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 6,563 $ 6,445 $ 6,042
Equity securities.......................... 78 50 60
Mortgage loans on real estate.............. 1,572 1,684 1,523
Real estate and real estate joint ventures. 1,529 1,718 1,668
Policy loans............................... 387 368 399
Other limited partnership interests........ 196 302 215
Cash, cash equivalents and short-term
investments 187 169 214
Other...................................... 841 368 401
-------- ------- --------
11,353 11,104 10,522
Less: Investment expenses.................. 1,125 1,613 1,544
-------- ------- --------
$10,228 $ 9,491 $ 8,978
======== ======= ========
Net realized investment gains, including changes in valuation allowances,
were as follows:
<CAPTION>
Years ended December 31,
---------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Fixed maturities........................... $ 573 $ 118 $ 234
Equity securities.......................... 994 224 101
Mortgage loans on real estate.............. 23 56 (86)
Real estate and real estate joint ventures. 424 446 371
Other limited partnership interests........ 13 12 (129)
Sale of subsidiaries....................... 531 139 --
Other...................................... 71 23 (33)
-------- ------- --------
2,629 1,018 458
Amounts allocable to:
Future policy benefit loss recognition... (300) (126) (203)
Deferred policy acquisition costs........ (240) (70) (4)
Participating pension contracts.......... (68) (35) (20)
-------- ------- --------
$ 2,021 $ 787 $ 231
======== ======= ========
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The components of net unrealized investment gains, included in accumulated
other comprehensive income, were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities............................. $ 4,809 $ 4,766 $ 2,226
Equity securities............................ 832 1,605 563
Other invested assets........................ 125 294 474
------- ------- -------
5,766 6,665 3,263
------- ------- -------
Amounts allocable to:
Future policy benefit loss recognition..... (2,248) (2,189) (1,219)
Deferred policy acquisition costs.......... (902) (1,147) (420)
Participating pension contracts............ (212) (312) (9)
Deferred income taxes........................ (864) (1,119) (587)
------- ------- -------
(4,226) (4,767) (2,235)
------- ------- -------
$ 1,540 $ 1,898 $ 1,028
======= ======= =======
The changes in net unrealized investment gains were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1......................... $ 1,898 $ 1,028 $ 1,646
Unrealized investment gains (losses) during
the year.................................... (899) 3,402 (2,493)
Unrealized investment (gains) losses relating
to:
Future policy benefit loss recognition..... (59) (970) 845
Deferred policy acquisition costs.......... 245 (727) 328
Participating pension contracts............ 100 (303) 341
Deferred income taxes........................ 255 (532) 361
------- ------- -------
Balance at December 31....................... $ 1,540 $ 1,898 $ 1,028
======= ======= =======
Net change in unrealized investment gains.... $ (358) $ 870 $ (618)
======= ======= =======
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Fixed Maturities and Equity Securities
Fixed maturities and equity securities at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U.S. government corporations and
agencies................................. $ 6,640 $ 1,117 $ 10 $ 7,747
States and political subdivisions......... 597 26 -- 623
Foreign governments....................... 3,435 254 88 3,601
Corporate................................. 46,377 2,471 260 48,588
Mortgage and asset-backed securities 26,456 569 46 26,979
Other..................................... 12,438 1,069 293 13,214
------- ------- ---- --------
95,943 5,506 697 100,752
Redeemable preferred stocks............... 15 -- -- 15
------- ------- ---- --------
$95,958 $ 5,506 $697 $100,767
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 1,286 $ 923 $ 77 $ 2,132
Nonredeemable preferred stocks............ 222 4 18 208
------- ------- ---- --------
$ 1,508 $ 927 $ 95 $ 2,340
======= ======= ==== ========
Fixed maturities and equity securities at December 31, 1997 were as follows:
<CAPTION>
Gross
Cost or Unrealized Estimated
Amortized ------------ Fair
Cost Gain Loss Value
--------- ------- ---- ---------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations
of U. S. government
corporations and agencies................ $ 8,708 $ 1,010 $ 2 $ 9,716
States and political subdivisions......... 486 22 -- 508
Foreign governments....................... 3,420 371 52 3,739
Corporate................................. 41,012 2,337 291 43,058
Mortgage and asset-backed securities...... 22,370 579 21 22,928
Other..................................... 11,374 929 134 12,169
------- ------- ---- --------
87,370 5,248 500 92,118
Redeemable preferred stocks............... 494 19 1 512
------- ------- ---- --------
$87,864 $ 5,267 $501 $ 92,630
======= ======= ==== ========
Equity Securities:
Common stocks............................. $ 2,444 $ 1,716 $105 $ 4,055
Nonredeemable preferred stocks............ 201 5 11 195
------- ------- ---- --------
$ 2,645 $ 1,721 $116 $ 4,250
======= ======= ==== ========
</TABLE>
The Company held foreign currency derivatives with notional amounts of $716
and $408 to hedge the exchange rate risk associated with foreign bonds at
December 31, 1998 and 1997, respectively. The Company also held options with
fair values of $(11) and $33 to hedge the market value of common stocks at
December 31, 1998 and 1997, respectively.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
At December 31, 1998, fixed maturities held by the Company that were below
investment grade or not rated by an independent rating agency totaled $8,289.
At December 31, 1998, non-income producing fixed maturities were
insignificant.
The amortized cost and estimated fair value of bonds at December 31, 1998,
by contractual maturity date, are shown below:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 2,380 $ 2,462
Due after one year through five years................. 17,062 17,527
Due after five years through 10 years................. 23,769 24,714
Due after 10 years.................................... 26,276 29,070
-------- --------
69,487 73,773
Mortgage and asset-backed securities.................. 26,456 26,979
-------- --------
$ 95,943 $100,752
======== ========
</TABLE>
Fixed maturities not due at a single maturity date have been included in the
above table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sales of fixed maturities and equity securities were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Fixed maturities classified as available-for-
sale:
Proceeds..................................... $43,828 $67,454 $67,239
Gross realized gains......................... $ 928 $ 672 $ 1,067
Gross realized losses........................ $ 355 $ 558 $ 842
Fixed maturities classified as held-to-
maturity:
Proceeds..................................... $ -- $ 352 $ 1,281
Gross realized gains......................... $ -- $ 5 $ 10
Gross realized losses........................ $ -- $ 1 $ 1
Equity securities:
Proceeds..................................... $ 3,085 $ 1,821 $ 2,069
Gross realized gains......................... $ 1,125 $ 293 $ 150
Gross realized losses........................ $ 131 $ 69 $ 49
</TABLE>
During 1997, fixed maturities with an amortized cost of $11,682 were
transferred from held-to-maturity to available-for-sale. Other comprehensive
income at the date of reclassification was increased by $198 excluding the
effects of deferred income taxes and policyholder related amounts.
Excluding investments in U.S. governments and agencies, the Company is not
exposed to any significant concentration of credit risk in its fixed
maturities portfolio.
Securities Lending Program
The Company participates in securities lending programs whereby large blocks
of securities are loaned to third parties, primarily major brokerage firms.
The Company requires a minimum of 102% of the fair value of the loaned
securities to be separately maintained as collateral for the loans. Securities
with a cost or amortized cost of $4,005 and $6,068 and estimated fair value of
$4,552 and $6,653 were on loan under the program at December 31, 1998 and
1997, respectively. The Company is liable for cash collateral of $3,769 at
December 31, 1998. This liability is included in other liabilities. Rebates of
$266 were paid and accrued on the cash collateral for the year ended
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1998. The rebates paid and accrued during 1998 are included in
other operating costs and expenses. Security collateral is returnable on short
notice and is not reflected in the consolidated financial statements.
Statutory Deposits
The Company had investment assets on deposit with regulatory agencies of
$466 and $4,695 as of December 31, 1998 and 1997, respectively.
Mortgage Loans on Real Estate
Mortgage loans were categorized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1998 1997
---------------- ----------------
Amount Percent Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial mortgage loans.................... $12,503 74% $14,945 73%
Agriculture mortgage loans................... 4,256 25% 3,753 18%
Residential mortgage loans................... 241 1% 272 1%
Other loans.................................. -- -- 1,512 8%
------- ------ ------- -----
17,000 100% 20,482 100%
====== =====
Less: Valuation allowances................... 173 289
------- -------
$16,827 $20,193
======= =======
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 1998, approximately 15%,
9% and 7% of the properties were located in California, New York and Florida,
respectively. Generally, the Company (as the lender) requires that a minimum
of one-fourth of the purchase price of the underlying real estate be paid by
the borrower.
Certain of the Company's real estate joint ventures have mortgage loans with
the Company. The carrying values of such mortgages were $606 and $725 at
December 31, 1998 and 1997, respectively.
Changes in mortgage loan valuation allowances were as follows:
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C> <C>
Balance at January 1......................... $ 289 $ 469 $ 491
Additions.................................... 40 61 144
Deductions for writedowns and dispositions... (130) (241) (166)
Deductions for disposition of affiliates..... (26) -- --
------- ------ -------
Balance at December 31....................... $ 173 $ 289 $ 469
======= ====== =======
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C> <C>
Impaired mortgage loans with valuation
allowances.................................. $ 823 $1,231
Impaired mortgage loans without valuation
allowances.................................. 375 306
------- ------
1,198 1,537
Less: Valuation allowances................... 149 250
------- ------
$ 1,049 $1,287
======= ======
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The average recorded investment in impaired mortgage loans on real estate
was $1,282, $1,680 and $2,113 for the years ended December 31, 1998, 1997 and
1996, respectively. Interest income on impaired mortgages was $109, $110 and
$119 for the years ended December 31, 1998, 1997 and 1996, respectively.
Restructured mortgage loans on real estate were $1,036 and $1,207 at
December 31, 1998 and 1997, respectively. Interest income of $74, $91 and $135
was recognized on restructured loans for the years ended December 31, 1998,
1997 and 1996, respectively. Gross interest income that would have been
recorded in accordance with the original terms of such loans amounted to $87,
$116 and $198 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Mortgage loans on real estate with scheduled payments 60 days (90 days for
agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $65 and $255 as of December 31, 1998 and 1997, respectively.
Real Estate and Real Estate Joint Ventures
Real estate and real estate joint ventures consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- ------
<S> <C> <C>
Real estate and real estate joint ventures held-for-
investment............................................ $ 6,301 $6,731
Impairments............................................ (408) (407)
------- ------
5,893 6,324
------- ------
Real estate and real estate joint ventures held-for-
sale.................................................. 546 915
Impairments............................................ (119) (49)
Valuation allowance.................................... (33) (110)
------- ------
394 756
------- ------
$ 6,287 $7,080
======= ======
</TABLE>
Accumulated depreciation on real estate was $2,065 and $2,030 at December
31, 1998 and 1997, respectively. Related depreciation expense was $282, $338
and $348 for the years ended December 31, 1998, 1997 and 1996, respectively.
Real estate and real estate joint ventures were categorized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
--------------- --------------
Amount Percent Amount Percent
------- ------- ------ -------
<S> <C> <C> <C> <C>
Office..................................... $ 4,265 68% $4,730 67%
Retail..................................... 640 10% 804 11%
Apartments................................. 418 7% 406 6%
Land....................................... 313 5% 346 5%
Agriculture................................ 195 3% 214 3%
Other...................................... 456 7% 580 8%
------- --- ------ ---
$ 6,287 100% $7,080 100%
======= === ====== ===
</TABLE>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 1998, approximately 23%, 23% and 12% of the
Company's real estate holdings were located in New York, California and Texas,
respectively.
Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Balance at January 1.... $ 110 $ 661 $ 924
Additions charged
(credited) to
operations............. (5) (76) 127
Deductions for
writedowns and
dispositions........... (72) (475) (390)
-------- -------- --------
Balance at December 31.. $ 33 $ 110 $ 661
======== ======== ========
</TABLE>
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Investment income (expense) relating to impaired real estate and real estate
joint ventures held-for-investment was $105, $28 and $(10) for the years ended
December 31, 1998, 1997 and 1996, respectively. Investment income relating to
real estate and real estate joint ventures held-for-sale was $3, $11 and $70
for the years ended December 31, 1998, 1997 and 1996, respectively. The
carrying value of non-income producing real estate and real estate joint
ventures was insignificant at December 31, 1998 and 1997, respectively.
The Company owned real estate acquired in satisfaction of debt of $154 and
$218 at December 31, 1998 and 1997, respectively.
Direct Financing and Leveraged Leases
Direct financing and leveraged leases, included in other invested assets,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
Direct Financing Leveraged
Leases Leases Total
----------------- -------------- --------------
1998 1997 1998 1997 1998 1997
----------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Investment................... $ -- $ 1,137 $1,067 $ 851 $1,067 $1,988
Estimated residual values.... -- 183 607 641 607 824
------- --------- ------ ------ ------ ------
-- 1,320 1,674 1,492 1,674 2,812
Unearned income.............. -- (261) (471) (428) (471) (689)
------- --------- ------ ------ ------ ------
Net investment............... $ -- $ 1,059 $1,203 $1,064 $1,203 $2,123
======= ========= ====== ====== ====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from three to eight years,
but in certain circumstances are as long as 20 years. Average yields range
from 7% to 12%. These receivables are generally collateralized by the related
property.
3. DERIVATIVE INSTRUMENTS
The table below provides a summary of the carrying value, notional amount
and current market or fair value of derivative financial instruments (other
than equity options) held at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------------------- -------------------------------------
Current Market or Current Market or
Fair Value Fair Value
------------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrying Notional Carrying Notional
Value Amount Assets Liabilities Value Amount Assets Liabilities
-------- -------- ------ ----------- -------- -------- ------ -----------
Financial futures....... $ 3 $ 2,190 $ 8 $ 6 $ 10 $ 2,262 $ 17 $ 7
Foreign exchange
contracts.............. -- 136 -- 2 -- 150 2 --
Interest rate swaps..... (9) 1,621 17 50 (11) 1,464 9 28
Foreign currency swaps.. (1) 580 3 62 -- 258 3 30
Caps.................... -- 8,391 -- -- -- 1,545 13 --
Options (fixed income).. -- -- -- -- 2 275 -- 2
-------- -------- ------ ----------- -------- -------- ------ -----------
Total contractual
commitments............ $ (7) $ 12,918 $ 28 $ 120 $ 1 $ 5,954 $ 44 $ 67
======== ======== ====== =========== ======== ======== ====== ===========
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following is a reconciliation of the notional amounts by derivative type
and strategy as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
December 31, 1997 Terminations/ December 31, 1998
Notional Amount Additions Maturities Notional Amount
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Financial futures....... $2,262 $25,073 $(25,145) $ 2,190
Foreign exchange
contracts.............. 150 1,231 (1,245) 136
Interest rate swaps..... 1,464 788 (631) 1,621
Foreign currency swaps.. 258 386 (64) 580
Caps.................... 1,545 8,250 (1,404) 8,391
Options (fixed income).. 275 -- (275) --
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
BY STRATEGY
Liability hedging....... $1,860 $ 8,419 $ (1,538) $ 8,741
Invested asset hedging.. 817 1,666 (1,619) 864
Portfolio hedging....... 2,787 25,643 (25,600) 2,830
Anticipated transaction
hedging................ 490 -- (7) 483
------ ------- -------- -------
Total contractual
commitments............ $5,954 $35,728 $(28,764) $12,918
====== ======= ======== =======
</TABLE>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 1998:
<TABLE>
<CAPTION>
Remaining Life
---------------------------------------
<S> <C> <C> <C> <C> <C>
After Five
After One Years After
One Year Year Through Through Ten Ten
or Less Five Years Years Years Total
-------- ------------ ----------- ----- -------
Financial futures.............. $2,190 $ -- $ -- $ -- $ 2,190
Foreign exchange contracts..... 136 -- -- -- 136
Interest rate swaps............ 470 774 162 215 1,621
Foreign currency swaps......... 39 182 343 16 580
Caps........................... 1,875 6,496 20 -- 8,391
-------- ------------ ----------- ----- -------
Total contractual commitments.. $4,710 $ 7,452 $ 525 $ 231 $12,918
======== ============ =========== ===== =======
</TABLE>
In addition to the derivative instruments above, the Company uses equity
option contracts as invested asset hedges. There were 92 thousand and 7
million equity option contracts outstanding with carrying values of $(11) and
$27 and market values of $(11) and $33, as of December 31, 1998 and 1997,
respectively. The outstanding contracts have a remaining life of one year or
less as of December 31, 1998.
4. REINSURANCE
The Company assumes and cedes insurance with other insurance companies. The
Company continually evaluates the financial condition of its reinsurers and
monitors concentration of credit risk in an effort to minimize its exposure to
significant losses from reinsurer insolvencies. The Company is contingently
liable with respect to ceded reinsurance should any reinsurer be unable to
meet its obligations under these agreements. The amounts in the consolidated
statements of income are presented net of reinsurance ceded.
The Company has exposure to catastrophes, which are an inherent risk of the
property and casualty insurance business and could contribute to material
fluctuations in the Company's results of operations. The Company uses excess
of loss and quota share reinsurance arrangements to diversify its risk
portfolio.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Direct premiums............................... $12,763 $12,728 $12,452
Reinsurance assumed........................... 409 360 508
Reinsurance ceded............................. (1,669) (1,810) (1,615)
------- ------- -------
Net premiums.................................. $11,503 $11,278 $11,345
======= ======= =======
Reinsurance recoveries netted against
policyholder benefits........................ $ 1,751 $ 1,648 $ 1,667
======= ======= =======
</TABLE>
Reinsurance recoverables, included in other receivables, were $2,956 and
$1,511 at December 31, 1998 and 1997, respectively. Reinsurance and ceded
commissions payables, included in other liabilities, were $105 and $158 at
December 31, 1998 and 1997, respectively.
The following provides an analysis of the activity in the liability for
benefits relating to property and casualty and group accident and non-medical
health policies and contracts:
<TABLE>
<CAPTION>
Years ended December
31,
-------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at January 1........................... $ 3,655 $ 3,345 $ 3,296
Reinsurance recoverables..................... (229) (215) (214)
------- ------- -------
Net balance at January 1....................... 3,426 3,130 3,082
------- ------- -------
Incurred related to:
Current year................................. 2,726 2,855 2,951
Prior years.................................. (245) 88 (114)
------- ------- -------
2,481 2,943 2,837
------- ------- -------
Paid related to:
Current year................................. (1,967) (1,832) (1,998)
Prior years.................................. (853) (815) (791)
------- ------- -------
(2,820) (2,647) (2,789)
------- ------- -------
Balance at December 31......................... 3,087 3,426 3,130
Add: Reinsurance recoverables................ 233 229 215
------- ------- -------
Balance at December 31......................... $ 3,320 $ 3,655 $ 3,345
======= ======= =======
</TABLE>
5. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
------------------
1998 1997 1996
------ ---- ----
<S> <C> <C> <C>
Current:
Federal............................................. $ 821 $424 $346
State and local..................................... 60 10 25
Foreign............................................. 99 26 27
------ ---- ----
980 460 398
------ ---- ----
Deferred:
Federal............................................. (178) (26) 66
State and local..................................... (8) 9 6
Foreign............................................. (54) 25 12
------ ---- ----
(240) 8 84
------ ---- ----
Provision for income taxes............................ $ 740 $468 $482
====== ==== ====
</TABLE>
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Reconciliations of the income tax provision at the U.S. statutory rate to
the provision for income taxes as reported were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------
1998 1997 1996
------ ------ ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate................ $ 730 $ 585 $492
Tax effect of:
Tax exempt investment income...................... (40) (30) (18)
Goodwill.......................................... 5 9 --
Surplus tax....................................... 18 (40) 38
State and local income taxes...................... 31 15 23
Foreign operations................................ 12 7 (7)
Tax credits....................................... (25) (15) (15)
Prior year taxes.................................. 4 (2) (46)
Sale of subsidiaries.............................. (19) (41) --
Other, net........................................ 24 (20) 15
------ ------ ----
Provision for income taxes.......................... $ 740 $ 468 $482
====== ====== ====
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax
liabilities consisted of the following:
<CAPTION>
December 31,
--------------
1998 1997
------ ------
<S> <C> <C> <C>
Deferred income tax assets:
Policyholder liabilities and receivables.......... $3,239 $3,174
Net operating losses.............................. 22 33
Employee benefits................................. 174 187
Non-deductible liabilities........................ 441 162
Other, net........................................ 158 223
------ ------
4,034 3,779
Less: Valuation allowance......................... 21 24
------ ------
4,013 3,755
------ ------
Deferred income tax liabilities:
Investments....................................... 1,417 1,118
Deferred policy acquisition costs................. 1,774 1,890
Net unrealized investment gains................... 864 1,119
Other, net........................................ 18 100
------ ------
4,073 4,227
------ ------
Net deferred income tax liability................... $ (60) $ (472)
====== ======
</TABLE>
Foreign net operating loss carryforwards generated a deferred income tax
benefit of $21. The Company has recorded a valuation allowance related to
these tax benefits. 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 foreign net operating loss carryforwards will
not be realized. The benefit will be recognized at such time management
believes that it is more likely than not that the portion of the deferred
income tax asset is realizable.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The sources of deferred income tax expense (benefit) and their tax effects
were as follows:
<TABLE>
<CAPTION>
Years ended
December 31,
-----------------
1998 1997 1996
----- ---- ----
<S> <C> <C> <C>
Policyholder liabilities and receivables............... $ (65) $(93) $ 27
Net operating losses................................... 11 5 (19)
Investments............................................ 230 245 (6)
Deferred policy acquisition costs...................... (116) (51) 55
Employee benefits...................................... 13 (40) (4)
Non-deductible liabilities............................. (279) (66) (24)
Change in valuation allowances......................... (3) 10 4
Other, net............................................. (31) (2) 51
----- ---- ----
$(240) $ 8 $ 84
===== ==== ====
</TABLE>
The Company has been audited by the Internal Revenue Service for the years
through and including 1993. The Company is being audited for the years 1994,
1995 and 1996. The Company believes that any adjustments that might be
required for open years will not have a material effect on the Company's
consolidated financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. EMPLOYEE BENEFIT PLANS
Pension Benefit and Other Benefit Plans
The Company is both the sponsor and administrator of defined benefit pension
plans covering all eligible employees and sales representatives of MetLife and
certain of its subsidiaries. Retirement benefits are based upon years of
credited service and final average earnings history.
