<PAGE>
Registration Nos. 333-43970/811-4001
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-4
PRE-EFFECTIVE AMENDMENT NO. 1
|X|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. |_|
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 31
|X|
----------------
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:
Diane E. Ambler, Esq.
Mayer, Brown & Platt
1909 K Street N.W., Suite 1200
Washington, D.C. 20006
----------------
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, 1999 was filed with the Commission
on March 30, 2000.
Approximate date of proposed public offering: It is intended that this
registration statement shall hereafter become effective as soon as practicable,
as determined by the Commission acting pursuant to Section 8(a) and Rule 461.
<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> <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; Your Investment Choices;
General Information-Voting Rights
6. Deductions and Expenses. ............. Table of Expenses; Death Benefit Fee;
Charges; Premium Taxes; General
Information-Who Sells the Income
Annuity;
Appendix-Premium Tax Table
7. General Description of Variable
Annuity............................. The Income Annuity; Reallocations;
General Information
8. Annuity Period ....................... Important Terms You Should Know; Income
Types/Calculating Your Income Payments
9. Death Benefit ........................ Death Benefit
10. Purchases and Annuity Values ......... MetLife; Metropolitan Life Separate
Account E; Purchase of an Income Annuity;
Calculating your Income Payments; Initial Income
Payment; Subsequent Income Payments;
General Information
11. Redemptions .......................... General Information-Changes to Your
Income Annuity
12. Taxes. ............................... Income Taxes
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
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Form
N-4
Item
No. Prospectus Heading
---- -----------------
<S> <C> <C>
18. Services .......................... Independent Auditors; Services;
Distribution of Certificates and Interests in the
Income Annuity
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 .................. Sample Calculation Illustrating How the
Adjustment Factor is Determined and
Applied to Income Payments
23. Financial Statements .............. Financial Statements of the Separate
Account; Financial Statements of MetLife
</TABLE>
2
<PAGE>
[ ], 2000
MetLife Income Security Plan(SM) Variable Income Annuity
Contracts Issued by Metropolitan Life Insurance Company
This Prospectus describes group non-qualified and qualified MetLife Income
Security Plan immediate variable income annuity ("Income Annuity") contracts.
--------------------------------------------------------------------------------
The investment choices available to you to allocate your purchase payment are
listed in the contract for your Income Annuity. Your choices may include the
Fixed Payment Option (not described in this Prospectus) and investment divisions
available through Metropolitan Life Separate Account E which, in turn, invest in
the following corresponding portfolios of the Metropolitan Series Fund, Inc.
("Metropolitan Fund") and series of the New England Zenith Fund ("Zenith Fund").
For convenience, both the portfolios and the series are referred to as
Portfolios in this Prospectus.
--------------------------------------------------------------------------------
Lehman Brothers(R) Aggregate Bond Index
State Street Research Income
State Street Research Diversified
MetLife Stock Index
Harris Oakmark Large Cap Value
T. Rowe Price Large Cap Growth
State Street Research Growth
Davis Venture Value
Putnam Large Cap Growth
MetLife Mid Cap Stock Index
Neuberger Berman Partners Mid Cap Value
Janus Mid Cap
State Street Research Aggressive Growth
Loomis Sayles High Yield Bond
Russell 2000(R) Index
T. Rowe Price Small Cap Growth
Loomis Sayles Small Cap
State Street Research Aurora Small Cap Value
Scudder Global Equity
Morgan Stanley EAFE(R) Index
Putnam International Stock
--------------------------------------------------------------------------------
How to learn more:
Before investing, read this Prospectus. The Prospectus contains information
about the Income Annuity and Metropolitan Life Separate Account E which you
should know before investing. Keep this Prospectus for future reference. For
more information, request a copy of the Statement of Additional Information
("SAI"), dated 2000. 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 of this Prospectus. To request a free copy of the SAI or to ask questions,
write or call:
Metropolitan Life Insurance Company
200 Park Avenue, Area 5N
New York, NY 10166-0188 [GRAPHIC OMITTED]
Attention: MetLife Retirement Group
Phone: (800) 638-2704, extension 2575
The Securities and Exchange Commission has a Web site (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 and Zenith Fund
Prospectuses are attached to the back of this Prospectus. You should also read
these Prospectuses carefully before purchasing an Income Annuity. This
Prospectus is not valid unless attached to Metropolitan Fund and Zenith Fund
Prospectuses.
--------------------------------------------------------------------------------
Income Annuity
This Income Annuity provides a stream of payments to you. The income payments
you receive will vary to reflect the net performance of the Portfolios
underlying the selected investment divisions and the changes in the interest
rate specified in your contract. The payment amount you receive is also based on
the amount of your purchase payment, the income type and possibly your age
and/or sex, depending on the income type chosen.
A word about investment risk:
An investment in the Income Annuity involves investment risk. Payments you
receive from MetLife will fluctuate in amount and may go down. Money invested is
NOT:
o a bank deposit or obligation;
o federally insured or guaranteed; or
o endorsed by any bank or financial institution other than MetLife.
--------------------------------------------------------------------------------
Metlife (R)
<PAGE>
TABLE OF CONTENTS
[GRAPHIC OMITTED]
Important Terms You Should Know ........................................... 4
Table of Expenses ......................................................... 7
MetLife ................................................................... 10
Metropolitan Life Separate Account E ...................................... 10
The Income Annuity ........................................................ 11
How the Income Annuity Differs From
Other Immediate Annuities ............................................ 11
Features of the Income Annuity ......................................... 13
Your Investment Choices ................................................ 14
Income Types ........................................................... 16
Death Benefit .......................................................... 17
Purchase of an Income Annuity .......................................... 17
Calculating Your Income Payments ....................................... 18
Initial Income Payment ............................................... 18
Subsequent Income Payments ........................................... 18
Adjustment Factor ...................................................... 19
Investment Factor .................................................... 19
Determining the Investment Factor .................................... 19
Interest Factor ...................................................... 20
Determining the Interest Factor ...................................... 20
The Effect of the Adjustment Factor .................................. 21
Examples of Income Payment Calculations .............................. 21
Reallocations .......................................................... 21
Death Benefit Fee ...................................................... 23
Charges ................................................................ 23
Separate Account Charge .............................................. 23
Investment-Related Charge ............................................ 24
Premium Taxes .......................................................... 24
Free Look .............................................................. 24
2
<PAGE>
General Information ....................................................... 24
Administration ......................................................... 24
Purchase Payment ..................................................... 24
Confirming Reallocations ............................................. 25
Processing Reallocations ............................................. 25
By Telephone or Internet ........................................... 25
After Your Death ................................................... 26
Third Party Requests ............................................... 26
Advertising Performance ................................................ 26
Changes to Your Income Annuity ......................................... 27
Voting Rights .......................................................... 28
Who Sells the Income Annuity ........................................... 29
Financial Statements ................................................... 29
Your Spouse's Rights ................................................... 29
Income Taxes .............................................................. 29
Table of Contents for the Statement of Additional Information ............. 36
Appendix - Premium Tax Table .............................................. 37
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 prospectuses, supplements to the prospectuses or any
supplemental sales material we authorize.
3
<PAGE>
Important Terms You Should Know
[GRAPHIC OMITTED]
Adjustment Factor
The adjustment factor for each investment division is used to calculate your
income payment (as defined later). For each investment division, your current
income payment is equal to the income payment as of the last valuation date
multiplied by the adjustment factor. The adjustment factor is the result of
multiplying the interest factor times the investment factor. Whether your income
payment goes up or down depends on the current adjustment factor.
Annuity Purchase Rate
The annuity purchase rate is based on the annuity income type you purchase, an
interest rate, and your age, sex and number of payments remaining, to the extent
relevant. The annuity purchase rate is reset each valuation date to reflect
these components. The reset annuity purchase rate represents the cost you would
incur if you were purchasing the same annuity contract you have in light of this
updated information.
Contract
A contract is the legal agreement between you and MetLife or between MetLife and
the employer, plan trustee or other entity, or the certificate issued to you
under a group annuity contract. You as the annuitant receive a certificate under
the contract. This document contains relevant provisions of your Income Annuity.
MetLife issues the contracts for the Income Annuity described in this
Prospectus.
Income Annuity
The Income Annuity described in this Prospectus is an immediate annuity contract
under which payments vary based upon the performance of investments such as
stocks and bonds, held by one or more underlying Portfolios, as well as changes
based upon a specified interest rate. You assume the investment risk for any
amounts allocated to the investment divisions and changes in the specified
interest rate.
Income Payments
The income payments are what we will pay you as a result of the purchase of the
Income Annuity. The income payment amount is not guaranteed but rather will vary
up and down depending on the adjustment factor.
Interest Factor
The interest factor measures the impact of changes in the specified interest
rate. It is one of two factors comprising the adjustment factor which we use to
determine your variable income payments.
4
<PAGE>
Investment Division
Investment divisions are subdivisions of the Separate Account. When you allocate
or reallocate money to an investment division, the investment division purchases
shares of a portfolio (with the same name) within the Metropolitan Fund or
Zenith Fund.
Investment Factor
The investment factor for each investment division measures the investment
experience (after applicable charges and expenses) of that investment division
compared to the specified interest rate in effect on the prior valuation date.
It is one of two factors comprising the adjustment factor which we use to
determine your variable income payments.
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 is the MetLife office that will generally handle
the processing of your requests concerning your Income Annuity. MetLife will
provide you with the address of your MetLife Designated Office.
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.
Specified Interest Rate
The specified interest rate is defined in your contract. It is based on market
interest rates such as the 10 Year Treasury, plus or minus a percentage. We use
it as the benchmark interest rate to determine your initial income payment and
all future income payments. We guarantee that we will not change the way we
determine the specified interest rate or the date we choose to apply the rate to
the interest factor calculation, except as stated next. For any valuation date
we will use the rate as published in the Wall Street Journal on the third
business day before the first of the month in which the valuation date occurs
(we may determine the rate either more often or less often, in which case, we
will tell you in advance that we will be doing so). Should a rate become
unavailable (for example, if we use 10 Year Treasury notes and the Treasury
stops issuing 10 year notes) or should this rate cease to be published in the
Wall Street Journal, we will use a readily available rate or source that we
consider most comparable.
[GRAPHIC OMITTED]
5
<PAGE>
Valuation Date
The day on which we calculate your income payment or process a reallocation
request. A valuation date is a day the New York Stock Exchange is open for
trading.
You
In this Prospectus, depending on the context, "you" may mean either: (1) the
owner of the Income Annuity, (2) the annuitant for whom money is invested under
group arrangements, or (3) any annuitant under a contract where the owner is not
an individual.
6
<PAGE>
--------------------------------------------------------------------------------
TABLE OF EXPENSES--INCOME ANNUITY
--------------------------------------------------------------------------------
The following table shows the Separate Account, Metropolitan Fund and Zenith
Fund charges and expenses applied to the Income Annuity. The numbers in the
table for the Separate Account, the Zenith Fund and for all Portfolios of the
Metropolitan Fund are based on past experience except those Portfolios
introduced on July 5, 2000. The Portfolios introduced on July 5, 2000 (marked by
note 11) do not have a full year's past experience, so the management fees and
other expenses are estimates for the current year. The numbers in the table are
subject to change. The table is not intended to show your actual total combined
expenses of the Separate Account, Metropolitan Fund and Zenith Fund, which may
be higher or lower. It does not show fees for the Fixed Payment Option or
premium taxes which may apply.
<TABLE>
<S> <C>
Sales Load Charge to Purchase Payment (as a percentage of the purchase payment).................... 0% or 5% (1)
Death Benefit Fee.................................................................................. Variable (2)
Separate Account Annual Expenses (currently we charge .95%)........................................ 1.25% (3)
</TABLE>
(estimated as a percentage of average account value for the fiscal year ending
December 31, 2000)
<TABLE>
<CAPTION>
Metropolitan Fund Annual Expenses (as a percentage of average net assets for
the fiscal year ending December 31, 1999)
----------------------------
OTHER TOTAL OTHER TOTAL
MANAGE- EXPENSES EXPENSES EXPENSES EXPENSES
MENT BEFORE BEFORE AFTER AFTER
FEES REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lehman Brothers(R)Aggregate Bond Index Portfolio (8).......... .25 .15 .40 .15 .40
State Street Research Income Portfolio (4)(5)................. .32 .06 .38 .06 .38
State Street Research Diversified Portfolio (4)(5)(6)......... .43 .03 .46 .03 .46
MetLife Stock Index Portfolio (4)............................. .25 .04 .29 .04 .29
Harris Oakmark Large Cap Value Portfolio (5)(6)(8)............ .75 .40 1.15 .23 .98
T. Rowe Price Large Cap Growth Portfolio (5)(6)(8)............ .69 .62 1.31 .26 .95
State Street Research Growth Portfolio (4)(5)(6).............. .47 .04 .51 .04 .51
Putnam Large Cap Growth Portfolio (11)........................ .80 .59 1.39 .20 1.00
MetLife Mid Cap Stock Index Portfolio (11).................... .25 .65 .90 .20 .45
Neuberger Berman Partners Mid Cap Value Portfolio (5)(6)(8)... .70 .48 1.18 .25 .95
Janus Mid Cap Portfolio (5)(7)................................ .67 .04 .71 .04 .71
State Street Research Aggressive Growth Portfolio (4)(5)(6) .. .70 .04 .74 .04 .74
Loomis Sayles High Yield Bond Portfolio (7)................... .70 .24 .94 .24 .94
Russell 2000(R)Index Portfolio (8)(9)......................... .25 .64 .89 .30 .55
T. Rowe Price Small Cap Growth Portfolio (5)(7)............... .52 .09 .61 .09 .61
State Street Research Aurora Small Cap Value Portfolio (5)(11) .85 .23 1.08 .20 1.05
Scudder Global Equity Portfolio (5)(7)........................ .67 .20 .87 .20 .87
Morgan Stanley EAFE(R)Index Portfolio (8)(10)................. .30 1.47 1.77 .40 .70
Putnam International Stock Portfolio (4)(5) .................. .90 .22 1.12 .22 1.12
Zenith Fund Annual Expenses
(as a percentage of average net assets)
Davis Venture Value Series (12)............................... .75 .06 .81 .06 .81
Loomis Sayles Small Cap Series (12)(13)....................... .90 .10 1.00 .10 1.00
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
--------------------------------------------------------------------------------
TABLE OF EXPENSES--INCOME ANNUITY (continued)
--------------------------------------------------------------------------------
Example
Following are the expenses on a $1,000 investment in each investment division
listed below, assuming a 5% return on assets) (14)
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Lehman Brothers(R)Aggregate Bond Index Division ..... $65 $ 93 $116 $156
State Street Research Income Division ............... 65 92 115 155
State Street Research Diversified Division .......... 66 94 118 159
MetLife Stock Index Division ........................ 64 90 112 149
Harris Oakmark Large Cap Value Division ............. 72 111 144 197
T. Rowe Price Large Cap Growth Division ............. 74 115 150 205
State Street Research Growth Division ............... 66 95 120 162
Putnam Large Cap Growth Division .................... 74 117 153 209
MetLife Mid Cap Stock Index Division ................ 70 105 135 183
Neuberger Berman Partners Mid Cap Value Division .... 72 112 145 198
Janus Mid Cap Division .............................. 68 100 128 173
State Street Research Aggressive Growth Division .... 68 101 129 175
Loomis Sayles High Yield Bond Division .............. 70 106 136 186
Russell 2000(R)Index Division ....................... 70 105 134 183
T. Rowe Price Small Cap Growth Division ............. 67 98 124 168
State Street Research Aurora Small Cap Value Division 71 109 141 193
Scudder Global Equity Division ...................... 70 104 134 182
Morgan Stanley EAFE(R)Index Division ................ 78 126 166 227
Putnam International Stock Division ................. 72 110 143 195
Davis Venture Value Division ........................ 69 103 131 179
Loomis Sayles Small Cap Division .................... 71 108 138 189
</TABLE>
(1) If your Income Annuity is purchased through a broker-dealer other than
MetLife, you pay a 5% front-end sales load, deducted from your purchase
payment to compensate that broker-dealer. If your Income Annuity is
purchased directly through MetLife you do not pay any front-end sales
load.
(2) You pay us for the cost of providing you term insurance for the period
from the time you purchase the Income Annuity until the time you start
receiving income payments. If you should die during that period, we will
return your purchase payment. The amount of this fee can vary
substantially depending on your life expectancy during this period (which
depends on your age and sex), the length of time until payments commence
and the amount of your consideration. We use the mortality table specified
in your certificate to determine this fee. As an example, a male, age 65,
who defers payment for one month, with a purchase payment of $1,000, would
pay $.92 for this fee.
(3) Pursuant to the terms of the contract, our total Separate Account annual
expenses will not exceed 1.25% of your average balance in the investment
divisions. Currently, we are charging .95% for the Income Annuity.
(4) Prior to May 16, 1993, we paid all expenses of the Metropolitan Fund
(other than management fees, brokerage commissions, taxes, interest and
extraordinary or nonrecurring expenses) (hereafter "Expenses"). The effect
of such reimbursements is that performance results are increased.
(5) 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 and Statement of
Additional Information for the Metropolitan Fund.
(6) The Metropolitan Fund directed certain portfolio trades to brokers who
paid a portion of the Fund's expenses. In addition, the Fund has entered
into arrangements with its custodian whereby credits realized as a result
of this practice were used to reduce a portion of each participating
Portfolio's custodian fees. These reductions are not included under "Other
Expenses After Reimbursement."
(Footnotes continued on next page)
8
<PAGE>
--------------------------------------------------------------------------------
TABLE OF EXPENSES (continued)
--------------------------------------------------------------------------------
(Footnotes continued from previous page)
(7) These Portfolios began operating on March 3, 1997. We paid all Expenses in
excess of .20% of the average net assets for each of these Portfolios
until each Portfolio's total assets reached $100 million, or until March
2, 1999, whichever came first. MetLife ceased subsidizing such Expenses
for the Janus Mid Cap, T. Rowe Price Small Cap Growth, Scudder Global
Equity and Loomis Sayles High Yield Bond Portfolios on December 31, 1997,
January 22, 1998, July 2, 1998 and March 2, 1999, respectively. All
expense information for these Portfolios reflect current expenses without
any reimbursement. The effect of such reimbursements is that performance
results are increased.
(8) These Portfolios began operating on November 9, 1998. We paid all Expenses
in excess of .20% (.25% for the Morgan Stanley EAFE(R) Index Portfolio) of
the average net assets for each of these Portfolios until November 8,
2000. MetLife ceased subsidizing such Expenses for Lehman Brothers(R)
Aggregate Bond Index and Russell 2000(R) Index Portfolios on July 13, 1999
and December 3, 1999, respectively. All expense information for the Lehman
Brothers(R) Aggregate Bond Index which we ceased subsidizing reflects
current expenses without any reimbursement. The "Other Expenses Before
Reimbursement" for Harris Oakmark Large Cap Value, T. Rowe Price Large Cap
Growth and Neuberger Berman Partners Mid Cap Value Portfolios assumes no
reduction of expenses of any kind. The "Other Expenses After
Reimbursement" for these Portfolios reflects the effect of the anticipated
reimbursement of Expenses during the entire current year. The effect of
such reimbursements is that performance results are increased.
(9) MetLife ceased subsidizing expenses in excess of .20% of the average net
assets of the Russell 2000(R) Index Portfolio on December 3, 1999.
Beginning on February 22, 2000, MetLife began to pay all Expenses in
excess of .30% of the average net assets for the Russell 2000(R) Index
Portfolio until the Portfolio's total assets reach $200 million, or until
April 30, 2001, whichever comes first. The "Other Expenses Before
Reimbursement" information for this Portfolio assumes no reduction of
expenses of any kind. The "Other Expenses After Reimbursement" for this
Portfolio reflects expenses as if the Expense reimbursement will be in
effect for the entire current year.
(10) MetLife paid all Expenses in excess of .25% of the average net assets for
the Morgan Stanley EAFE(R) Index Portfolio until November 9, 2000. After
that date, MetLife will continue to pay all Expenses in excess of .40% of
the Portfolio's average net assets until the Portfolio's total assets
reach $200 million, or until April 30, 2001, whichever comes first. The
"Other Expenses Before Reimbursement" information for this Portfolio
assumes no reduction of expenses of any kind. The "Other Expenses After
Reimbursement" for this Portfolio reflects our estimate of the effect of
the combined reimbursement expected for the entire current year. The
effect of such reimbursements is that performance results are increased.
(11) MetLife Mid Cap Stock Index and State Street Research Aurora Small Cap
Value Portfolios began operating on July 5, 2000. Putnam Large Cap Growth
Portfolio began operating on May 1, 2000. We will pay all Expenses in
excess of .20% of the average net assets for each of these Portfolios
until each Portfolio's total assets reach $100 million, or until July 4,
2002, whichever comes first. The expense information shows estimates for
first year Expenses.
(12) New England Investment Management, Inc. ("NEIM") pays us for providing
administrative services. You do not bear these fees. NEIM absorbs the fees
payable to MetLife.
(13) NEIM pays all expenses other than brokerage costs, interest, taxes or
other extraordinary expenses, in excess of 1.00% of the average net assets
for this Portfolio. The 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 and Statement of Additional Information for the Zenith Fund.
(14) The example assumes that a Lifetime Income Annuity paying monthly benefits
is purchased at the beginning of year 1 by a male age 65. In addition, the
example assumes a constant 7% specified interest rate, the highest
allowable annual Separate Account expense charge (1.25%), no reimbursement
of portfolio annual expenses, and payment of a 5% sales load charge.
9
<PAGE>
MetLife
[GRAPHIC OMITTED]
Metropolitan Life Insurance Company ("MetLife") is a wholly-owned subsidiary of
MetLife, Inc., a publicly traded company. Our main office is located at One
Madison Avenue, New York, New York 10010. MetLife was formed under the laws of
New York State in 1868. Headquartered in New York City, we are a leading
provider of insurance and financial services to a broad spectrum of individual
and group customers. MetLife, through its subsidiaries and affiliates, serves
approximately 9 million individual households in the United States and
corporations and institutions with 33 million employees and members. It also has
international insurance operations in 12 countries.
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 the
Income Annuity and some other 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 "1940 Act").
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.
10
<PAGE>
The Income Annuity
[GRAPHIC OMITTED]
How the Income Annuity Differs from Other Immediate Annuities
Immediate annuities generally come in two varieties, fixed or variable. The
Income Annuity does not fall squarely in either of these traditional categories.
A fixed annuity provides guaranteed payments based on a fixed rate of return
that typically reflects market interest rates at the time of purchase. The
amount of each payment is fixed for the duration of the annuity. A fixed annuity
provides you with the security of a guaranteed income but does not protect your
income payments from the negative impact of inflation over time.
A variable annuity provides payments which vary based on the net investment
performance of underlying portfolios of stocks and bonds relative to a
benchmark, commonly termed the assumed investment return (AIR). This benchmark
is constant for the duration of the annuity. To the extent that the net
investment performance exceeds the benchmark, income payments go up. Conversely,
if the net investment performance is below the benchmark, income payments go
down. Despite the risk you bear of lower payments, the economic assumption
underlying a typical variable annuity is that over the long term the stock and
bond investment returns will outperform the guaranteed interest rate of a
typical fixed annuity.
[GRAPHIC OMITTED]
If market interest rates at the time a variable annuity is purchased exceed the
stated AIR, then the payments under a fixed annuity generally will be greater
than the initial variable payment under the variable annuity. There are two
reasons for the higher fixed annuity payment. First, higher interest rates yield
higher income payments. Second, a variable annuity typically assumes a
relatively low AIR which increases the likelihood of rising income payments over
time. Even though the initial payment under a variable annuity may be lower than
a fixed annuity's, variable income payments may increase over time (although
they may decrease as well). Therefore, variable annuities provide potential
protection against inflation.
The Income Annuity described in this prospectus contains features of both fixed
and variable immediate annuities, but also has key differences:
o The initial variable income payment under the Income Annuity is comparable
to that provided by a fixed annuity, because it uses a benchmark interest
rate (the specified interest rate) that reflects market interest rates.
Subsequent income payments vary based on net investment performance
relative to the benchmark interest rate and the impact of changes to the
benchmark interest rate.
11
<PAGE>
o Unlike a traditional variable annuity, which has a constant benchmark rate
(the AIR) and a variable investment component, the Income Annuity has both
a variable benchmark interest rate and variable investment component.
o This Income Annuity is also different from other traditional immediate
annuities because you may move the source of income payments back and
forth between the Fixed Payment Option and the investment divisions. This
feature allows you to select an asset allocation based on your risk
tolerance and adjust it over time with periodic rebalancing. Other
variable annuities typically restrict the reallocation of the source of
income payments from their fixed option.
The Income Annuity has both fixed and variable options. The Fixed Payment
Option works like a fixed annuity. If you want the security of a
guaranteed income you may allocate a portion or all of your income
payments to the Fixed Payment Option. You may also have a portion or all
of your income payment allocated to the variable investment divisions.
[GRAPHIC OMITTED]
Product Comparison
<TABLE>
<CAPTION>
FEATURE TRADITIONAL FIXED TRADITIONAL VARIABLE METLIFE INCOME
ANNUITY ANNUITY SECURITY PLAN
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Return Fixed Constant - Assumed Varies - specified
Assumption Investment Return interest rate (based on
(AIR) market interest rates)
----------------------------------------------------------------------------------------------------------
Who Bears Risk
Investment Not applicable You You
Performance
Interest Rate Issuer Not applicable You
----------------------------------------------------------------------------------------------------------
Amount of Initial Based on market Generally, less than a Based on specified
Payment interest rates fixed annuity interest rate (based
market interest rates)
----------------------------------------------------------------------------------------------------------
Subsequent Fixed-guaranteed Varies - based on net Varies - based on net
Income investment investment performance
Payments performance relative to the prior specified
relative to AIR interest rate and impact
of change in the specified
interest rate
----------------------------------------------------------------------------------------------------------
Transfers between Not applicable Limited or Prohibited Permitted
funding options
(including Fixed
Payment Option)
----------------------------------------------------------------------------------------------------------
Asset Allocation and Not applicable Generally, limited to Full capability
Rebalancing variable options
----------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Features of the Income Annuity
[GRAPHIC OMITTED]
This Income Annuity can provide you with a stream of payments to meet your
anticipated income needs. This can be payments for your lifetime, for the
lifetimes of two people or over a specified period. It is a "variable" annuity
because the amount of your income payment varies based on the changes in the
adjustment factor, which is based on net investment returns and changes in
interest rates. In short, the amount of each of your income payments under your
Income Annuity may go up or down. Since neither investment performance nor
interest rates are guaranteed, your money is at risk. The degree of risk will
depend on the investment divisions you select and changes in the specified
interest rate. We do not guarantee that your income payments will be a specific
amount of money.
The Income Annuity has a fixed option called the "Fixed Payment Option." You may
choose to have all or a portion of the income payment fixed and guaranteed under
the Fixed Payment Option. Under the Fixed Payment Option, we guarantee the
amount of the income payment to you which is attributable to the percentage you
allocate to the Fixed Payment Option. The Fixed Payment Option is not described
in this Prospectus although we occasionally refer to it. You decide how to
allocate your money among the Fixed Payment Option and the investment divisions.
With the Income Annuity, you must start receiving income payments within the
first year after the contract is issued. The Income Annuity may not be available
in certain states.
The group Income Annuity described in this Prospectus is offered to an employer,
association, trust or other group for its employees, members or participants.
In addition to the group non-qualified contract, you may also use lump sum
rollovers or transfers from tax-favored arrangements to purchase the Income
Annuity if all applicable Federal income tax requirements are satisfied.
If your retirement plan has purchased an Income Annuity, your choice of income
types may be subject to the terms of the plan. We may rely on your employer's or
plan administrator's statements to us as to the terms of the plan or your
entitlement to any payments. We will not be responsible for interpreting the
terms of your plan. You should review your plan document to see how you may be
affected.
You select the income type suited to your needs. Some of the income types
guarantee an income stream for your lifetime; others guarantee an income stream
for both your lifetime, as well as the lifetime of another person (such as a
spouse). Some income types guarantee a time period of your choice over which
MetLife will make income payments to you. The amount of your income payments you
receive will depend on such things as the income type you choose, your
investment choices and the amount of your purchase payment.
13
<PAGE>
The degree of investment risk you assume will depend on the investment divisions
you choose. We have listed your choices in the approximate order of risk from
the most conservative to the most aggressive.
The investment divisions generally offer the opportunity for greater income
payments to you over the long term than our guaranteed Fixed Payment Option. On
the other hand, income payments to you will fluctuate for amounts allocated to
the investment divisions and may go down as well as up.
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 investment divisions and Portfolios are
not those mutual funds. The Portfolios most likely will not have the same
performance experience as any publicly available mutual fund.
Your Investment Choices
The Metropolitan Fund, the Zenith Fund and each of their Portfolios are more
fully described in their respective prospectuses and SAIs. The Metropolitan Fund
and the Zenith Fund prospectuses are attached at the end of this Prospectus. You
should read these prospectuses carefully before making purchase payments to the
investment divisions. The SAIs are available upon your request.
Starting with the most conservative Portfolio, your investment choices are
listed in the approximate risk relationship among the available Portfolios. You
should understand that each Portfolio incurs its own risk which will be
dependent upon the investment decisions made by the respective Portfolio's
investment manager. Furthermore, the name of a Portfolio may not be indicative
of all the investments held by the Portfolio. The list is intended to be a
guide. Please consult the appropriate Fund prospectus for more information
regarding the investment objectives and investment practices of each Portfolio.
Since your income payments are subject to the risks associated with investing in
stocks and bonds, your variable income payments based on amounts allocated to
the investment divisions may go down as well as up.
--------------------------------------------------------------------------------
Lehman Brothers(R) Aggregate Bond Index Portfolio
State Street Research Income 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]
Davis Venture Value Portfolio
Putnam Large Cap Growth Portfolio
MetLife Mid Cap Stock Index Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
Janus Mid Cap Portfolio
State Street Research Aggressive Growth Portfolio
Loomis Sayles High Yield Bond Portfolio
Russell 2000(R) Index Portfolio
T. Rowe Price Small Cap Growth Portfolio
Loomis Sayles Small Cap Portfolio
State Street Research Aurora Small Cap Value Portfolio
Scudder Global Equity Portfolio
Morgan Stanley EAFE(R) Index Portfolio
Putnam International Stock Portfolio
--------------------------------------------------------------------------------
14
<PAGE>
Some of the investment choices may not be available under the terms of the
Income Annuity. The contract will indicate the investment divisions that are
available to you. Your investment choices may be limited because:
o Some of the investment divisions are not approved in your state.
o Your employer, association or other group contract holder limits the
number of available investment divisions.
o We have restricted the available investment divisions.
The investment divisions buy and sell shares of corresponding mutual fund
portfolios. These Portfolios, which are part of either the Metropolitan Fund or
the Zenith 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 to you under the Income Annuity. You pay
no transaction expenses (i.e., front-end 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 and the Zenith Fund are available only
by purchasing annuities and life insurance policies from MetLife or certain of
its affiliated insurance companies and are never sold directly to the public.