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
<TABLE>
<CAPTION>
December 31,
------------------------------------
Pension Benefits Other Benefits
------------------ ----------------
1998 1997 1998 1997
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning
of year................................. $ 3,523 $ 3,268 $ 1,763 $ 1,773
Service cost............................. 88 73 31 30
Interest cost............................ 254 244 114 122
Actuarial gain........................... 205 160 (74) (57)
Divestitures, curtailments and
terminations............................ 24 (9) (13) 2
Change in benefits....................... 12 6 -- (2)
Benefits paid............................ (245) (219) (113) (105)
-------- -------- ------- -------
Projected benefit obligation at end of
year.................................... 3,861 3,523 1,708 1,763
-------- -------- ------- -------
Change in plan assets:
Contract value of plan assets at
beginning of year....................... 3,982 3,628 1,004 897
Actual return on plan assets............. 671 566 171 128
Employer contribution.................... 15 7 61 84
Benefits paid............................ (245) (219) (113) (105)
Other payments........................... (100) -- -- --
-------- -------- ------- -------
Contract value of plan assets at end of
year.................................... 4,323 3,982 1,123 1,004
-------- -------- ------- -------
Over (under) funded...................... 462 459 (585) (759)
Unrecognized net asset at transition..... (95) (140) -- --
Unrecognized net actuarial gains......... (81) (109) (322) (171)
Unrecognized prior service cost.......... 144 150 (3) (2)
-------- -------- ------- -------
Prepaid (accrued) benefit cost........... $ 430 $ 360 $ (910) $ (932)
======== ======== ======= =======
Qualified plan prepaid pension cost...... $ 546 $ 516 $ -- $ --
Non-qualified plan accrued pension cost.. (116) (156) -- --
-------- -------- ------- -------
Prepaid benefit cost..................... $ 430 $ 360 $ -- $ --
======== ======== ======= =======
</TABLE>
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
Qualified Plan Non-Qualified Plan Total
--------------- ------------------ -------------
1998 1997 1998 1997 1998 1997
------- ------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected benefit
obligation................ $ 3,638 $ 3,170 $ 223 $ 353 $3,861 $3,523
Aggregate contract value of
plan assets (principally
Company contracts)........ 4,323 3,831 -- 151 4,323 3,982
------- ------- --------- --------- ------ ------
Over (under) funded........ $ 685 $ 661 $ (223) $ (202) $ 462 $ 459
======= ======= ========= ========= ====== ======
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits
were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
--------------------- --------------------
Weighted average assumptions as of
December 31, 1998 1997 1998 1997
- ---------------------------------- --------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Discount rate...................... 7%-7.25% 7.25%-7.75% 7% 7.25%-7.75%
Expected return on plan assets..... 8.5% 8.75% 7.25%-9% 8.75%
Rate of compensation increase...... 4.5%-8.5% 4.5%-8.5% n/a n/a
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was 6.5% per year for pre-
Medicare eligible claims and 6% for Medicare eligible claims in 1998. The
assumed health care cost trend rate used in measuring the accumulated
nonpension postretirement benefit obligation was generally 9% in 1997,
gradually decreasing to 5.25% over 5 years.
Assumed health care cost trend rates may have a significant effect on the
amounts reported for health care plans. A one-percentage point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One One
Percent Percent
Increase Decrease
-------- --------
<S> <C> <C>
Effect on total of service and interest cost
components........................................... $ 16 $ 18
Effect on accumulated postretirement benefit
obligation........................................... $124 $183
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------- ----------------
1998 1997 1996 1998 1997 1996
----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................ $ 88 $ 73 $ 77 $ 31 $ 30 $ 41
Interest cost........................... 254 244 232 114 122 127
Expected return on plan assets.......... (330) (318) (273) (79) (66) (58)
Amortization of prior actuarial (gain)
loss................................... (11) (5) (12) (12) (4) 2
Curtailment (credit) cost............... (10) -- -- 4 -- --
----- ----- ----- ---- ---- ----
Net periodic benefit cost (credit)...... $ (9) $ (6) $ 24 $ 58 $ 82 $112
===== ===== ===== ==== ==== ====
</TABLE>
Savings and Investment Plans
The Company sponsors savings and investment plans for substantially all
employees under which the Company matches a portion of employee contributions.
The Company contributed $43, $44 and $42 for the years ended December 31,
1998, 1997 and 1996, respectively.
7. LEASES
In accordance with industry practice, certain of the Company's income from
lease agreements with retail tenants is contingent upon the level of the
tenants' sales revenues. Additionally, the Company, as lessee, has entered
into various lease and sublease agreements for office space, data processing
and other equipment. Future minimum rental and subrental income, and minimum
gross rental payments relating to these lease agreements were as follows:
<TABLE>
<CAPTION>
Gross
Rental Sublease Rental
Income Income Payments
------ -------- --------
<S> <C> <C> <C>
1999...................................... $1,213 $10 $126
2000...................................... 1,150 11 109
2001...................................... 1,052 11 94
2002...................................... 942 10 72
2003...................................... 787 9 51
Thereafter................................ 2,636 35 242
</TABLE>
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1997
------- ------
<S> <C> <C>
MetLife:
6.300% surplus notes due 2003.................................. $ 397 $ 397
7.000% surplus notes due 2005.................................. 249 249
7.700% surplus notes due 2015.................................. 198 198
7.450% surplus notes due 2023.................................. 296 296
7.875% surplus notes due 2024.................................. 148 148
7.800% surplus notes due 2025.................................. 248 248
Other.......................................................... 207 436
------- ------
1,743 1,972
------- ------
Investment Related:
Exchangeable subordinated debt, interest based on LIBOR plus
factors, due 1999........................................... 212 374
Exchangeable subordinated debt, interest rates ranging from
4.90% to 6.18%, due 2001
and 2002.................................................... 371 --
------- ------
583 374
------- ------
Total MetLife.................................................... 2,326 2,346
------- ------
Nvest:
7.060% senior notes due 2003................................... 110 110
7.290% senior notes due 2007................................... 160 160
------- ------
270 270
------- ------
Other Companies:
Fixed rate notes, interest rates ranging from 6.96% to 8.51%,
maturity dates ranging from 1999 to 2008 179 --
Floating rate notes, interest based on LIBOR plus factors...... -- 146
Other.......................................................... 128 122
------- ------
307 268
------- ------
Total long-term debt............................................. 2,903 2,884
Total short-term debt............................................ 3,585 4,587
------- ------
$ 6,488 $7,471
======= ======
</TABLE>
Short-term debt consisted of commercial paper with a weighted average
interest rate of 5.31% and 5.75% and a weighted average maturity of 44 and 71
days as of December 31, 1998 and 1997, respectively.
The Company maintains an unsecured credit facility of $2,000 under which
bank loans and other short-term debt are drawn. This facility is maintained
for general corporate purposes and to provide additional support to the
Company's commercial paper program. At December 31, 1998 there were no
outstanding borrowings under the facility.
Payments of interest and principal on the surplus notes, subordinated to all
other indebtedness, may be made only with the prior approval of the
Superintendent. Subject to the prior approval of the Superintendent, the 7.45%
surplus notes may be redeemed, in whole or in part, at the election of the
Company at any time on or after November 1, 2003.
The exchangeable subordinated debt is payable in cash or by the delivery of
the underlying common stock collateral owned by the Company. The value
ascribed to the common stock at the date of delivery is the greater of the
market value at the date of the debt issuance or date of delivery. The debt
provides for additional interest if the market value of the common stock
appreciates above certain levels at the date of delivery as compared with the
market value at the date of issuance.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The aggregate maturities of long-term debt are $413 in 1999, $45 in 2000,
$191 in 2001, $221 in 2002, $527 in 2003 and $1,518 thereafter.
Interest expense related to the Company's outstanding indebtedness was $333,
$344 and $311, for the years ended December 31, 1998, 1997 and 1996,
respectively.
9. COMMITMENTS AND CONTINGENCIES
Litigation
The Company and certain of its subsidiaries are currently defendants in
approximately 400 lawsuits, including over 40 putative or certified class
action lawsuits, raising allegations of improper marketing and sales of
individual life insurance or annuities (hereafter "sales practices claims").
Two of these putative class actions are filed in Canada and the remainder are
filed in the United States. These cases are brought by or on behalf of
policyholders and others and allege, among other claims, that individual life
insurance policies were improperly sold in replacement transactions or with
inadequate or inaccurate disclosure concerning the period for which premiums
would be payable, or were misleadingly sold as savings or retirement plans.
The classes proposed in the pending class actions are defined broadly enough,
in the aggregate, to include a substantial number of active and lapsed
policyholders who purchased individual life insurance policies from the
Company during the 1980's and 1990's. In California, Ohio and West Virginia,
courts have certified or deemed certifiable classes on behalf of policyholders
in those states who allegedly did not receive proper notice of replacement. A
Federal Court in Massachusetts has certified a mandatory class involving
certain former policyholders of New England Mutual Life Insurance Company
which merged into the Company in 1996. The United States Court of Appeals
remanded the case to the trial court for further consideration. A number of
the sales practices claims pending in federal courts have been consolidated as
a multidistrict proceeding for pre-trial purposes in the United States
District Court for the Western District of Pennsylvania and, as to former New
England Mutual Life Insurance Company policyholders, in the United States
District Court in Massachusetts. In another case, a New York federal court has
certified or conditionally certified some subclasses of purchasers of the
Company's policies and annuity contracts outside the United States. While most
of these cases are in the early stages of litigation, they seek substantial
damages, including in some cases punitive and treble damages and attorneys'
fees. Additional litigation relating to the Company's marketing and sale of
individual life insurance may be commenced in the future.
Regulatory authorities in a small number of states, including both insurance
departments and attorneys general, have ongoing investigations of the
Company's sales of individual life insurance or annuities, including
investigations of alleged improper replacement transactions and alleged
improper sales of insurance with inaccurate or inadequate disclosures as to
the period for which premiums would be payable. Over the past several years, a
number of investigations by other regulatory authorities have been resolved by
the Company for monetary payments and certain other relief.
The Company is also a defendant in numerous lawsuits seeking compensatory
and punitive damages for personal injuries allegedly caused by exposure to
asbestos or asbestos-containing products. The Company has never engaged in the
business of manufacturing, producing, distributing or selling asbestos or
asbestos-containing products. Rather, these lawsuits, currently numbering in
the thousands, have principally been based upon allegations relating to
certain research, publication and other activities of one or more of the
Company's employees during the period from the 1920's through approximately
the 1950's and alleging that the 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. Legal theories asserted
against the Company have included negligence, intentional tort claims and
conspiracy claims concerning the health risks associated with asbestos. While
the Company believes it has meritorious defenses to these claims, and has not
suffered any adverse judgments in respect thereof, most of the cases have been
resolved by settlements. The Company intends to continue to exercise its best
judgment regarding settlement or defense of such cases. The number of such
cases that may be brought or the aggregate amount of any liability that may
ultimately be incurred by the Company is uncertain. Significant portions of
amounts paid in settlement of such cases have been funded with proceeds from a
previously resolved dispute with its primary, umbrella and first level excess
liability insurance carriers. The Company is presently in litigation with
several of its excess liability insurers regarding amounts payable under the
Company's policies with respect to coverage for these claims.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company believes that the claims and the amount of damages asserted in
the aforementioned sales practices and asbestos personal injury litigations
are without merit, and it intends to continue to defend its interests
vigorously.
During 1998, the Company obtained certain excess reinsurance and insurance
policies providing coverage for risks associated primarily with sales
practices claims and claims for personal injuries caused by exposure to
asbestos or asbestos-containing products. In 1998, the Company recorded a
charge of $1,715, included in other expenses, for related insurance and
reinsurance premiums and for potential liabilities related to certain of these
claims.