The Metropolitan Fund and the Zenith Fund are both a "series" type fund
registered with the Securities and Exchange Commission as an "open-end
management investment company" under the 1940 Act. A "series" fund means that
each Portfolio is one of several available through the fund. Except for the
Janus Mid Cap Portfolio, 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. The Zenith Fund pays New England Investment Management, Inc.
("NEIM") a monthly fee as its investment manager. These fees, as well as the
operating expenses paid by each Portfolio, are described in the applicable
prospectus and SAI for the Metropolitan Fund or Zenith Fund.
In addition, the Metropolitan Fund and Zenith Fund prospectuses each discuss
other separate accounts of MetLife and its affiliated insurance companies that
invest in the Metropolitan Fund or the Zenith Fund. The risks of these
arrangements are also discussed in each Fund's prospectus.
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<PAGE>
Income Types
Currently, we provide you with a wide variety of income types to suit a range of
personal preferences.
There may be three people who are involved under your Income Annuity:
o Owner: the person or entity which has all rights under the Income Annuity
including the right to direct who receives the income payment.
o Annuitant: the person or persons whose life is the measure for determining
the duration and sometimes the dollar amount of the income payments.
o Beneficiary: the person or persons who receive continuing income payments
or a lump sum if the owner dies.
The amount of your income payments will depend in large part on the income type
you choose. For example, if you select a "Lifetime Income Annuity for Two," your
income payments will typically be lower than if you select a "Lifetime Income
Annuity." The terms of your contract will determine when your income payments
start and the frequency with which you will receive your income payments. When
you select an income type, it will apply to both the fixed payments and variable
income payments. We reserve the right to limit or stop issuing any of the income
types currently available based on legal requirements or other considerations.
The following income types are available:
Lifetime Income Annuity: A variable income that is paid as long as the annuitant
is living. No income payments are made once the annuitant is no longer living.
Lifetime Income Annuity with a Guarantee Period: A variable income that
continues as long as the annuitant is living but is guaranteed to be paid for a
number of years. If the annuitant dies before all of the guaranteed income
payments have been made, income payments are made to the owner of the annuity
(or the beneficiary, if the owner dies during the guarantee period) until the
end of the guarantee period. No income payments are made once the guarantee
period has expired and the annuitant is no longer living.
Income Annuity for a Specified Period or Lifetime (whichever is shorter): A
variable income that continues as long as the annuitant lives up to a designated
number of years. No income payments are made once the annuitant is no longer
living or the specified period has elapsed.
Lifetime Income Annuity for Two: A variable income continues as long as either
of the two annuitants is living. After one annuitant dies, payments continue to
be made as long as the other annuitant is living. In that event,
Many times the Owner and the Annuitant are the same person.
You may choose the frequency of your income payments. For example, you may
receive your payments on a monthly, quarterly, semiannual or annual basis.
[GRAPHIC OMITTED]
When deciding how to receive income payments, consider:
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.
16
<PAGE>
the income payments may be the same as those made while both annuitants were
living or may be a smaller percentage that is selected when the annuity is
purchased. No income payments are made once both annuitants are no longer
living.
Lifetime Income Annuity for Two with a Guarantee Period: A variable income that
continues as long as either of the two annuitants is living but is guaranteed to
be paid (unreduced by any percentage selected) for a number of years. If both
annuitants die before all of the guaranteed income payments have been made,
income payments are made to the owner of the annuity (or the beneficiary, if the
owner dies during the guarantee period) until the end of the guarantee period.
If one annuitant dies after the guarantee period has expired, income payments
continue to be made to the living annuitant. In that event, income payments may
be the same as those made while both annuitants were living or may be a smaller
percentage that is selected when the annuity is purchased. No income payments
are made once the guarantee period has expired and both annuitants are no longer
living.
Income Annuity for a Guarantee Period: A variable income that continues for a
guaranteed period of 5 to 30 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 type. If the annuitant dies before all income
payments have been made, income payments are paid to the owner of the annuity
(or the beneficiary, if the owner dies during the guarantee period) until the
end of the guarantee period. No income payments are made once the guarantee
period has expired.
Death Benefit
Your Income Annuity may provide you a death benefit in the event of your death
before you start receiving income payments. Your contract states whether a death
benefit is provided. If you die before income payments begin, the owner or any
beneficiaries will receive the full amount of your purchase payment in a lump
sum once we receive satisfactory proof of your death. The death benefit is not
affected by the changes in the adjustment factor. The fee you pay for this death
benefit is described later in this Prospectus.
Purchase of an Income Annuity
We offer the Income Annuity only in states in which we have obtained approval.
Approval may not be needed in all states. You must purchase an Income Annuity
with one purchase payment of at least $25,000.
[GRAPHIC OMITTED]
17
<PAGE>
Calculating Your Income Payments
The variable income payments you receive are calculated based on the investment
factor for each investment division you select and the interest factor. We
reflect the combined impact of these two factors in the adjustment factor. How
much your variable income payment will change from one payment to the next
payment and whether the income payment goes up or down depends on the adjustment
factor calculated for each of the investment divisions. For each income payment,
we determine an adjustment factor (a number) for each investment division which
you have selected. The amount of your income payment goes up from your last
income payment when the adjustment factor is more than one; the amount of your
income payments goes down when the adjustment factor is less than one. You can
verify the amount of your current income payment by multiplying your last
calculated income payment by the current adjustment factor.
Initial Income Payment
The initial income payment for an investment division is a hypothetical amount
which is calculated based upon the current annuity purchase rate. Before we
determine your initial income payment, we reduce the purchase payment by the
death benefit fee and, if applicable, the sales load charge and premium taxes.
This hypothetical amount will be the first income payment you will receive only
if your first income payment is payable within 10 days after we issue the Income
Annuity. If your first income payment is payable more than 10 days after the
contract's issue date, the amount of the first income payment you receive will
be different from the initial income payment calculated at issue. In this case,
the amount of your first income payment will be calculated using the method
described in the next section (Subsequent Income Payments).
Subsequent Income Payments
Subsequent income payments depend on the net investment performance of the
investment divisions you choose and changes in the specified interest rate. The
impact of these market factors are reflected in an adjustment factor that is
calculated for each investment division. Whether your income payment increases
or decreases will depend upon the adjustment factor calculated for each
investment division you choose.
[GRAPHIC OMITTED]
Subsequent income payments are calculated on each valuation date by multiplying
the income payment for an investment division on the last valuation date by the
adjustment factor for that investment division. If you choose more than one
investment division, your income payment will be the sum of the income payments
from each investment division.
18
<PAGE>
Adjustment Factor
The adjustment factor has two components: the investment factor and the interest
factor.
The adjustment factor used to calculate your income payments has two components:
the investment factor and the interest factor. We compute a number for each of
these factors and multiply these numbers together to produce an adjustment
factor for each investment division on each valuation date. Generally, to the
extent that the net investment performance exceeds the specified interest rate,
the investment factor will tend to increase your income payment. Similarly, when
there is an increase in the specified interest rate relative to the prior
period's specified interest rate, the interest factor will tend to increase your
income payments. However, the investment factor and interest factor may have
opposite impacts which will cause the components that comprise the adjustment
factor to offset each other. Following is a more in depth discussion of these
factors.
Investment Factor
The investment factor reflects an investment division's net investment
performance as compared to the specified interest rate effective on the prior
valuation date. Setting aside the impact of the interest factor, if an
investment division's annualized net investment performance is more than the
specified interest rate on the prior valuation date, this increases your income
payment. In this case, the investment factor will have a value more than one.
Conversely, setting aside the impact of the interest factor, if an investment
division's annualized net investment performance is less than the specified
interest rate on the prior valuation date, this decreases your income payment.
In this case, the investment factor will have a value less than one.
To summarize:
--------------------------------------------------------------------------------
If an investment division's Then the investment Value of the investment
annualized net investment factor (assuming the factor is
performance is interest factor is 1)
--------------------------------------------------------------------------------
More than the prior Increases your income More than 1
specified interest rate payment
--------------------------------------------------------------------------------
Equal to the prior specified Keeps your income Equal to 1
interest rate payment the same
--------------------------------------------------------------------------------
Less than the prior Decreases your income Less than 1
specified interest rate payment
Determining the Investment Factor
[GRAPHIC OMITTED]
We separately determine the investment factor for each investment division you
choose on each valuation date.
The investment factor for an investment division is based upon the net
investment performance for that division. This is how we calculate the
19
<PAGE>
investment factor for each investment division.
o First, we determine the change in the investment performance (reflecting
any investment-related charge) for the underlying Portfolio from the
previous valuation date to the current valuation date;
o Next, we subtract the daily equivalent of the Separate Account charge for
each day since the last valuation date. This number is the net investment
performance for the investment division.
o Then, we multiply by an adjustment based on the specified interest rate in
effect on the last valuation date for each day since that last valuation
date. This number is the investment factor for the current valuation date.
Interest Factor
The interest factor reflects the impact of changes in the value of the specified
interest rate from the prior valuation date to the current valuation date.
Setting aside the impact of the investment factor, if the specified interest
rate increases from the prior valuation date to the current valuation date, this
increases your income payment. In this case, the value of the interest factor is
more than one. Again, setting aside the impact of the investment factor, if the
specified interest rate decreases from the prior valuation date to the current
valuation date, this decreases your income payment. In this case, the value of
the interest factor is less than one.
The interest factor changes based on fluctuations in the specified interest
rate.
Each investment division has a different investment factor. The interest factor
is the same for all investment divisions.
[GRAPHIC OMITTED]
To summarize:
--------------------------------------------------------------------------------
Then the interest factor
If the current specified (assuming the investment Value of the interest
interest rate is factor is 1) factor is
--------------------------------------------------------------------------------
More than the prior Increases your income More than 1
specified interest rate payment
--------------------------------------------------------------------------------
The same as the prior Keeps your income Equal to 1
specified interest rate payment the same
--------------------------------------------------------------------------------
Less than the prior Decreases your income Less than 1
specified interest rate payment
Determining the Interest Factor
o First, we determine the annuity purchase rate based on the specified
interest rate in effect as of the prior valuation date. This annuity
purchase rate is updated to reflect your age, where relevant, and future
income payments.
o Next, we perform the same calculation to determine a new annuity purchase
rate based on the specified interest rate updated to the current valuation
date for all future income payments.
20
<PAGE>
o Then, we divide the annuity purchase rate we calculated in the first step
by the annuity purchase rate we calculated in the second step. The
resulting number is the interest factor for the current valuation date.
The Effect of the Adjustment Factor
Whether your income payment will increase or decrease depends on how the
investment factor and the interest factor work together. If each of them is more
than one, your income payment will increase. If each of them is less than one,
your income payment will decrease. If one of them has an increasing effect and
the other has a decreasing effect, whether your income payment will increase or
decrease will depend on which factor has the bigger impact.
To determine how the investment factor and the interest factor work together to
impact your income payment, we multiply them to produce the adjustment factor.
When the adjustment factor is more than one, your income payment will increase.
When the adjustment factor is less than one, your income payment will decrease.
When the adjustment factor is more than one, your income payment will increase.
When the adjustment factor is less than one, your income payment will decrease.
If you chose more than one investment division, your new variable income payment
is the sum of the amounts determined for each investment division.
[GRAPHIC OMITTED]
To summarize:
--------------------------------------------------------------------------------
If the adjustment factor is : Your income payment will :
--------------------------------------------------------------------------------
More than 1 Increase
--------------------------------------------------------------------------------
Equal to 1 Stay the same
--------------------------------------------------------------------------------
Less than 1 Decrease
Examples of Income Payment Calculations
Below are some examples of the income payment calculation for an investment
division reflecting the combined effect of the interest factor and investment
factor.
<TABLE>
<CAPTION>
INTEREST INVESTMENT ADJUSTMENT PRIOR INCOME CURRENT INCOME
FACTOR FACTOR FACTOR PAYMENT PAYMENT
<S> <C> <C> <C> <C>
1.01000[UP ARROW] x [UP ARROW]1.00225 = [UP ARROW]1.01227 x $500.00 = $506.14[UP ARROW]
1.00553[UP ARROW] x [DOWN ARROW]0.99857 = [UP ARROW]1.00409 x $506.14 = $508.21[UP ARROW]
0.98800[DOWN ARROW] x [UP ARROW]1.01105 = [DOWN ARROW]0.99892 x $508.21 = $507.66[DOWN ARROW]
0.99937[DOWN ARROW] x [DOWN ARROW]0.98788 = [DOWN ARROW]0.98726 x $507.66 = $501.19[DOWN ARROW]
</TABLE>
Reallocations
You can reallocate among investment divisions and the Fixed Payment Option.
There is no charge to make a reallocation. Your request for a reallocation tells
us to move, in accordance with your instructions, the
21
<PAGE>
underlying assets we have designated to generate your income payments.
For us to process a reallocation, you must tell us:
o For each investment division (or Fixed Payment Option), the percentage
reduction (not dollar amount) in your current allocation necessary to
achieve the new allocation you want for future income payments; and
o The investment divisions (or Fixed Payment Option) to which you want to
increase the allocation and the percentage of the total reallocation
amount by which you want to increase them.
We may require that you use our forms to make reallocations.
You generally may make a reallocation on any business day. At a future date we
may limit the number of reallocations you make, but never to fewer than one a
month. If we do so, we will give you advance written notice. We may limit a
beneficiary's ability to make a reallocation.
[GRAPHIC OMITTED]
The effective date of a reallocation is also a valuation date. Although a
reallocation triggers a valuation date, each income payment we pay to you is
calculated on a valuation date which is 10 days before your income payment is to
be paid.
The prior income payment may be an amount calculated when you requested a
reallocation, so it may not be an amount that we paid to you.
Each Fund may restrict or refuse purchases or redemption of shares in their
Portfolios as a result of certain market timing activities. You should read the
Fund prospectuses for more details.
Ordinarily, your reallocation request must be completed prior to 4:00 p.m.
Eastern time on a business day if you want the transaction to take place on that
day. All other reallocation requests will be processed the next business day.
When you request a reallocation, we first update the adjustment factor as of the
date of the reallocation and determine what the income payment amount would have
been if we were to pay it within 10 days. We then determine the revised
allocation of future income payments based on the percentages you selected.
Thus, if your most recent income payment attributable to an investment division
was $100, the revised income payment as of the date of reallocation is $95, and
you asked us to move 30% from that investment division, we would reallocate
$28.50 (not $30.00). This would leave an income payment of $66.50 in that
investment division as of the reallocation date. When we calculate the next
income payment, we would determine the new income payment amount based on net
investment performance and specified interest rate change from the reallocation
date to the next valuation date.
Here are examples of the effect of a reallocation on the income payment:
o Suppose you choose to reallocate 30% of your income payment supported by
investment division A to the Fixed Payment Option and the recalculated
income payment supported by investment division A is $100. Then, your
income payment from the Fixed Payment Option will be increased by $30 and
your income payment supported by investment division A will be decreased
by $30.
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<PAGE>
o Suppose you choose to reallocate 30% of your fixed payment to a variable
income payment supported by investment division A and the fixed payment is
$100. Then, your income payment supported by investment division A will be
increased by $30 and your fixed payment will be decreased by $30.
o Suppose you choose to reallocate 30% of your income payment supported by
investment division A to investment division B and the recalculated income
payment supported by investment division A is $100. Then, your income
payment supported by investment division B will be increased by $30 and
your income payment supported by investment division A will be decreased
by $30.
Death Benefit Fee
The death benefit fee is a one time charge deducted from your purchase payment.
Your contract will state the amount of the death benefit fee to be taken from
your purchase payment to pay us for the cost of providing a death benefit in the
event of your death (or in the event of your death or the death of the second
annuitant where an income annuity for two is chosen) before you start receiving
income payments. The amount of the death benefit fee depends on the length of
time until you start receiving your income payments and your age, sex and
purchase payment amount.
Charges
There are two types of recurring charges you pay if you allocate any of your
purchase payment to the investment divisions:
o Separate Account charge; and
o Investment-related charge.
Charges are not deducted directly from your income payment. The charges are
applied when we calculate the investment factor.
Separate Account Charge
Currently, the Separate Account charge is no more than .95% annually of the
average value of the amount you have in the investment divisions. However,
pursuant to the terms of the Income Annuity, this Separate Account charge may
range up to 1.25% of the average value of amounts in the investment divisions.
We will give you advance notice if we increase the Separate Account charge. 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 income payments
than 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 distribution costs and our miscellaneous
administrative costs. These
23
<PAGE>
administrative costs which we incur include financial, actuarial, accounting and
legal expenses.
Investment-Related Charge
This charge has two components. The first pays the investment managers for
managing money in the Portfolios. The second consists of Portfolio operating
expenses. The amount you pay depends on the investment divisions you select.
Amounts for each investment division for the previous year are listed in the
Table of Expenses.
Premium Taxes
Some jurisdictions tax what are called "annuity considerations." We deduct money
to pay "premium" taxes (also known as "annuity" taxes) when you make the
purchase payment.
Premium taxes, if applicable, currently range from .5% to 3.5% depending on the
Income Annuity you purchased and your home state or jurisdiction. A chart in the
Appendix shows the jurisdictions where premium taxes are charged and the amount
of these taxes.
Free Look
You may cancel your Income Annuity within a certain time period. This is known
as a "free look." We must receive your request to cancel in writing. The number
of days for this "free look" varies from state to state. The "free look" may
also vary based on other factors such as whether you purchased your Income
Annuity through the mail. Not all contracts issued are subject to free look
provisions under state law. Depending on state law, we may refund all of your
purchase payment as of the date your properly completed refund request is
received at your MetLife Designated Office. If you do not cancel your Income
Annuity during the "free look" period, your decision to purchase the Income
Annuity is irrevocable.
[GRAPHIC OMITTED]
General Information
Administration
All transactions will be processed in the manner described below.
Purchase Payment
Ordinarily, your purchase payment is sent by check or wire made payable to
"MetLife," to your MetLife Designated Office. (We reserve the right to receive
purchase payments by other means acceptable to us.) We will provide all forms
necessary to apply your purchase payment. We must have all properly completed
documents to credit your purchase payment.
24
<PAGE>
Ordinarily, your purchase payment is effective and valued as of 4:00 p.m.
Eastern time, on the day we receive it in good order at your MetLife Designated
Office on days when the office is open (business day), except when it is
received:
o On a day when the net investment performance 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 net
investment performance, as applicable, is calculated.
Generally, your properly completed requests are effective the day we receive
them at your MetLife Designated Office.
We reserve the right to credit your purchase payment to you within two days of
receipt at your MetLife Designated Office. However, if the forms are incorrect
or incomplete or other documents are not completed properly, we have up to five
business days to credit the purchase payment. If the problem cannot be resolved
by the fifth business day, we will notify you and give you the reasons for the
delay. At that time, you will be asked whether you agree to let us keep your
money until the problem is resolved. If you do not agree or we cannot reach you
by the fifth business day, your money will be returned.
Under the Income Annuity, your employer or the group in which you are a
participant or member must identify you to us and tell us how your purchase
payment should be allocated among the investment divisions and the Fixed Payment
Option.
Confirming Reallocations
You will receive a written statement confirming that a reallocation was recently
completed.
Processing Reallocations
We permit you to request reallocations by mail and telephone. We anticipate
making Internet access available to you in the future. We may suspend or
eliminate telephone or Internet privileges at any time, without prior notice. We
reserve the right not to accept requests for reallocations by facsimile. We
reserve the right to refuse any reallocation request where the request would
tend to disrupt contract administration or is not in the best interest of the
contract holders or the Separate Account.
When you request a reallocation, we will process the reallocation using the next
available valuation date.
[GRAPHIC OMITTED]
By Telephone or Internet
You may request reallocations and obtain information by telephone between 9 a.m.
and 5 p.m. Eastern Time each business day. In the future, you may be able to
request reallocations and obtain information through Internet access, unless
prohibited by state law.
Ordinarily, your request for reallocations must be completed prior to 4:00 p.m.
Eastern time on a business day if you want the reallocation to be valued and
25
<PAGE>
effective on that day. Reallocations will not be valued and effective on a day
the net investment performance is not calculated or after 4:00 p.m. Eastern
time. We will value and make effective these reallocations on our next business
day.
We have put into place (or may in the future put into place for Internet
communications) reasonable security procedures to insure that instructions
communicated by telephone are genuine. For example, all telephone calls are
recorded. Also, you will be asked to provide some personal data prior to giving
your instructions over the telephone. When someone contacts us by telephone and
follows our security procedures, we will assume that you are authorizing us to
act upon those instructions. Neither the Separate Account nor MetLife will be
liable for any loss, expense or cost arising out of any requests that we or the
Separate Account reasonably believe to be authentic. In the unlikely event that
you have trouble reaching us, requests should be made in writing to your MetLife
Designated Office.
Response times for telephone or Internet may vary due to a variety of factors,
including volumes, market conditions and performance of the systems. We are not
responsible or liable for:
o any inaccuracy, error, or delay in or omission of any information you
transmit or deliver to us; or
o any loss or damage you may incur because of such inaccuracy, error, delay
or omission, non-performance, or any interruption of information beyond
our control.
After Your Death
If we are notified of your death before a requested reallocation is completed,
we will cancel the request. For example, we will cancel the reallocation request
and continue making income payments to your beneficiary if your Income Annuity
so provides. Or, depending on your Income Annuity's provisions, we may continue
making income payments to a joint annuitant.
Third Party Requests
Generally, we only accept requests for reallocations or information from you.
Therefore, we reserve the right not to process reallocations requested on your
behalf by your agent with a power of attorney or any other authorization. This
includes processing reallocations by an agent you designate, through a power of
attorney or other authorization, who has the ability to control the amount and
timing of reallocations for a number of other contract owners, and who
simultaneously makes the same request or series of requests on behalf of other
contract owners.
Advertising Performance
We periodically advertise the performance of the investment divisions. You may
get performance information from a variety of sources
26
<PAGE>
including your quarterly statements, the Internet, annual reports and semiannual
reports.
All performance numbers are based upon historical information. These numbers are
not intended to indicate future results.
[GRAPHIC OMITTED]
We may state performance in terms of "yield," "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.
Annualized change in value (i.e., average annual total return) calculations
reflect all Separate Account charges. These figures also assume a steady annual
rate of return.
We may demonstrate hypothetical values of income payments (e.g., beginning with
an initial income payment of $500) over a specified period based on historical
net asset values of the Portfolios and the historical specified interest rates.
These presentations reflect the investment and interest factors and deduction of
the Separate Account charge and investment-related charge. We may assume that
the Income Annuity was in existence prior to its inception date. When we do so,
we calculate performance based on the historical performance of the underlying
Portfolio for the period before the inception date of the Income Annuity and
historical rates for the specified interest rate. We use the actual data after
the inception date.
Historical performance information should not be relied on as a guarantee of
future performance results.
Changes to Your Income Annuity
We have the right to make certain changes to your 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 your approval and
the approval of any appropriate regulatory authorities. Examples of the changes
we may make include:
o To operate the Separate Account in any form permitted by law.
o To take any action necessary to comply with or obtain and continue any
exemptions under the law.
o To 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 To substitute for the Portfolio shares in any investment division, the
shares of another class of the Metropolitan Fund, Zenith Fund or the
shares of another investment company or any other investment permitted by
law.
27
<PAGE>
o To change the way we assess charges, but without increasing the aggregate
amount charged to the Separate Account specified in your contract and any
currently available portfolio in connection with the Income Annuity.
o To 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 in which you have made an allocation, we will notify you of
the change. You may then make a new choice of investment divisions. Where
required by law, we will ask your approval before making any technical changes.
Voting Rights
Based on our current view of applicable law, you have voting interests under
your Income Annuity concerning Metropolitan Fund or Zenith Fund proposals that
are subject to a shareholder vote. Therefore, you are entitled to give us
instructions for the number of shares which are deemed attributable to your
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.
You will be entitled to give instructions regarding the votes attributable to
your Income Annuity in your sole discretion. Neither the Separate Account nor
MetLife has any duty to inquire as to the instructions received or your
authority to give instructions; thus, as far as the Separate Account, and any
others having voting interests in respect of the Separate Account are concerned,
such instructions are valid and effective.
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
your voting instructions, we will vote your interest in the same proportion as
represented by the votes we receive from other investors. Shares of the
Metropolitan Fund or Zenith 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:
o The shares for which voting instructions are received, and
o The shares 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.
28
<PAGE>
Who Sells the Income Annuity
The Income Annuity is sold through individuals who are our licensed sales
representatives. We are registered with the Securities and Exchange Commission
as a broker-dealer under the Securities Exchange Act of 1934. We are also a
member of the National Association of Securities Dealers, Inc. Income Annuities
are also sold through other registered broker-dealers. They also may be sold
through the mail or over the Internet.
Our licensed sales representatives who sell the Income Annuity may be
compensated for these sales by us. Other broker-dealers are paid a one-time
commission consisting of the front-end sales load deducted from purchase
payments. We remit to the broker-dealer the entire front-end sales load charge.
The broker-dealer's sales commission is 5%. MetLife pays its own distribution
costs from the Separate Account charge.
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 independant auditors, audit these financial statements.
Your Spouse's Rights
If you received your contract through a qualified retirement plan and your plan
is subject to ERISA (the Employee Retirement Income Security Act of 1974) and
you are married, the income payments and payment of the death benefit under your
Income Annuity may be subject to your spouse's rights.
If your benefit is worth $5,000 or less, your plan may provide for distribution
of your entire interest in a lump sum without your spouse's consent.
For details or advice on how the law applies to your circumstances, consult your
tax advisor or attorney.
Income Taxes
The following information on taxes is a general discussion of the subject. It is
not intended as tax advice. The Internal Revenue Code ("Code") is complex and
subject to change regularly. Consult your own tax advisor about your
circumstances, any recent tax developments, and the impact of state income
taxation. You are responsible for determining whether your purchase of an Income
Annuity, income payments under theIncome Annuity and other transactions under
the contract satisfy applicable tax laws.
29
<PAGE>
Tax rules vary according to whether the contract is a non-qualified or qualified
contract. We have divided the following tax discussion into these two
categories. The qualified Income Annuity is intended to pay out benefits under a
tax qualified retirement plan or arrangement or to satisfy tax requirements for
a "rollover IRA". You need to know the Code section under which your plan or
arrangement intends to qualify, because different tax sections have different
requirements. For the purposes of this Prospectus, a "qualified" contract
includes Section 403(b)("TSAs"), Section 457(b) (state and local government
plans and tax-exempt organizations), Section 401(a) ("corporate and Keogh
plans"), Section 403(a) annuity plans, Traditional IRAs (including contracts
issued under a Simplified Employee Pension or "SEP") and SIMPLE IRAs.
We do not expect to incur Federal, state or local income taxes on the earnings
or realize capital gains attributable to the Separate Account. However, if we do
incur such taxes in the future, we reserve the right to charge amounts allocated
to the Separate Account for these taxes.
General Tax Information for All Income Annuities
Income Payments
When income paymentsare made from your Income Annuity (whether to you or your
beneficiary), some or all of the payments will be included in your taxable
income. The amount treated as taxable income differs depending on the type of:
o annuity you purchase (e.g., non-qualified or qualified), and
o income type you elect.
[GRAPHIC OMITTED]
Because of the potential penalty tax, it may not be suitable for you to purchase
an Income Annuity if you plan on receiving income payments before you reach age
59 1/2.
Income Payments Before Age 59 1/2
If you receive income payments from your Income Annuity before you reach age
59 1/2, this amount may be subject to a 10% penalty tax, in addition to ordinary
income taxes. The penalty tax under SIMPLE IRAs is generally increased from 10%
to 25% for income payments made within the first two years of an employee's
participation in an employer's SIMPLE IRA plan.
Some distributions prior to age 59 1/2 are exempt from the penalty. Some of
these exceptions include amounts received:
o For non-qualified income annuities providing a series of substantially
equal periodic payments made annually (or more frequently) over the
payment period;
30
<PAGE>
o For both non-qualified and qualified income annuities as part of a series
of substantially equal payments made annually (or more frequently) for
your life or life expectancy or for the joint lives or joint life
expectancies of you and your designated beneficiary. You must also be
separated from the service of your employer at the time you receive the
income payments under TSAs, Section 403(a) annuity plans, and corporate
and Keogh plans.
It is unclear whether the income payments under the Income Annuity atisfy an
exception to the penalty tax. Accordingly, if you have not reached age 59 1/2,
you should consult a tax advisor prior to purchasing the Income Annuity
After-tax means that your purchase payments for your annuity do not reduce your
taxable income or give you a tax deduction.
Non-Qualified Annuities
o A purchase payment for a non-qualified contract is on an "after-tax"
basis, so you pay income taxes on income payments only on your earnings
under the contract. Generally, these earnings are taxed when received from
the contract.
o The Income Annuity may accept as a purchase payment an after-tax
contribution, a Section 1035 tax-free exchange or any other tax-free
transfer permitted under the Federal tax laws. It may also be used to
annuitize one of our existing annuity contracts.
o When a non-natural person owns a non-qualified contract, the Income
Annuity will generally not be treated as an annuity for tax purposes and
gains under the contract will be subject to immediate taxation as ordinary
income. Corporations and certain other entities are generally considered
non-natural persons. However, an Income Annuity owned by a non-natural
person as agent for an individual will be treated as an annuity for tax
purposes. There is also an exception for some types of immediate annuities
owned by non-natural persons. It is not certain whether this Income
Annuity meets this exception. Accordingly, such entities should consult
their tax advisor prior to the purchase of the Income Annuity.
o In some circumstances, annuities issued after October 21, 1988 by the same
insurance company (or an affiliate) in the same year are combined for
certain tax purposes. As a result, a greater portion of your income
payments may be considered taxable income than you would otherwise expect.
[GRAPHIC OMITTED]
Diversification
In order for a non-qualified contract to be considered an annuity contract for
Federal income tax purposes, we must comply with certain diversification
standards with respect to the investments underlying the contract. We believe
that we satisfy and will continue to satisfy these
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<PAGE>
diversification standards. Inadvertent failure to meet these standards may be
correctable. Failure to meet these standards would result in immediate taxation
to contract holders of gains under their contract.
Changes to tax rules and interpretations
Changes in applicable tax rules and interpretations can adversely affect the tax
treatment of the Income Annuity. These changes may take effect retroactively.
Examples of changes that could create adverse tax consequences include:
o Possible taxation of reallocations between investment divisions and
between an investment division and the Fixed Payment Option.
o Possible taxation as if you were the owner of your portion of the Separate
Account's assets.
o Possible limits on the number of investment divisions available or the
frequency of reallocations among them.
Income Payments
Income payments are subject to an "excludable amount" which determines how much
of each payment is treated as:
o A non-taxable return of your purchase payment; and
o A taxable payment of earnings.
[GRAPHIC OMITTED]
The Internal Revenue Service (the "IRS") has not specifically approved the use
of a method to calculate an excludable amount with respect to a variable income
annuity where reallocations are permitted between investment divisions or
between an investment division and the Fixed Payment Option.
We generally will tell you how much of each income payment is a non-taxable
return of your purchase payment. However, itis possible that the IRS could
conclude that the taxable portion of income payments under a non-qalified
contract is an amount greater (or less) than the taxable amount determined by us
and reported by us to you and the IRS. Generally, once the total amount treated
as a non-taxable return of your purchase payment equals your purchase payment
(reduced by any refund or guarantee feature as required under Federal tax law),
then all remaining payments are fully taxable. We will withhold a portion of the
taxable amount of your income payment for income taxes, unless you elect
otherwise. The amount we withhold is determined by the Code.
After Death
If you (the owner or any annuitant) die before payments under the Income Annuity
begin, we must make payment of your entire interest in the contract within five
years of the date of your death.
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<PAGE>
If you die on or after the date that income payments begin, payments must
continue to be made at least as rapidly as before your death in accordance with
the income type selected.
If you die after income payments begin but before your purchase payment is
returned, the unreturned amount may be deductible on your final income tax
return or excluded from income by your beneficiary if income payments continue
after your death.
Qualified Annuities
General
This Income Annuity is intended to accept a single purchase payment from your
employer's plan, accrued plan benefit or a tax-free transfer or rollover from
your employer's plan or from another plan permitted under the Code. This type of
purchase payment is generally not subject to the annual limits on purchase
payments which otherwise apply to contributions under these types of plans.
Generally, income payments must commence prior to the date that you must begin
receiving distributions from the qualified plan. Under certain circumstances,
however, we may also accept the purchase payment after that date.
Generally, your qualified Income Annuity can accept deductible (or pre-tax) and
non-deductible (after-tax) purchase payments. Deductible or pre-tax purchase
payments will be taxable when distributed from the contract.
o Your annuity is generally not forfeitable (e.g., not subject to claims of
your creditors) and you may not transfer it to someone else.
[GRAPHIC OMITTED]
We are not responsible for determining if your employer's plan or arrangement
satisfies the requirements of the Code and/or ERISA.
Income Payments
Income payments are included in taxable income except for the portion that
represents a return of non-deductible purchase payments. This portion is
determined based on a ratio of the non-deductible purchase payment to the total
value of your plan benefit or account balance. In some cases (e.g., IRAs and
TSAs), plan benefits or account balances may be aggregated.
We will withhold a portion of the taxable amount of your income payment for
income taxes, unless you elect otherwise. The amount we withhold is determined
by the Code.
Minimum Distribution Requirements
o For Traditional and Simple IRAs and SEPs, you must begin receiving
distributions by April 1st of the calendar year following the year in
which you turn 70 1/2. For plans or arrangements other than IRAs or SEPs
33
<PAGE>
(e.g., TSAs, Section 403(a) annuity plans, and corporate and Keogh plans),
you must generally begin receiving distributions by April 1st of the
calendar year following the later of (1) the year in which you reach 701/2
or (2) the year in which you retire. Complex rules apply to the
determination of the amount of these distributions. These rules limit the
income payment types available under a qualified contract and the
guaranteed period over which income payments can be made (if such a period
is selected). A tax penalty of 50% applies to distributions which should
have been taken but were not. It is uncertain whether your income payments
under the Income Annuity meet these minimum distribution requirements, and
MetLife is seeking guidance from the IRS. You should consult a tax advisor
prior to purchasing the contract as a Traditional IRA, SEP or SIMPLE IRA,
or in connection with TSAs, Section 403(a) annuity plans or corporate and
Keogh plans.
After Death
If you (the owner or any annuitant) die before income payments begin, we must
make payment of your entire interest in the contract within five years after
your death.
If you die on or after the first income payment date, income payments must con
tinue at least as rapidly as under the distribution method in effect at your
death.
Additional Considerations for Certain Qualified Arrangements
SIMPLE IRAs
Once purchase payments are made under the SIMPLE IRA rules, your SIMPLE IRA
generally operates as if it were a Traditional IRA.Additionally, you may not
make a direct transfer or a rollover from a SIMPLE IRA into a Traditional IRA
during the initial two year period in which you participated in the SIMPLE IRA
plan of your employer, nor can you make a direct transfer of or a rollover from
a Traditional IRA into a SIMPLE IRA at any time.
Defined Benefit Plans
MetLife has asked the IRS to rule that the tax qualified status of a defined
benefit plan will not be adversely affected by the purchase of the Income
Annuity to distribute benefits under the plan. In addition, we have asked the
IRS for a ruling that the Income Annuity is not a "variable annuity" requiring
an actuarial adjustment to the plan's benefits pursuant to Section 415(b)(2)(B)
of the Code and Rev. Rul. 76-47. We do not know whether the IRS will issue
either of the requested rulings. You should consult a tax advisor prior to
purchasing the Income Annuity for use in connection with a defined benefit plan.
34
<PAGE>
Mandatory 20% Withholding on Certain Qualified Plans and Arrangements
For a qualified Income Annuity issued in connection with TSAs, Section 403(a)
annuity plans, and corporate and Keogh plans, we are required to withhold 20% of
any income payment that constitutes an "eligible rollover distribution" for
Federal income taxes. We are not required to withhold this money if you direct
us, the trustee or the custodian of the plan to directly rollover your eligible
rollover distribution to a Traditional IRA or another eligible retirement plan.
Generally, income payments made on or after the required beginning date (as
previously discussed in "Minimum Distribution Requirements") are not eligible
rollover distributions. Additionally, payments under certain types of income
annuities are not treated as eligible rollover distributions. We or your
qualified plan administrator will notify you if an income payment is an eligible
rollover distribution.
TSAs
Payments generally cannot be made from a TSA prior to age 59 1/2, unless the
participant dies, becomes disabled or separates from service with his or her
employer. Accordingly, if you have not reached age 59 1/2, you should consult a
tax advisor prior to purchasing the Income Annuity.
Section 457(b)
Rules similar to the minimum distribution requirements apply to Section 457(b)
plans. Additionally, the Code requires that the payments under such plans must
be non-increasing. For these plans, the required beginning date is generally
April 1st following the later of: (1) the calendar year in which you reach age
70 1/2 or (2) the calendar year in which you retire. It is uncertain whether
income payments from the qualified Income Annuity meet these distribution
requirements. Consequently, you or the plan administrator should consult a tax
advisor prior to purchasing the contract in connection with the payment of plan
benefits.
Income payments made to a plan participant under a Section 457(b) plan are
generally subject to the Federal income tax rules applicable to wages (including
withholding) and not to the rules and withholding election under annuity
contracts.
Generally, an Income Annuity can not be purchased for you until you:
o reach age 70 1/2;
o separate from service; or
o as otherwise provided under the code and regulations.
[GRAPHIC OMITTED]
35
<PAGE>
Table of Contents for the Statement of Additional Information
Page
Cover Page ........................................................... 1
Table of Contents .................................................... 1
Independent Auditors ................................................. 2
Distribution of Certificates and Interests in the
Income Annuity ................................................. 2
Sample Calculation Illustrating
How the Adjustment Factor Is Determined and
Applied to Income Payments ..................................... 3
Investment Management Fees ........................................... 4
Voting Rights ........................................................ 6
Performance Data and Advertisement of
the Separate Account ........................................... 7
Financial Statements of the Separate Account ......................... F-1
Financial Statements of MetLife (consolidated) ....................... F-28
Financial Statements of MetLife (unaudited) .......................... F-65
[GRAPHIC OMITTED]
36
<PAGE>
Appendix
Premium Tax Table
If you are a resident of one of the following jurisdictions, the percentage
amount listed by the jurisdiction is the premium tax rate applicable to your
Income Annuity.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Corporate
Non- IRA & SEP Section and Section
Qualified (1) TSA 403(a) Keogh 457(b)
<S> <C> <C> <C> <C> <C> <C>
California .......... 2.35% .5%(2) .5% .5% .5% 2.35%
Maine ............... 2.0% -- -- -- -- --
Nevada .............. 3.5% -- -- -- -- --
Puerto Rico ......... 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
South Dakota ........ 1.25% -- -- -- -- --
West Virginia ....... 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Wyoming ............. 1.0% -- -- -- -- --
</TABLE>
----------
(1) Premium tax rates applicable to Income Annuities purchased for use in
connection with individual retirement trust or custodial accounts meeting
the requirements of ss.408(a) of the Code are included under the column
headed "IRA and SEP."
(2) With respect to Income Annuities purchased for use in connection with
individual retirement trust or custodial accounts meeting requirements of
ss.408(a) of the Code, the annuity tax rate in California is 2.35% instead
of 0.5%.
PEANUTS(C) United Feature Syndicate, Inc.
(C) 2000 Metropolitan Life Insurance Company
37
<PAGE>
Request For a Statement of
Additional Information/Change of Address
If you would like any of the following Statements of Additional Information, or
have changed your address, please check the appropriate box below and return to
the address below.
|_| Metropolitan Life Separate Account E, Metropolitan Series Fund Inc. and
New England Zenith Fund
|_| I have changed my address. My current address is:
____________________________________ Name_________________________________
(Contract Number)
Address_________________________________
____________________________________ _________________________________
(Signature) zip
Metropolitan Life Insurance Company
200 Park Avenue, Area 5N
New York, New York 10166-0188
Attention: MetLife Retirement Group
38
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
METROPOLITAN LIFE SEPARATE ACCOUNT E
METLIFE INCOME SECURITY PLAN(SM)
A VARIABLE INCOME ANNUITY
STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 PART B
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 Income Security Plan, A Variable Income Annuity and
should be read in conjunction with the Prospectus. Copies of the Prospectus may
be obtained from Metropolitan Life Insurance Company, MetLife Retirement Group,
200 Park Avenue, Area 5N, New York, New York 10166-0188.
A Statement of Additional Information for the Metropolitan Series Fund, Inc.
and the Zenith Fund 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 Income Security Plan, A Variable
Income Annuity.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors ................................................... 2
Distribution of Certificates and Interests in the Income Annuity ....... 2
Sample Calculation Illustrating How the Adjustment Factor Is Determined
and Applied to Income Payments ......................................... 3
Investment Management Fees ............................................. 4
Voting Rights .......................................................... 6
Performance Data and Advertisement of the Separate Account ............. 7
Financial Statements of the Separate Account ........................... F-1
Financial Statements of MetLife (consolidated) ......................... F-28
Financial Statements of MetLife (unaudited) ............................ F-65
</TABLE>
<PAGE>
INDEPENDENT AUDITORS
The financial statements for the Separate Account for the period ended
December 31, 1999 included in this Statement of Additional Information have been
audited by Deloitte & Touche LLP, 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.
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
individuals who are licensed sales representatives. We are registered with the
Securities and Exchange Commission as a broker-dealer under the Securities Act
of 1934. We are also a member of the National Association of Securities Dealers,
Inc. Income Annuities are also sold through other registered broker-dealers.
They may also be sold through the mail. Our licensed sales representatives who
sell the Income Annuity may be compensated for these sales by us. Other
broker-dealers are paid sales commissions from the front-end sales load deducted
from the purchase payments. We remit to the broker-dealer the entire front-end
sales load charge. The broker-dealer's sales commission is 5%. Metlife pays its
own distribution costs from the Separate Account Charge.
The offering of the Income Annuity is continuous. In certain situations, the
Income Annuity may not include all investment choices or the Fixed Payment
Option. Each contract will indicate the available choices.
2
<PAGE>
CALCULATING YOUR INCOME PAYMENTS
Sample Calculation Illustrating How the
Adjustment Factor Is Determined
and Applied to the Income Payments
<TABLE>
<CAPTION>
<S> <C> <C>
Example of Calculation of Investment Factor
a. Assumed net investment performance for the
period (.65%) ................................ 1.00650
b. Assumed interest rate (as specified in your
contract) as of the last valuation date ...... 7.1%
c. Adjustment based on assumed interest rate for
the period(1) ................................ 0.99467
d. Investment factor (a) x (c) .................. 1.00114
Example of Calculation of Interest Factor
a. Annuity purchase rate based on prior interest
rate (7.1%)(2) ............................... 122.32996
b. Annuity purchase rate based on current
interest rate (7.2%)(3) ...................... 121.37388
c. Interest Factor (a) / (b) .................... 1.00788
Life annuity for male, age 65
a. First monthly variable income payment due
February 1, 2000 ............................. $400.00
b. Assumed investment factor for first month* ... 1.00114
c. Assumed interest factor for first month* ..... 1.00788
d. Adjustment factor (b) x (c) .................. 1.00903
e. Second monthly variable income payment due
March 1, 2000 (a) x (d). ..................... $403.61
f. Assumed investment factor for second month* .. .99981
g. Assumed interest factor for second month* .... .97665
h. Adjustment factor (f) x (g) .................. .97646
i. Third monthly variable income payment due
April 1, 2000 (e) x (h) ...................... $394.11
</TABLE>
---------------
Notes:
(1) Approximately one month.
(2) This is the annuity purchase rate in effect on the prior valuation date,
based on your future annuity income, age as of the prior valuation date, and
the interest rate (as specified in your contract) as of the prior valuation
date.
(3) This is the annuity purchase rate in effect on the prior valuation date,
based on your future annuity income, age as of the prior valuation date, and
the interest rate as of the current valuation date. However, the interest
rate as of the current valuation date is adjusted to reflect the interest
rate as of the prior valuation date for the time period from the prior
valuation date to the current valuation date.
*Calculated on the income determination date which is 10 days prior to the date
the income payment is made.
3
<PAGE>
INVESTMENT MANAGEMENT FEES
Metropolitan Life Insurance Company
Each of the currently available Metropolitan Fund Portfolios pays us, the
investment manager of the Metropolitan Fund, an investment management fee. The
following table shows the fee schedules for the investment management fees for
the Metropolitan Fund as a percentage per annum of the average net assets for
each Portfolio.
<TABLE>
<CAPTION>
Investment
Management
Fee
Average Schedule--
Daily Net % Per
Portfolio Assets Annum
--------- ------ -----
<S> <C> <C>
State Street Research Growth ............. 1st $500 million 0.55%
next $500 million 0.50%
over $1 billion 0.45%
State Street Research Income ............. 1st $250 million 0.35%
next $250 million 0.30%
over $500 million 0.25%
State Street Research Diversified ........ 1st $500 million 0.50%
next $500 million 0.45%
over $1 billion 0.40%
State Street Research Aggressive Growth .. 1st $500 million 0.75%
next $500 million 0.70%
over $1 billion 0.65%
Putnam Large Cap Growth .................. 1st $500 million 0.80%
next $500 million 0.75%
over $1 billion 0.70%
State Street Research Aurora Small Cap
Value .................................... 1st $500 million 0.85%
next $500 million 0.80%
over $1 billion 0.75%
Putnam International Stock (formerly
Santander International Stock) ........... 1st $500 million 0.90%
next $500 million 0.85%
over $1 billion 0.80%
Loomis Sayles High Yield Bond ............ All assets 0.70%
T. Rowe Price Small Cap Growth ........... 1st $100 million 0.55%
next $300 million 0.50%
over $400 million 0.45%
T. Rowe Price Large Cap Growth ........... 1st $50 million 0.70%
over $50 million 0.60%
Janus Mid Cap ............................ 1st $100 million 0.75%
next $400 million 0.70%
over $500 billion 0.65%
Scudder Global Equity .................... 1st $50 million 0.90%
next $50 million 0.55%
next $400 million 0.50%
over $500 million .475%
Harris Oakmark Large Cap Value ........... 1st $250 million 0.75%
over $250 million 0.70%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Investment
Management
Fee
Average Schedule--
Daily Net % Per
Portfolio Assets Annum
--------- ------ -----
<S> <C> <C>
Neuberger Berman Partners Mid Cap Value .. 1st $100 million 0.70%
next $250 million .675%
next $500 million 0.65%
next $750 million .675%
over $1.6 billion 0.60%
MetLife Stock Index ...................... All Assets 0.25%
Lehman Brothers Aggregate Bond Index. .... All Assets 0.25%
Russell 2000 Index ....................... All Assets 0.25%
Morgan Stanley EAFE Index ................ All Assets 0.30%
MetLife Mid Cap Stock Index .............. All Assets 0.25%
</TABLE>
We pay the following entities for providing services as sub-investment
manager of the portfolio(s) indicated:
<TABLE>
<CAPTION>
Sub-Investment Manager Portfolio(s)
--------------------- ------------
<S> <C>
State Street Research & Management State Street Research Income
Company(1) ............................... State Street Research Diversified
State Street Research Growth
State Street Research
Aggressive Growth
State Street Research Aurora
Small Cap Value
Putnam Investment Management, Inc. ....... Putnam Large Cap Growth
Putnam International Stock
Loomis, Sayles & Company, L.P. ........... Loomis Sayles High Yield Bond
Janus Capital Corporation ................ Janus Mid Cap
T. Rowe Price Associates, Inc. ........... T. Rowe Price Small Cap Growth
T. Rowe Price Large Cap Growth
Scudder Kemper Investments, Inc. ......... Scudder Global Equity
Harris Associates, L.P. .................. Harris Oakmark Large Cap Value
Neuberger Berman Management Incorporated . Neuberger Berman Partners Mid
Cap Value
</TABLE>
---------------
(1) State Street Research & Management Company is one of our subsidiaries.
5
<PAGE>
The Zenith Fund pays an investment management fee to New England Investment
Management, Inc. ("NEIM") to serve as investment manager to the Davis Venture
Value Series and the Loomis Sayles Small Cap Series.
The Zenith Fund pays as a percentage per annum of the average net assets the
following:
<TABLE>
<CAPTION>
Investment
Management
Average Fee
Daily Net % Per
Series Assets Annum
------ ------ -----
<S> <C> <C>
Davis Venture Value .................. All Assets .75%
Loomis Sayles Small Cap .............. 1st $500 million .85%
over $500 million .90%
</TABLE>
NEIM pays sub-investment advisory fees to Davis Selected Advisers, L.P. for
the Davis Venture Value Series and Loomis Sayles & Company, L.P. for the
Loomis Sayles Small Cap Series. These fees are solely the responsibility of
the NEIM.
The Metropolitan Fund and the Zenith Fund, are more fully described in their
respective prospectuses and the Statements of Additional Information that the
prospectuses refer to. The Metropolitan Fund's and the Zenith Fund prospectuses
are attached at the end of the prospectus. The SAIs are available upon request.
See the prospectuses for the Metropolitan Fund and Zenith Fund for a
discussion of the different separate accounts of MetLife and its affiliated
insurance companies that invest in the Metropolitan Fund and Zenith Fund and the
risk related to that arrangement.
VOTING RIGHTS
In accordance with our view of the present applicable law, we will vote the
shares of each of the portfolios held by the Separate Account which are deemed
attributable to the Income Annuity described in the Prospectus or at regular and
special meetings of the shareholders of the portfolio based on instructions
received from those having the voting interest in corresponding investment
divisions of the Separate Account. However, if the 1940 Act or any rules
thereunder should be amended or if the present interpretation thereof should
change, and as a result we determine that we are permitted to vote the shares of
the portfolios in our own right, we may elect to do so.
Accordingly, you have voting interests under all the Income Annuity described
in the Prospectus. The number of shares held in each Separate Account investment
division deemed attributable to your Income Annuity is determined by dividing
the value of your Income Annuity attributable to you in that investment
division, if any, by the net asset value of one share in the portfolio in which
the assets in that Separate Account investment division are invested. Fractional
votes will be counted. The number of shares for which you have the right to give
instructions will be determined as of the record date for the meeting.
Portfolio shares held in each registered separate account of MetLife or any
affiliate that are or are not attributable to life insurance policies or
annuities (including the Income Annuity described in the Prospectus) and for
which no timely instructions are received will be voted in the same proportion
as the shares for which voting instructions are received by that separate
account. Portfolio shares held in the general accounts or unregistered separate
accounts of MetLife or its affiliates will be voted in the same proportion as
the aggregate of (i) the shares for which voting instructions are received and
(ii) the shares that are voted in proportion to such voting instructions.
However, if we or an affiliate determine that we are permitted to vote any such
shares, in our own right, we may elect to do so subject to the then current
interpretation of the 1940 Act or any rules thereunder.
6
<PAGE>
You will be entitled to give instructions regarding the votes attributable to
your Income Annuity, in your sole discretion.
You may give instructions regarding, among other things, the election of the
board of directors, ratification of the election of independent auditors, and
the approval of investment and sub-investment managers.
Disregarding voting instructions
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 advisor or principal underwriter or any portfolio which may be
initiated by those having voting interests or the Metropolitan Fund's or Zenith
Fund's, boards 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.
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, or
"average annual total return" or some combination of the foregoing. Yield, and
average annual total return figures are based on historical earnings and are not
intended to indicate future performance. 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. Annualized change in value
(i.e., average annual total return) calculations reflect all Separate Account
charges. These figures also assume a steady annual rate of return.
We may demonstrate hypothetical values of annuity benefits (e.g. beginning
with an initial annuity benefit of $500) over a specified period based on
historical net asset values of the Portfolios and the historical specified
interest rates. These presentations reflect the investment and interest factors
deduction of the Separate Account charge and the investment-related charge. We
may assume that the Income Annuity was in existence prior to its inception date.
When we do so, we calculate performance based on the historical performance of
the underlying Portfolio for the period before the inception date of the Income
Annuity. We use the actual annuity unit data after the inception date.
Historical performance information should not be relied on as a guarantee of
future performance results.
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(R) and The Wall Street Journal. The
Separate Account may
7
<PAGE>
also advertise its performance in comparison to appropriate indices, such as the
Standard & Poor's 500 Composite Stock Price Index, the Standard & Poor's MidCap
400 Index, the Standard & Poor's 600 Index, the Russell 2000(R) Index, the
Russell 2000(R) Growth Index, the Russell 2000(R) Value Index, the Lehman
Brothers Aggregate Bond Index, and/or the Lehman Brothers Government/ Corporate
Bond Index, the Merrill Lynch High Yield Bond Index, the Morgan Stanley Capital
International All Country World Index and the Morgan Stanley Capital
International Europe, Australasia, Far East Index.
The following data for the Portfolios has been restated to reflect the
deduction of the .95% Separate Account charge and the investment-related charge
for the period before the inception date of the Income Annuity.
Average Annual Total Return for the Portfolios of the Metropolitan Series
Fund and the Zenith Fund for the Period Ending 12/31/99 For periods of 1, 5, and
10 years (or since inception) as applicable.
<TABLE>
<CAPTION>
5 Year 10 Year
(or inception (or inception
Portfolio Inception Date 1 Year if less) if less)
--------- ------------- ----- ------- -------
<S> <C> <C> <C> <C>
Lehman Brothers Aggregate Bond Index................... 11/9/98 5.63% 2.61% NA
State Street Research Income........................... 3/1/85 5.23% 5.24% 7.29%
State Street Research Diversified...................... 7/25/86 13.84% 13.82% 13.26%
MetLife Stock Index.................................... 5/1/90 11.89% 20.03% 17.87%
Harris Oakmark Large Cap Value......................... 11/9/98 -6.12% -5.98% NA
T. Rowe Price Large Cap................................ 11/9/98 28.10% 21.10% NA
State Street Research Growth........................... 3/1/85 22.11% 20.57% 18.18%
Davis Venture Value.................................... 7/5/00 1.47%* NA NA
Putnam Large Cap Growth................................ 7/5/00 -2.24%* NA NA
MetLife Mid Cap Stock Index............................ 7/5/00 11.20%* NA NA
Neuberger Berman Partners Mid Cap Value................ 11/9/98 36.69% 24.14% NA
Janus Mid Cap.......................................... 3/3/97 50.19% 43.11% NA
State Street Research Aggressive Growth................ 4/29/88 53.89% 12.86% 18.98%
Loomis Sayles High Yield Bond.......................... 3/3/97 10.92% 4.68% NA
Russell 2000u Index.................................... 11/9/98 21.90% 15.77% NA
T. Rowe Price Small Cap Growth......................... 3/3/97 28.36% 13.17% NA
Loomis Sayles Small Cap................................ 7/5/00 5.22%* NA NA
State Street Research Aurora Small Cap Value........... 7/5/00 9.20%* NA NA
Scudder Global Equity.................................. 3/3/97 10.99% 11.68% NA
Morgan Stanley EAFEu Index............................. 11/9/98 1.30% 8.51% NA
Putnam International Stock............................. 7/1/91 -0.17% 3.95% 6.12%
</TABLE>
---------------
*Less than one year not annualized.