Various litigation, claims and assessments against the Company, in addition
to the aforementioned and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including in connection with its activities as an insurer, employer,
investor and taxpayer. Further, state insurance regulatory authorities and
other authorities regularly make inquiries and conduct investigations
concerning the Company's compliance with applicable insurance and other laws
and regulations.
In certain of the matters referred to above, very large and/or indeterminate
amounts, including punitive and treble damages, are sought. While it is not
feasible to predict or determine the ultimate outcome of all pending
investigations and legal proceedings, it is the opinion of the Company's
management that their outcomes, after consideration of available insurance and
reinsurance and the provisions made in the Company's consolidated financial
statements, are not likely to have a material adverse effect on the Company's
financial position. However, given the large and/or indeterminable 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 operating
results in particular quarterly or annual periods.
Year 2000
The Year 2000 issue is the result of the widespread use of computer programs
written using two digits (rather than four) to define the applicable year.
Such programming was a common industry practice designed to avoid the
significant costs associated with additional mainframe capacity necessary to
accommodate a four-digit year field. As a result, any of the Company's
computer systems that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in major
system failures or miscalculations. The Company has conducted a comprehensive
review of its computer systems to identify the systems that could be affected
by the Year 2000 issue and has developed and implemented a plan to resolve the
issue. The Company currently believes that, with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company's computer systems. However,
if such modifications and conversions are not completed on a timely basis, the
Year 2000 issue may have a material impact on the operations of the Company.
Furthermore, even if the Company completes such modifications and conversions
on a timely basis, there can be no assurance that the failure by vendors or
other third parties to solve the Year 2000 issue will not have a material
impact on the operations of the Company. The Company estimates the total cost
to resolve its Year 2000 problem to be approximately $210 (unaudited) of which
approximately $149 has been incurred through December 31, 1998.
Guaranty Funds
Under insurance guaranty fund laws in each state, the District of Columbia
and Puerto Rico, insurers licensed to do business can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life
insurance companies for the deemed losses. Most of these laws do provide,
however, that an assessment may be excused or deferred if it would threaten an
insurer's solvency and further provide annual limits on such assessments. A
large part of the assessments paid by the Company pursuant to these laws may
be used as credits for a portion of the Company's premium taxes. The Company
paid guaranty fund assessments of $35, $23 and $25 in 1998, 1997 and 1996,
respectively, of which $24, $20 and $19 were estimated to be credited against
future premium taxes.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
10. OTHER EXPENSES
Other expenses were comprised of the following:
<TABLE>
<CAPTION>
Years ended December
31,
------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Compensation.................................. $ 2,478 $2,072 $ 1,813
Commissions................................... 902 766 722
Interest and debt issue costs................. 379 453 311
Amortization of policy acquisition costs...... 587 771 633
Capitalization of policy acquisition costs.... (1,025) (1,000) (1,028)
Rent, net of sublease......................... 155 179 183
Minority interest............................. 67 56 30
Restructuring charge.......................... 81 -- --
Other......................................... 4,494 2,637 2,091
------- ------ -------
$ 8,118 $5,934 $ 4,755
======= ====== =======
</TABLE>
11. DISCONTINUED OPERATIONS
The 1996 loss from discontinued operations resulted from the finalization of
the transfer of certain group medical contracts in connection with the
Company's disposal of its group medical benefits business during 1995. The
components of discontinued operations for the year ended December 31, 1996
were as follows:
<TABLE>
<S> <C>
Loss from discontinued operations, net of
income tax benefit of $18........................................ $ 52
Loss on disposal of discontinued operations, net of
income tax benefit of $11........................................ 19
----
Loss from discontinued operations................................. $ 71
====
</TABLE>
12. CONSOLIDATED CASH FLOW INFORMATION
During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial
financing company) and substantially all of its Canadian and Mexican insurance
operations, which resulted in realized investment gains of $531. During 1997,
the Company sold its United Kingdom insurance operations, which resulted in a
realized investment gain of $139. Such sales caused a reduction in assets by
$10,663 and $4,342 and liabilities by $3,691 and $4,207 in 1998 and 1997,
respectively.
In 1997, the Company also acquired assets of $3,777 and assumed liabilities
of $3,347, through the acquisition of certain insurance and noninsurance
companies. The aggregate purchase prices were allocated to the assets and
liabilities acquired based upon their estimated fair values.
Real estate of $69, $151 and $189 was acquired in satisfaction of debt for
the years ended December 31, 1998, 1997 and 1996, respectively.
13. FAIR VALUE INFORMATION
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein
may not necessarily be indicative of amounts that could be realized in a
current market exchange. The use of different assumptions or valuation
methodologies may have a material effect on the estimated fair value amounts.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Amounts related to the Company's financial instruments were as follows:
<TABLE>
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1998 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $100,767 $100,767
Equity securities................................. 2,340 2,340
Mortgage loans on real estate..................... 16,827 17,793
Policy loans...................................... 5,600 6,143
Short-term investments............................ 1,369 1,369
Cash and cash equivalents......................... 3,301 3,301
Mortgage loan commitments......................... 472 -- 14
Liabilities:
Policyholder account balances..................... 37,088 37,304
Short-term debt................................... 3,585 3,585
Long-term debt.................................... 2,903 2,995
<CAPTION>
Estimated
Notional Carrying Fair
Amount Value Value
December 31, 1997 -------- -------- ---------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $ $ 92,630 $ 92,630
Equity securities................................. 4,250 4,250
Mortgage loans on real estate..................... 20,193 21,084
Policy loans...................................... 5,846 6,110
Short-term investments............................ 679 679
Cash and cash equivalents......................... 2,911 2,911
Mortgage loan commitments......................... 334 -- 4
Liabilities:
Policyholder account balances..................... 37,034 37,265
Short-term debt................................... 4,587 4,587
Long-term debt.................................... 2,884 2,939
</TABLE>
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
Fixed Maturities and Equity Securities
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities in which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
Mortgage Loans on Real Estate and Mortgage Loan Commitments
Fair values for mortgage loans on real estate and mortgage loan commitments
are estimated by discounting expected future cash flows using current interest
rates for similar loans with similar credit risk.
Policy Loans
Fair values for policy loans are estimated by discounting expected future
cash flows using U.S. treasury rates to approximate interest rates and the
Company's past experiences to project patterns of loan accrual and repayment
characteristics.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
Cash and Cash Equivalents and Short-term Investments
The carrying values for cash and cash equivalents and short-term investments
approximated fair market values due to the short-term maturities of these
instruments.
Policyholder Account Balances
The fair value of policyholder account balances 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.
Short-term and Long-term Debt
The 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.
Derivative Instruments
The fair value of derivative instruments, including financial futures,
financial forwards, interest rate and foreign currency swaps, floors, foreign
exchange contracts, caps and options are based upon quotations obtained from
dealers or other reliable sources. See Note 3 for derivative fair value
disclosures.
14. STATUTORY FINANCIAL INFORMATION
The reconciliation of MetLife's statutory surplus and net change in
statutory surplus, determined in accordance with accounting practices
prescribed or permitted by insurance regulatory authorities, with equity and
net income determined in conformity with generally accepted accounting
principles were as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1998 1997
------- -------
<S> <C> <C> <C>
Statutory surplus..................................... $ 7,388 $ 7,378
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... (6,830) (6,807)
Deferred policy acquisition costs................... 6,560 6,438
Deferred income taxes............................... 295 (242)
Valuation of investments............................ 3,981 3,474
Statutory asset valuation reserves.................. 3,381 3,854
Statutory interest maintenance reserve.............. 1,486 1,261
Surplus notes....................................... (1,595) (1,555)
Other, net.......................................... 201 206
------- -------
Equity................................................ $14,867 $14,007
======= =======
<CAPTION>
Years ended December
31,
-----------------------
1998 1997 1996
------- ------- -----
<S> <C> <C> <C>
Net change in statutory surplus....................... $ 10 $ 227 $ 366
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... 127 (38) (165)
Deferred policy acquisition costs................... 224 149 391
Deferred income taxes............................... 234 62 (74)
Valuation of investments............................ 1,158 (387) (84)
Statutory asset valuation reserves.................. (461) 1,136 599
Statutory interest maintenance reserve.............. 312 53 19
Other, net.......................................... (261) 1 (199)
------- ------- -----
Net income............................................ $ 1,343 $ 1,203 $ 853
======= ======= =====
</TABLE>
31
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
15. SEPARATE ACCOUNTS
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts totaling $39,490 and $32,893 at December 31, 1998 and 1997,
respectively, in which the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $18,578 and $15,445 at December 31, 1998
and 1997, respectively, in which MetLife contractually guarantees either a
minimum return or account value to the policyholder.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in
the Company's revenues as universal life and investment-type product policy
fees and totaled $413, $287 and $216 in 1998, 1997 and 1996, respectively.
Guaranteed separate accounts consisted primarily of Met Managed Guaranteed
Interest Contracts and participating close out contracts. The average interest
rate credited on these contracts was 7% at December 31, 1998. The assets that
support these liabilities were comprised of $16,639 in fixed maturities as of
December 31, 1998. The portfolios are segregated from other investments and
are managed to minimize liquidity and interest rate risk. In order to minimize
the risk of disintermediation associated with early withdrawals, these
investment products carry a graded surrender charge as well as a market value
adjustment.
16. OTHER COMPREHENSIVE INCOME
The following tables set forth the reclassification adjustments required for
the years ended December 31, 1998, 1997 and 1996 to avoid double-counting in
comprehensive income items that are included as part of net income for the
current year that have been reported as a part of other comprehensive income
in the current or prior year:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Holding gains (losses) on investments arising during
the year........................................... $ 1,556 $ 4,479 $(1,494)
Income tax effect of holding gains or losses........ (646) (1,698) 550
Transfer of securities from held-to-maturity to
available-for-sale:
Holding gains on investments...................... -- 198 --
Income tax effect................................. -- (75) --
Reclassification adjustments:
Realized holding gains included in current year
net income....................................... (2,043) (868) (367)
Amortization of premium and discount on
investments...................................... (411) (406) (631)
Realized holding gains (losses) allocated to other
policyholder amounts............................. 608 231 227
Income tax effect................................. 766 394 285
Allocation of holding (gains) losses on investments
relating to other
policyholder amounts............................... (322) (2,231) 1,286
Income tax effect of allocation of holding gains and
losses to other
policyholder amounts............................... 134 846 (474)
------- ------- -------
Net unrealized investment (losses) gains............ (358) 870 (618)
------- ------- -------
Foreign currency translation adjustments arising
during the year.................................... (115) (46) (6)
Reclassification adjustment for sale of investment
in foreign operation............................... 2 (3) --
------- ------- -------
Foreign currency translation adjustment............. (113) (49) (6)
------- ------- -------
Minimum pension liability adjustment................ (12) -- --
------- ------- -------
Other comprehensive (loss) income................... $ (483) $ 821 $ (624)
======= ======= =======
</TABLE>
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
17. RESTRUCTURING
During 1998, the Company restructured headquarters operations and
consolidated certain agencies and other operations. The impacts of these
actions on a segment basis are as follows:
<TABLE>
<CAPTION>
Severance
and Related Facility
Number of Termination Consolidation
Positions Costs Costs Total
--------- ----------- ------------- -----
<S> <C> <C> <C> <C>
Individual............................ 488 $15 $16 $31
Institutional......................... 320 8 2 10
Auto & Home........................... 357 4 -- 4
Corporate and Other................... 1,102 30 6 36
----- --- --- ---
2,267 $57 $24 $81
===== === === ===
</TABLE>
These programs are expected to be completed by the third quarter of 1999. As
of December 31, 1998, $28 of these restructuring costs had been paid and the
unpaid balance was $53.