8
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Contractholders of
Metropolitan Life Separate Account E:
We have audited the accompanying statement of assets and liabilities of
Metropolitan Life Separate Account E (including the State Street Research
Growth, State Street Research Income, State Street Research Money Market,
State Street Research Diversified, Variable B, Variable C, Variable D, 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(R) Index, Russell
2000(R) Index, Fidelity Money Market, Fidelity Equity-Income, Fidelity Growth,
Fidelity Overseas, Fidelity Investment Grade Bond, Fidelity Asset Manager,
Calvert Social Balanced and the Calvert Social Mid Cap Growth Divisions,
collectively the "Separate Account E") as of December 31, 1999, the related
statements of operations for the year then ended, and the statements of
changes in net assets for years ended December 31, 1999 and 1998. These
financial statements are the responsibility of the Separate Account E's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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. Our
procedures included confirmation of securities owned as of December 31, 1999,
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, the financial statements referred to above present fairly, in
all material respects, the financial position of the Separate Account E as of
December 31, 1999, the results of its operations and changes in its net assets
for the years ended December 31, 1999 and 1998 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
March 3, 2000
1
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<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
(77,691,420 Shares;
cost $2,369,169,265)... $2,943,335,593 -- -- --
State Street Research
Income Portfolio
(33,927,963 Shares;
cost $432,000,031)..... -- $396,278,612 -- --
State Street Research
Money Market Portfolio
(1,386,327 Shares; cost
$14,662,649)........... -- -- $14,338,780 --
State Street Research
Diversified Portfolio
(135,123,188 Shares;
cost $2,236,243,719)... -- -- -- $2,468,700,640
State Street Research
Aggressive Growth
Portfolio
(34,466,893 Shares;
cost $919,522,846)..... -- -- -- --
MetLife Stock Index
Portfolio
(94,736,586 Shares;
cost $2,525,501,665)... -- -- -- --
Santander International
Stock Portfolio
(18,942,941 Shares;
cost $257,448,652)..... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(6,073,840 Shares; cost
$59,810,704)........... -- -- -- --
Janus Mid Cap Portfolio
(48,516,692 Shares;
cost $1,066,602,135)... -- -- -- --
T.Rowe Price Small Cap
Growth Portfolio
(14,546,010 Shares;
cost $176,447,578)..... -- -- -- --
Scudder Global Equity
Portfolio
(10,218,341 Shares;
cost $125,516,194)..... -- -- -- --
Harris Oakmark Large Cap
Value Portfolio
(3,722,279 Shares; cost
$37,664,217)........... -- -- -- --
Neuberger Berman
Partners Mid Cap Value
Portfolio
(2,633,587 Shares; cost
$31,258,158)........... -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(3,481,175 Shares; cost
$40,642,372)........... -- -- -- --
Lehman Brothers
Aggregate Bond Index
Portfolio
(8,252,388 Shares; cost
$81,657,758)........... -- -- -- --
Morgan Stanley EAFE
Index Portfolio
(4,007,541 Shares; cost
$46,807,364)........... -- -- -- --
Russell 2000 Index
Portfolio
(5,705,319 Shares; cost
$61,816,817)........... -- -- -- --
Total investments...... 2,943,335,593 396,278,612 14,338,780 2,468,700,640
Cash.................... -- -- -- --
-------------- ------------ ----------- --------------
Total assets........... 2,943,335,593 396,278,612 14,338,780 2,468,700,640
LIABILITIES............. -- -- -- 81
-------------- ------------ ----------- --------------
NET ASSETS.............. $2,943,335,593 $396,278,612 $14,338,780 $2,468,700,559
============== ============ =========== ==============
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
State Street Loomis
Research MetLife Santander 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>
$93,941,724 $3,523,461 $41,395 -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- $1,325,252,021 -- -- --
-- -- -- -- $3,845,358,027 -- --
-- -- -- -- -- $262,738,596 --
-- -- -- -- -- -- $55,211,208
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
-- -- -- -- -- -- --
93,941,724 3,523,461 41,395 1,325,252,021 3,845,358,027 262,738,596 55,211,208
-- -- -- 15 -- -- --
----------- ---------- ------- -------------- -------------- ------------ -----------
93,941,724 3,523,461 41,395 1,325,252,036 3,845,358,027 262,738,596 55,211,208
-- -- -- -- 36 -- --
----------- ---------- ------- -------------- -------------- ------------ -----------
$93,941,724 $3,523,461 $41,395 $1,325,252,036 $3,845,357,991 $262,738,596 $55,211,208
=========== ========== ======= ============== ============== ============ ===========
</TABLE>
3
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
T. Rowe Harris
Price Scudder Oakmark
Janus Small Cap Global Large Cap
Mid Cap Growth Equity 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
(77,691,420 Shares; cost
$2,369,169,265)......... -- -- -- --
State Street Research
Income Portfolio
(33,927,963 Shares; cost
$432,000,031)........... -- -- -- --
State Street Research
Money Market Portfolio
(1,386,327 Shares; cost
$14,662,649)............ -- -- -- --
State Street Research
Diversified Portfolio
(135,123,188 Shares;
cost $2,236,243,719).... -- -- -- --
State Street Research
Aggressive Growth
Portfolio
(34,466,893 Shares; cost
$919,522,846)........... -- -- -- --
MetLife Stock Index
Portfolio
(94,736,586 Shares; cost
$2,525,501,665)......... -- -- -- --
Santander International
Stock Portfolio
(18,942,941 Shares; cost
$257,448,652)........... -- -- -- --
Loomis Sayles High Yield
Bond Portfolio
(6,073,840 Shares; cost
$59,810,704)............ -- -- -- --
Janus Mid Cap Portfolio
(48,516,692 Shares; cost
$1,066,602,135)......... $1,772,799,944 -- -- --
T.Rowe Price Small Cap
Growth Portfolio
(14,546,010 Shares; cost
$176,447,578)........... -- $228,808,731 -- --
Scudder Global Equity
Portfolio
(10,218,341 Shares; cost
$125,516,194)........... -- -- $152,355,460 --
Harris Oakmark Large Cap
Value Portfolio
(3,722,279 Shares; cost
$37,664,217)............ -- -- -- $33,239,953
Neuberger Berman Partners
Mid Cap Value Portfolio
(2,633,587 Shares; cost
$31,258,158)............ -- -- -- --
T. Rowe Price Large Cap
Growth Portfolio
(3,481,175 Shares; cost
$40,642,372)............ -- -- -- --
Lehman Brothers Aggregate
Bond Index Portfolio
(8,252,388 Shares; cost
$81,657,758)............ -- -- -- --
Morgan Stanley EAFE Index
Portfolio
(4,007,541 Shares; cost
$46,807,364)............ -- -- -- --
Russell 2000 Index
Portfolio
(5,705,319 Shares; cost
$61,816,817)............ -- -- -- --
-------------- ------------ ------------ -----------
Total investments....... 1,772,799,944 228,808,731 152,355,460 33,239,953
Cash..................... -- 44 -- --
-------------- ------------ ------------ -----------
Total assets............ 1,772,799,944 228,808,775 152,355,460 33,239,953
LIABILITIES.............. 964 -- -- 48
-------------- ------------ ------------ -----------
NET ASSETS............... $1,772,798,980 $228,808,775 $152,355,460 $33,239,905
============== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
Neuberger
Berman T. Rowe Lehman
Partners Price Brothers Morgan
Mid Cap Large Cap Aggregate Stanley Russell
Value Growth Bond Index EAFE Index 2000 Index
Division Division Division Division Division
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
$31,524,039 -- -- -- --
-- $46,682,553 -- -- --
-- -- $77,985,063 -- --
-- -- -- $53,460,599 --
-- -- -- -- $71,430,599
----------- ----------- ----------- ----------- -----------
31,524,039 46,682,553 77,985,063 53,460,599 71,430,599
10 -- -- 14 2
----------- ----------- ----------- ----------- -----------
31,524,049 46,682,553 77,985,063 53,460,613 71,430,601
-- -- -- -- --
----------- ----------- ----------- ----------- -----------
$31,524,049 $46,682,553 $77,985,063 $53,460,613 $71,430,601
=========== =========== =========== =========== ===========
</TABLE>
5
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Fidelity Fidelity Fidelity Fidelity
Money Market Equity-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 VIP Money Market
Portfolio
(10,319,078 Shares; cost
$10,319,078)............. $10,319,078 -- -- --
Fidelity VIP Equity-Income
Portfolio
(5,167,623 Shares; cost
$109,067,057)............ -- $132,859,589 -- --
Fidelity VIP Growth
Portfolio
(4,469,498 Shares; cost
$149,929,294)............ -- -- $245,509,514 --
Fidelity VIP Overseas
Portfolio
(1,278,457 Shares; cost
$31,635,802)............. -- -- -- $35,080,863
Fidelity VIP II Investment
Grade Bond Portfolio
(763,593 Shares; cost
$9,375,044).............. -- -- -- --
Fidelity VIP II Asset
Manager Portfolio
(3,222,980 Shares; cost
$50,989,152)............. -- -- -- --
Investments in Calvert
Variable Series, Inc. at
Value (Note 1A):
Calvert Social Balanced
Portfolio
(25,035,526 Shares; cost
$47,278,157)............. -- -- -- --
Calvert Social Mid Cap
Growth Portfolio
(266,845 Shares; cost
$7,492,696).............. -- -- -- --
----------- ------------ ------------ -----------
Total investments......... 10,319,078 132,859,589 245,509,514 35,080,863
Cash....................... -- -- -- --
----------- ------------ ------------ -----------
Total assets.............. 10,319,078 132,859,589 245,509,514 35,080,863
LIABILITIES................ -- -- -- --
----------- ------------ ------------ -----------
NET ASSETS................. $10,319,078 $132,859,589 $245,509,514 $35,080,863
=========== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
6
<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>
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
$9,285,286 -- -- --
-- $60,173,030 -- --
-- -- $54,302,056 --
-- -- -- $8,013,346
---------- ----------- ----------- ----------
9,285,286 60,173,030 54,302,056 8,013,346
-- -- -- --
---------- ----------- ----------- ----------
9,285,286 60,173,030 54,302,056 8,013,346
-- -- -- --
---------- ----------- ----------- ----------
$9,285,286 $60,173,030 $54,302,056 $8,013,346
========== =========== =========== ==========
</TABLE>
7
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<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)..... $312,332,694 $ 25,596,607 $673,364 $209,323,264
Expenses (Note 3)...... 34,204,641 5,344,116 219,620 30,308,765
------------ ------------ -------- ------------
Net investment income
(loss)................. 278,128,053 20,252,491 453,744 179,014,499
------------ ------------ -------- ------------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions........... 62,166,340 (1,218,121) (32,887) 28,959,695
Change in net unrealized
appreciation
(depreciation) of
investments for the
period................. 89,025,372 (34,603,213) 62,159 (39,501,729)
------------ ------------ -------- ------------
Net realized and
unrealized gain (loss)
on investments (Note
1B).................... 151,191,712 (35,821,334) 29,272 (10,542,034)
------------ ------------ -------- ------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS........ $429,319,765 $(15,568,843) $483,016 $168,472,465
============ ============ ======== ============
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
<TABLE>
<CAPTION>
State Street
Research Santander Loomis Sayles
Aggressive MetLife International High Yield
Variable B Variable C Variable D Growth Stock Index Stock Bond
Division Division Division Division Division Division Division
----------- ---------- ---------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$10,075,972 $373,385 $4,364 $ 28,442,616 $184,825,378 $41,421,269 $4,339,807
861,573 -- -- 13,929,760 41,218,438 3,063,490 573,037
----------- -------- ------ ------------ ------------ ----------- ----------
9,214,399 373,385 4,364 14,512,856 143,606,940 38,357,779 3,766,770
----------- -------- ------ ------------ ------------ ----------- ----------
8,316,913 154,760 -- 77,224,327 141,933,683 12,224,938 (1,002,119)
(3,045,574) 37,844 2,089 232,588,654 312,858,179 (13,893,204) 4,099,504
----------- -------- ------ ------------ ------------ ----------- ----------
5,271,339 192,604 2,089 309,812,981 454,791,862 (1,668,266) 3,097,385
----------- -------- ------ ------------ ------------ ----------- ----------
$14,485,738 $565,989 $6,453 $324,325,837 $598,398,802 $36,689,513 $6,864,155
=========== ======== ====== ============ ============ =========== ==========
</TABLE>
9
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
T. Rowe Harris
Price Scudder Oakmark
Janus Small Cap Global Large Cap
Mid Cap Growth Equity Value
Division Division Division Division
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2)......... $ 86,515,076 -- $ 5,157,718 $ 347,609
Expenses (Note 3).......... 9,773,157 2,107,943 1,445,714 254,434
------------ ----------- ----------- -----------
Net investment income
(loss)..................... 76,741,919 (2,107,943) 3,712,004 93,175
------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss)
from security
transactions............... 102,627,814 5,272,038 2,471,119 (89,794)
Change in net unrealized
appreciation (depreciation)
of investments for the
period..................... 631,364,390 44,474,798 21,316,192 (4,447,057)
------------ ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments
(Note 1B).................. 733,992,204 49,746,836 23,787,311 (4,536,851)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS................. $810,734,123 $47,638,893 $27,499,315 $(4,443,676)
============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
<TABLE>
<CAPTION>
Neuberger
Berman T. Rowe Lehman
Partners Price Brothers Morgan Fidelity Fidelity
Mid Cap Large Cap Aggregate Stanley Russell Money Equity-
Value Growth Bond Index EAFE Index 2000 Index Market Income
Division Division Division Division Division Division Division
---------- ---------- ----------- ---------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
$1,375,021 $ 182,727 $ 3,369,814 $ 549,558 $ 2,081,201 $179,961 $ 6,058,921
223,904 279,506 560,784 320,458 443,137 35,659 1,244,145
---------- ---------- ----------- ---------- ----------- -------- -----------
1,151,117 (96,779) 2,809,030 229,100 1,638,064 144,302 4,814,776
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
---------- ---------- ----------- ---------- ----------- -------- -----------
662,939 188,181 (65,373) 1,530,194 400,083 -- 3,770,581
163,745 5,837,101 (3,639,449) 6,558,714 9,296,566 -- (1,968,262)
---------- ---------- ----------- ---------- ----------- -------- -----------
826,684 6,025,282 (3,704,822) 8,088,908 9,696,649 -- 1,802,319
---------- ---------- ----------- ---------- ----------- -------- -----------
$1,977,801 $5,928,503 $ (895,792) $8,318,008 $11,334,713 $144,302 $ 6,617,095
========== ========== =========== ========== =========== ======== ===========
</TABLE>
11
<PAGE>
Metropolitan Life Separate Account E
STATEMENT OF OPERATIONS
For the period ended December 31, 1999
<TABLE>
<CAPTION>
Fidelity Fidelity
Fidelity Fidelity Investment Asset
Growth Overseas Grade Bond Manager
Division Division Division Division
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Dividends (Note 2)...... $18,361,174 $ 943,215 $ 490,093 $4,079,414
Expenses (Note 3)....... 1,827,739 244,700 88,708 527,898
----------- ----------- --------- ----------
Net investment income
(loss).................. 16,533,435 698,515 401,385 3,551,516
----------- ----------- --------- ----------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss)
from security
transactions............ 1,690,620 7,899,918 57,436 807,833
Change in net unrealized
appreciation
(depreciation) of
investments for the
period.................. 44,508,514 1,741,692 (641,467) 1,127,977
----------- ----------- --------- ----------
Net realized and
unrealized gain (loss)
on investments (Note
1B)..................... 46,199,134 9,641,610 (584,031) 1,935,810
----------- ----------- --------- ----------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS......... $62,732,569 $10,340,125 $(182,646) $5,487,326
=========== =========== ========= ==========
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
Calvert Calvert
Social Social Mid Cap
Balanced Growth
Division Division
---------- --------------
<S> <C>
$5,178,041 $617,370
574,129 69,135
---------- --------
4,603,912 548,235
---------- --------
603,710 276,373
13,211 (349,562)
---------- --------
616,921 (73,189)
---------- --------
$5,220,833 $475,046
========== ========
</TABLE>
13
<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,
1999 1998 1999 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)............... $ 278,128,053 $ 204,616,327 $ 20,252,491 $ 29,082,224
Net realized gain
(loss) from security
transactions......... 62,166,340 26,298,215 (1,218,121) 1,273,744
Change in net
unrealized apprecia-
tion (depreciation)
of investments....... 89,025,372 280,912,929 (34,603,213) (200,044)
-------------- -------------- ------------ ------------
Net increase (de-
crease) in net assets
resulting from opera-
tions................ 429,319,765 511,827,471 (15,568,843) 30,155,924
-------------- -------------- ------------ ------------
From capital transac-
tions:
Purchases............. 265,161,445 271,042,284 55,913,381 64,640,719
Redemptions........... (171,009,194) (122,272,961) (38,156,879) (28,530,070)
-------------- -------------- ------------ ------------
Total net purchase
payments (redemp-
tions).............. 94,152,251 148,769,323 17,756,502 36,110,649
Net portfolio trans-
fers................. (109,728,292) (26,963,363) (55,018,970) 33,277,896
Net other transfers... (406,507) (508,271) (157,467) (77,316)
-------------- -------------- ------------ ------------
Net increase
(decrease) in net
assets resulting from
capital
transactions......... (15,982,548) 121,297,689 (37,419,935) 69,311,229
-------------- -------------- ------------ ------------
NET CHANGE IN NET AS-
SETS.................. 413,337,217 633,125,160 (52,988,778) 99,467,153
NET ASSETS--BEGINNING
OF PERIOD............. 2,529,998,376 1,896,873,216 449,267,390 349,800,237
-------------- -------------- ------------ ------------
NET ASSETS--END OF PE-
RIOD.................. $2,943,335,593 $2,529,998,376 $396,278,612 $449,267,390
============== ============== ============ ============
</TABLE>
See Notes to Financial Statements.
14
<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,
1999 1998 1999 1998 1999 1998
------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$453,744 $ 508,951 $ 179,014,499 $ 187,134,254 $ 9,214,399 $ 7,696,652
(32,887) 34,837 28,959,695 5,466,303 8,316,913 5,782,962
62,159 (5,989) (39,501,729) 134,318,516 (3,045,574) 6,978,552
----------- ----------- -------------- -------------- ----------- -----------
483,016 537,799 168,472,465 326,919,073 14,485,738 20,458,166
----------- ----------- -------------- -------------- ----------- -----------
452,736 255,102 307,244,358 333,211,219 233,613 226,228
(3,850,645) (3,418,636) (168,992,672) (117,752,204) (10,881,209) (11,306,407)
----------- ----------- -------------- -------------- ----------- -----------
(3,397,909) (3,163,534) 138,251,686 215,459,015 (10,647,596) (11,080,179)
2,974,885 1,749,990 (121,768,364) 61,274,635 90 22
(3,391) (3,315) (804,885) (673,377) 77,106 (2,764)
----------- ----------- -------------- -------------- ----------- -----------
(426,415) (1,416,859) 15,678,437 276,060,273 (10,570,400) (11,082,921)
----------- ----------- -------------- -------------- ----------- -----------
56,601 (879,060) 184,150,902 602,979,346 3,915,338 9,375,245
14,282,179 15,161,239 2,284,549,657 1,681,570,311 90,026,386 80,651,141
----------- ----------- -------------- -------------- ----------- -----------
$14,338,780 $14,282,179 $2,468,700,559 $2,284,549,657 $93,941,724 $90,026,386
=========== =========== ============== ============== =========== ===========
</TABLE>
15
<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,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)................... $ 373,385 $ 312,967 $ 4,364 $ 3,215
Net realized gain (loss)
from security transac-
tions.................... 154,760 441,254 -- --
Change in net unrealized
appreciation (deprecia-
tion) of investments..... 37,844 70,584 2,089 4,467
---------- ---------- ------- -------
Net increase (decrease) in
net assets resulting from
operations............... 565,989 824,805 6,453 7,682
---------- ---------- ------- -------
From capital transactions:
Purchases................. -- 25,268 -- --
Redemptions............... (305,902) (935,863) -- --
---------- ---------- ------- -------
Total net purchase pay-
ments (redemptions)..... (305,902) (910,595) -- --
Net portfolio transfers... -- (309) -- --
Net other transfers....... 2,730 (11,069) -- --
---------- ---------- ------- -------
Net increase (decrease) in
net assets resulting from
capital transactions..... (303,172) (921,973) -- --
---------- ---------- ------- -------
NET CHANGE IN NET ASSETS... 262,817 (97,168) 6,453 7,682
NET ASSETS--BEGINNING OF
PERIOD.................... 3,260,644 3,357,812 34,942 27,260
---------- ---------- ------- -------
NET ASSETS--END OF PERIOD.. $3,523,461 $3,260,644 $41,395 $34,942
========== ========== ======= =======
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
<TABLE>
<CAPTION>
Santander
State Street Research MetLife International Stock
Aggressive Growth Division Stock Index Division 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,
1999 1998 1999 1998 1999 1998
-------------- -------------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 14,512,856 $ 56,171,296 $ 143,606,940 $ 89,125,955 $ 38,357,779 $ (145,246)
77,224,327 35,680,553 141,933,683 68,017,631 12,224,938 7,654,046
232,588,654 45,940,529 312,858,179 398,393,213 (13,893,204) 38,302,726
-------------- -------------- -------------- -------------- ------------ ------------
324,325,837 137,792,378 598,398,802 555,536,799 36,689,513 45,811,526
-------------- -------------- -------------- -------------- ------------ ------------
75,870,705 108,436,372 504,735,590 403,472,148 21,979,327 25,765,813
(84,909,572) (78,737,642) (201,712,483) (122,924,047) (16,662,946) (16,037,510)
-------------- -------------- -------------- -------------- ------------ ------------
(9,038,867) 29,698,730 303,023,107 280,548,101 5,316,381 9,728,303
(207,792,091) (158,421,934) 74,385,432 159,663,776 (29,169,982) (33,426,187)
46 (363,723) (507,670) (770,595) (62,350) (84,341)
-------------- -------------- -------------- -------------- ------------ ------------
(216,830,912) (129,086,927) 376,900,869 439,441,282 (23,915,951) (23,782,225)
-------------- -------------- -------------- -------------- ------------ ------------
107,494,925 8,705,451 975,299,671 994,978,081 12,773,562 22,029,301
1,217,757,111 1,209,051,660 2,870,058,320 1,875,080,239 249,965,034 227,935,733
-------------- -------------- -------------- -------------- ------------ ------------
$1,325,252,036 $1,217,757,111 $3,845,357,991 $2,870,058,320 $262,738,596 $249,965,034
============== ============== ============== ============== ============ ============
</TABLE>
17
<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 Year For the Year For the Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 3,766,770 $ 3,568,151 $ 76,741,919 $ (907,747)
Net realized gain
(loss) from security
transactions.......... (1,002,119) (343,705) 102,627,814 8,354,115
Change in net
unrealized
appreciation
(depreciation) of
investments........... 4,099,504 (7,314,238) 631,364,390 66,659,923
----------- ----------- -------------- ------------
Net increase (decrease)
in net assets
resulting from
operations............ 6,864,155 (4,089,792) 810,734,123 74,106,291
----------- ----------- -------------- ------------
From capital
transactions:
Purchases.............. 9,511,700 14,100,048 262,621,252 103,125,247
Redemptions............ (2,531,875) (1,956,958) (35,345,823) (7,555,010)
----------- ----------- -------------- ------------
Total net purchase
payments
(redemptions)......... 6,979,825 12,143,090 227,275,429 95,570,237
Net portfolio
transfers............. 2,589,191 5,001,434 394,697,486 73,431,163
Net other transfers.... (3,422) 4,283 (328,916) (307,458)
----------- ----------- -------------- ------------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 9,565,594 17,148,807 621,643,999 168,693,942
----------- ----------- -------------- ------------
NET CHANGE IN NET
ASSETS................. 16,429,749 13,059,015 1,432,378,122 242,800,233
NET ASSETS--BEGINNING OF
PERIOD................. 38,781,459 25,722,444 340,420,858 97,620,625
----------- ----------- -------------- ------------
NET ASSETS--END OF
PERIOD................. $55,211,208 $38,781,459 $1,772,798,980 $340,420,858
=========== =========== ============== ============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
<TABLE>
<CAPTION>
T. Rowe Price Scudder Global Harris Oakmark Large
Small Cap Growth Division Equity Division Cap Value 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,
1999 1998 1999 1998 1999 1998
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ (2,107,943) $ (1,596,579) $ 3,712,004 $ 551,635 $ 93,175 $ 6,654
5,272,038 (1,844,850) 2,471,119 3,761,734 (89,794) (192)
44,474,798 7,150,268 21,316,192 5,427,106 (4,447,057) 22,793
------------- ------------- ------------ ------------ ----------- ----------
47,638,893 3,708,839 27,499,315 9,740,475 (4,443,676) 29,255
------------- ------------- ------------ ------------ ----------- ----------
36,495,836 59,726,669 25,895,458 27,935,594 17,050,410 1,011,345
(9,131,942) (5,689,823) (5,620,294) (2,923,122) (1,022,417) (12,703)
------------- ------------- ------------ ------------ ----------- ----------
27,363,894 54,036,846 20,275,164 25,012,472 16,027,993 998,642
(15,988,758) 24,916,661 2,623,332 12,284,725 17,887,362 2,738,739
(19,608) (16,742) (21,564) 14,374 1,728 (138)
------------- ------------- ------------ ------------ ----------- ----------
11,355,528 78,936,765 22,876,932 37,311,571 33,917,083 3,737,243
------------- ------------- ------------ ------------ ----------- ----------
58,994,421 82,645,604 50,376,247 47,052,046 29,473,407 3,766,498
169,814,354 87,168,750 101,979,213 54,927,167 3,766,498 --
------------- ------------- ------------ ------------ ----------- ----------
$ 228,808,775 $ 169,814,354 $152,355,460 $101,979,213 $33,239,905 $3,766,498
============= ============= ============ ============ =========== ==========
</TABLE>
19
<PAGE>
Metropolitan Life Separate Account E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Neuberger Berman Partners T. Rowe Price Large
Mid Cap Value Division Cap Growth Division
---------------------------- ----------------------------
For the Period For the Period
For the Year Nov. 9, 1998 For the Year Nov. 9, 1998
Ended to Ended to
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 1,151,117 $ 1,462 $ (96,779) $ (264)
Net realized gain
(loss) from security
transactions.......... 662,939 5,610 188,181 481
Change in net
unrealized
appreciation
(depreciation) of
investments........... 163,745 102,136 5,837,101 203,080
----------- ---------- ----------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 1,977,801 109,208 5,928,503 203,297
----------- ---------- ----------- ----------
From capital
transactions:
Purchases.............. 13,058,613 528,225 17,679,944 1,011,671
Redemptions............ (748,540) (8,079) (1,063,352) (15,197)
----------- ---------- ----------- ----------
Total net purchase
payments
(redemptions)......... 12,310,073 520,146 16,616,592 996,474
Net portfolio
transfers............. 13,991,061 2,608,509 19,630,907 3,312,056
Net other transfers.... 7,270 (19) (5,434) 158
----------- ---------- ----------- ----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 26,308,404 3,128,636 36,242,065 4,308,688
----------- ---------- ----------- ----------
NET CHANGE IN NET
ASSETS................. 28,286,205 3,237,844 42,170,568 4,511,985
NET ASSETS--BEGINNING OF
PERIOD................. 3,237,844 -- 4,511,985 --
----------- ---------- ----------- ----------
NET ASSETS--END OF
PERIOD................. $31,524,049 $3,237,844 $46,682,553 $4,511,985
=========== ========== =========== ==========
</TABLE>
See Notes To Financial Statements.
20
<PAGE>
<TABLE>
<CAPTION>
Lehman Brothers Aggregate Morgan Stanley EAFE
Bond Index Division Index Division Russell 2000 Index Division
--------------------------------------------------------- ----------------------------
For the Period For the Period For the Period
For the Year Nov. 9, 1998 For the Year Nov. 9, 1998 For the Year Nov. 9, 1998
Ended to Ended to Ended to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1999 1998 1999 1998
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$2,809,030 $ 42,997 $ 229,100 $ 695 $ 1,638,064 $ 4,244
(65,373) 8,661 1,530,194 2,965 400,083 299
(3,639,449) (33,246) 6,558,714 94,521 9,296,566 317,216
----------- ---------- ----------- ---------- ----------- ----------
(895,792) 18,412 8,318,008 98,181 11,334,713 321,759
----------- ---------- ----------- ---------- ----------- ----------
44,917,262 2,383,753 26,127,439 939,109 32,650,492 1,458,407
(2,176,680) (16,786) (1,184,409) (4,888) (1,393,965) (10,084)
----------- ---------- ----------- ---------- ----------- ----------
42,740,582 2,366,967 24,943,030 934,221 31,256,527 1,448,323
27,995,578 5,756,045 16,362,043 2,798,711 22,368,433 4,694,140
3,258 14 6,400 19 6,901 (195)
----------- ---------- ----------- ---------- ----------- ----------
70,739,418 8,123,025 41,311,473 3,732,951 53,631,861 6,142,268
----------- ---------- ----------- ---------- ----------- ----------
69,843,626 8,141,437 49,629,481 3,831,132 64,966,574 6,464,027
8,141,437 -- 3,831,132 -- 6,464,027 --
----------- ---------- ----------- ---------- ----------- ----------
$77,985,063 $8,141,437 $53,460,613 $3,831,132 $71,430,601 $6,464,027
=========== ========== =========== ========== =========== ==========
</TABLE>
21
<PAGE>
Metropolitan Life Separate Account E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fidelity Fidelity
Money Market Division Equity-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,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 144,302 $ 70,816 $ 4,814,776 $ 5,849,442
Net realized gain
(loss) from security
transactions.......... -- -- 3,770,581 2,573,653
Change in net
unrealized
appreciation
(depreciation) of
investments........... -- -- (1,968,262) 3,204,174
----------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from
operations............ 144,302 70,816 6,617,095 11,627,269
----------- ----------- ------------ ------------
From capital
transactions:
Purchases.............. 8,015,817 1,265,510 22,859,455 24,530,054
Redemptions............ (1,757,138) (1,516,869) (8,066,343) (9,385,105)
----------- ----------- ------------ ------------
Total net purchase
payments
(redemptions)........ 6,258,679 (251,359) 14,793,112 15,144,949
Net portfolio
transfers............. 2,057,532 1,078,004 (15,924,137) (5,053,322)
Net other transfers.... (4,811) (571) (36,424) (64,670)
----------- ----------- ------------ ------------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 8,311,400 826,074 (1,167,449) 10,026,957
----------- ----------- ------------ ------------
NET CHANGE IN NET
ASSETS................. 8,455,702 896,890 5,449,646 21,654,226
NET ASSETS--BEGINNING OF
PERIOD................. 1,863,376 966,486 127,409,943 105,755,717
----------- ----------- ------------ ------------
NET ASSETS--END OF
PERIOD................. $10,319,078 $ 1,863,376 $132,859,589 $127,409,943
=========== =========== ============ ============
</TABLE>
See Notes To Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
Fidelity Overseas Fidelity Investment
Fidelity Growth Division Division Grade Bond 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,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 16,533,435 $ 13,632,842 $ 698,515 $ 1,389,339 $ 401,385 $ 279,415
1,690,620 3,491,143 7,899,918 924,598 57,436 84,679
44,508,514 24,850,739 1,741,692 42,139 (641,467) 234,217
------------ ------------ ----------- ----------- ----------- ----------
62,732,569 41,974,724 10,340,125 2,356,076 (182,646) 598,311
------------ ------------ ----------- ----------- ----------- ----------
29,193,313 23,670,952 3,990,736 5,122,845 1,956,738 2,187,773
(10,933,417) (11,519,342) (1,453,009) (1,927,541) (611,744) (810,073)
------------ ------------ ----------- ----------- ----------- ----------
18,259,896 12,151,610 2,537,727 3,195,304 1,344,994 1,377,700
7,609,412 (3,683,855) (806,163) (3,286,287) (1,300,166) 1,086,486
(17,359) (105,446) (182,955) (8,379) (9,037) (7,460)
------------ ------------ ----------- ----------- ----------- ----------
25,851,949 8,362,309 1,548,609 (99,362) 35,791 2,456,726
------------ ------------ ----------- ----------- ----------- ----------
88,584,518 50,337,033 11,888,734 2,256,714 (146,855) 3,055,037
156,924,996 106,587,963 23,192,129 20,935,415 9,432,141 6,377,104
------------ ------------ ----------- ----------- ----------- ----------
$245,509,514 $156,924,996 $35,080,863 $23,192,129 $ 9,285,286 $9,432,141
============ ============ =========== =========== =========== ==========
</TABLE>
23
<PAGE>
Metropolitan Life Separate Account E
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Fidelity Calvert Social Calvert Social Mid Cap
Asset Manager Division Balanced Division 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,
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
From operations:
Net investment income
(loss)................ $ 3,551,516 $ 5,718,492 $ 4,603,912 $ 2,803,917 $ 548,235 $ 763,151
Net realized gain
(loss) from security
transactions.......... 807,833 860,649 603,710 404,517 276,373 200,832
Change in net
unrealized
appreciation
(depreciation) of
investments........... 1,127,977 149,631 13,211 2,341,578 (349,562) 395,768
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets
resulting from
operations............ 5,487,326 6,728,772 5,220,833 5,550,012 475,046 1,359,751
----------- ----------- ----------- ----------- ---------- ----------
From capital
transactions:
Purchases.............. 8,191,507 8,448,368 7,293,509 7,171,631 1,644,955 1,423,352
Redemptions............ (3,989,450) (3,988,838) (1,876,553) (1,653,370) (242,225) (451,262)
----------- ----------- ----------- ----------- ---------- ----------
Total net purchase
payments
(redemptions)......... 4,202,057 4,459,530 5,416,956 5,518,261 1,402,730 972,090
Net portfolio
transfers............. (4,054,499) (2,379,056) (1,485,236) 80,963 (806,101) 485,270
Net other transfers.... (60,514) (2,755,577) (12,300) (149,713) (1,935) (61,198)
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease)
in net assets
resulting from capital
transactions.......... 87,044 (675,103) 3,919,420 5,449,511 594,694 1,396,162
----------- ----------- ----------- ----------- ---------- ----------
NET CHANGE IN NET
ASSETS................. 5,574,370 6,053,669 9,140,253 10,999,523 1,069,740 2,755,913
NET ASSETS--BEGINNING OF
PERIOD................. 54,598,660 48,544,991 45,161,803 34,162,280 6,943,606 4,187,693
----------- ----------- ----------- ----------- ---------- ----------
NET ASSETS--END OF
PERIOD................. $60,173,030 $54,598,660 $54,302,056 $45,161,803 $8,013,346 $6,943,606
=========== =========== =========== =========== ========== ==========
</TABLE>
See Notes To Financial Statements.
24
<PAGE>
Metropolitan Life Separate Account E
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 Value, 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, Equity-Income, Growth, Overseas, Investment Grade
Bond, and Asset Manager Divisions correspond to the Money Market, Equity-
Income, Growth, Overseas, Investment Grade Bond, and 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 principles, 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, 1999 are described in the Fund's 1999 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, 1999 are described in Fidelity's
1999 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, 1999 are described in Calvert's 1999 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.
25
<PAGE>
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.
E. Accumulation Units
As of December 31, 1999, there were 424,599,147 Accumulation Units
outstanding, which consisted of:
<TABLE>
<CAPTION>
Accumulation
Division Units
-------- ------------
<S> <C>
State Street Research Growth Division........................... 68,186,817
State Street Research Income Division........................... 20,028,295
State Street Research Money Market Division..................... 766,554
State Street Research Diversified Division...................... 81,803,533
State Street Research Aggressive Growth Division................ 34,476,844
MetLife Stock Index Division.................................... 86,194,645
Santander International Stock Division.......................... 14,166,000
Loomis Sayles High Yield Bond Division.......................... 4,939,193
Janus Mid Cap Division.......................................... 46,723,767
T. Rowe Price Small Cap Growth Division......................... 15,032,736
Scudder Global Equity Division.................................. 9,905,262
Harris Oakmark Large Cap Value Division......................... 3,705,619
Neuberger Berman Partners Mid Cap Value Division................ 2,517,069
T. Rowe Price Large Cap Growth Division......................... 3,509,482
Lehman Brothers Aggregate Bond Index Division................... 7,899,005
Morgan Stanley EAFE Index Division.............................. 4,009,779
Russell 2000 Index Division..................................... 5,590,923
Fidelity Money Market Division.................................. 756,966
Fidelity Equity-Income Division................................. 3,703,407
Fidelity Growth Division........................................ 4,417,859
Fidelity Overseas Division...................................... 1,220,096
Fidelity Investment Grade Bond Division......................... 560,146
Fidelity Asset Manager Division................................. 2,253,306
Calvert Social Balanced Division................................ 1,948,896
Calvert Social Mid-Cap Growth Division.......................... 282,948
</TABLE>
In addition to the above mentioned Accumulation Units, there were cash
reserves applicable to contracts receiving annuity payout under the
Variable Account B Division and cash reserves for Preference Plus (PPA)
Immediate Annuities.
<TABLE>
<S> <C>
Variable Account B Division..................................... $ 2,915,679
Cash Reserves for PPA Immediate Annuities....................... $42,968,371
</TABLE>
26
<PAGE>
2. DIVIDENDS
The amount of dividends received by the Separate Account during the year
were $952,895,633. The dividends were paid to Metropolitan Life 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 held by each of the investment divisions increased by the
following:
<TABLE>
<CAPTION>
Division: Shares
--------- ----------
<S> <C>
State Street Research Growth Division............................. 8,285,667
State Street Research Income Division............................. 2,186,881
State Street Research Money Market Division....................... 65,195
State Street Research Diversified Division........................ 11,683,635
Variable B Division............................................... 267,238
Variable C Division............................................... 9,905
Variable D Division............................................... 116
State Street Research Aggressive Growth Division.................. 809,854
MetLife Stock Index Division...................................... 4,707,799
Santander International Stock Division............................ 3,044,329
Loomis Sayles High Yield Bond Division............................ 478,479
Janus Mid Cap Division............................................ 2,638,977
T. Rowe Price Small Cap Growth Division........................... --
Scudder Global Equity Division.................................... 370,368
Harris Oakmark Large Cap Value Division........................... 40,140
Neuberger Berman Partners Mid Cap Value Division.................. 119,910
T. Rowe Price Large Cap Growth Division........................... 14,207
Lehman Brothers Aggregate Bond Index Division..................... 356,913
Morgan Stanley EAFE Index Division................................ 43,409
Russell 2000 Index Division....................................... 176,227
Fidelity Money Market Division.................................... 179,961
Fidelity Equity-Income Division................................... 254,791
Fidelity Growth Division.......................................... 440,739
Fidelity Overseas Division........................................ 49,075
Fidelity Investment Grade Bond Division........................... 39,942
Fidelity Asset Manager Division................................... 241,672
Calvert Social Balanced Division.................................. 2,389,497
Calvert Social Mid-Cap Growth Division............................ 20,634
</TABLE>
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 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.
27
<PAGE> 1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
METROPOLITAN LIFE INSURANCE COMPANY
Independent Auditors' Report................................
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997..........................
Consolidated Balance Sheets at December 31, 1999 and 1998...
Consolidated Statements of Equity for the years ended
December 31, 1999, 1998 and 1997..........................
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997..........................
Notes to Consolidated Financial Statements..................
</TABLE>
<PAGE> 2
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, 1999 and 1998, and the related consolidated statements of income,
equity and cash flows for each of the three years in the period ended December
31, 1999. 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, 1999 and 1998, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 7, 2000
<PAGE> 3
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums.................................................... $12,088 $11,503 $11,278
Universal life and investment-type product policy fees...... 1,438 1,360 1,418
Net investment income....................................... 9,816 10,228 9,491
Other revenues.............................................. 2,154 1,994 1,491
Net realized investment gains (losses) (net of amounts
allocable to other accounts of $(67), $608 and $231,
respectively)............................................. (70) 2,021 787
------- ------- -------
25,426 27,106 24,465
------- ------- -------
EXPENSES
Policyholder benefits and claims (excludes amounts directly
related to net realized investment gains (losses) of
$(21), $368 and $161, respectively)....................... 13,105 12,638 12,403
Interest credited to policyholder account balances.......... 2,441 2,711 2,878
Policyholder dividends...................................... 1,690 1,651 1,742
Other expenses (excludes amounts directly related to net
realized investment gains (losses) of $(46), $240 and $70,
respectively)............................................. 6,755 8,019 5,771
------- ------- -------
23,991 25,019 22,794
------- ------- -------
Income before provision for income taxes and extraordinary
item...................................................... 1,435 2,087 1,671
Provision for income taxes.................................. 593 740 468
------- ------- -------
Income before extraordinary item............................ 842 1,347 1,203
Extraordinary item -- demutualization expense............... 225 4 --
------- ------- -------
Net income.................................................. $ 617 $ 1,343 $ 1,203
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value........ $ 96,981 $100,767
Equity securities, at fair value.......................... 2,006 2,340
Mortgage loans on real estate............................. 19,739 16,827
Real estate and real estate joint ventures................ 5,649 6,287
Policy loans.............................................. 5,598 5,600
Other limited partnership interests....................... 1,331 1,047
Short-term investments.................................... 3,055 1,369
Other invested assets..................................... 1,501 1,484
-------- --------
135,860 135,721
Cash and cash equivalents................................... 2,789 3,301
Accrued investment income................................... 1,725 1,994
Premiums and other receivables.............................. 6,681 5,972
Deferred policy acquisition costs........................... 8,492 6,538
Deferred income taxes....................................... 603 --
Other....................................................... 4,141 3,752
Separate account assets..................................... 64,941 58,068
-------- --------
$225,232 $215,346
======== ========
LIABILITIES AND EQUITY
Liabilities:
Future policy benefits...................................... $ 73,582 $ 72,701
Policyholder account balances............................... 45,901 46,494
Other policyholder funds.................................... 4,498 4,061
Policyholder dividends payable.............................. 974 947
Short-term debt............................................. 4,208 3,585
Long-term debt.............................................. 2,514 2,903
Current income taxes payable................................ 548 403
Deferred income taxes payable............................... -- 545
Other....................................................... 14,376 10,772
Separate account liabilities................................ 64,941 58,068
-------- --------
211,542 200,479
-------- --------
Commitments and contingencies (Note 9)
Equity:
Retained earnings........................................... 14,100 13,483
Accumulated other comprehensive income (loss)............... (410) 1,384
-------- --------
13,690 14,867
-------- --------
$225,232 $215,346
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
-----------------------------------------
NET FOREIGN MINIMUM
UNREALIZED CURRENCY PENSION
COMPREHENSIVE RETAINED INVESTMENT TRANSLATION LIABILITY
TOTAL INCOME (LOSS) EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT
----- ------------- -------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997....... $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)
Comprehensive loss:
Net income..................... 617 $ 617 617
-------
Other comprehensive loss:
Unrealized investment losses,
net of related offsets,
reclassification
adjustments and income
taxes...................... (1,837) (1,837)
Foreign currency translation
adjustments................ 50 50
Minimum pension liability
adjustment................. (7) (7)
-------
Other comprehensive loss..... (1,794) (1,794)
-------
Comprehensive loss............. $(1,177)
=======
------- ------- ------- ----- ----
Balance at December 31, 1999..... $13,690 $14,100 $ (297) $ (94) $(19)
======= ======= ======= ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
METROPOLITAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 617 $ 1,343 $ 1,203
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization expenses.................. 173 56 (36)
(Gains) losses from sales of investments and businesses,
net................................................... 137 (2,629) (1,018)
Change in undistributed income of real estate joint
ventures and other limited partnership interests...... (322) (91) 157
Interest credited to policyholder account balances...... 2,441 2,711 2,878
Universal life and investment-type product policy
fees.................................................. (1,438) (1,360) (1,418)
Change in accrued investment income..................... 269 (181) (215)
Change in premiums and other receivables................ (619) (2,681) (792)
Change in deferred policy acquisition costs, net........ (389) (188) (159)
Change in insurance related liabilities................. 2,248 1,481 2,364
Change in income taxes payable.......................... 22 251 (99)
Change in other liabilities............................. 857 2,390 (206)
Other, net.............................................. (131) (260) 213
-------- -------- --------
Net cash provided by operating activities................... 3,865 842 2,872
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturities........................................ 73,120 57,857 75,346
Equity securities....................................... 760 3,085 1,821
Mortgage loans on real estate........................... 1,992 2,296 2,784
Real estate and real estate joint ventures.............. 1,062 1,122 2,046
Other limited partnership interests..................... 469 146 166
Purchases of:
Fixed maturities........................................ (72,253) (67,543) (76,603)
Equity securities....................................... (410) (854) (2,121)
Mortgage loans on real estate........................... (4,395) (2,610) (4,119)
Real estate and real estate joint ventures.............. (341) (423) (624)
Other limited partnership interests..................... (465) (723) (338)
Net change in short-term investments...................... (1,577) (761) 63
Net change in policy loans................................ 2 133 17
Purchase of businesses, net of cash received.............. (2,972) -- (430)
Proceeds from sales of businesses......................... -- 7,372 135
Net change in investment collateral....................... 2,692 3,769 --
Other, net................................................ (73) (183) 191
-------- -------- --------
Net cash provided by (used in) investing activities......... (2,389) 2,683 (1,666)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Policyholder account balances:
Deposits................................................ 18,428 19,361 16,061
Withdrawals............................................. (20,650) (21,706) (18,831)
Short-term debt, net...................................... 623 (1,002) 1,265
Long-term debt issued..................................... 44 693 989
Long-term debt repaid..................................... (433) (481) (104)
-------- -------- --------
Net cash used in financing activities....................... (1,988) (3,135) (620)
-------- -------- --------
Change in cash and cash equivalents......................... (512) 390 586
Cash and cash equivalents, beginning of year................ 3,301 2,911 2,325
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR...................... $ 2,789 $ 3,301 $ 2,911
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................................. $ 388 $ 367 $ 422
======== ======== ========
Income taxes.............................................. $ 587 $ 579 $ 589
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
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.
PLAN OF REORGANIZATION
On September 28, 1999, the board of directors of MetLife adopted, pursuant
to the New York Insurance Law, a plan of reorganization, and subsequently
adopted amendments to the plan, pursuant to which MetLife proposes to convert
from a mutual life insurance company to a stock life insurance company and
become a wholly-owned subsidiary of MetLife, Inc. The plan was approved by
MetLife's voting policyholders on February 7, 2000. The plan will become
effective at such time as the New York Superintendent of Insurance
("Superintendent") approves it based on finding, among other things, that the
plan is fair and equitable to policyholders. The plan requires an initial public
offering of common stock and provides for other capital raising transactions on
the effective date of the plan.
On the date the plan of reorganization becomes effective, each
policyholder's membership interest will be extinguished and each eligible
policyholder will be entitled to receive, in exchange for that interest, trust
interests representing shares of common stock of MetLife, Inc. to be held in a
trust, cash or an adjustment to their policy values in the form of policy
credits, as provided in the plan. In addition, when MetLife demutualizes,
MetLife's Canadian branch will make cash payments to holders of certain policies
transferred to Clarica Life Insurance Company ("Clarica Life") in connection
with the sale of a substantial portion of MetLife's Canadian operations in 1998.
See Note 9.
The plan of reorganization requires that MetLife establish and operate a
closed block for the benefit of holders of certain individual life insurance
policies of MetLife. Assets will be allocated to the closed block in an amount
that is expected to produce cash flows which, together with anticipated revenue
from the policies included in the closed block, are reasonably expected to be
sufficient to support obligations and liabilities relating to these policies,
including, but not limited to, provisions for the payment of claims and certain
expenses and taxes, and for the continuation of policyholder dividend scales in
effect for 1999, if the experience underlying such dividend scales continues,
and for appropriate adjustments in such scales if the experience changes. The
closed block assets, the cash flows generated by the closed block assets and the
anticipated revenues from the policies in the closed block will benefit only the
holders of these policies included in the closed block. To the extent that, over
time, cash flows from the assets allocated to the closed block and claims and
other experience relating to the closed block are, in the aggregate, more or
less favorable than assumed in establishing the closed block, total dividends
paid to the closed block policyholders in the future may be greater than or less
than which would have been paid to these policyholders if the policyholder
dividend scales in effect for 1999 had been continued. Any cash flows in excess
of amounts assumed will be available for distribution over time to closed block
policyholders and will not be available to stockholders. The closed block will
continue in effect until the last policy in the closed block is no longer in
force.
<PAGE> 8
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The accounting principles to account for the participating policies
included in the closed block will be those used prior to the date of the
demutualization. However, a policyholder dividend obligation will be established
for earnings that will be paid to policyholders as additional dividends in the
amounts described below, unless these earnings are offset by future unfavorable
experience in the closed block. Although all of the cash flows of the closed
block are for the benefit of closed block policyholders, the excess of closed
block liabilities over closed block assets at the effective date will represent
the estimated maximum future contributions from the closed block expected to be
reported in income as the contribution from the closed block after income taxes.
The contribution from the closed block will be recognized in income over the
period the policies and contracts in the closed block remain in force.
Management believes that over time the actual cumulative contributions from the
closed block will approximately equal the expected cumulative contributions, due
to the effect of dividend changes. If, over the period the closed block remains
in existence, the actual cumulative contribution from the closed block is
greater than the expected cumulative contribution from the closed block, the
expected cumulative contribution will be recognized in income with the excess
recorded as a policyholder dividend obligation, because the excess of the actual
cumulative contribution from the closed block over the expected cumulative
contribution will be paid to closed block policyholders as additional
policyholder dividends unless offset by future unfavorable experience of the
closed block. If over such period, the actual cumulative contribution from the
closed block is less than the expected cumulative contribution from the closed
block, the actual contribution will be recognized in income. However, dividends
in the future may be changed, which would be intended to increase future actual
contribution until the actual contribution equal the expected cumulative
contribution.
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 dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. 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.
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 majority voting interest or general partner interest with limited removal
rights by limited partners. 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 related to consolidated entities included in other
liabilities was $245 and $274 at December 31, 1999 and 1998, respectively.
<PAGE> 9
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 1999 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 (loss), net of policyholder related amounts and
deferred income taxes. The cost of fixed maturity and equity securities is
adjusted for impairments in value deemed to be other than temporary. These
adjustments are recorded as 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 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.
<PAGE> 10
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 (loss), similar to
the accounting for the investment security. Such contracts are accounted for at
settlement by recording the purchase of the specified securities at the
contracted 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 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 (loss), 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.
<PAGE> 11
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 of property and
equipment and accumulated amortization on leasehold improvements was $1,130 and
$1,098 at December 31, 1999 and 1998, respectively. Related depreciation and
amortization expense was $103, $116 and $103 for the years ended December 31,
1999, 1998 and 1997, 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 with interest 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. Interest rates are based on rates in effect at
the inception of the contracts. Actual gross margins or profits can vary from
management's estimates resulting in increases or decreases in the rate of
amortization. Management 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
lives of the contracts. Deviations from estimated experience are included in
operations when they occur. For these contracts, the amortization period is
typically the estimated life of the policy.
Deferred policy acquisition costs related to internally replaced contracts
are expensed at date of replacement.
Deferred policy acquisition costs for property and casualty 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.
On September 28, 1999, the Company's Board of Directors adopted a plan of
reorganization. Consequently, in the fourth quarter of 1999, the Company was
able to commit to state insurance regulatory authorities that it would establish
investment sub-segments to further align investments with the traditional
individual life business of the Individual segment. As a result, future
dividends for the traditional individual life business will be determined based
on the results of the new investment sub-segments. Additionally, estimated
future gross margins used to determine amortization of deferred policy
acquisition costs and the amount of unrealized investment gains and losses
relating to these products are based on investments in the new sub-segments.
Using the investments in the sub-segments to determine estimated gross margins
and unrealized investment gains and losses increased 1999 amortization of
deferred policy acquisition costs by $56 (net of income taxes of $32) and
decreased other comprehensive loss in 1999 by $123 (net of income taxes of $70).
<PAGE> 12
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information regarding deferred policy acquisition costs is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1.................................. $ 6,538 $6,436 $7,227
Capitalized during the year........................... 1,160 1,025 1,000
------- ------ ------
Total............................................ 7,698 7,461 8,227
------- ------ ------
Amortization allocated to:
Net realized investment gains (losses).............. (46) 240 70
Unrealized investment gains (losses)................ (1,628) (216) 727
Other expenses...................................... 862 587 771
------- ------ ------
Total amortization............................... (812) 611 1,568
------- ------ ------
Dispositions and other................................ (18) (312) (223)
------- ------ ------
Balance at December 31................................ $ 8,492 $6,538 $6,436
======= ====== ======
</TABLE>
Amortization of deferred policy acquisition costs is allocated to (1)
realized investment gains and losses to provide consolidated statement of income
information regarding the impact of such gains and losses on the amount of the
amortization, (2) unrealized investment gains and losses to provide information
regarding the amount of deferred policy acquisition costs that would have been
amortized if such gains and losses had been realized and (3) other expenses to
provide amounts related to the gross margins or profits originating from
transactions other than investment gains and losses.
Realized investment gains and losses related to certain products have a
direct impact on the amortization of deferred policy acquisition costs.
Presenting realized investment gains and losses net of related amortization of
deferred policy acquisition costs provides information useful in evaluating the
operating performance of the Company. This presentation may not be comparable to
presentations made by other insurers.
INTANGIBLE ASSETS
The excess of cost over the fair value of net assets acquired ("goodwill")
and other intangible assets, including 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.
Impairments are recognized in operating results if a permanent diminution in
value is deemed to have occurred. Other intangible assets are amortized over the
expected policy or contract duration in relation to the present value of
estimated gross profits from such policies and contracts.
<PAGE> 13
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
GOODWILL OTHER INTANGIBLE ASSETS
-------------------- --------------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
YEARS ENDED DECEMBER 31
Net Balance at January 1.............. $404 $359 $136 $1,006 $1,055 $ 767
Acquisitions.......................... 237 67 240 156 39 355
Amortization.......................... (30) (22) (17) (114) (88) (67)
---- ---- ---- ------ ------ ------
Net Balance at December 31............ $611 $404 $359 $1,048 $1,006 $1,055
==== ==== ==== ====== ====== ======
DECEMBER 31
Accumulated amortization.............. $118 $ 88 $ 392 $ 278
==== ==== ====== ======
</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 3% to 10%, 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 3% 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 3% to 10%. Future policy benefit
liabilities for disabled lives are estimated using the present value of benefits
method and experience assumptions as to claim terminations, expenses and
interest. Interest rates used in establishing such liabilities range from 3% to
10%.
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 2%
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 included 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.
<PAGE> 14
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED 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 products are
credited to policyholder account balances. Revenues from such contracts consist
of amounts assessed against policyholder account balances for mortality, policy
administration and surrender charges. 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 MetLife and its insurance subsidiaries.
DIVIDEND RESTRICTIONS
MetLife, when it converts from a mutual life insurance company to a stock
life insurance company, may be restricted as to the amounts it may pay as
dividends to MetLife, Inc. Under the New York Insurance Law, the Superintendent
has broad discretion to determine whether the financial condition of a stock
life insurance company would support the payment of dividends to its
shareholders. The Department has established informal guidelines for the
Superintendent's determinations which focus upon, among other things, the
overall financial condition and profitability of the insurer under statutory
accounting practices.
PARTICIPATING BUSINESS
Participating business represented approximately 19% and 21% of the
Company's life insurance in-force, and 84% and 81% of the number of life
insurance policies in-force, at December 31, 1999 and 1998, respectively.
Participating policies represented approximately 42% and 44%, 39% and 40%, and
41% and 41% of gross and net life insurance premiums for the years ended
December 31, 1999, 1998 and 1997, 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. MetLife will not be subject to the equity tax when it
converts to a stock life insurance company. The future tax consequences of
temporary differences between financial reporting and tax bases of assets and
liabilities are measured at the balance sheet dates and are recorded as deferred
income tax assets and liabilities.
REINSURANCE
The Company has reinsured certain of its life insurance and property and
casualty insurance contracts with other insurance companies under various
agreements. Amounts due from
<PAGE> 15
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Deferred policy acquisition costs are reduced by amounts recovered under
reinsurance contracts. Amounts received from reinsurers for policy
administration are reported in other revenues.
SEPARATE ACCOUNTS
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account liabilities.
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. See Note 6.
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 the functional currencies unless the local
economy is highly inflationary. Translation adjustments are charged or credited
directly to other comprehensive income (loss). Gains and losses from foreign
currency transactions are reported in other expenses and were insignificant for
all years presented.
EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSE
The accompanying consolidated statements of income include extraordinary
charges of $225 (net of income taxes of $35) and $4 (net of income taxes of $2)
for the years ended December 31, 1999 and 1998, respectively, related to costs
associated with the demutualization.
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted Statement of Position
("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. Adoption of SOP
98-5 did not have a material effect on the Company's consolidated financial
statements.
Effective January 1, 1999, the Company adopted 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. Adoption of the provisions of SOP 98-1 had the effect of
increasing other assets by $82 at December 31, 1999.
Effective January 1, 1999, the Company adopted 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
<PAGE> 16
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
assessments. Adoption of SOP 97-3 did not have a material effect on the
Company's consolidated financial statements.
In 1998, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities ("SFAS 125") which were
deferred by SFAS 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 other
revenues and other expenses by $266 for the year ended December 31, 1998.
During 1997, the Company changed to the retrospective interest method of
accounting for investment income on structured notes in accordance with Emerging
Issues Task Force Consensus No. 96-12, Recognition of Interest Income and
Balance Sheet Classification of Structured Notes. This accounting change
increased 1997 net investment income by $175, which included an immaterial
amount related to prior years.
In June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133 ("SFAS 137"). SFAS 137 defers the provisions of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133") until January 1, 2001. 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 in the process of quantifying the impact of SFAS 133 on its
consolidated financial statements.
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.
<PAGE> 17
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. INVESTMENTS
The components of net investment income were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities.................................... $ 6,766 $ 6,563 $ 6,445
Equity securities................................... 40 78 50
Mortgage loans on real estate....................... 1,479 1,572 1,684
Real estate and real estate joint ventures.......... 1,426 1,529 1,718
Policy loans........................................ 340 387 368
Other limited partnership interests................. 199 196 302
Cash, cash equivalents and short-term investments... 173 187 169
Other............................................... 501 841 368
------- ------- -------
10,924 11,353 11,104
Less: Investment expenses........................... 1,108 1,125 1,613
------- ------- -------
$ 9,816 $10,228 $ 9,491
======= ======= =======
</TABLE>
Net realized investment gains (losses), including changes in valuation
allowances, were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities........................................ $(538) $ 573 $ 118
Equity securities....................................... 99 994 224
Mortgage loans on real estate........................... 28 23 56
Real estate and real estate joint ventures.............. 265 424 446
Other limited partnership interests..................... 33 13 12
Sales of businesses..................................... -- 531 139
Other................................................... (24) 71 23
----- ------ ------
(137) 2,629 1,018
Amounts allocable to:
Future policy benefit loss recognition................ -- (272) (126)
Deferred policy acquisition costs..................... 46 (240) (70)
Participating contracts............................... 21 (96) (35)
----- ------ ------
$ (70) $2,021 $ 787
===== ====== ======
</TABLE>
Realized investment gains (losses) have been reduced by (1) additions to
future policy benefits resulting from the need to establish additional
liabilities due to the recognition of investment gains, (2) deferred policy
acquisition cost amortization to the extent that such amortization results from
realized investment gains and losses, and (3) additions to participating
contractholder accounts when amounts equal to such investment gains and losses
are credited to the contractholders' accounts. This presentation may not be
comparable to presentations made by other insurers.
<PAGE> 18
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of net unrealized investment gains (losses), included in
accumulated other comprehensive income (loss), were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed maturities.................................... $(1,828) $ 4,809 $ 4,766
Equity securities................................... 875 832 1,605
Other invested assets............................... 165 154 294
------- ------- -------
(788) 5,795 6,665
------- ------- -------
Amounts allocable to:
Future policy benefit loss recognition............ (249) (2,248) (2,189)
Deferred policy acquisition costs................. 697 (931) (1,147)
Participating contracts........................... (118) (212) (312)
Deferred income taxes............................... 161 (864) (1,119)
------- ------- -------
491 (4,255) (4,767)
------- ------- -------
$ (297) $ 1,540 $ 1,898
======= ======= =======
</TABLE>
The changes in net unrealized investment gains (losses) were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1.................................. $ 1,540 $1,898 $1,028
Unrealized investment gains (losses) during the
year................................................ (6,583) (870) 3,402
Unrealized investment (gains) losses relating to:
Future policy benefit loss recognition.............. 1,999 (59) (970)
Deferred policy acquisition costs................... 1,628 216 (727)
Participating contracts............................. 94 100 (303)
Deferred income taxes................................. 1,025 255 (532)
------- ------ ------
Balance at December 31................................ $ (297) $1,540 $1,898
======= ====== ======
Net change in unrealized investment gains (losses).... $(1,837) $ (358) $ 870
======= ====== ======
</TABLE>
<PAGE> 19
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturities and equity securities at December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ---------------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
<S> <C> <C> <C> <C>
Fixed Maturities:
Bonds:
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 5,990 $ 456 $ 147 $ 6,299
States and political subdivisions.... 1,583 4 45 1,542
Foreign governments.................. 4,090 210 94 4,206
Corporate............................ 47,505 585 1,913 46,177
Mortgage and asset-backed
securities......................... 27,396 112 847 26,661
Other................................ 12,235 313 462 12,086
------- ------ ------ -------
98,799 1,680 3,508 96,971
Redeemable preferred stocks............. 10 -- -- 10
------- ------ ------ -------
$98,809 $1,680 $3,508 $96,981
======= ====== ====== =======
Equity Securities:
Common stocks........................... $ 980 $ 921 $ 35 $ 1,866
Nonredeemable preferred stocks.......... 151 -- 11 140
------- ------ ------ -------
$ 1,131 $ 921 $ 46 $ 2,006
======= ====== ====== =======
</TABLE>
Fixed maturities and equity securities at December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
COST OR GROSS UNREALIZED
AMORTIZED ----------------- ESTIMATED
COST GAIN LOSS FAIR 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
======= ====== ==== ========
</TABLE>
<PAGE> 20
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company held foreign currency derivatives with notional amounts of
$4,002 and $716 to hedge the exchange rate risk associated with foreign bonds at
December 31, 1999 and 1998, respectively. The Company also held options with
fair values of $(11) to hedge the market value of common stocks at December 31,
1998.
At December 31, 1999, fixed maturities held by the Company that were below
investment grade or not rated by an independent rating agency had an estimated
fair value of $8,813. At December 31, 1999, non-income producing fixed
maturities were insignificant.
The amortized cost and estimated fair value of bonds at December 31, 1999,
by contractual maturity date, are shown below:
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Due in one year or less............................... $ 3,180 $ 3,217
Due after one year through five years................. 18,152 18,061
Due after five years through ten years................ 23,755 23,114
Due after ten years................................... 26,316 25,918
------- -------
71,403 70,310
Mortgage and asset-backed securities.................. 27,396 26,661
------- -------
$98,799 $96,971
======= =======
</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 securities were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Securities classified as available-for-sale:
Proceeds.......................................... $59,852 $46,913 $69,275
Gross realized gains.............................. $ 605 $ 2,053 $ 965
Gross realized losses............................. $ 911 $ 486 $ 627
Fixed maturities classified as held-to-maturity:
Proceeds.......................................... $ -- $ -- $ 352
Gross realized gains.............................. $ -- $ -- $ 5
Gross realized losses............................. $ -- $ -- $ 1
</TABLE>
Gross realized losses above exclude writedowns recorded during 1999 for
permanently impaired available-for-sale securities of $133.
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.
<PAGE> 21
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SECURITIES LENDING PROGRAM
The Company participates in securities lending programs whereby large
blocks of securities, which are returnable to the Company on short notice and
included in investments, are loaned to third parties, primarily major brokerage
firms. The Company requires a minimum of 102% of the fair value of the loaned
securities to be separately maintained as collateral for the loans. Securities
with a cost or amortized cost of $6,458 and $4,005 and estimated fair value of
$6,391 and $4,552 were on loan under the program at December 31, 1999 and 1998,
respectively. The Company was liable for cash collateral under its control of
$6,461 and $3,769 at December 31, 1999 and 1998, respectively. This liability is
included in other liabilities. Security collateral on deposit from securities
borrowers is returnable to them 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
$476 and $466 at December 31, 1999 and 1998, respectively.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans were categorized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1999 1998
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Commercial mortgage loans.................. $14,931 75% $12,503 74%
Agricultural mortgage loans................ 4,816 24% 4,256 25%
Residential mortgage loans................. 82 1% 241 1%
------- --- ------- ---
19,829 100% 17,000 100%
=== ===
Less: Valuation allowances................. 90 173
------- -------
$19,739 $16,827
======= =======
</TABLE>
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 1999, approximately 16%,
8% and 8% 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 $547 and $606 at
December 31, 1999 and 1998, respectively.
<PAGE> 22
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in mortgage loan valuation allowances were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1................................. $ 173 $ 289 $ 469
Additions............................................ 40 40 61
Deductions for writedowns and dispositions........... (123) (130) (241)
Deductions for disposition of affiliates............. -- (26) --
----- ----- -----
Balance at December 31............................... $ 90 $ 173 $ 289
===== ===== =====
</TABLE>
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1999 1998
---- ----
<S> <C> <C>
Impaired mortgage loans with valuation allowances.......... $540 $ 823
Impaired mortgage loans without valuation allowances....... 437 375
---- ------
977 1,198
Less: Valuation allowances................................. 83 149
---- ------
$894 $1,049
==== ======
</TABLE>
The average investment in impaired mortgage loans on real estate was
$1,134, $1,282 and $1,680 for the years ended December 31, 1999, 1998 and 1997,
respectively. Interest income on impaired mortgages was $101, $109 and $110 for
the years ended December 31, 1999, 1998 and 1997, respectively.
The investment in restructured mortgage loans on real estate was $980 and
$1,140 at December 31, 1999 and 1998, respectively. Interest income of $80, $74
and $91 was recognized on restructured loans for the years ended December 31,
1999, 1998 and 1997, respectively. Gross interest income that would have been
recorded in accordance with the original terms of such loans amounted to $92,
$87 and $116 for the years ended December 31, 1999, 1998 and 1997, respectively.
Mortgage loans on real estate with scheduled payments of 60 days (90 days
for agriculture mortgages) or more past due or in foreclosure had an amortized
cost of $44 and $65 at December 31, 1999 and 1998, respectively.
<PAGE> 23
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REAL ESTATE AND REAL ESTATE JOINT VENTURES
Real estate and real estate joint ventures consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Real estate and real estate joint ventures
held-for-investment....................................... $5,440 $6,301
Impairments................................................. (289) (408)
------ ------
5,151 5,893
------ ------
Real estate and real estate joint ventures held-for-sale.... 719 546
Impairments................................................. (187) (119)
Valuation allowance......................................... (34) (33)
------ ------
498 394
------ ------
$5,649 $6,287
====== ======
</TABLE>
Accumulated depreciation on real estate was $2,235 and $2,065 at December
31, 1999 and 1998, respectively. Related depreciation expense was $247, $282 and
$338 for the years ended December 31, 1999, 1998 and 1997, respectively.
Real estate and real estate joint ventures were categorized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998
----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Office........................................ $3,846 68% $4,265 68%
Retail........................................ 587 10% 640 10%
Apartments.................................... 474 8% 418 7%
Land.......................................... 258 5% 313 5%
Agriculture................................... 96 2% 195 3%
Other......................................... 388 7% 456 7%
------ --- ------ ---
$5,649 100% $6,287 100%
====== === ====== ===
</TABLE>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 1999, approximately 25%, 24% and 10% 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,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1....................................... $ 33 $110 $ 661
Additions charged (credited) to operations................. 36 (5) (76)
Deductions for writedowns and dispositions................. (35) (72) (475)
---- ---- -----
Balance at December 31..................................... $ 34 $ 33 $ 110
==== ==== =====
</TABLE>
Investment income related to impaired real estate and real estate joint
ventures held-for-investment was $61, $105 and $28 for the years ended December
31, 1999, 1998 and 1997, respectively. Investment income related to real estate
and real estate joint ventures held-for-sale
<PAGE> 24
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was $14, $3 and $11 for the years ended December 31, 1999, 1998 and 1997,
respectively. The carrying value of non-income producing real estate and real
estate joint ventures was $22 and $1 at December 31, 1999 and 1998,
respectively.
The Company owned real estate acquired in satisfaction of debt of $47 and
$154 at December 31, 1999 and 1998, respectively.
Real estate of $37, $69 and $151 was acquired in satisfaction of debt
during the years ended December 31, 1999, 1998 and 1997, respectively.