18. BUSINESS SEGMENT INFORMATION
The Company provides insurance and financial services to customers in the
United States, Canada, Central America, South America, Europe and Asia. The
Company's business is divided into six segments: Individual, Institutional,
Auto & Home, International, Asset Management and Corporate. These segments are
managed separately because they either provide different products and
services, require different strategies or have different technology
requirements.
Individual offers a wide variety of individual insurance and investment
products, including life insurance, annuities and mutual funds. Institutional
offers a broad range of group insurance and retirement and savings products
and services, including group life insurance, non-medical health insurance
such as short and long-term disability, long-term care and dental insurance
and other insurance products and services. Auto & Home provides insurance
coverages including private passenger automobile, homeowners and personnel
excess liability insurance. International provides life insurance, accident
and health insurance, annuities and retirement and savings products to both
individuals and groups, and auto and homeowners coverage to individuals. Asset
Management provides a broad variety of asset management products and services
to individuals and institutions such as mutual funds for savings and
retirement needs, commercial real estate advisory and management services, and
institutional and retail investment management. Through its Corporate segment,
the Company reports items that are not allocated to any of the business
segments.
Set forth in the tables below is certain financial information with respect
to the Company's operating segments for the years ended December 31, 1998,
1997 and 1996. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies, except for the
method of capital allocation. The Company allocates capital to each segment
based upon an internal capital allocation system that allows the Company to
more effectively manage its capital. The Company has divested operations that
did not meet targeted rates of return, including its medical insurance
operations, commercial leasing business, and insurance operations in the
United Kingdom and substantially all of its Canadian operations. The Company
evaluates the performance of each operating segment based upon income or loss
from operations before provision for income taxes and non-recurring items
(e.g. items of unusual or infrequent nature). The Company allocates non-
recurring items to the Corporate segment.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1998 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,381 $ 5,101 $1,403 $ 618 $ -- $ -- $ -- $11,503
Universal life and
investment-type product
policy fees 817 475 -- 68 -- -- -- 1,360
Net investment income... 5,501 3,864 81 343 76 808 (445) 10,228
Other revenues.......... 523 574 36 33 814 35 (50) 1,965
Net realized investment
gains.................. 663 552 122 117 -- 683 (116) 2,021
Policyholder benefits
and claims............. 4,659 6,373 869 597 -- (10) -- 12,488
Interest credited to
policyholder account
balances............... 1,443 1,199 -- 89 -- -- -- 2,731
Policyholder dividends.. 1,447 142 -- 64 -- -- -- 1,653
Other expenses.......... 2,609 1,592 546 352 799 2,632 (412) 8,118
Income before provision
for income taxes....... 1,727 1,260 227 77 91 (1,096) (199) 2,087
Income after provision
for income taxes....... 1,091 833 161 56 47 (675) (166) 1,347
Total assets............ 103,974 88,356 2,771 3,432 1,165 20,652 (5,004) 215,346
Deferred policy
acquisition costs...... 6,255 43 57 205 -- -- -- 6,560
Separate account assets. 23,038 35,286 -- 26 -- -- -- 58,350
Policyholder
liabilities............ 71,989 49,045 1,477 2,043 -- 1 (352) 124,203
Separate account
liabilities............ $23,013 $35,029 $ -- $ 26 $ -- $ -- $ -- $58,068
</TABLE>
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1997 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,327 $ 4,689 $1,354 $ 908 $ -- $ -- $ -- $11,278
Universal life and
investment-type product
policy fees............ 855 426 -- 137 -- -- -- 1,418
Net investment income... 4,754 3,754 71 504 87 895 (574) 9,491
Other revenues.......... 338 357 25 54 682 19 16 1,491
Net realized investment
gains.................. 356 45 9 142 -- 326 (91) 787
Policyholder benefits
and claims............. 4,597 5,934 834 869 -- -- -- 12,234
Interest credited to
policyholder account
balances............... 1,428 1,319 -- 137 -- -- -- 2,884
Policyholder dividends.. 1,340 305 -- 97 -- -- -- 1,742
Other expenses.......... 2,384 1,178 520 497 679 1,118 (442) 5,934
Income before provision
for income taxes....... 881 535 105 145 90 122 (207) 1,671
Income after provision
for income taxes....... 603 339 74 126 52 210 (201) 1,203
Total assets............ 95,990 83,481 2,542 7,412 1,147 18,494 (6,290) 202,776
Deferred policy
acquisition costs...... 5,912 40 56 428 -- -- -- 6,436
Separate account assets. 17,368 30,732 -- 520 -- -- -- 48,620
Policyholder
liabilities............ 70,686 49,550 1,509 5,615 -- 1 (3) 127,358
Separate account
liabilities............ $17,345 $30,473 $ -- $ 520 $ -- $ -- $ -- $48,338
</TABLE>
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Auto
At or for the year ended & Asset Consolidation/
December 31, 1996 Individual Institutional Home International Management Corporate Elimination Total
- ------------------------ ---------- ------------- ------ ------------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,559 $ 4,676 $1,316 $ 794 $-- $ -- $ -- $11,345
Universal life and
investment-type product
policy fees............ 729 375 -- 139 -- -- -- 1,243
Net investment income... 4,604 3,446 71 523 60 761 (487) 8,978
Other revenues.......... 74 475 26 37 495 89 50 1,246
Net realized investment
gains (losses) ....... 282 28 24 13 -- (112) (4) 231
Policyholder benefits
and claims............. 4,690 6,006 891 700 -- (1) -- 12,286
Interest credited to
policyholder account
balances 1,354 1,358 -- 156 -- -- -- 2,868
Policyholder dividends.. 1,333 284 -- 111 -- -- -- 1,728
Other expenses.......... 2,019 1,008 490 418 498 706 (384) 4,755
Income before provision
for income taxes....... 852 344 56 121 57 33 (57) 1,406
Income after provision
for income taxes....... 511 217 34 86 47 85 (56) 924
Total assets............ 86,042 75,872 2,801 11,714 901 18,900 (6,954) 189,276
Deferred policy
acquisition costs...... 6,495 29 56 647 -- -- -- 7,227
Separate account assets. 12,403 27,715 -- 3,645 -- -- -- 43,763
Policyholder
liabilities............ 67,220 48,253 1,562 6,045 -- 1 (55) 123,026
Separate account
liabilities............ $12,386 $27,368 $ -- $3,645 $-- $ -- $ -- $43,399
</TABLE>
The individual segment includes an equity ownership interest in Nvest
Companies, L.P. ("Nvest") under the equity method of accounting. Nvest has
been included within the asset management segment due to the types of products
and strategies employed by the entity. The individual segment's equity in
earnings of Nvest, which is included in net investment income, was $49, $45
and $43 for the years ended December 31, 1998, 1997 and 1996, respectively.
The investment in Nvest was $252, $216 and $152 at December 31, 1998, 1997 and
1996, respectively.
Net investment income and net realized investment gains are based upon the
actual results of each segment's specifically identifiable asset portfolio.
Other costs and operating costs were allocated to each of the segments based
upon: (i) a review of the nature of such costs, (ii) time studies analyzing
the amount of employee compensation costs incurred by each segment, and (iii)
cost estimates included in the Company's product pricing.
The consolidation/elimination column includes the elimination of all
intersegment amounts and the individual segment's ownership interest in Nvest.
The principal component of the intersegment amounts related to intersegment
loans, which bore interest at rates commensurate with related borrowings.
Revenues derived from any customer did not exceed 10% of consolidated
revenues. Revenues from U.S. operations were $25,643, $22,664 and $21,762 for
the years ended December 31, 1998, 1997 and 1996, respectively, which
represented 96%, 93% and 94%, respectively, of consolidated revenues.
35
5
<PAGE>
APPENDIX FOR GRAPHIC AND IMAGE MATERIAL
Pursuant to Rule 304 of Regulation S-T, the following table presents fair and
accurate narrative descriptions of graphic and image material omitted from the
EDGAR filing due to ASCII-incompatibility and cross-references this material to
the location of each occurrence in the text.
INTRODUCTION
The prospectus included in the Form N-4 for Metropolitan Life Separate
Account E includes illustrations using various characters from the
PEANUTS(Registered) gang which are copyrighted by United Feature Syndicate,
Inc. There is a list and description of characters followed by a list of
illustrations and their page location in the prospectus.
CHARACTERS
Snoopy -- A Beagle dog
Charlie Brown -- A little boy with zigzag pattern on shirt
Woodstock -- A small bird
Lucy -- A little brunette girl
Linus -- A younger little boy with stripped shirt (Lucy's brother)
Marcie -- A little brunette girl with glasses
Franklin -- A curly haired little boy
Pigpen -- A little boy with dust cloud and smudged face
Peppermint Patty -- An athletic girl with freckles, page boy haircut and sandals
Sally -- A little blond girl with curls on top (Charlie Brown's sister)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Snoopy as MetLife Representative with briefcase First page
straightening bow tie
2. Charlie Brown on step ladder looking at fold Page 3 Table of Contents
out map
3. Snoopy in suit with pointer Page 4 Important Terms
You Should Know
4. Snoopy as MetLife Representative listening to Page 7 MetLife
crowd of Woodstocks
5. Corporate Snoopy with pointer with graph at Page 8 Settling Your Claim
meeting
6. Snoopy and Woodstock balanced on seesaw Page 9 The Income Annuity
7. Snoopy reading menu at restaurant table Page 10 Your Investment Choices
8. Snoopy as WWI flying ace dispatching Woodstocks Page 11 Allocation of
with checks Purchase Payment
9. Marcie at desk with adding machine reviewing Page 12 AIR
tape of calculations
10. Lucy with magnifying glass studying a piece of Page 14 Charges
paper
11. Woodstock writing out a check Page 15 Purchase Payments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
12. Charlie Brown receiving letter at mail box Page 15 Receiving Income Payments
and Information
13. "Colonial" Snoopy as town cryer Page 16 Advertising Performance
14. Snoopy as MetLife Representative shaking paw/ Page 18 Who Sells the
wing with Woodstock Income Annuity
15. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, Page 22 Table of Contents
Linus and Peppermint Patty for the SAI
16. Lucy in her advice box with "TAXES--The Expert Page 23 Premium Tax Table
is in" printed on it advising Peppermint Patty
and Sally
</TABLE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
The following financial statements are included in Part B of this
Post-Effective Amendment on Form N-4 (to be filed by amendment):
Metropolitan Life Separate Account E
Independent Auditors' Report
Financial Statements for the Years Ended December 31, 1998 and 1997
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Metropolitan Life Insurance Company
Independent Auditors' Report
Financial Statements for the Years Ended December 31, 1998, 1997 and
1996
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flow
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
(B) EXHIBITS
<TABLE>
<S> <C>
(1) -- Resolution of the Board of Directors of Metropolitan Life
establishing Separate Account E.1
(2) -- Not applicable.
(3)(a) -- Not applicable.
(b) -- Form of Selected Broker Agreement.1
(4)(a) -- Form of Income Annuity Contract.