LEVERAGED LEASES
Leveraged leases, included in other invested assets, consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Investment............................................... $1,016 $1,067
Estimated residual values................................ 559 607
------ ------
1,575 1,674
Unearned income.......................................... (417) (471)
------ ------
$1,158 $1,203
====== ======
</TABLE>
The investment amounts set forth above are generally due in monthly
installments. The payment periods generally range from four to 15 years, but in
certain circumstances are as long as 30 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, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------------------------------ ------------------------------------------
CURRENT MARKET CURRENT MARKET
OR FAIR VALUE OR FAIR VALUE
CARRYING NOTIONAL -------------------- CARRYING NOTIONAL --------------------
VALUE AMOUNT ASSETS LIABILITIES VALUE AMOUNT ASSETS LIABILITIES
-------- -------- ------ ----------- -------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial futures.................. $ 27 $ 3,140 $37 $ 10 $ 3 $ 2,190 $ 8 $ 6
Foreign exchange contracts......... -- -- -- -- -- 136 -- 2
Interest rate swaps................ (32) 1,316 11 40 (9) 1,621 17 50
Foreign currency swaps............. -- 4,002 26 103 (1) 580 3 62
Caps............................... 1 12,376 3 -- -- 8,391 -- --
---- ------- --- ---- --- ------- --- ----
Total contractual commitments...... $ (4) $20,834 $77 $153 $(7) $12,918 $28 $120
==== ======= === ==== === ======= === ====
</TABLE>
<PAGE> 25
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of the notional amounts by derivative
type and strategy at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 TERMINATIONS/ DECEMBER 31, 1999
NOTIONAL AMOUNT ADDITIONS MATURITIES NOTIONAL AMOUNT
----------------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
BY DERIVATIVE TYPE
Financial futures................... $ 2,190 $18,259 $17,309 $ 3,140
Foreign exchange contracts.......... 136 702 838 --
Interest rate swaps................. 1,621 429 734 1,316
Foreign currency swaps.............. 580 3,501 79 4,002
Caps................................ 8,391 5,860 1,875 12,376
------- ------- ------- -------
Total contractual commitments....... $12,918 $28,751 $20,835 $20,834
======= ======= ======= =======
BY STRATEGY
Liability hedging................... $ 8,741 $ 5,865 $ 2,035 $12,571
Invested asset hedging.............. 864 4,288 937 4,215
Portfolio hedging................... 2,830 13,920 14,729 2,021
Anticipated transaction hedging..... 483 4,678 3,134 2,027
------- ------- ------- -------
Total contractual commitments....... $12,918 $28,751 $20,835 $20,834
======= ======= ======= =======
</TABLE>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 1999:
<TABLE>
<CAPTION>
REMAINING LIFE
-------------------------------------------------------------------
ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS
OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL
-------- ------------------ ----------------- --------------- -----
<S> <C> <C> <C> <C> <C>
Financial futures......... $3,140 $ -- $ -- $ -- $ 3,140
Interest rate swaps....... 833 483 -- -- 1,316
Foreign currency swaps.... 7 3,371 503 121 4,002
Caps...................... 3,426 8,930 20 -- 12,376
------ ------- ---- ---- -------
Total contractual
commitments............. $7,406 $12,784 $523 $121 $20,834
====== ======= ==== ==== =======
</TABLE>
In addition to the derivative instruments above, the Company uses equity
option contracts as invested asset hedges. There were ninety-two thousand equity
option contracts outstanding with a carrying value of $(11) and a market value
of $(11) at December 31, 1998.
4. 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.
<PAGE> 26
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Amounts related to the Company's financial instruments were as follows:
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
DECEMBER 31, 1999 AMOUNT VALUE FAIR VALUE
----------------- -------- -------- ----------
<S> <C> <C> <C>
Assets:
Fixed maturities.................................. $96,981 $96,981
Equity securities................................. 2,006 2,006
Mortgage loans on real estate..................... 19,739 19,452
Policy loans...................................... 5,598 5,618
Short-term investments............................ 3,055 3,055
Cash and cash equivalents......................... 2,789 2,789
Mortgage loan commitments......................... $465 -- (7)
Liabilities:
Policyholder account balances..................... 37,170 36,893
Short-term debt................................... 4,208 4,208
Long-term debt.................................... 2,514 2,466
Investment collateral............................. 6,451 6,451
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
DECEMBER 31, 1998 AMOUNT VALUE FAIR VALUE
----------------- -------- -------- ----------
<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.................... 37,448 37,664
Short-term debt.................................. 3,585 3,585
Long-term debt................................... 2,903 3,006
Investment collateral............................ 3,769 3,769
</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 are estimated by discounting
expected future cash flows, using current interest rates for similar loans with
similar credit risk. For mortgage loan commitments, the estimated fair value is
the net premium or discount of the commitments.
<PAGE> 27
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 on 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 AND INVESTMENT COLLATERAL
The fair values of short-term and long-term debt and investment collateral
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.
5. 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 postemployment benefits and certain
postretirement health care and life insurance benefits for retired employees
through insurance contracts. Substantially all of the Company's employees may,
in accordance with the plans applicable to the
<PAGE> 28
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
postretirement 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
---------------- ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in projected benefit obligation:
Projected benefit obligation at beginning of year.... $3,920 $3,573 $1,708 $1,763
Service cost....................................... 100 90 28 31
Interest cost...................................... 271 257 107 114
Actuarial (gains) losses........................... (260) 212 (281) (74)
Divestitures, curtailments and terminations........ (22) 24 10 (13)
Change in benefits................................. -- 12 -- --
Benefits paid........................................ (272) (248) (89) (113)
------ ------ ------ ------
Projected benefit obligation at end of year.......... 3,737 3,920 1,483 1,708
------ ------ ------ ------
Change in plan assets:
Contract value of plan assets at beginning of year... 4,403 4,056 1,123 1,004
Actuarial return on plan assets.................... 575 680 141 171
Employer contribution.............................. 20 15 24 61
Benefits paid...................................... (272) (248) (89) (113)
Other payments..................................... -- (100) -- --
------ ------ ------ ------
Contract value of plan assets at end of year......... 4,726 4,403 1,199 1,123
------ ------ ------ ------
Over (under) funded.................................. 989 483 (284) (585)
------ ------ ------ ------
Unrecognized net asset at transition................. (66) (98) -- --
Unrecognized net actuarial gains..................... (564) (78) (487) (322)
Unrecognized prior service cost...................... 127 145 (2) (2)
------ ------ ------ ------
Prepaid (accrued) benefit cost....................... $ 486 $ 452 $ (773) $ (909)
====== ====== ====== ======
Qualified plan prepaid pension cost.................. $ 632 $ 568 $ -- $ --
Non-qualified plan accrued pension cost.............. (146) (116) -- --
------ ------ ------ ------
Prepaid benefit cost................................. $ 486 $ 452 $ -- $ --
====== ====== ====== ======
</TABLE>
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<TABLE>
<CAPTION>
NON-QUALIFIED
QUALIFIED PLAN PLAN TOTAL
---------------- -------------- ----------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Aggregate projected benefit
obligation...................... $3,482 $3,697 $ 255 $ 223 $3,737 $3,920
Aggregate contract value of plan
assets (principally Company
contracts)...................... 4,726 4,403 -- -- 4,726 4,403
------ ------ ----- ----- ------ ------
Over (under) funded............... $1,244 $ 706 $(255) $(223) $ 989 $ 483
====== ====== ===== ===== ====== ======
</TABLE>
<PAGE> 29
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED 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
---------------------------- -----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average assumptions at
December 31,
Discount rate....................... 6.25% - 7.75% 6.5% - 7.25% 6% - 7.75% 7%
Expected rate of return on plan
assets............................ 8% - 10.5% 8.5% - 10.5% 6% - 9% 7.25% - 9%
Rate of compensation increase....... 4.5% - 8.5% 4.5% - 8.5% N/A N/A
</TABLE>
The assumed health care cost trend rates used in measuring the accumulated
nonpension postretirement benefit obligation were 6.5% for pre-Medicare eligible
claims and 6% for Medicare eligible claims in both 1999 and 1998.
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 PERCENT ONE PERCENT
INCREASE DECREASE
----------- -----------
<S> <C> <C>
Effect on total of service and interest cost components.... $ 14 $ 11
Effect of accumulated postretirement benefit obligation.... $134 $111
</TABLE>
The components of periodic benefit costs were as follows:
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
--------------------- ------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost............................... $ 100 $ 90 $ 74 $ 28 $ 31 $ 30
Interest cost.............................. 271 257 247 107 114 122
Expected return on plan assets............. (363) (337) (324) (89) (79) (66)
Amortization of prior actuarial gains...... (6) (11) (5) (11) (13) (4)
Curtailment (credit) cost.................. (17) (10) -- 10 4 --
----- ----- ----- ---- ---- ----
Net periodic benefit cost (credit)......... $ (15) $ (11) $ (8) $ 45 $ 57 $ 82
===== ===== ===== ==== ==== ====
</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 $45, $43 and $44 for the years ended December 31, 1999,
1998 and 1997, respectively.
6. SEPARATE ACCOUNTS
Separate accounts reflect two categories of risk assumption: non-guaranteed
separate accounts totaling $47,618 and $39,490 at December 31, 1999 and 1998,
respectively, for which the policyholder assumes the investment risk, and
guaranteed separate accounts totaling $17,323 and $18,578 at December 31, 1999
and 1998, respectively, for which MetLife contractually guarantees either a
minimum return or account value to the policyholder.
<PAGE> 30
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $485, $413 and $287 for the years ended December 31, 1999, 1998 and
1997, respectively. Guaranteed separate accounts consisted primarily of Met
Managed Guaranteed Interest Contracts and participating close out contracts. The
average interest rates credited on these contracts were 6.5% and 7% at December
31, 1999 and 1998, respectively. The assets that support these liabilities were
comprised of $16,874 and $16,639 in fixed maturities at December 31, 1999 and
1998, respectively. 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.
7. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<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
7.785% surplus notes due 2024.......................... 148 148
7.800% surplus notes due 2025.......................... 248 248
Other.................................................... 130 207
------ ------
1,666 1,743
------ ------
Investment related:
Floating rate debt, interest based on LIBOR............ -- 212
Exchangeable debt, interest rates ranging from 4.90% to
5.80%, due 2001 and 2002............................ 369 371
------ ------
369 583
------ ------
Total MetLife............................................ 2,035 2,326
------ ------
Nvest:
7.060% senior notes due 2003........................... 110 110
7.290% senior notes due 2007........................... 160 160
------ ------
270 270
------ ------
Other Affiliated Companies:
Fixed rate notes, interest rates ranging from 6.96% to
8.51%, maturity dates ranging from 2000 to 2008..... 170 179
Other.................................................. 39 128
------ ------
209 307
------ ------
Total long-term debt..................................... 2,514 2,903
Total short-term debt.................................... 4,208 3,585
------ ------
$6,722 $6,488
====== ======
</TABLE>
<PAGE> 31
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-term debt consisted of commercial paper with a weighted average
interest rate of 6.05% and 5.31% and a weighted average maturity of 74 and 44
days at December 31, 1999 and 1998, respectively.
The Company maintains unsecured credit facilities aggregating $7,000
(five-year facility of $1,000 expiring in April 2003; 364-day facility of $1,000
expiring in April 2000; 364-day facility of $5,000 expiring in September 2000).
Both $1,000 facilities bear interest at LIBOR plus 20 basis points. The $5,000
facility bears interest at various rates under specified borrowing scenarios.
The facilities can be used for general corporate purposes and also provide
backup for the Company's commercial paper program. At December 31, 1999, there
were no outstanding borrowings under any of the facilities.
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.
Each issue of investment related debt is payable in cash or by delivery of
an underlying security owned by the Company. The amount payable at maturity of
the debt is greater than the principal of the debt if the market value of the
underlying security appreciates above certain levels at the date of debt
repayment as compared to the market value of the underlying security at the date
of debt issuance.
The aggregate maturities of long-term debt are $93 in 2000, $194 in 2001,
$210 in 2002, $415 in 2003, $126 in 2004 and $1,477 thereafter.
Interest expense related to the Company's outstanding indebtedness was
$358, $333 and $344 for the years ended December 31, 1999, 1998 and 1997,
respectively.
8. ACQUISITIONS AND DISPOSITIONS
In 1999 and 1997, respectively, the Company acquired assets of $4,832 and
$3,777 and assumed liabilities of $1,860 and $3,347 through the acquisition of
certain insurance and non-insurance operations. The aggregate purchase prices
were allocated to the assets and liabilities acquired based on their estimated
fair values.
During 1998, the Company sold MetLife Capital Holdings, Inc. (a commercial
financing company) and a substantial portion of its Canadian and Mexican
insurance operations, which resulted in a realized investment gain 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 of $10,663 and $4,342 and liabilities of $3,691 and $4,207 in 1998 and
1997, respectively.
See Note 16 for information regarding the Company's acquisition of
GenAmerica Corporation.
9. COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is currently a defendant in approximately 500 lawsuits raising
allegations of improper marketing and sales of individual life insurance
policies or annuities. These lawsuits are generally referred to as "sales
practices claims".
<PAGE> 32
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 28, 1999, after a fairness hearing, the United States District
Court for the Western District of Pennsylvania approved a class action
settlement resolving a multidistrict litigation proceeding involving alleged
sales practices claims. The settlement class includes most of the owners of
permanent life insurance policies and annuity contracts or certificates issued
pursuant to individual sales in the United States by Metropolitan Life Insurance
Company, Metropolitan Insurance and Annuity Company or Metropolitan Tower Life
Insurance Company between January 1, 1982 and December 31, 1997. This class
includes owners of approximately six million in-force or terminated insurance
policies and approximately one million in-force or terminated annuity contracts
or certificates.
In addition to dismissing the consolidated class actions, the District
Court's order also bars sales practices claims by class members for sales by the
defendant insurers during the class period, effectively resolving all pending
class actions against these insurers. The defendants are in the process of
having these claims dismissed.
Under the terms of the order, only those class members who excluded
themselves from the settlement may continue an existing, or start a new, sales
practices lawsuit against Metropolitan Life Insurance Company, Metropolitan
Insurance and Annuity Company or Metropolitan Tower Life Insurance Company for
sales that occurred during the class period. Approximately 20,000 class members
elected to exclude themselves from the settlement. Over 400 of the approximately
500 lawsuits noted above are brought by individuals who elected to exclude
themselves from the settlement.
The settlement provides three forms of relief. General relief, in the form
of free death benefits, is provided automatically to class members who did not
exclude themselves from the settlement or who did not elect the claim evaluation
procedures set forth in the settlement. The claim evaluation procedures permit a
class member to have a claim evaluated by a third party under procedures set
forth in the settlement. Claim awards made under the claim evaluation procedures
will be in the form of policy adjustments, free death benefits or, in some
instances, cash payments. In addition, class members who have or had an
ownership interest in specified policies will also automatically receive
deferred acquisition cost tax relief in the form of free death benefits. The
settlement fixes the aggregate amounts that are available under each form of
relief.
The Company expects that the total cost of the settlement will be
approximately $957. This amount is equal to the amount of the increase in
liabilities for the death benefits and policy adjustments and the present value
of expected cash payments to be provided to included class members, as well as
attorneys' fees and expenses and estimated other administrative costs, but does
not include the cost of litigation with policyholders who are excluded from the
settlement. The Company believes that the cost of the settlement will be
substantially covered by available reinsurance and the provisions made in its
consolidated financial statements, and thus will not have a material adverse
effect on its business, results of operations or financial position. The Company
has not yet made a claim under those reinsurance agreements and, although there
is a risk that the carriers will refuse coverage for all or part of the claim,
the Company believes this is very unlikely to occur. The Company believes it has
made adequate provision in its consolidated financial statements for all
probable losses for sales practices claims, including litigation costs involving
policyholders who are excluded from the settlement.
The class action settlement does not resolve nine purported or certified
class actions currently pending against New England Mutual Life Insurance
Company with which the Company merged in 1996. Eight of those actions have been
consolidated as a multidistrict proceeding for pre-trial purposes in the United
States District Court in Massachusetts. That Court certified a mandatory class
as to those claims. Following an appeal of that certification, the United States
<PAGE> 33
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Court of Appeals remanded the case to the District Court for further
consideration. The Company is negotiating a settlement with class counsel.
The class action settlement also does not resolve three putative sales
practices class action lawsuits which have been brought against General American
Life Insurance Company. These lawsuits have been consolidated in a single
proceeding in the United States District Court for the Eastern District of
Missouri. General American Life Insurance Company and counsel for plaintiffs
have negotiated a settlement in principle of this consolidated proceeding.
General American Life Insurance Company has not reached agreement with
plaintiffs' counsel on the attorneys' fees to be paid. However, negotiations are
ongoing.
In addition, the class action settlement does not resolve two putative
class actions involving sales practices claims filed against Metropolitan Life
Insurance Company in Canada. The class action settlement also does not resolve a
certified class action with conditionally certified subclasses against
Metropolitan Life Insurance Company, Metropolitan Insurance and Annuity Company,
Metropolitan Tower Life Insurance Company and various individual defendants
alleging improper sales abroad. That lawsuit is pending in a New York federal
court.
In the past, the Company has resolved some individual sales practices
claims through settlement, dispositive motion or, in a few instances, trial.
Most of the current cases seek substantial damages, including in some cases
punitive and treble damages and attorneys' fees. Additional litigation relating
to the Company's marketing and sales of individual life insurance may be
commenced in the future.
Regulatory authorities in a small number of states, including both
insurance departments and one state attorney general, as well as the National
Association of Securities Dealers, Inc., have ongoing investigations or
inquiries relating to the Company's sales of individual life insurance policies
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, the Company has resolved a number of investigations
by other regulatory authorities for monetary payments and certain other relief,
and may continue to do so in the future.
MetLife 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. MetLife 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 MetLife's employees
during the period from the 1920s through approximately the 1950s and alleging
that MetLife 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 MetLife have included
negligence, intentional tort claims and conspiracy claims concerning the health
risks associated with asbestos. While MetLife believes it has meritorious
defenses to these claims, and has not suffered any adverse judgments in respect
of these claims, most of the cases have been resolved by settlements. MetLife
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 MetLife may ultimately incur is
uncertain.
Significant portions of amounts paid in settlement of such cases have been
funded with proceeds from a previously resolved dispute with MetLife's primary,
umbrella and first level excess liability insurance carriers. MetLife is
presently in litigation with several of its excess
<PAGE> 34
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liability insurers regarding amounts payable under its policies with respect to
coverage for these claims. The trial court has granted summary judgment to these
insurers. MetLife has appealed. There can be no assurances regarding the outcome
of this litigation or the amount and timing of recoveries, if any, from these
excess liability insurers. MetLife's asbestos-related litigation with these
insurers should have no effect on recoveries under the excess insurance policies
described below.
The Company has recorded, in other expenses, charges of $499 ($317
after-tax), $1,895 ($1,203 after-tax) and $300 ($190 after-tax) for the years
ended December 31, 1999, 1998 and 1997, respectively, for sales practices claims
and claims for personal injuries caused by exposure to asbestos or
asbestos-containing products. The 1999 charge was principally related to the
settlement of the multidistrict litigation proceeding involving alleged improper
sales practices, accruals for sales practices claims not covered by the
settlement and other legal costs. The 1998 charge was comprised of $925 and $970
for sales practices claims and asbestos-related claims, respectively. The
Company recorded the charges for sales practices claims based on preliminary
settlement discussions and the settlement history of other insurers.
Prior to the fourth quarter of 1998, the Company established a liability
for asbestos-related claims based on settlement costs for claims that the
Company had settled, estimates of settlement costs for claims pending against
the Company and an estimate of settlement costs for unasserted claims. The
amount for unasserted claims was based on management's estimate of unasserted
claims that would be probable of assertion. A liability is not established for
claims which management believes are only reasonably possible of assertion.
Based on this process, the accrual for asbestos-related claims at December 31,
1997 was $386. Potential liabilities for asbestos-related claims are not easily
quantified, due to the nature of the allegations against the Company, which are
not related to the business of manufacturing, producing, distributing or selling
asbestos or asbestos-containing products, adding to the uncertainty as to the
number of claims that may be brought against the Company.
During 1998, the Company decided to pursue the purchase of excess insurance
to limit its exposure to asbestos-related claims. In connection with the
negotiations with the casualty insurers to obtain this insurance, the Company
obtained information that caused management to reassess the accruals for
asbestos-related claims. This information included:
- Information from the insurers regarding the asbestos-related claims
experience of other insureds, which indicated that the number of claims
that were probable of assertion against the Company in the future was
significantly greater than it had assumed in its accruals. The number of
claims brought against the Company is generally a reflection of the
number of asbestos-related claims brought against asbestos defendants
generally and the percentage of those claims in which the Company is
included as a defendant. The information provided to the Company relating
to other insureds indicated that the Company had been included as a
defendant for a significant percentage of total asbestos-related claims
and that it may be included in a larger percentage of claims in the
future, because of greater awareness of asbestos litigation generally by
potential plaintiffs and plaintiffs' lawyers and because of the
bankruptcy and reorganization or the exhaustion of insurance coverage of
other asbestos defendants; and that, although volatile, there was an
upward trend in the number of total claims brought against asbestos
defendants.
- Information derived from actuarial calculations the Company made in the
fourth quarter of 1998 in connection with these negotiations, which
helped to frame, define and quantify this liability. These calculations
were made using, among other things, current information regarding the
Company's claims and settlement experience (which reflected the Com-
<PAGE> 35
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
pany's decision to resolve an increased number of these claims by
settlement), recent and historic claims and settlement experience of
selected other companies and information obtained from the insurers.
Based on this information, the Company concluded that certain claims that
previously were considered as only reasonably possible of assertion were now
probable of assertion, increasing the number of assumed claims to approximately
three times the number assumed in prior periods. As a result of this
reassessment, the Company increased its liability for asbestos-related claims to
$1,278 at December 31, 1998.
During 1998, the Company paid $1,407 of premiums for excess of loss
reinsurance agreements and excess insurance policies, consisting of $529 for the
excess of loss reinsurance agreements for sales practices claims and excess
mortality losses and $878 for the excess insurance policies for asbestos-related
claims.
The Company obtained the excess of loss reinsurance agreements to provide
reinsurance with respect to sales practices claims made on or prior to December
31, 1999 and for certain mortality losses in 1999. These reinsurance agreements
have a maximum aggregate limit of $650, with a maximum sublimit of $550 for
losses for sales practices claims. This coverage is in excess of an aggregate
self-insured retention of $385 with respect to sales practices claims and $506,
plus the Company's statutory policy reserves released upon the death of
insureds, with respect to life mortality losses. At December 31, 1999, the
subject losses under the reinsurance agreements due to sales practices claims
and related counsel fees from the time the Company entered into the reinsurance
agreements did not exceed that self-insured retention. The maximum sublimit of
$550 for sales practices claims was within a range of losses that management
believed were reasonably possible at December 31, 1998. Each excess of loss
reinsurance agreement for sales practices claims and mortality losses contains
an experience fund, which provides for payments to the Company at the
commutation date if experience is favorable at such date. The Company accounts
for the aggregate excess of loss reinsurance agreements as reinsurance; however,
if deposit accounting were applied, the effect on the Company's consolidated
financial statements in 1998, 1999 and 2000 would not be significant.
Under reinsurance accounting, the excess of the liability recorded for
sales practices losses recoverable under the agreements of $550 over the premium
paid of $529 results in a deferred gain of $21 which is being amortized into
income over the settlement period from January 1999 through April 2000. Under
deposit accounting, the premium would be recorded as an other asset rather than
as an expense, and the reinsurance loss recoverable and the deferred gain would
not have been recorded. Because the agreements also contain an experience fund
which increases with the passage of time, the increase in the experience fund in
1999 and 2000 under deposit accounting would be recognized as interest income in
an amount approximately equal to the deferred gain that will be amortized into
income under reinsurance accounting.
The excess insurance policies for asbestos-related claims provide for
recovery of losses up to $1,500, which is in excess of a $400 self-insured
retention ($878 of which was recorded as a recoverable at December 31, 1999 and
1998). The asbestos-related policies are also subject to annual and per-claim
sublimits. Amounts are recoverable under the policies annually with respect to
claims paid during the prior calendar year. Although amounts paid in any given
year that are recoverable under the policies will be reflected as a reduction in
the Company's operating cash flows for that year, management believes that the
payments will not have a material adverse effect on the Company's liquidity.
Each asbestos-related policy contains an experience fund and a reference fund
that provides for payments to the Company at the commutation date if experience
under the policy to such date has been favorable, or pro rata reductions from
time to
<PAGE> 36
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
time in the loss reimbursements to the Company if the cumulative return on the
reference fund is less than the return specified in the experience fund.
A purported class action suit involving policyholders in 32 states has been
filed in a Rhode Island state court against MetLife's subsidiary, Metropolitan
Property and Casualty Insurance Company, with respect to claims by policyholders
for the alleged diminished value of automobiles after accident-related repairs.
A similar "diminished value" allegation was made recently in a Texas Deceptive
Trade Practices Act letter and lawsuit which involve a Metropolitan Property and
Casualty Company policyholder. A purported class action has been filed against
Metropolitan Property and Casualty Insurance Company and its subsidiary,
Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging
breach of contract and unfair trade practices with respect to Metropolitan
Casualty Insurance Company allowing the use of parts not made by the original
manufacturer to repair damaged automobiles. These suits are in the early stages
of litigation and Metropolitan Property and Casualty Insurance Company and
Metropolitan Casualty Insurance Company intend to vigorously defend themselves
against these suits. Similar suits have been filed against several other
personal lines property and casualty insurers.
The United States, the Commonwealth of Puerto Rico and various hotels and
individuals have sued MetLife Capital Corporation, a former subsidiary of the
Company, seeking damages for clean up costs, natural resource damages, personal
injuries and lost profits and taxes based upon, among other things, a release of
oil from a barge which was being towed by the M/V Emily S. In connection with
the sale of MetLife Capital, the Company acquired MetLife Capital's potential
liability with respect to the M/V Emily S lawsuit. MetLife Capital had entered
into a sale and leaseback financing arrangement with respect to the M/V Emily S.
The plaintiffs have taken the position that MetLife Capital, as the owner of
record of the M/V Emily S, is responsible for all damages caused by the barge,
including the oil spill. The governments of the United States and Puerto Rico
have claimed damages in excess of $150. At a mediation, the action brought by
the United States and Puerto Rico was conditionally settled, provided that the
governments have access to additional sums from a fund contributed to by oil
companies to help remediate oil spills. The Company can provide no assurance
that this action will be settled in this manner.
Three putative class actions have been filed by Conning Corporation
shareholders alleging that the Company's announced offer to purchase the
publicly-held Conning shares is inadequate and constitutes a breach of fiduciary
duty (see Note 16). The Company believes the actions are without merit, and
expects that they will not materially affect its offer to purchase the shares.
A civil complaint challenging the fairness of the plan of reorganization
and the adequacy and accuracy of the disclosures to policyholders regarding the
plan has been filed in New York Supreme Court for Kings County on behalf of an
alleged class consisting of the policyholders of MetLife who should have
membership benefits in MetLife and were and are eligible to receive notice, vote
and receive consideration in the demutualization. The complaint seeks to enjoin
or rescind the plan and seeks other relief. The defendants named in the
complaint are MetLife and the individual members of its board of directors and
MetLife, Inc. MetLife believes that the allegations made in the complaint are
wholly without merit, and intends to vigorously contest the complaint.
Various litigation, claims and assessments against the Company, in addition
to those discussed above and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including, but not limited to, in connection with its activities as an
insurer, employer, investor, investment advisor and taxpayer. Further, state
insurance regulatory authorities and other Federal and state authorities
regularly
<PAGE> 37
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
make inquiries and conduct investigations concerning the Company's compliance
with applicable insurance and other laws and regulations.
In some 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 or provide reasonable ranges of potential
losses, 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 consolidated financial position.
However, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could, from time to time, have a material
adverse effect on the Company's operating results or cash flows in particular
quarterly or annual periods.
TRANSFERRED CANADIAN POLICIES
In July 1998, MetLife sold a substantial portion of its Canadian operations
to Clarica Life. As part of that sale, a large block of policies in effect with
MetLife in Canada were transferred to Clarica Life, and the holders of the
transferred Canadian policies became policyholders of Clarica Life. Those
transferred policyholders are no longer policyholders of MetLife and, therefore,
are not entitled to compensation under the plan of reorganization. However, as a
result of a commitment made in connection with obtaining Canadian regulatory
approval of that sale, if MetLife demutualizes, its Canadian branch will make
cash payments to those who are, or are deemed to be, holders of those
transferred Canadian policies. The payments, which will be recorded in other
expenses in the same period as the effective date of the plan, will be
determined in a manner that is consistent with the treatment of, and fair and
equitable to, eligible policyholders of MetLife. The amount of the payment is
dependent upon the initial public offering price of common stock to be issued on
the effective date of the plan of demutualization.
YEAR 2000
The Year 2000 issue was 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 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 implemented a plan to resolve the issue. There can be no
assurances that the Year 2000 plan of the Company or that of its vendors or
third parties have resolved all Year 2000 issues. Further, there can be no
assurance that there will not be any future system failure or that such failure,
if any, will not have a material impact on the operations of the Company.
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
<PAGE> 38
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
2000......................................... $ 817 $13 $156
2001......................................... 740 12 135
2002......................................... 689 11 111
2003......................................... 612 9 90
2004......................................... 542 9 69
Thereafter................................... 2,032 27 299
</TABLE>
10. INCOME TAXES
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................................................... $643 $668 $370
State and local........................................... 24 60 10
Foreign................................................... 4 99 26
---- ---- ----
671 827 406
---- ---- ----
Deferred:
Federal................................................... (78) (25) 28
State and local........................................... 2 (8) 9
Foreign................................................... (2) (54) 25
---- ---- ----
(78) (87) 62
---- ---- ----
Provision for income taxes.................................. $593 $740 $468
==== ==== ====
</TABLE>
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,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax provision at U.S. statutory rate........................ $502 $730 $585
Tax effect of:
Tax exempt investment income.............................. (39) (40) (30)
Surplus tax............................................... 125 18 (40)
State and local income taxes.............................. 18 31 15
Tax credits............................................... (5) (25) (15)
Prior year taxes.......................................... (31) 4 (2)
Sale of businesses........................................ -- (19) (41)
Other, net................................................ 23 41 (4)
---- ---- ----
Provision for income taxes.................................. $593 $740 $468
==== ==== ====
</TABLE>
<PAGE> 39
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
---- ----
<S> <C> <C>
Deferred income tax assets:
Policyholder liabilities and receivables............... $3,042 $3,108
Net operating losses................................... 72 22
Net unrealized investment losses....................... 161 --
Employee benefits...................................... 192 174
Litigation related..................................... 468 312
Other.................................................. 242 158
------ ------
4,177 3,774
Less: Valuation allowance.............................. 72 21
------ ------
4,105 3,753
------ ------
Deferred income tax liabilities:
Investments............................................ 1,472 1,529
Deferred policy acquisition costs...................... 1,967 1,887
Net unrealized investment gains........................ -- 864
Other.................................................. 63 18
------ ------
3,502 4,298
------ ------
Net deferred income tax asset (liability)................ $ 603 $ (545)
====== ======
</TABLE>
Foreign net operating loss carryforwards generated deferred income tax
benefits of $72 and $21 at December 31, 1999 and 1998, respectively. 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 when management believes that it is more likely than not that the
portion of the deferred income tax asset is realizable.