(b) -- Form of Certificate
(6) -- Charter and By-Laws of Metropolitan Life.1
(6)(a) -- By-Laws Amendment.1
(7) -- Not applicable.
(8) -- Not applicable.
(9) -- Opinion and consent of counsel as to the legality of the
securities being registered.4
(10) -- (a) Form of Settlement Agreement.
(b) Form of Uniform Qualified Assignment.
(c) Form of Uniform Qualified Assignment and Release
(11) -- Not applicable.
(12) -- Not applicable.
(13)(a) -- Powers of Attorney.1,2,3
</TABLE>
- ------------------
1. Filed with Post-Effective Amendment No. 19 to Registration Statement
No. 2-90380/811-4001 for Metropolitan Life Separate Account E on Form N-4 on
February 27, 1996. As incorporated herein by reference.
(Footnotes continued on next page)
II-1
<PAGE>
(Footnotes continued from previous page)
2. Powers of attorney for Gerald Clark, Burton A. Dole, Jr. and Charles H.
Leighton were filed with Post-Effective Amendment No. 21 to Registration
Statement No. 2-90380/811-4001 for Metropolitan Life Separate Account E on
Form N-4 on February 28, 1997. As incorporated herein by reference.
3. Powers of Attorney for Robert H. Benmosche, Jon F. Danski and Stewart G.
Nagler filed with Post-Effective Amendment No. 23 to Registration Statement
No. 2-90380/811-4001 for Metropolitan Life Separate Account E on Form N-4 on
April 3, 1998. As incorporated herein by reference.
4. Filed herewith. Power of Attorney for Virginia M. Wilson is filed herewith.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH DEPOSITOR
- ------------------------- ---------------------------------------- ---------------------
<S> <C> <C>
Curtis H. Barnette....... Chairman and Chief Executive Officer, Director
Bethlehem Steel Corporation,
1170 Eighth Avenue,
Martin Tower 2118,
Bethlehem, PA 18016-7699.
Robert H. Benmosche...... Chairman of the Board, President and Chairman of the
Chief Executive Officer, Board, President and
Metropolitan Life Insurance Company, Chief Executive
One Madison Avenue, Officer
New York, NY 10010.
Gerald Clark............. Vice-Chairman of the Board and Vice-Chairman of the
Chief Investment Officer, Board and Chief
Metropolitan Life Insurance Company, Investment Officer
One Madison Avenue,
New York, NY 10010.
Joan Ganz Cooney......... Chairman, Executive Committee, Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023.
Burton A. Dole, Jr....... Retired Chairman, President and Director
Chief Executive Officer,
Nellcor Puritan Bennett,
2200 Faraday Avenue,
Carlsbad, CA 92008-7208.
James R. Houghton........ Chairman Emeritus of the Board Director
and Director,
Corning Incorporated,
80 East Market Street, 2nd Floor,
Corning, NY 14830.
Harry P. Kamen........... Retired Chairman and Chief Executive Director
Officer,
Metropolitan Life Insurance Company,
One Madison Avenue,
New York, NY 10010.
Helene L. Kaplan......... Of Counsel, Skadden, Arps, Slate, Director
Meagher and Flom,
919 Third Avenue,
New York, NY 10022.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH DEPOSITOR
- ------------------------- ---------------------------------------- ---------------------
<S> <C> <C>
Charles M. Leighton...... Retired Chairman of the Board, Director
CML Group, Inc.,
524 Main Street,
Bolton, MA 01720.
Allen E. Murray.......... Retired Chairman of the Board and Director
Chief Executive Officer,
Mobil Corporation,
375 Park Avenue, Suite 2901,
New York, NY 10152.
Stewart G. Nagler........ Vice-Chairman of the Board and Vice-Chairman of the
Chief Financial Officer, Board and Chief
Metropolitan Life Insurance Company, Financial Officer
One Madison Avenue,
New York, NY 10010.
John J. Phelan, Jr....... Retired Chairman and Director
Chief Executive Officer,
New York Stock Exchange,
P.O. Box 312,
Mill Neck, NY 11765.
Hugh B. Price............ President and Chief Executive Officer, Director
National Urban League, Inc.,
120 Wall Street, 7th & 8th Floors,
New York, NY 10005.
Robert G. Schwartz....... Retired Chairman of the Board, Director
President and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700,
New York, NY 10166.
Ruth J. Simmons, Ph.D.... President, Director
Smith College,
College Hall 20,
Northhampton, MA 01063.
William C. Steere, Jr.... Chairman of the Board and Director
Chief Executive Officer,
Pfizer, Inc.,
235 East 42nd Street,
New York, NY 10016
</TABLE>
Set forth below is a list of the executive officers of Metropolitan Life.
The principal business address of each officer of Metropolitan Life is One
Madison Avenue, New York, New York 10010.
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE
- ------------------------------ -------------------------------------------------
<S> <C>
Robert H. Benmosche........... Chairman of the Board, President and Chief
Executive Officer
Gerald Clark.................. Vice-Chairman of the Board and Chief Investment
Officer
Stewart G. Nagler............. Vice-Chairman of the Board and Chief Financial
Officer
Gary A. Beller................ Senior Executive Vice-President and General
Counsel
James M. Benson............... President, Individual Business
C. Robert Henrikson........... President, Institutional Business
Catherine A. Rein............. Senior Executive Vice-President
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METROPOLITAN LIFE
- ------------------------------ -------------------------------------------------
<S> <C>
William J. Toppeta............ President, Client Services and Chief
Administrative Officer
John H. Tweedie............... Senior Executive Vice-President
Lisa M. Weber................. Senior Vice-President
Judy E. Weiss................. Executive Vice-President and Chief Actuary
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
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. No
person has the direct or indirect power to control Metropolitan Life Insurance
Company. As a mutual life insurance company, Metropolitan Life Insurance Company
has no stockholders. Its Board of Directors is elected in accordance with New
York Insurance Law by Metropolitan's policyholders, whose policies or contracts
have been in force for at least one year. Each such policyholder has only one
vote, irrespective of the number of policies or contracts held and the amount
thereof. The following outline indicates those persons who are controlled by or
under common control with Metropolitan Life Insurance Company:
<PAGE>
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1998
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 1998. Those entities which are listed at
the left margin (labelled with capital letters) are direct subsidiaries of
Metropolitan. Unless otherwise indicated, each entity which is indented under
another entity is a subsidiary of such indented entity and, therefore, an
indirect subsidiary of Metropolitan. Certain inactive subsidiaries have been
omitted from the Metropolitan 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. Metropolitan Tower Corp. (Delaware)
1. Metropolitan Property and Casualty Insurance Company (Rhode Island)
a. Metropolitan Group Property and Casualty Insurance Company
(Rhode Island)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great
Britain)
b. Metropolitan Casualty Insurance Company (Rhode Island)
c. Metropolitan General Insurance Company (Rhode Island)
d. Metropolitan Direct Property and Casualty Insurance Company
(Georgia)
e. Metropolitan P&C Insurance Services, Inc. (California)
f. Metropolitan Lloyds, Inc. (Texas)
g. Met P&C Managing General Agency, Inc. (Texas)
2. Metropolitan Insurance and Annuity Company (Delaware)
a. MetLife Europe I, Inc. (Delaware)
b. MetLife Europe II, Inc. (Delaware)
c. MetLife Europe III, Inc. (Delaware)
d. MetLife Europe IV, Inc. (Delaware)
e. MetLife Europe V, Inc. (Delaware)
3. MetLife General Insurance Agency, Inc. (Delaware)
a. MetLife General Insurance Agency of Alabama, Inc. (Alabama)
b. MetLife General Insurance Agency of Kentucky, Inc. (Kentucky)
c. MetLife General Insurance Agency of Mississippi, Inc.
(Mississippi)
d. MetLife General Insurance Agency of Texas, Inc. (Texas)
e. MetLife General Insurance Agency of North Carolina, Inc. (North
Carolina)
f. MetLife General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
<PAGE>
4. Metropolitan Asset Management Corporation (Delaware)
(a.) MetLife Capital, Limited Partnership (Delaware).
Partnership interests in MetLife Capital, Limited
Partnership are held by Metropolitan (90%) and
Metropolitan Asset Management Corporation (10%).
(i.) MetLife Capital Credit L.P. (Delaware).
Partnership interests in MetLife Capital Credit
L.P. are held by Metropolitan (90%) and
Metropolitan Asset Management Corporation (10%).
(1) MetLife Capital CFLI Holdings, LLC (DE)
(a.) MetLife Capital CFLI Leasing, LLC
(DE)
b. MetLife Financial Acceptance Corporation (Delaware).
MetLife Capital Holdings, Inc. holds 100% of the voting
preferred stock of MetLife Financial Acceptance Corporation.
Metropolitan Property and Casualty Insurance Company holds
100% of the common stock of MetLife Financial Acceptance
Corporation.
c. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments
Limited.
d. MetLife Investments Asia Limited (Hong Kong). One share of
MetLife Investments Asia Limited is held by W&C Services, Inc.,
a nominee of Metropolitan Asset Management Corporation.
5. SSRM Holdings, Inc. (Delaware)
a. GFM Investments Limited (Delaware)
b. State Street Research & Management Company (Delaware). Is a
sub-investment manager for the Growth, Income, Diversified
and Aggressive Growth Portfolios of Metropolitan Series
Fund, Inc.
i. State Street Research Investment Services, Inc.
(Massachusetts)
<PAGE>
c. SSR Realty Advisors, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Property Management, Inc. (Delaware)
(1) Metric Realty (Delaware). SSR Realty Advisors, Inc.
and Metric Property Management, Inc. each hold 50% of
the common stock of Metric Realty.
(a) Metric Institutional Apartment Fund II, L.P.
(California). Metric Realty holds a 1% interest
as general partner and Metropolitan holds an
approximately 14.6% limited partnership interest
in Metric Institutional Apartment Fund II, L.P.
(2) Metric Colorado, Inc. (Colorado). Metric Property
Management, Inc. holds 80% of the common stock of
Metric Colorado, Inc.
iii. Metric Capital Corporation (California)
iv. Metric Assignor, Inc. (California)
v. SSR AV, Inc. (Delaware)
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. Met Life Real Estate Advisors, Inc. (California)
9. Security First Group, Inc. (DE)
a. Security First Life Insurance Company (DE)
b. Security First Insurance Agency, Inc. (MA)
c. Security First Insurance Agency, Inc. (NV)
d. Security First Group of Ohio, Inc. (OH)
e. Security First Financial, Inc. (DE)
f. Security First Investment Management Corporation (DE)
g. Security First Management Corporation (DE)
h. Security First Real Estate, Inc. (DE)
i. Security First Financial Agency, Inc. (TX)
10. Natiloportem Holdings, Inc. (Delaware)
B. Metropolitan Tower Life Insurance Company (Delaware)
C. MetLife Security Insurance Company of Louisiana (Louisiana)
<PAGE>
D. MetLife Texas Holdings, Inc. (Delaware)
1. Texas Life Insurance Company (Texas)
a. Texas Life Agency Services, Inc. (Texas)
b. Texas Life Agency Services of Kansas, Inc. (Kansas)
E. MetLife Securities, Inc. (Delaware)
F. 23rd Street Investments, Inc. (Delaware)
G. Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
H. Santander Met, S.A. (Spain). Shares of Santander Met, S.A. are held by
Metropolitan (50%) and by an entity (50%) unaffiliated with Metropolitan.
1. Seguros Genesis, S.A. (Spain)
2. Genesis Seguros Generales, Sociedad Anomina de Seguros y Reaseguros
(Spain)
I. MetLife Saengmyoung Insurance Company Ltd. (Korea).
J. Metropolitan Life Seguros de Vida S.A. (Argentina)
K. Metropolitan Life Seguros de Retiro S.A. (Argentina).
L. Met Life Holdings Luxembourg (Luxembourg)
M. Metropolitan Life Holdings, Netherlands BV (Netherlands)
N. MetLife International Holdings, Inc. (Delaware)
O. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
P. Metropolitan Marine Way Investments Limited (Canada)
Q. P.T. MetLife Sejahtera (Indonesia) Shares of P.T. MetLife Sejahtera are
held by Metropolitan (80%) and by an entity (20%) unaffiliated with
Metropolitan.
R. Seguros Genesis S.A. (Mexico) Metropolitan holds 85.49%, Metropolitan Tower
Corp. holds 7.31% and Metropolitan Asset Management Corporation holds 7.20%
of the common stock of Seguros Genesis S.A.
S. Metropolitan Life Seguros de Vida S.A. (Uruguay). One share of Metropolitan
Life Seguros de Vida S.A. is held by Alejandro Miller Artola, a nominee of
Metropolitan Life Insurance Company.
T. Metropolitan Life Seguros E Previdencia Privada S.A. (Brazil)
<PAGE>
U. Hyatt Legal Plans, Inc. (Delaware)
1. Hyatt Legal Plans of Florida, Inc. (Fl)
V. One Madison Merchandising L.L.C. (Connecticut) Ownership of membership
interests in One Madison Merchandising L.L.C. is as follows: Metropolitan
owns 99% and Metropolitan Tower Corp. owns 1%.
W. Metropolitan Realty Management, Inc. (Delaware)
1. Edison Supply and Distribution, Inc. (Delaware)
2. Cross & Brown Company (New York)
a. CBNJ, Inc. (New Jersey)
X. MetPark Funding, Inc. (Delaware)
Y. 2154 Trading Corporation (New York)
Z. Transmountain Land & Livestock Company (Montana)
AA. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
2. Farmers National Marketing Group, LLC (Iowa) Ownership of membership
interests in Farmers National Marketing Group, LLC is as follows:
Farmers National Company (50%) and an entity unaffiliated with
Metropolitan (50%).
A.B. MetLife Trust Company, National Association. (United States)
A.C. Benefit Services Corporation (Georgia)
A.D. G.A. Holding Corporation (MA)
A.E. TNE-Y, Inc. (DE)
A.F. CRH., Inc. (MA)
A.G. NELRECO Troy, Inc. (MA)
A.H. TNE Funding Corporation (DE)
A.I. L/C Development Corporation (CA)
A.J. Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA)
A.K. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred
non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000
preferred non-voting shares of CRB Co., Inc.
A.L. New England Life Mortgage Funding Corporation (MA)
A.M. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Capital
L.P.
A.N. Mercadian Funding L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian
Funding L.P.
A.O. Tower Resources Group, Inc. (DE)
<PAGE>
A.P. MetLife New England Holdings, Inc. (DE)
1. Fulcrum Financial Advisors, Inc. (MA)
2. New England Life Insurance Company (MA)
a. New England Life Holdings, Inc. (DE)
i. New England Securities Corporation (MA)
(1) Hereford Insurance Agency, Inc. (MA)
(2) Hereford Insurance Agency of Alabama, Inc. (AL)
(3) Hereford Insurance Agency of Minnesota, Inc. (MN)
(4) Hereford Insurance Agency of Ohio, Inc. (OH)
(5) Hereford Insurance Agency of New Mexico, Inc. (NM)
ii. TNE Advisers, Inc. (MA)
iii. TNE Information Services, Inc. (MA)
(1) First Connect Insurance Network, Inc. (DE)
(2) Interative Financial Solutions, Inc. (MA)
iv. N.L. Holding Corp. (Del)(NY)
(1) Nathan & Lewis Securities, Inc. (NY)
(2) Nathan & Lewis Associates, Inc. (NY)
(a) Nathan and Lewis Insurance Agency of Massachusetts,
Inc. (MA)
(b) Nathan and Lewis Associates of Texas, Inc. (TX)
(3) Nathan & Lewis Associates--Arizona, Inc. (AZ)
(4) Nathan & Lewis of Nevada, Inc. (NV)
(5) Nathan and Lewis Associates Ohio, Incorporated (OH)
b. Exeter Reassurance Company, Ltd. (MA)
c. Omega Reinsurance Corporation (AZ)
d. New England Pension and Annuity Company (DE)
e. Newbury Insurance Company, Limited (Bermuda)
3. Nvest Corporation (MA)
a. Nvest, L.P. (DE) Nvest Corporation holds a 1.69% general partnership
interest and MetLife New England Holdings, Inc. 3.19% general
partnership interest in Nvest, L.P.
b. Nvest Companies, L.P. (DE) Nvest Corporation holds a 0.0002% general
partnerhship interest in Nvest Companies, L.P. Nvest, L.P. holds a
14.64% general partnership interest in Nvest Companies, L.P.
Metropolitan holds a 46.23% limited partnership interest in Nvest
Companies, L.P.
i. Nvest Holdings, Inc. (DE)
(1) Back Bay Advisors, Inc. (MA)
(a) Back Bay Advisors, L.P. (DE)
Back Bay Advisors, Inc.
holds a 1% general partner
interest and NEIC
Holdings, Inc. holds a 99%
limited partner interest
in Back Bay Advisors, L.P.
(2) R & T Asset Management, Inc. (MA)
(a) Reich & Tang Distributors, Inc. (DE)
(b) R & T Asset Management L.P.
R & T Asset Management, Inc.
holds a 0.5% general partner interest and
NEIC Holdings, Inc. hold a 99.5% limited
partner interest in &
Asset Management, L.P.
(c) Reich & Tang Services, Inc. (DE)
<PAGE>
(3) Loomis, Sayles & Company, Inc. (MA)
(a) Loomis Sayles & Company, L.P. (DE)
Loomis Sayles & Company, Inc.
holds a 1% general partner interest and
R & T Asset Management, Inc. holds a 99%
limited partner interest in Loomis Sayles &
Company, L.P.
(4) Westpeak Investment Advisors, Inc. (MA)
(a) Westpeak Investment Advisors, L.P. (DE)
Westpeak Investment Advisors, Inc.
holds a 1% general partner interest and
Reich & Tang holds a 99% limited
partner interest in Westpeak Investment
Advisors, L.P.
(i) Westpeak Investment Advisors Australia
Limited Pty.
(5) Vaughan, Nelson Scarborough & McCullough (DE)
(a) Vaughan, Nelson Scarborough & McCullough, L.P. (DE)
VNSM, Inc. holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Vaughan, Nelson
Scarborough & McCullough, L.P.
(i) VNSM Trust Company
(6) MC Management, Inc. (MA)
(a) MC Management, L.P. (DE)
MC Management, Inc. holds a 1% general partner
interest and R & T Asset Management, Inc.
holds a 99% limited partner interest in MC
Management, L.P.
(7) Harris Associates, Inc. (DE)
(a) Harris Associates Securities L.P. (DE)
Harris Associates, Inc. holds a 1% general partner
interest and Harris Associates L.P. holds a
99% limited partner interest in Harris Associates
Securities, L.P.
(b) Harris Associates L.P. (DE)
Harris Associates, Inc. holds a 0.33% general
partner interest and NEIC Operating Partnership,
L.P. holds a 99.67% limited partner interest in
Harris Associates L.P.
(i) Harris Partners, Inc. (DE)
(ii) Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1%
membership interest and
Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(1) Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
<PAGE>
(2) Perseus Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
(3) Pleiades Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general partner
interest
(4) Stellar Partners L.P. (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(5) SPA Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
(8) Graystone Partners, Inc. (MA)
(a) Graystone Partners, L.P. (DE)
Graystone Partners, Inc. holds a 1%
general partner interest and New England
NEIC Operating Partnership, L.P.
holds a 99% limited partner interest in
Graystone Partners, L.P.
(9) NEF Corporation (MA)
(a) New England Funds, L.P. (DE) NEF Corporation holds a
1% general partner interest and NEIC Operating
Partnership, L.P. holds a 99% limited
partner interest in New England Funds, L.P.
(b) New England Funds Management, L.P. (DE) NEF
Corporation holds a 1% general partner interest and
NEIC Operating Partnership, L.P. holds a 99%
limited partner interest in New England Funds
Management, L.P.
(10) New England Funds Service Corporation
(11) AEW Capital Management, Inc. (DE)
(a) AEW Securities, L.P. (DE) AEW Capital Management, Inc. holds
a 1% general partnership and AEW Capital Management, L.P.
holds a 99% limited partnership interest in AEW Securities,
L.P.
ii. Nvest Associates, Inc.
iii. Snyder Capital Management, Inc.
(1) Snyder Capital Management, L.P. NEIC Operating
Partnership holds a 99.5% limited partnership
interest and Snyder Capital Management Inc. holds a
0.5% general partnership interest.
iv. Jurika & Voyles, Inc.
(1) Jurika & Voyles, L.P NEIC Operating Partnership,
L.P. holds a 99% limited partnership interest and
Jurika & Voyles, Inc. holds a 1% general partnership
interest.
v. Capital Growth Management, L.P. (DE)
NEIC Operating Partnership, L.P. holds a 50% limited partner
interest in Capital Growth Management, L.P.
vi. Nvest Partnerships, LLC ( )
<PAGE>
vii. AEW Capital Management L.P. (DE)
New England Investment Companies, L.P. holds a 99% limited partner
interest and AEW Capital Management, Inc. holds a 1% general
partner interest in AEW Capital Management, L.P.
(1) AEW II Corporation ( )
(2) AEW Partners III, Inc. ( )
(3) AEW TSF, Inc. ( )
(4) AEW Exchange Management, LLC
(5) AEWPN, LLC ( )
(6) AEW Investment Group, Inc. (MA)
(a) Copley Public Partnership Holding, L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75%
limited partnership interest in Copley Public Partnership
Holding, L.P.
(b) AEW Management and Advisors L.P. (MA)
AEW Investment Group, Inc. holds a 25% general partnership
interest and AEW Capital Management, L.P. holds a 75% limited
partnership interest in AEW Management and Advisors L.P.
ii. AEW Real Estate Advisors, Inc. (MA)
1. AEW Advisors, Inc. (MA)
2. Copley Properties Company, Inc. (MA)
3. Copley Properties Company II, Inc. (MA)
4. Copley Properties Company III, Inc. (MA)
5. Fourth Copley Corp. (MA)
6. Fifth Copley Corp. (MA)
7. Sixth Copley Corp. (MA)
8. Seventh Copley Corp. (MA).
9. Eighth Copley Corp. (MA).
10. First Income Corp. (MA).
11. Second Income Corp. (MA).
12. Third Income Corp. (MA).
13. Fourth Income Corp. (MA).
14. Third Singleton Corp. (MA).
15. Fourth Singleton Corp. (MA)
16. Fifth Singleton Corp. (MA)
17. Sixth Singleton Corp. (MA).
18. BCOP Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 1% general
partner interest in BCOP Associates L.P.
ii. CREA Western Investors I, Inc. (MA)
1. CREA Western Investors I, L.P. (DE)
CREA Western Investors I, Inc. holds a 24.28% general
partnership interest and Copley Public Partnership Holding,
L.P. holds a 57.62% limited partnership interest in CREA
Western Investors I, L.P.
iii. CREA Investors Santa Fe Springs, Inc. (MA)
(7) Copley Public Partnership Holding, L.P. (DE)
AEW Capital Management, L.P. holds a 75% limited partner interest and
AEW Investment Group, Inc. holds a 25% general partner interest and
CREA Western Investors I, L.P holds a 57.62% Limited Partnership
interest.