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.
11. 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's life insurance operations participate in reinsurance in order
to limit losses, minimize exposure to large risks and to provide additional
capacity for future growth. During
<PAGE> 40
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998, the Company began reinsuring, under yearly renewal term policies, 90
percent of the mortality risk on universal life policies issued after 1983. The
Company also reinsures 90 percent of the mortality risk on term life insurance
policies issued after 1995 under yearly renewal term policies and coinsures 100
percent of the mortality risk in excess of $25 and $35 on single and joint
survivorship policies, respectively.
During 1997, the Company obtained a 100 percent coinsurance policy to
provide coverage for contractual payments generated by certain portions of the
Company's non-life contingency long-term guaranteed interest contracts and
structured settlement lump sum contracts issued during the periods 1991 through
1993. The policy was amended in 1998 to include structured settlement lump sum
payments issued during the period 1983 through 1990, 1994 and 1995. Reinsurance
recoverables under the contract, which has been accounted for as a financing
transaction, were $1,372 and $1,374 at December 31, 1999 and 1998, respectively.
See Note 9 for information regarding certain excess of loss reinsurance
agreements providing coverage for risks associated primarily with sales
practices claims.
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 limit its maximum loss, provide
greater diversification of risk and minimize exposure to larger risks. The
Company's reinsurance program is designed to limit a catastrophe loss to no more
than 10% of the Auto & Home segment's statutory surplus.
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Direct premiums..................................... $13,249 $12,763 $12,728
Reinsurance assumed................................. 484 409 360
Reinsurance ceded................................... (1,645) (1,669) (1,810)
------- ------- -------
Net premiums........................................ $12,088 $11,503 $11,278
======= ======= =======
Reinsurance recoveries netted against policyholder
benefits.......................................... $ 1,626 $ 1,744 $ 1,648
======= ======= =======
</TABLE>
The effects of reinsurance with GenAmerica Corporation ("GenAmerica") were
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums ceded to GenAmerica.............................. $108 $113 $61
==== ==== ===
Reinsurance recoveries from GenAmerica netted against
policyholder benefits................................... $ 74 $ 28 $24
==== ==== ===
</TABLE>
Reinsurance recoverables, included in other receivables, were $2,898 and
$3,134 at December 31, 1999 and 1998, respectively, of which $5 and $5,
respectively, were recoverable from GenAmerica. Reinsurance and ceded
commissions payables, included in other liabilities, were $148 and $105 at
December 31, 1999 and 1998, respectively.
<PAGE> 41
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at January 1................................ $ 3,320 $ 3,655 $ 3,345
Reinsurance recoverables.......................... (233) (229) (215)
------- ------- -------
Net balance at January 1............................ 3,087 3,426 3,130
------- ------- -------
Acquisition of business............................. 204 -- --
------- ------- -------
Incurred related to:
Current year...................................... 3,129 2,726 2,855
Prior years....................................... (16) (245) 88
------- ------- -------
3,113 2,481 2,943
------- ------- -------
Paid related to:
Current year...................................... (2,128) (1,967) (1,832)
Prior years....................................... (759) (853) (815)
------- ------- -------
(2,887) (2,820) (2,647)
------- ------- -------
Balance at December 31.............................. 3,517 3,087 3,426
Add: Reinsurance recoverables..................... 272 233 229
------- ------- -------
Balance at December 31.............................. $ 3,789 $ 3,320 $ 3,655
======= ======= =======
</TABLE>
12. OTHER EXPENSES
Other expenses were comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Compensation........................................ $ 2,590 $ 2,478 $ 2,078
Commissions......................................... 937 902 766
Interest and debt issue costs....................... 405 379 453
Amortization of policy acquisition costs (excludes
amortization of $(46), $240 and $70, respectively,
related to realized investment gains and
(losses))......................................... 862 587 771
Capitalization of policy acquisition costs.......... (1,160) (1,025) (1,000)
Rent, net of sublease income........................ 239 155 179
Minority interest................................... 55 67 56
Restructuring charge................................ -- 81 --
Other............................................... 2,827 4,395 2,468
------- ------- -------
$ 6,755 $ 8,019 $ 5,771
======= ======= =======
</TABLE>
During 1998, the Company recorded charges of $81 to restructure
headquarters operations and consolidate certain agencies and other operations.
These costs have been fully paid at December 31, 1999.
<PAGE> 42
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. STATUTORY FINANCIAL INFORMATION
The reconciliations 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,
------------------
1999 1998
---- ----
<S> <C> <C>
Statutory surplus........................................... $ 7,630 $ 7,388
GAAP adjustments for:
Future policy benefits and policyholder account
balances............................................... (4,167) (6,830)
Deferred policy acquisition costs......................... 8,381 6,560
Deferred income taxes..................................... 886 (190)
Valuation of investments.................................. (2,102) 3,981
Statutory asset valuation reserves........................ 3,189 3,381
Statutory interest maintenance reserves................... 1,114 1,486
Surplus notes............................................. (1,602) (1,595)
Other, net................................................ 361 686
------- -------
Equity...................................................... $13,690 $14,867
======= =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net change in statutory surplus......................... $ 242 $ 10 $ 227
GAAP adjustments for:
Future policy benefits and policyholder account
balances........................................... 556 127 (38)
Deferred policy acquisition costs..................... 379 224 149
Deferred income taxes................................. 154 234 62
Valuation of investments.............................. 473 1,158 (387)
Statutory asset valuation reserves.................... (226) (461) 1,136
Statutory interest maintenance reserves............... (368) 312 53
Other, net............................................ (593) (261) 1
----- ------ ------
Net income.............................................. $ 617 $1,343 $1,203
===== ====== ======
</TABLE>
<PAGE> 43
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. OTHER COMPREHENSIVE INCOME (LOSS)
The following table sets forth the reclassification adjustments required
for the years ended December 31, 1999, 1998 and 1997 to avoid double-counting in
other comprehensive income (loss) items that are included as part of net income
for the current year that have been reported as a part of other comprehensive
income (loss) in the current or prior year:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Holding (losses) gains on investments arising during the
year...................................................... $(6,314) $ 1,493 $ 4,257
Income tax effect of holding gains or losses................ 2,262 (617) (1,615)
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) losses included in current year
net income............................................. 38 (2,013) (844)
Amortization of premium and discount on investments....... (307) (350) (209)
Realized holding (losses) gains allocated to other
policyholder amounts................................... (67) 608 231
Income tax effect......................................... 120 729 312
Allocation of holding losses (gains) on investments relating
to other policyholder amounts............................. 3,788 (351) (2,231)
Income tax effect of allocation of holding gains and losses
to other policyholder amounts............................. (1,357) 143 846
------- ------- -------
Net unrealized investment (losses) gains.................... (1,837) (358) 870
------- ------- -------
Foreign currency translation adjustments arising during the
year...................................................... 50 (115) (46)
Reclassification adjustment for sale of investment in
foreign operation......................................... -- 2 (3)
------- ------- -------
Foreign currency translation adjustment..................... 50 (113) (49)
------- ------- -------
Minimum pension liability adjustment........................ (7) (12) --
------- ------- -------
Other comprehensive income (loss)........................... $(1,794) $ (483) $ 821
======= ======= =======
</TABLE>
15. 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 personal excess liability
insurance. International provides life insurance, accident and health insurance,
annuities and retirement and savings
<PAGE> 44
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1999, 1998
and 1997. 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 commercial leasing business
(Corporate segment) and substantial portions of its Canadian operations
(International segment), and insurance operations in the United Kingdom
(International segment). 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 (primarily consisting of sales practices
claims and claims for personal injuries caused by exposure to asbestos or
asbestos-containing products) and prior to its sale in 1998, the results of
MetLife Capital Holdings, Inc. to the Corporate segment.
<TABLE>
<CAPTION>
AUTO
AT OR FOR THE YEAR ENDED & ASSET CONSOLIDATION/
DECEMBER 31, 1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL MANAGEMENT CORPORATE ELIMINATION TOTAL
------------------------ ---------- ------------- ---- ------------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................ $ 4,289 $ 5,525 $1,751 $ 523 $ -- $ -- $ -- $ 12,088
Universal life and
investment-type
product policy fees... 888 502 -- 48 -- -- -- 1,438
Net investment income... 5,346 3,755 103 206 80 605 (279) 9,816
Other revenues.......... 558 629 21 12 803 59 72 2,154
Net realized investment
gains (losses)........ (14) (31) 1 1 -- (41) 14 (70)
Policyholder benefits
and claims............ 4,625 6,712 1,301 463 -- -- 4 13,105
Interest credited to
policyholder account
balances.............. 1,359 1,030 -- 52 -- -- -- 2,441
Policyholder
dividends............. 1,509 159 -- 22 -- -- -- 1,690
Other expenses.......... 2,719 1,589 514 248 795 1,031 (141) 6,755
Income (loss) before
provision for income
taxes and
extraordinary item.... 855 890 61 5 88 (408) (56) 1,435
Income (loss) after
provision for income
taxes before
extraordinary item.... 555 567 56 21 51 (358) (50) 842
Total assets............ 109,401 88,127 4,443 4,381 1,036 19,834 (1,990) 225,232
Deferred policy
acquisition costs..... 8,049 106 93 244 -- -- -- 8,492
Separate account
assets................ 28,828 35,236 -- 877 -- -- -- 64,941
Policyholder
liabilities........... 72,956 47,781 2,318 2,187 -- 6 (293) 124,955
Separate account
liabilities........... 28,828 35,236 -- 877 -- -- -- 64,941
</TABLE>
<PAGE> 45
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED 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................ $ 4,323 $ 5,159 $1,403 $ 618 $ -- $ -- $ -- $ 11,503
Universal life and
investment-type
product policy fees... 817 475 -- 68 -- -- -- 1,360
Net investment income... 5,480 3,885 81 343 75 682 (318) 10,228
Other revenues.......... 474 575 36 33 817 111 (52) 1,994
Net realized investment
gains................. 659 557 122 117 -- 679 (113) 2,021
Policyholder benefits
and claims............ 4,606 6,416 1,029 597 -- (10) -- 12,638
Interest credited to
policyholder account
balances.............. 1,423 1,199 -- 89 -- -- -- 2,711
Policyholder
dividends............. 1,445 142 -- 64 -- -- -- 1,651
Other expenses.......... 2,577 1,613 386 352 799 2,601 (309) 8,019
Income (loss) before
provision for income
taxes and
extraordinary item.... 1,702 1,281 227 77 93 (1,119) (174) 2,087
Income (loss) after
provision for income
taxes before
extraordinary item.... 1,069 846 161 56 49 (691) (143) 1,347
Total assets............ 103,614 88,741 2,763 3,432 1,164 20,852 (5,220) 215,346
Deferred policy
acquisition costs..... 6,194 82 57 205 -- -- -- 6,538
Separate account
assets................ 23,013 35,029 -- 26 -- -- -- 58,068
Policyholder
liabilities........... 71,571 49,406 1,477 2,043 -- 1 (295) 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 78 700 (370) 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 1,003 869 -- -- -- 12,403
Interest credited to
policyholder account
balances............... 1,422 1,319 -- 137 -- -- -- 2,878
Policyholder dividends... 1,340 305 -- 97 -- -- -- 1,742
Other expenses........... 2,394 1,178 351 497 679 966 (294) 5,771
Income before provision
for income taxes....... 877 535 105 145 81 79 (151) 1,671
Income after provision
for income taxes....... 599 339 74 126 45 163 (143) 1,203
Total assets............. 95,323 83,473 2,542 7,412 1,136 18,641 (5,745) 202,782
Deferred policy
acquisition costs...... 5,912 40 56 428 -- -- -- 6,436
Separate account assets.. 17,345 30,473 -- 520 -- -- -- 48,338
Policyholder
liabilities............ 70,686 49,547 1,509 5,615 -- 1 -- 127,358
Separate account
liabilities............ 17,345 30,473 -- 520 -- -- -- 48,338
</TABLE>
<PAGE> 46
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 $48, $49 and $45 for
the years ended December 31, 1999, 1998 and 1997, respectively. The investment
in Nvest was $196, $252 and $216 at December 31, 1999, 1998 and 1997,
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: (1) a review of the nature of such costs, (2) time studies analyzing the
amount of employee compensation costs incurred by each segment, and (3) 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 $24,637, $25,643 and $22,664 for
the years ended December 31, 1999, 1998 and 1997, respectively, which
represented 97%, 96% and 93%, respectively, of consolidated revenues.
16. SUBSEQUENT EVENTS
On January 6, 2000, the Company acquired GenAmerica for $1.2 billion. In
connection with this acquisition, the Company incurred $900 of short-term debt.
GenAmerica is a holding company which includes General American Life Insurance
Company, 48.3% of the outstanding shares of Reinsurance Group of America ("RGA")
common stock, a provider of reinsurance, and 61.0% of the outstanding shares of
Conning Corporation common stock, an asset manager. On January 18, 2000, the
Company announced that it had proposed to acquire all of the outstanding shares
of Conning common stock not already owned by it for $10.50 per share in cash, or
approximately $55. At December 31, 1999, the Company owned 9.6% of the
outstanding shares of RGA common stock which were acquired on November 24, 1999
for $125. Subsequent to the GenAmerica acquisition, the Company owned 57.9% of
the outstanding shares of RGA common stock. Total assets, revenues and net loss
of GenAmerica were $23,594, $3,916 and $(174), respectively, at or for the year
ended December 31, 1999.
As part of the acquisition agreement, in September 1999 the Company assumed
$5,752 of General American Life funding agreements and received cash of $1,926
and investment assets with a market value of $3,826. In October 1999, as part of
the assumption arrangement, the holders of General American Life funding
agreements aggregating $5,136 elected to have the Company redeem the funding
agreements for cash. General American Life agreed to pay the Company a fee of
$120 in connection with the assumption of the funding agreements. The fee will
be considered as part of the purchase price to be allocated to the fair value of
assets and liabilities acquired. The Company also agreed to make a capital
contribution of $120 to General American Life after the completion of the
acquisition.
At the date of the acquisition agreement, the Company and GenAmerica were
parties to a number of reinsurance agreements. In addition, as part of the
acquisition, the Company entered into agreements effective as of July 25, 1999,
which coinsured new and certain existing business of General American Life and
some of its affiliates. See Note 11.
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
PRO FORMA SIX
SIX MONTHS MONTHS ENDED
ENDED JUNE 30, JUNE 30, (NOTE 4)
-------------- -----------------
2000 1999 2000
---- ---- ----
REVENUES
Premiums........................... $7,041 $5,786 $ 6,147
Universal life and investment-type
product policy fees.............. 917 651 917
Net investment income.............. 5,042 4,806 4,432
Other revenues..................... 1,359 1,048 1,370
Net realized investment losses (net
of amounts allocable to other
accounts of $23, $40 and $12,
respectively).................... (147) (155) (127)
Contribution from the closed
block............................ 1 -- 25
------- ------- -------
14,213 12,136 12,764
------- ------- -------
EXPENSES
Policyholder benefits and claims
(includes amounts directly
related to net realized
investment losses of $8,
$16 and $8, respectively)........ 7,336 6,400 6,420
Interest credited to policyholder
account balances................. 1,421 1,207 1,421
Policyholder dividends............. 605 784 226
Payments to former Canadian
policyholders.................... 327 -- --
Other expenses (includes amounts
directly related to net realized
investment losses of $15, $24 and
$4, respectively)................ 3,857 3,421 3,693
------- ------- -------
13,546 11,812 11,760
------- ------- -------
Income before provision for income
taxes and extraordinary item..... 667 324 1,004
Provision for income taxes......... 376 171 335
------- ------- -------
Income before extraordinary item... 291 153 669
Extraordinary item --
demutualization expense.......... 170 44 --
------- ------- -------
Net income......................... $ 121 $ 109 $ 669
======= ======= =======
Net income after date of
demutualization.................. $ 341
=======
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-65
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN MILLIONS)
2000 1999
---- ----
ASSETS
Investments:
Fixed maturities available-for-sale,
at fair value ............................ $ 83,618 $ 96,981
Equity securities, at fair value ........... 2,133 2,006
Mortgage loans on real estate .............. 16,405 19,739
Real estate and real estate joint
ventures ................................. 5,619 5,649
Policy loans ............................... 4,179 5,598
Other limited partnership interests ........ 1,559 1,331
Short-term investments ..................... 1,046 3,055
Other invested assets ...................... 2,122 1,501
--------- ---------
116,681 135,860
Cash and cash equivalents .................... 3,187 2,789
Accrued investment income .................... 1,424 1,725
Premiums and other receivables ............... 8,317 6,681
Deferred policy acquisition costs ............ 6,771 9,069
Deferred income taxes ........................ 695 603
Other ........................................ 4,824 3,564
Closed block assets .......................... 39,089 --
Separate account assets ...................... 73,706 64,941
--------- ---------
$ 254,694 $ 225,232
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits ....................... $ 41,373 $ 73,582
Policyholder account balances ................ 53,605 45,901
Other policyholder funds ..................... 5,339 4,498
Policyholder dividends payable ............... 283 974
Short-term debt .............................. 1,775 4,208
Long-term debt ............................... 3,838 2,514
Current income tax payable ................... 552 548
Other ........................................ 16,938 14,376
Closed block liabilities ..................... 42,766 --
Separate account liabilities ................. 73,706 64,941
--------- ---------
240,175 211,542
--------- ---------
Commitments and contingencies (Note 7)
Company-obligated mandatory redeemable
securities of subsidiary trust holding
solely junior subordinated debentures
of its Parent .............................. 118 --
--------- ---------
Stockholder's Equity:
Common stock, par value $.01 per
share: ..................................... 5 --
Additional paid-in capital ................... 14,549 --
Retained earnings ............................ 341 14,100
Accumulated other comprehensive loss ......... (494) (410)
--------- ---------
14,401 13,690
--------- ---------
$ 254,694 $ 225,232
========= =========
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-66
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE LOSS
------------------
NET FOREIGN MINIMUM
ADDITIONAL UNREALIZED CURRENCY PENSION
COMMON PAID-IN RETAINED INVESTMENT TRANSLATION LIABILITY
STOCK CAPITAL EARNING LOSSES ADJUSTMENT ADJUSTMENT TOTAL
------ ---------- -------- ---------- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
2000................... $-- $ -- $ 14,100 $(297) $(94) $(19) $13,690
Policy credits and cash
payments to eligible
policyholders.......... (2,958) (2,958)
Common stock issued in
demutualization........ 5 10,917 (10,922) --
Capital contribution from
Parent................. -- 3,632 -- -- -- -- 3,632
Comprehensive income:
Net loss before date of
demutualization...... (220) (220)
Net income after date
of demutualization... 341 341
Other comprehensive
loss:
Unrealized investment
losses, net of
realized offsets,
reclassification
adjustments and
income taxes....... (92) (92)
Foreign currency
translation
adjustments........ 8 8
-------
Other comprehensive
loss............... (84)
-------
Comprehensive income... 37
--- ------- -------- ----- ---- ---- -------
Balance at June 30,
2000................... $ 5 $14,549 $ 341 $(389) $(86) $(19) $14,401
=== ======= ======== ===== ==== ==== =======
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-67
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(IN MILLIONS)
2000 1999
---- ----
NET CASH PROVIDED BY OPERATING ACTIVITIES .......... $ 1,682 $ 1,280
CASH FLOWS FROM INVESTING ACTIVITIES
Sales, maturities and repayments of:
Fixed maturities ............................. 21,473 39,728
Equity securities ............................ 392 456
Mortgage loans on real estate ................ 998 761
Real estate and real estate joint ventures ... 344 482
Other limited partnership interests .......... 263 273
Purchases of:
Fixed maturities ............................... (25,258) (40,588)
Equity securities .............................. (377) (172)
Mortgage loans on real estate .................. (833) (2,190)
Real estate and real estate joint ventures ..... (186) (170)
Other limited partnerhip interests ............. (338) (193)
Net change in short-term investments ............. 2,130 616
Net change in policy loans ....................... (98) 87
Purchase of business, net of cash received ....... (419) --
Proceeds from sales of businesses ................ 107 --
Net change in investment collateral .............. 1,015 505
Other, net ....................................... (387) (72)
-------- --------
Net cash used in investing activities .............. (1,174) (477)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution from Parent ................. 3,632 --
Cash payments to eligible
policyholders .................................. (2,550) --
Policyholder account balances:
Deposits ....................................... 14,769 10,268
Withdrawals .................................... (14,636) (11,509)
Net change in short-term debt .................... (2,436) (1,058)
Long-term debt issued ............................ 1,124 165
Long-term debt repaid ............................ (13) (181)
-------- --------
Net cash provided by (used in) financing
activities ....................................... (110) (2,315)
-------- --------
Change in cash and cash equivalents ................ 398 (1,512)
Cash and cash equivalents, beginning of period ..... 2,789 3,301
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........... $ 3,187 $ 1,789
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ......................................... $ 257 $ 196
======== ========
Income taxes ..................................... $ 235 $ 170
======== ========
Non-cash transactions during the period:
Policy credits to eligible policyholders ......... $ 408 $ --
======== ========
Business acquisitions -- assets .................. $ 23,686 $ --
======== ========
Business acquisitions --
liabilities .................................... $ 22,406 $ --
======== ========
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-68
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Metropolitan Life Insurance Company 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, reinsurance and
retirement and savings products and services to corporations and other
institutions.
On April 7, 2000, Metropolitan Life Insurance Company ("Metropolitan Life")
converted from a mutual life insurance company to a stock life insurance company
and became a wholly-owned subsidiary of MetLife, Inc. ("MetLife"), a Delaware
corporation. The conversion was pursuant to an order by the New York
Superintendent of Insurance ("Superintendent") approving Metropolitan Life's
plan of reorganization (the "plan") as amended.
On the date of demutualization, each policyholder's membership interest in
Metropolitan Life was extinguished and each eligible policyholder received, in
exchange for that interest, trust interests representing shares of common stock
of MetLife to be held in a trust, cash or an adjustment to their policy values
in the form of policy credits, as provided in the plan. In addition,
Metropolitan Life's Canadian branch made cash payments to holders of certain
policies transferred to Clarica Life Insurance Company in connection with the
sale of a substantial portion of Metropolitan Life's Canadian operations in
1998.
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America. These condensed consolidated financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position of the Company
and its consolidated results of operations and cash flows for the periods
presented. Interim results are not necessarily indicative of full year
performance. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto for the year ended December 31, 1999.
PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include the
accounts of the Company, partnerships and joint ventures in which the Company
has a majority voting interest or general partner interest with limited removal
rights from limited partners. All material intercompany accounts and
transactions have been eliminated.
EXTRAORDINARY ITEM -- DEMUTUALIZATION EXPENSE
The accompanying condensed consolidated statements of operations include
extraordinary charges of $170 (net of income tax benefit of $60), and $44 (net
of income tax benefit of $10) for the six months ended June 30, 2000 and 1999,
respectively, related to costs associated with the demutualization.
F-69
<PAGE>
FEDERAL INCOME TAXES
Federal income taxes for interim periods have been computed using an
estimated annual effective tax rate. This rate is revised, if necessary, at the
end of each successive interim period to reflect the current estimate of the
annual effective tax rate. Income tax expense for the six months ended June 30,
2000 reflect the effect of surplus tax for the period prior to demutualization
and the non-deductible payment to the former Canadian policyholders.
CLOSED BLOCK
On the date of demutualization, Metropolitan Life established a closed block
for the benefit of holders of certain individual life insurance policies of
Metropolitan Life. Assets have been allocated to the closed block in an amount
that has been determined to produce cash flows which, together with anticipated
revenues from the policies included in the closed block, are reasonably expected
to be sufficient to support obligations and liabilities relating to these
policies, including, but not limited to, provisions for the payment of claims
and certain expenses and taxes, and to provide for the continuation of
policyholder dividend scales in effect for 1999, if the experience underlying
such dividend scales continues, and for appropriate adjustments in such scales
if the experience changes. The closed block assets, the cash flows generated by
the closed block assets and the anticipated revenues from the policies in the
closed block will benefit only the holders of the policies in the closed block.
To the extent that, over time, cash flows from the assets allocated to the
closed block and claims and other experience related to the closed block are, in
the aggregate, more or less favorable than what was assumed when the closed
block was established, total dividends paid to closed block policyholders in the
future may be greater than or less than the total dividends that would have been
paid to these policyholders if the policyholder dividend scales in effect for
1999 had been continued. Any cash flows in excess of amounts assumed will be
available for distribution over time to closed block policyholders and will not
be available to stockholders. The closed block will continue in effect as long
as any policy in the closed block remains in force. The expected life of the
closed block is over 100 years.
The Company uses the same accounting principles to account for the
participating policies included in the closed block as it used prior to the date
of demutualization. However, the Company establishes a policyholder dividend
obligation for earnings that will be paid to policyholders as additional
dividends in the amounts described below. The excess of closed block liabilities
over closed block assets at the effective date of the demutualization represents
the estimated maximum future contributions from the closed block expected to
result from operations attributed to the closed block after income taxes.
Contributions from the closed block are recognized in income over the period the
policies and contracts in the closed block remain in force. Management believes
that over time the actual cumulative contributions from the closed block will
approximately equal the expected cumulative contributions due to the effect of
dividend changes. If, over the period the closed block remains in existence, the
actual cumulative contribution from the closed block is greater than the
expected cumulative contribution from the closed block, the Company will
recognize only the expected cumulative contribution in income with the excess
recorded as a policyholder dividend obligation, because it will pay the excess
of the actual cumulative contribution from the closed block over the expected
cumulative contribution to closed block policyholders as additional policyholder
dividends unless offset by future unfavorable experience of the closed block. If
over such period, the actual cumulative contribution from the closed block is
less than the expected cumulative contribution from the closed block, the
Company will recognize only the actual contribution in income. However, the
Company may change dividends in the future, which would be intended to increase
future actual contributions until the actual cumulative contributions equal the
expected cumulative contributions.
F-70
<PAGE>
The results of operations of the closed block are presented as a single line
item in the Company's condensed consolidated statements of operations entitled,
"Contribution from the closed block". In addition, all assets and liabilities
allocated to the closed block are reported in the Company's condensed
consolidated balance sheet separately under the captions "Closed block assets"
and "Closed block liabilities", respectively. Prior to the establishment of the
closed block the assets, liabilities, revenues and expenses of the closed block
were reported in various line items in the Company's condensed consolidated
financial statements. Accordingly, certain line items in the Company's condensed
consolidated financial statements subsequent to the establishment of the closed
block reflect material reductions in reported amounts, as compared to periods
prior to the establishment of the closed block, while having no effect on
stockholder's equity or net income (loss).
The pre-tax contribution from the closed block includes only those revenues,
benefit payments, dividends, premium taxes, administrative and investment
expenses considered in funding the closed block and deferred policy acquisition
costs incurred prior to the date of demutualization, applicable to policies
included in the closed block. Income tax expenses applicable to the closed block
are allocated to the closed block and are reflected as a component of the
provision for income taxes.
EARNINGS AFTER DATE OF DEMUTUALIZATION
Net income after the date of demutualization is based on the results of
operations for the period beginning on April 1, 2000, adjusted to eliminate the
payments to the former Canadian policyholders and costs of demutualization
recorded in April 2000 which are applicable to the period prior to
demutualization.
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2000, the Company adopted 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. Adoption of SOP 98-7 did
not have a material effect on the Company's condensed consolidated financial
statements.
In June 2000, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 138, ACCOUNTING FOR CERTAIN
DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES -- AN AMENDMENT OF
FASB STATEMENT NO. 133 ("SFAS 138"). In June 1999, the FASB also issued
Statement of Financial Accounting Standards No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133 ("SFAS 137"). SFAS 137 defers the provisions of Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES ("SFAS 133") until January 1, 2001. SFAS 133, as amended
by SFAS 138, requires, among other things, that all derivatives be recognized in
the consolidated balance sheet 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 in the process of quantifying the impact of SFAS 133 on its
consolidated financial statements.
F-71
<PAGE>
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
("SAB 101"). SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company is required to adopt SAB 101 as of January 1, 2001. The Company is
in the process of quantifying the impact, if any, of the requirements of SAB
101.
2. INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS
On the date of demutualization, MetLife conducted an initial public offering
of 202,000,000 shares and concurrent private placements of 60,000,000 shares of
its common stock at an initial public offering price of $14.25 per share. The
shares of common stock issued in the offerings are in addition to 493,903,472
shares of common stock of MetLife distributed to the Metropolitan Life
policyholder trust for the benefit of policyholders of Metropolitan Life in
connection with the demutualization. On April 10, 2000, MetLife issued
30,300,000 additional shares of common stock as a result of the exercise of
over-allotment options granted to underwriters in the initial public offering.
In April 2000, MetLife Capital Trust I, a business trust wholly owned by
MetLife, issued 20,125,000 8.00% equity security units ("units"). Each unit
contains a purchase contract under which the holder agrees to purchase, for
$50.00, shares of common stock of MetLife on May 15, 2003 and a capital
security, with a stated liquidation amount of $50.00. The number of shares to be
purchased at such date will be determined based on the average trading price of
MetLife common stock. The proceeds from the sale of the units were used to
acquire $1,006 8.00% debentures of MetLife ("MetLife debentures"). The capital
securities represent undivided beneficial ownership interests in MetLife Capital
Trust I's assets, which consist solely of the MetLife debentures. These
securities are pledged to collateralize the obligations of the unit holder under
the related purchase contracts. Holders of the capital securities are entitled
to receive cumulative cash distributions accruing from April 7, 2000 and payable
quarterly in arrears commencing August 15, 2000 at an annual rate of 8.00%.
MetLife irrevocably guarantees, on a senior and unsecured basis, the payment in
full of distributions on the capital securities and the stated liquidation
amount of the capital securities, in each case to the extent of available trust
funds. Holders of the capital securities generally have no voting rights.
The MetLife debentures bear interest at an annual rate of 8.00% of the
principal amount, payable quarterly in arrears commencing August 15, 2000 and
mature on May 15, 2005. These debentures are unsecured. Because MetLife is a
holding company, its right to participate in the distribution of assets of any
subsidiary upon the subsidiary's liquidation, reorganization or otherwise, is
subject to the prior claims of creditors of the subsidiary, except to the extent
MetLife may be recognized as a creditor of that subsidiary. Accordingly,
MetLife's obligations under the debentures are effectively subordinated to all
existing and future liabilities of its subsidiaries.
F-72
<PAGE>
In connection with the contribution to Metropolitan Life of the net proceeds
from the initial public offering, the private placements and the unit offering,
Metropolitan Life issued to MetLife a $1,006 8.00% mandatorily convertible note
due 2005 having the same interest and payment terms as set forth in the
debentures of MetLife issued to MetLife Capital Trust I. The principal amount of
the capital note is mandatorily convertible into common stock of Metropolitan
Life upon maturity or acceleration of the capital note and without any further
action by MetLife or Metropolitan Life. In addition, the capital note provides
that Metropolitan Life may not make any payment of principal or interest on the
capital note so long as specified payment restrictions exist and have not been
waived by the Superintendent. Payment restrictions would exist if Metropolitan
Life fails to exceed certain thresholds relative to the level of its statutory
risk-based capital or the amount of its outstanding capital notes, surplus notes
or similar obligations. At June 30, 2000, Metropolitan Life's statutory total
adjusted capital exceeded these limitations.