<PAGE>
(8) AEW Real Estate Advisors, Limited Partnership (MA)
AEW Real Estate Advisors, Inc. holds a 25% general partnership interest
and AEW Capital Management, L.P. holds a 75% limited partnership
interest in AEW Real Estate Advisors, Limited Partnership.
(9) AEW Hotel Investment Corporation (MA)
(a.) AEW Hotel Investment, Limited Partnership (MA)
AEW Hotel Investment Corporation holds a 1% general
partnership interest and AEW Capital Management, L.P. holds a
99% limited partnership interest in AEW Hotel Investment,
Limited Partnership.
(10) Aldrich Eastman Global Investment Strategies, LLC (DE)
AEW Capital Management, L.P. holds a 25% membership interest and an
unaffiliated third party holds a 75% membership interest in Aldrich
Eastman Global Investment Strategies, LLC.
In addition to the entities listed above, Metropolitan (or where indicated an
affiliate) also owns an interest in the following entities, among others:
1) CP&S Communications, Inc., a New York corporation, holds federal radio
communications licenses for equipment used in Metropolitan owned facilities and
airplanes. It is not engaged in any business.
2) Quadreal Corp., a New York corporation, is the fee holder of a parcel of
real property subject to a 999 year prepaid lease. It is wholly owned by
Metropolitan, having been acquired by a wholly owned subsidiary of Metropolitan
in 1973 in connection with a real estate investment and transferred to
Metropolitan in 1988.
3) Met Life International Real Estate Equity Shares, Inc., a Delaware
corporation, is a real estate investment trust. Metropolitan owns approximately
18.4% of the outstanding common stock of this company and has the right to
designate 2 of the 5 members of its Board of Directors.
4) Metropolitan Structures is a general partnership in which Metropolitan owns
a 50% interest.
5) Metropolitan owns, via its subsidiary, AFORE Genesis Metropolitan S.A. de
C.V., approximately 61.7% of SIEFORE Genesis S.A. de C.V., a mutual fund.
6) Metropolitan 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.
7) Metropolitan Lloyds Insurance Company of Texas, an affiliated association,
provides homeowner and related insurance for the Texas market. It is an
association of individuals designated as underwriters. Metropolitan Lloyds,
Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company ("MET
P&C"), serves as the attorney-in-fact and manages the association.
8) Metropolitan directly owns 100% of the non-voting preferred stock of Nathan
and Lewis Associates Ohio, Incorporated, an insurance agency. 100% of the voting
common stock of this company is held by an individual who has agreed to vote
such shares at the direction of N.L. Holding Corp. (DEL), an indirect wholly
owned subsidiary of Metropolitan.
<PAGE>
9) 100% of the capital stock of Hereford Insurance Agency of Oklahoma, Inc.
(OK) is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such officer's
shares.
10) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc. (TX)
is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such officer's
shares.
11) 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 serves as the
general partner of the limited partnerships and Metropolitan directly owns a 99%
limited partnership interest in each MILP. The MILPs have various's ownership
interests in certain companies. The various MILPs own, directly or indirectly,
100% of the voting stock of the following company: Coating Technologies
International, Inc.
NOTE: THE METROPOLITAN LIFE ORGANIZATIONAL CHART DOES NOT INCLUDE REAL ESTATE
JOINT VENTURES AND PARTNERSHIPS OF WHICH METROPOLITAN LIFE AND/OR ITS
SUBSIDIARIES IS AN INVESTMENT PARTNER. IN ADDITION, CERTAIN INACTIVE
SUBSIDIARIES HAVE ALSO BEEN OMITTED.
II-4
<PAGE>
ITEM 27. NUMBER OF CONTRACTOWNERS.
N/A
ITEM 28. INDEMNIFICATION
UNDERTAKING PURSUANT TO RULE 484(B)(1) UNDER THE SECURITIES ACT OF 1933
Metropolitan Life Insurance Company has secured a Financial Institutions
Bond in the amount of $50,000,000, subject to a $5,000,000 deductible.
Metropolitan Life Insurance Company maintains a directors' and officers'
liability policy with a maximum coverage of $200 million. A provision in
Metropolitan Life Insurance Company's by-laws provides for the indemnification
(under certain circumstances) of individuals serving as directors or officers of
Metropolitan Life Insurance Company.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Metropolitan Life Insurance Company pursuant to the foregoing provisions, or
otherwise, Metropolitan has been advised that in the opinion of the Securities
and Exchange Commission such indemnification may be against public policy as
expressed in the Act and may be, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Metropolitan of expenses incurred or paid by a director, officer or controlling
person or Metropolitan 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 29. PRINCIPAL UNDERWRITERS.
(a) The principal underwriter of the registrant is Metropolitan Life
Insurance Company. Metropolitan Life acts in the following capacities with
respect to the following investment companies:
Metropolitan Tower Life Separate Account One (principal underwriter)
Metropolitan Tower Life Separate Account Two (principal underwriter)
Metropolitan Life Separate Account UL (principal underwriter)
Metropolitan Series Fund, Inc. (principal underwriter and investment adviser)
(b) See response to Item 25 above.
(c)
<TABLE>
<S> <C>
(1) (2)
NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING DISCOUNTS AND
COMMISSIONS
Metropolitan Life Insurance Company N/A
(3) (4)
COMPENSATION ON REDEMPTION OR BROKERAGE COMMISSIONS
ANNUITIZATION
N/A N/A*
(5)
COMPENSATION
N/A*
</TABLE>
- ------------------
* As regards this new contract, as of the date of this filing the Registrant has
not completed a full fiscal year and issued no contracts.
II-5
<PAGE>
ITEM 30. LOCATION OF ACCOUNT AND RECORDS.
Metropolitan Life Insurance Company
One Madison Avenue
New York, N.Y. 10010
ITEM 31. MANAGEMENT SERVICES.
Not Applicable
ITEM 32. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to file a post-effective
amendment to this registration statement as frequently as is necessary to ensure
that the financial statements in this registration statement are not more than
16 months old for as long as payments under these variable annuity contracts may
be accepted.
(b) The undersigned registrant hereby undertakes to include a post card or
similar written communication affixed to or included in the prospectus that the
applicant can remove to send for a Statement of Additional Information.
(c) The undersigned registrant hereby undertakes to deliver any Statement
of Additional Information and any financial statements required to be made
available under this form promptly upon written or oral request.
(d) The undersigned registrant represents that it is relying on the
exemptions from certain provisions of Sections 22(e) and 27 of the Investment
Company Act of 1940 provided by Rule 6c-7 under the Act. The registrant further
represents that the provisions of paragraph (a)-(d) of Rule 6c-7 have been
complied with.
(e) Metropolitan Life Insurance Company represents that the fees and
charges deducted under the Income Annuity described in this 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 Insurance Company under the Income Annuity.
II-6
<PAGE>
SIGNATURES
AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF
1940, THE REGISTRANT CERTIFIES AND HAS CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF, IN THE CITY OF NEW YORK, AND STATE OF NEW YORK ON THIS
DAY OF OCTOBER, 1999.
METROPOLITAN LIFE SEPARATE ACCOUNT E
(Registrant)
by: METROPOLITAN LIFE INSURANCE COMPANY
(Depositor)
by: /s/ GARY A. BELLER
--------------------------------------
(Gary A. Beller)
Senior Executive Vice-President
and General Counsel
METROPOLITAN LIFE INSURANCE COMPANY
(Depositor)
by: /s/ GARY A. BELLER
--------------------------------------
(Gary A. Beller)
Senior Executive Vice-President
and General Counsel
II-7
<PAGE>
SIGNATURES
AS REQUIRED BY THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------- -------------
<S> <C> <C>
* Chairman, President, Chief
- ------------------------------- Executive Officer and
Robert H. Benmosche Director
* Vice Chairman, Chief
- ------------------------------- Investment Officer and
Gerald Clark Director
* Vice Chairman, Chief
- ------------------------------- Financial Officer (Principal
Stewart G. Nagler Financial Officer) and
Director
* Senior Vice-President and
- ------------------------------- Controller
Virginia M. Wilson
* Director
- -------------------------------
Curtis H. Barnette
* Director
- -------------------------------
Joan Ganz Cooney
* Director
- -------------------------------
Burton A. Dole, Jr.
* Director
- -------------------------------
James R. Houghton
* Director
- -------------------------------
Harry P. Kamen
* Director
- -------------------------------
Helene L. Kaplan
By: /s/ RICHARD G. MANDEL, ESQ.
----------------------------
Richard G. Mandel, Esq. October 29, 1999
Attorney-in-Fact
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ---------------------------- -------------
<S> <C> <C>
* Director
- -------------------------------
Charles M. Leighton
* Director
- -------------------------------
Allen E. Murray
* Director
- -------------------------------
John J. Phelan, Jr.
* Director
- -------------------------------
Hugh B. Price
* Director
- -------------------------------
Robert G. Schwartz
* Director
- -------------------------------
Ruth J. Simmons, Ph.D.
Director
- -------------------------------
William C. Steere, Jr.
By: /s/ RICHARD G. MANDEL, ESQ.
----------------------------
Richard G. Mandel, Esq.
Attorney-in-Fact June 11, 1999
</TABLE>
II-9
<PAGE>
INDEPENDENT AUDITORS' CONSENT
Contractholders of Metropolitan Life Separate Account E:
We consent to the use in this Post-Effective Amendment No. 2 to
Registration Statement No. 333-80547 of our opinion dated March 5, 1999,
relating to Metropolitan Life Separate Account E, our opinion dated February 4,
1999, relating to Metropolitan Life Insurance Company, to the reference to us
under the heading "Independent Auditors", appearing in the Statement of
Additional Information, which is a part of such Registration Statement, and to
the reference to us under the heading "Financial Statements" appearing in the
Prospectuses, which are also a part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
October 29, 1999
<PAGE>
POWER OF ATTORNEY
Virginia M. Wilson
Officer
KNOW ALL MEN BY THESE PRESENTS, that I, an officer of Metropolitan Life
Insurance Company, do hereby appoint Gary A. Beller, Gwenn L. Carr, Richard G.
Mandel and Christopher P. Nicholas, and each of them severally, my true and
lawful attorney-in-fact, for me and in my name, place and stead to execute and
file any instrument or document to be filed as part of or in connection with or
in any way related to the Registration Statements and any and all amendments
thereto, filed by said Company under the Securities Act of 1933 and/or the
Investment Company Act of 1940, in connection with Metropolitan Life Separate
Account UL, Metropolitan Life Separate Account E, The New England Variable
Account, New England Variable Annuity Fund I or New England Retirement
Investment Account of said Company, and to have full power and authority to do
or cause to be done in my name, place and stead each and every act and thing
necessary or appropriate in order to effectuate the same, as fully to all
intents and purposes as I might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact or any of them, may do or cause to be
done by virtue hereof. Each said attorney-in-fact shall have power to act
hereunder with or without the others.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of October,
1999.
/s/Virginia M. Wilson
------------------------
Signature