3. CLOSED BLOCK
The closed block was established on the effective date of demutualization.
Amounts reported at April 7, 2000 and for the period after demutualization are
as of April 1, 2000 and for the period beginning on April 1, 2000 (the effect of
transactions from April 1, 2000 through April 6, 2000 are not considered
material). Certain amounts reported for the closed block are based on estimates
and assumptions that management believes are reasonable. Revisions to such
estimates will be recorded in the period of change. Pro forma amounts are as if
the closed block had been established on January 1, 2000.
Closed block revenues and expenses were as follows:
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
JANUARY 1, 2000 APRIL 7, 2000 SIX MONTHS
THROUGH THROUGH ENDED
APRIL 6, 2000 JUNE 30, 2000 JUNE 30, 2000
--------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Premiums......................... $ 894 $ 936 $1,830
Net investment income and other
revenues....................... 620 626 1,246
Net realized investment losses
(net of amounts allocable to
other accounts of $11, $(6) and
$5, respectively).............. (20) (20) (40)
------ ------ ------
1,494 1,542 3,036
------ ------ ------
EXPENSES
Policyholder benefits and claims
(includes amounts directly
related to net realized
investment losses of $--, $(7)
and $(7), respectively)........ 916 918 1,834
Policyholder dividends........... 379 376 755
Policyholder dividend
obligation..................... -- 27 27
Other expenses (includes amounts
directly related to net
realized investment losses of
$11, $1 and $12,
respectively).................. 175 220 395
------ ------ ------
1,470 1,541 3,011
------ ------ ------
Contribution from the closed
block............................ $ 24 $ 1 $ 25
====== ====== ======
</TABLE>
F-73
<PAGE>
Closed block assets and liabilities at June 30, 2000 and April 7, 2000 were
as follows:
JUNE 30, APRIL 7,
2000 2000
-------- --------
ASSETS
Investments:
Fixed maturities available-for-sale,
at fair value .............................. $23,961 $23,939
Equity securities, at fair value ............. 24 --
Mortgage loans on real estate ................ 5,026 4,744
Policy loans ................................. 3,776 3,762
Short-term investments ....................... 98 167
Other invested assets ........................ 428 325
------- -------
33,313 32,937
Cash and cash equivalents ...................... 1,005 643
Accrued investment income ...................... 518 538
Premiums and other receivables ................. 242 250
Deferred policy acquisition costs .............. 4,011 4,011
Other .......................................... -- 22
------- -------
Total closed block assets .................... $39,089 $38,401
======= =======
LIABILITIES
Future policy benefits ......................... $38,835 38,662
Other policyholder funds ....................... 313 321
Policyholder dividends payable ................. 767 747
Current income tax payable ..................... 61 46
Other .......................................... 2,790 2,331
------- -------
Total closed block liabilities ............... $42,766 $42,107
======= =======
4. PRO FORMA INFORMATION
The pro forma information for the six months ended June 30, 2000 is provided
for informational purposes only and does not necessarily indicate the
consolidated results of operations had the demutualization been consummated on
January 1, 2000. The pro forma information also does not project or forecast the
consolidated results of operations for any future period.
The pro forma earnings information gives effect to the demutualization and
other related events as if they occurred on January 1, 2000. Accordingly, pro
forma earnings reflect the following adjustments:
o The elimination of surplus tax of $30, since Metropolitan Life will no
longer be subject to such tax as a stock life insurance company;
o The elimination of interest of $9 (net of income taxes of $5) related to
the repayment of $900 of short-term debt incurred in connection with
Metropolitan Life's acquisition of GenAmerica for the period January 1,
2000 through April 6, 2000;
o The elimination of cash payments of $327 made by Metropolitan Life's
Canadian branch to certain holders of policies included in its Canadian
business sold to Clarica Life Insurance Company in 1998;
F-74
<PAGE>
o The elimination of demutualization expenses of $170 (net of income taxes
of $60) which were assumed to have been incurred prior to January 1, 2000;
and
o The establishment of the closed block (See Note 3 for pro forma amounts of
revenues and expenses).
5. ACQUISITIONS AND DISPOSITIONS
GENAMERICA CORPORATION
On January 6, 2000, Metropolitan Life completed its acquisition of
GenAmerica Corporation ("GenAmerica") for $1.2 billion plus costs of the
acquisition. GenAmerica is a holding company which includes General American
Life Insurance Company, 48.3% of the outstanding shares of Reinsurance Group of
America ("RGA") common stock, a provider of reinsurance, and 61.0% of the
outstanding shares of Conning Corporation ("Conning") common stock, an asset
manager. Metropolitan Life owned 9.6% of the outstanding shares of RGA common
stock prior to the completion of the GenAmerica acquisition. On the date of the
acquisition, Metropolitan Life's ownership percentage of the outstanding shares
of RGA common stock was 57.9%.
In connection with the acquisition of GenAmerica, Metropolitan Life obtained
GenAmerica Capital I, a wholly-owned subsidiary trust of GenAmerica. In June
1997, GenAmerica Capital I issued $125 of 8.525% capital securities. GenAmerica
has fully and conditionally guaranteed, on a subordinated basis, the obligation
of the trust under the capital securities and is obligated to mandatorily redeem
the securities on June 30, 2027. GenAmerica may prepay the securities at any
time after June 30, 2007.
In April 2000, Metropolitan Life acquired the outstanding shares of Conning
common stock not already owned by Metropolitan Life for $73.
As part of the GenAmerica acquisition, General American Life Insurance
Company paid Metropolitan Life a fee of $120 in connection with the assumption
of certain funding agreements. The fee has been considered as part of the
purchase price of GenAmerica. In connection with this transaction, Metropolitan
Life made a capital contribution of $120 to General American Life after the
completion of the acquisition.
The Company's total revenues, income before extraordinary items and net
income for the six months ended June 30, 1999 on both an historical and pro
forma basis as if the acquisition of GenAmerica had occurred on January 1, 1999
were as follows:
INCOME BEFORE
TOTAL REVENUES EXTRAORDINARY ITEM NET INCOME
-------------- ------------------ ----------
Historical.................... $12,136 $153 $109
Pro forma..................... $14,201 $188 $140
NVEST
On June 16, 2000, the Company announced that its affiliates, Nvest, L.P. and
Nvest Companies, L.P., have entered into a definitive agreement to be acquired
by CDC Asset Management, an affiliate of Caisse des Depots Group. The Company
owns 48% of the outstanding units of the Nvest entities.
F-75
<PAGE>
CDC Asset Management will pay $40 per unit for Nvest, L.P. and Nvest
Companies, L.P., subject to a possible price adjustment and other conditions set
forth in the agreement. Based on the $40 per unit price, the Company would
receive $858 upon the closing of this transaction. This transaction, which will
result in a gain, is expected to be completed in the fourth quarter of 2000.
Total assets of the Nvest entities were approximately $871 at June 30, 2000.
Total revenues and net income (net of minority interest) applicable to the Nvest
entities were approximately $318 and $21 for the six months ended June 30, 2000,
respectively.
6. NET REALIZED INVESTMENT LOSSES
Net realized investment losses, including changes in valuation allowances,
for the six months ended June 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Fixed maturities ............................................. $ (240) $ (276)
Equity securities ............................................ 79 (37)
Mortgage loans on real estate ................................ 6 4
Real estate and real estate joint
ventures ................................................... 27 166
Other limited partnership interests .......................... (3) 27
Sales of businesses .......................................... 3 --
Other ........................................................ (42) (79)
---- ----
(170) (195)
Amounts allocable to:
Deferred policy acquisition costs ............................ 15 24
Participating pension contracts .............................. 8 16
---- ----
$ (147) $ (155)
==== ====
Realized investment losses have been reduced by (1) deferred policy
acquisition cost adjustments to the extent that such adjustments result from
realized investment gains and losses and (2) adjustments to participating
contractholder accounts when amounts equal to such investment gains and losses
are credited to or deducted from the contractholders' accounts. This
presentation may not be comparable to presentations made by other insurers.
7. COMMITMENTS AND CONTINGENCIES
LITIGATION
Metropolitan Life is currently a defendant in approximately 550 lawsuits
raising allegations of improper marketing and sales of individual life insurance
policies or annuities. These lawsuits are generally referred to as "sales
practices claims".
On December 28, 1999, after a fairness hearing, the United States District
Court for the Western District of Pennsylvania approved a class action
settlement resolving a multidistrict litigation proceeding involving alleged
sales practices claims. No appeal was taken, and the settlement is final. The
settlement class includes most of the owners of permanent life insurance
F-76
<PAGE>
policies and annuity contracts or certificates issued pursuant to individual
sales in the United States by Metropolitan Life, Metropolitan Insurance and
Annuity Company or Metropolitan Tower Life Insurance Company between January 1,
1982 and December 31, 1997. The class includes owners of approximately six
million in-force or terminated insurance policies and approximately one million
in-force or terminated annuity contracts or certificates.
In addition to dismissing the consolidated class actions, the District
Court's order also bars sales practices claims by class action members for sales
by the defendant insurers during the class period, effectively resolving all
pending class actions against these insurers.
Under the terms of the order, only those class members who exclude
themselves from the settlement may continue an existing, or start a new, sales
practices lawsuit against Metropolitan Life, Metropolitan Insurance and Annuity
Company or Metropolitan Tower Life Insurance Company for sales that occurred
during the class period. Approximately 20,000 class members elected to exclude
themselves from the settlement.
The settlement provides three forms of relief. General relief, in the form
of free death benefits, is provided automatically to class members who did not
exclude themselves from the settlement or who did not elect the claim evaluation
procedures set forth in the settlement. The claim evaluation procedures permit a
class member to have a claim evaluated by a third party under procedures set
forth in the settlement. Claim awards made under the claim evaluation procedures
will be in the form of policy adjustments, free death benefits or, in some
instances, cash payments. In addition, class members who have or had an
ownership interest in specified policies will also automatically receive
deferred acquisition cost tax relief in the form of free death benefits. The
settlement fixes the aggregate amounts that are available under each form of
relief.
Metropolitan Life expects that the total cost of the settlement will be
approximately $957. This amount is equal to the amount of the increase in
liabilities for the death benefits and policy adjustments and the present value
of expected cash payments to be provided to included class members, as well as
attorneys' fees and expenses and estimated other administrative costs, but does
not include the cost of litigation with policyholders who are excluded from the
settlement. Metropolitan Life believes that the cost to it of the settlement
will be substantially covered by available reinsurance and the provisions made
in its consolidated financial statements, and thus will not have a material
adverse effect on its business, results of operations or financial position.
Metropolitan Life has not yet made a recovery under those reinsurance agreements
and, although there is a risk that the carriers will refuse coverage for all or
part of the claim, Metropolitan Life believes this is very unlikely to occur.
Metropolitan Life believes it has made adequate provision in its consolidated
financial statements for all probable losses for sales practices claims,
including litigation costs involving policyholders who are excluded from the
settlement.
The class action settlement does not resolve nine purported or certified
class actions currently pending against New England Mutual Life Insurance
Company ("New England") with which Metropolitan Life merged in 1996. Eight of
those actions have been consolidated as a multidistrict proceeding for pre-trial
purposes in the United States District Court of Massachusetts. The Court
certified a mandatory class as to those claims. Following an appeal of that
certification, the United States Court of Appeals remanded the case to the
District Court for further consideration. New England has agreed to a settlement
with class counsel. The District Court has granted preliminary approval, and a
fairness hearing is scheduled for October 2000.
F-77
<PAGE>
The Metropolitan Life class action settlement also does not resolve three
putative sales practices class action lawsuits which have been brought against
General American Life Insurance Company. These lawsuits have been consolidated
in a single proceeding in the United States District Court for the Eastern
District of Missouri. General American Life Insurance Company and counsel for
plaintiffs have negotiated a settlement of this consolidated proceeding. General
American Life Insurance Company has not reached agreement with plaintiffs'
counsel on the attorneys' fees to be paid, and the District Court will decide
that issue.
In addition, the class action settlement does not resolve two putative class
actions involving sales practices claims filed against Metropolitan Life in
Canada. A certified class action with conditionally certified subclasses against
Metropolitan Life, Metropolitan Insurance and Annuity Company, Metropolitan
Tower Life Insurance Company and various individual defendants alleging improper
sales abroad is pending in a New York federal court and settlement discussions
are continuing.
In the past, some individual sales practices claims have been resolved
through settlement, dispositive motion, or, in a few instances, trial. Most of
the current cases seek substantial damages, including in some cases punitive and
treble damages and attorneys' fees. Additional litigation relating to the
Company's marketing and sales of individual life insurance may be commenced in
the future.
See Note 9 of Notes to Consolidated Financial Statements for the year ended
December 31, 1999 for information regarding reinsurance contracts related to
sales practices claims.
Regulatory authorities in a small number of states, including both insurance
departments and one state attorney general, as well as the National Association
of Securities Dealers, Inc., have ongoing investigations or inquiries relating
to Metropolitan Life's or the New England's sales of individual life insurance
policies 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, Metropolitan Life has resolved a number of
investigations by other regulatory authorities for monetary payments and certain
other relief, and may continue to do so in the future.
Metropolitan Life 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. Metropolitan Life 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 Metropolitan Life's employees during the period from the 1920's
through approximately the 1950's and alleging that Metropolitan Life learned or
should have learned of certain health risks posed by asbestos and, among other
things, improperly publicized or failed to disclose those health risks. Legal
theories asserted against Metropolitan Life have included negligence,
intentional tort claims and conspiracy claims concerning the health risks
associated with asbestos. While Metropolitan Life believes it has meritorious
defenses to these claims, and has not suffered any adverse judgments in respect
of these claims, most of the cases have been resolved by settlements.
Metropolitan Life 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 Metropolitan Life may
ultimately incur is uncertain.
F-78
<PAGE>
Significant portions of amounts paid in settlement of such cases have been
funded with proceeds from a previously resolved dispute with Metropolitan Life's
primary, umbrella and first level excess liability insurance carriers.
Metropolitan Life is presently in litigation with several of its excess
liability insurers regarding amounts payable under its policies with respect to
coverage for these claims. The trial court has granted summary judgment to these
insurers. Metropolitan Life has appealed. There can be no assurances regarding
the outcome of this litigation or the amount and timing of recoveries, if any,
from these excess liability insurers. Metropolitan Life's asbestos-related
litigation with these insurers should have no effect on its recoveries under
excess insurance policies that were obtained in 1998 for asbestos-related
claims.
See Note 9 of Notes to Consolidated Financial Statements for the year ended
December 31, 1999 for information regarding insurance policies obtained in 1998
related to asbestos-related claims.
A purported class action suit involving policyholders in 32 states has been
filed in a Rhode Island state court against a Metropolitan Life subsidiary,
Metropolitan Property and Casualty Insurance Company, with respect to claims by
policyholders for the alleged diminished value of automobiles after
accident-related repairs. The trial court recently denied a motion by
Metropolitan Property and Casualty Insurance Company for summary judgment. A
similar "diminished value" allegation was made recently in a Texas Deceptive
Trade Practices Act letter and lawsuit which involve a Metropolitan Property and
Casualty Insurance Company policyholder. A purported class action has been filed
against Metropolitan Property and Casualty Insurance Company and its subsidiary,
Metropolitan Casualty Insurance Company, in Florida by a policyholder alleging
breach of contract and unfair trade practices with respect to allowing the use
of parts not made by the original manufacturer to repair damaged automobiles.
These suits are in the early stages of litigation and Metropolitan Property and
Casualty Insurance Company and Metropolitan Casualty Insurance Company intend to
defend themselves vigorously against these suits. Similar suits have been filed
against several other personal lines property and casualty insurers.
The United States, the Commonwealth of Puerto Rico and various hotels and
individuals have sued MetLife Capital Corporation, a former subsidiary of the
Company, seeking damages for clean up costs, natural resource damages, personal
injuries and lost profits and taxes based upon, among other things, a release of
oil from a barge which was being towed by the M/V EMILY S. In connection with
the sale of MetLife Capital, the Company acquired MetLife Capital's potential
liability with respect to the M/V EMILY S lawsuit. MetLife Capital had entered
into a sale and leaseback financing arrangement with respect to the M/V EMILY S.
The plaintiffs have taken the position that MetLife Capital, as the owner of
record of the M/V EMILY S, is responsible for all damages caused by the barge,
including the oil spill. The governments of the United States and Puerto Rico
have claimed damages in excess of $150. At a mediation, the action brought by
the United States and Puerto Rico was conditionally settled, provided that the
governments have access to additional sums from a fund contributed to by oil
companies to help remediate oil spills. The Company can provide no assurance
that this action will be settled in this manner.
Metropolitan Life has completed a tender offer to purchase the shares of
Conning Corporation that it had not already owned. After Metropolitan Life had
announced its intention to make a tender offer, three putative class actions
were filed by Conning shareholders alleging that the prospective offer was
inadequate and constituted a breach of fiduciary duty. The parties
F-79
<PAGE>
to the litigation have reached an agreement in principle providing for a
settlement of the actions.
Several lawsuits have been brought challenging the fairness of Metropolitan
Life's plan of reorganization and the adequacy and accuracy of Metropolitan
Life's disclosure to policyholders regarding the plan. These actions name as
defendants some or all of Metropolitan Life, MetLife, the individual directors,
the New York State Superintendent of Insurance and MetLife's underwriters for
the initial public offering, Goldman Sachs & Company and Credit Suisse First
Boston. Five purported class actions pending in the Supreme Court of the State
of New York for New York County have been consolidated within the commercial
part. There remains a separate purported class action in state court in New York
County and another in Kings County. The plaintiffs in the state court class
actions seek injunctive, declaratory and compensatory relief, as well as an
accounting. Some of the plaintiffs in the above described actions have also
brought a proceeding under Article 78 of New York's Civil Practice Law and Rules
challenging the Opinion and Decision of the New York Superintendent of Insurance
that approved the plan. In this action, petitioners seek to vacate the
Superintendent's Opinion and Decision and enjoin him from granting final
approval of the plan. Three purported class actions were filed in the United
States District Court for the Eastern District of New York claiming violation of
the Securities Act of 1933. The plaintiffs in these actions claim that the
Policyholder Information Booklets relating to the plan failed to disclose
certain material facts and seek rescission and compensatory damages. These three
federal cases have been consolidated, and the defendants have moved to dismiss
the complaints. On August 3, 2000, a purported class action was filed in the
United States District Court for the Southern District of New York seeking
damages from MetLife for alleged violations of various provisions of the
Constitution of the United States in connection with the plan of reorganization.
Metropolitan Life, MetLife and the individual defendants believe they have
meritorious defenses to the plaintiffs' claims and intend to contest vigorously
all of the plaintiffs' claims in these actions.
Two lawsuits were filed in July 2000 against Metropolitan Life alleging
racial discrimination against African-Americans in the marketing, sale, and
administration of inexpensive life insurance policies, including "industrial"
life insurance policies, sold by Metropolitan Life decades ago. The first
lawsuit was filed in the United States District Court for the Southern District
of New York and the second was filed in the United States District Court for the
Eastern District of Louisiana. The plaintiffs in these purported class actions
seek unspecified compensatory damages, punitive damages, reformation, imposition
of a constructive trust, a declaration that the alleged practices are
discriminatory and illegal, injunctive relief requiring Metropolitan Life to
discontinue the alleged discriminatory practices and adjust policy values, and
other relief. Metropolitan Life believes it has meritorious defenses to the
plaintiffs' claims and intends to contest vigorously all of the plaintiffs'
claims in these actions.
Insurance Departments in a number of states recently have initiated
inquiries about possible race-based underwriting of life insurance. These
inquiries generally have been directed to all life insurers licensed in the
respective states, including Metropolitan Life and certain of its subsidiaries.
Various litigation, claims and assessments against the Company, in addition
to those discussed above and those otherwise provided for in the Company's
consolidated financial statements, have arisen in the course of the Company's
business, including, but not limited to, in connection with its activities as an
insurer, employer, investor, investment advisor and taxpayer. Further, state
insurance regulatory authorities and other Federal and state authorities
F-80
<PAGE>
regularly make inquiries and conduct investigations concerning the Company's
compliance with applicable insurance and other laws and regulations.
In some 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 or provide reasonable ranges of potential
losses, 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 consolidated financial position.
However, given the large and/or indeterminate amounts sought in certain of these
matters and the inherent unpredictability of litigation, it is possible that an
adverse outcome in certain matters could, from time to time, have a material
adverse effect on the Company's operating results or cash flows in particular
quarterly or annual periods.
8. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the six months ended June 30, 2000 and 1999
was as follows:
2000 1999
---- ----
Net Income (loss) before date of
demutualization .............................. $ (220) $ 109
Net income after date of demutualization ....... 341 --
Accumulated other comprehensive income (loss):
Unrealized investment losses, net of
related offsets, reclassification
adjustments and income taxes ............... (92) (1,077)
Foreign currency translation adjustments ..... 8 27
------- -------
Accumulated other comprehensive income (loss): . (84) (1,050)
------- -------
Comprehensive income (loss) ................ $ 37 $ (941)
======= =======
9. BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
AUTO
FOR THE SIX MONTHS ENDED & ASSET CONSOLIDATION/
JUNE 30, 2000 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL REINSURANCE MANAGEMENT CORPORATE ELIMINATION TOTAL
------------------------ ---------- ------------- ---- ------------- ----------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................. $2,253 $3,377 $1,301 $ 319 $728 $ -- $ -- $(937) $7,041
Universal life and
investment-type product
policy fees............ 620 273 -- 24 -- -- -- -- 917
Net investment income.... 3,176 1,882 83 128 183 42 329 (781) 5,042
Other revenues........... 404 355 18 5 11 434 63 69 1,359
Net realized investment
gains (losses)......... (57) (41) 6 8 (3) -- (84) 24 (147)
Contribution from the
closed block........... -- -- -- -- -- -- -- 1 1
Income (loss) before
provision for income
taxes and extraordinary
item................... 548 409 (9) (296) 50 40 (40) (35) 667
</TABLE>
F-81
<PAGE>
<TABLE>
<CAPTION>
AUTO
FOR THE SIX MONTHS ENDED & ASSET CONSOLIDATION/
JUNE 30, 1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL REINSURANCE MANAGEMENT CORPORATE ELIMINATION TOTAL
------------------------ ---------- ------------- ---- ------------- ----------- ---------- --------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums................. $2,068 $2,754 $ 727 $237 $-- $ -- $ -- $ -- $5,786
Universal life and
investment-type product
policy fees............ 381 249 -- 21 -- -- -- -- 651
Net investment income.... 2,601 1,898 44 101 -- 38 278 (154) 4,806
Other revenues........... 260 305 9 3 -- 403 21 47 1,048
Net realized investment
gains (losses)......... 23 (72) (1) 6 -- -- (92) (19) (155)
Income (loss) before
provision for income
taxes and extraordinary
item................... 482 454 29 4 -- 48 (636) (57) 324
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
2000 1999
--------- ---------------
Assets
<S> <C> <C>
Individual ......................................................... $ 130,909 $ 109,401
Institutional ...................................................... 90,841 88,127
Auto & Home ........................................................ 4,451 4,443
International ...................................................... 4,873 4,381
Reinsurance ........................................................ 6,607 --
Asset Management ................................................... 1,199 1,036
Corporate .......................................................... 19,512 20,499
Consolidation/Elimination .......................................... (3,698) (2,655)
--------- ---------
Total ............................................................ $ 254,694 $ 225,232
========= =========
</TABLE>
The Individual segment includes the results of the closed block for the
period April 7, 2000 (date the closed block became effective) through June 30,
2000 combined on a line by line basis with the results of operations outside the
closed block. See Note 3 for closed block amounts included in the Individual
segment above.
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 $21 and $25 for the
six months ended June 30, 2000 and 1999, respectively. The investment in Nvest
was $192 and $206 at June 30, 2000 and 1999, respectively.
The Reinsurance segment includes the life reinsurance business of RGA
combined with Exeter, a previously existing ancillary life reinsurance business.
Exeter has been reported as a component of the Individual segment rather than as
a separate segment for periods prior to January 1, 2000 due to its
immateriality.
The Consolidation/Elimination column includes the elimination of all
intersegment amounts, the closed block amounts presented on a line by line basis
in the Individual segment, and the Individual segment's ownership interest in
Nvest.
Revenues (including revenues of the closed block) derived from any one
customer did not exceed 10% of consolidated revenues. Such revenues from U.S.
operations were $15,270 and $11,768 for the six months ended June 30, 2000 and
1999, respectively, which represented 97% of consolidated revenues for 2000 and
1999.
F-82
<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 striped 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)
Schroeder -- A little boy with full head of hair and striped shirt (pianist)
<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 2 Table of Contents
out map
3. Snoopy in suit with pointer Page 4 Important Terms
You Should Know
4. Charlie Brown Reading Financial Section Page 5 Specified Interest Rate
5. Snoopy as MetLife Representative listening to Page 10 MetLife
crowd of Woodstocks
6. "Professor" Snoopy at blackboard with Page 11 The Income Annuity
"Immediate Annuities" written on it
with pointer
7. Hour glass with dollar bill being Page 11 The Income Annuity
shredded into bottom of glass with
"inflation" written on it
8. Charlie Brown deciding between three building Page 12 Product Comparison
blocks with "Annuity A", "Annuity B"
and "Annuity C" written on them
9. Snoopy on beach with drink and sunglasses Page 13 Features of the Income Annuity
relaxing in lounge chair
10. Snoopy reading menu at restaurant table Page 14 Your Investment Choices
11. Snoopy with money in both hands looking Page 16 Income Types
at desk calendar with "Monday 1st"
written on it
12. Woodstock writing out a check Page 17 Purchase of an Income Annuity
13. "Flying Ace" Snoopy with pointer looking Page 18 Subsequent Income Payments
at crowd of Woodstocks flying away
14. Snoopy using adding machine Page 19 Determining the Investment Factor
15. Snoopy and Woodstock balanced on seesaw Page 20 Interest Factor
16. Woodstock in middle of balance scale with Page 21 Income Payment Calculations
"Interest Factor" going up and "Investment
Factor" going down
17. Woodstock carring a sack of money Page 22 Reallocations
18. Lucy with magnifying glass studying a piece of Page 24 Free Look
paper
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
19. Charlie Brown on the telephone Page 25 Processing Reallocations by Telephone or Internet
20. "Colonial" Snoopy as town cryer Page 27 Advertising Performance
21. "Uncle Sam" Snoopy with "tax Page 30 General Tax Information
bill" in hand
22. Woodstock flying holding paper in hand Page 31 Diversification
23. Lucy filling out "FORM 1040" with adding Page 32 Income Payments
machine on table
24. Linus rolling ball with "IRAs" written on it Page 33 Qualified Annuities
25. Charle Brown digging in pockets to pay Page 35 Section 457(b)
"Uncle Sam" Snoopy
26. Franklin, Snoopy, Charlie Brown, Lucy, Pigpen, Page 36 Table of Contents
Schroeder and Peppermint Patty for the SAI
27. Lucy in her advice box with "TAXES--The Expert Page 37 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, 1999 and 1998
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, 1999, 1998 and 1997
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flow
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Unaudited Interim Condensed Consolidated Statements of Operations for the
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
(B) Exhibits
<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.(7)
(b) Form of Certificate.(7)
(5) Application Form for the Income Annuity
(8)
(6) Charter and By-Laws of Metropolitan
Life.(1, 5)
(7) Not applicable.
(8) Not applicable.
(9) Opinion and consent of counsel as to the
legality of the securities being
registered.(8)
(10) Consent of Auditors (8)
(11) Not applicable.
(12) Not applicable.
(13)(a) Powers of Attorney.(1,2,3,4,6)
</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.
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.
II-1
<PAGE>
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. Power of Attorney for Virginia M. Wilson filed with Pre-Effective Amendment
No. 2 to Registration Statement 333-80547/811-4001 for Metropolitan Life
Separate Account E on Form N-4 on November 1, 1999. As incorporated herein
by reference.
5. Filed with Post Effective Amendment No. 29 to Registration Statement No.
333-80547/811-4001 for Metropolitan Life Separate Account E on Form N-4 on
April 7, 2000, as incorporated herein by reference.
6. Power of Attorney for William C. Steere, Jr. filed with Post-Effective
Amendment No. 18 to Registration Statement No. 33-57320 for Metropolitan
Life Separate Account UL on Form S-6 on April 23, 1999. As incorporated
herein by reference.
7. Filed with Registration Statement No. 333-43970/811-4001 for Metropolitan
Life Separate Account E on Form N-4 on August 17, 2000.
8. 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>
Robert H. Benmosche ..... Chairman of the Board, President and Chairman, President,
Chief Executive Officer, Chief Executive Officer and Director
MetLife, Inc. and Metropolitan Life
Insurance Company,
One Madison Avenue,
New York, NY 10010.
Curtis H. Barnette ...... Chairman Emeritus and Chief Executive Director
Officer,
Bethlehem Steel Corporation,
1170 Eighth Avenue,
Martin Tower 101, Bethlehem, PA 18016-7699.
Gerald Clark ............ Vice-Chairman of the Board and Chief Vice-Chairman, Chief Investment Officer
Investment Officer, and Director
MetLife, Inc. and Metropolitan Life
Insurance Company,
One Madison Avenue,
New York, NY 10010.
Joan Ganz Cooney ........ Chairman, Executive Committee, Director
Sesame Workshop,
One Lincoln Plaza,
New York, NY 10023.
Burton A. Dole, Jr. ..... Retired Chairman, President and Chief Director
Executive Officer,
Puritan Bennett,
2200 Faraday Avenue,
Carlsbad, CA 92008-7208.
James R. Houghton ....... Chairman of the Board Director
Emeritus 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.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation & Positions and Offices
Name Business Address with Depositor
---- --------------- -------------
<S> <C> <C>
Helene L. Kaplan ........ Of Counsel, Skadden, Arps, Slate, Director
Meagher and Flom,
Four Times Square,
New York, NY 10036.
Charles M. Leighton ..... Retired Chairman of the Board and Chief Director
Executive Officer,
CML Group, Inc.,
524 Main Street,
Bolton, MA 01720.
Allen E. Murray ......... Retired Chairman of the Board and Chief Director
Executive Officer,
Mobil Corporation, 375 Park Avenue,
Suite 2901, New York, NY 10152.
Stewart G. Nagler ....... Vice-Chairman of the Board and Chief Vice-Chairman, Chief
Financial Officer, Financial Officer
MetLife, Inc. and Metropolitan Life and Director
Insurance Company,
One Madison Avenue,
New York, NY 10010.
John J. Phelan, Jr. ..... Former Chairman and Chief Executive Director
Officer,
New York Stock Exchange,
108 Forest Avenue
Locust Valley, NY 11560
Hugh B. Price ........... President and Chief Executive Officer, Director
National Urban League, Inc.,
120 Wall Street, 7th & 8th Floors,
New York, NY 10005.
Ruth J. Simmons, Ph.D ... President, Director
Smith College,
College Hall 20,
Northhampton, MA 01063.
William C. Steere, Jr. .. Chairman of the Board and Chief Executive Director
Officer,
Pfizer, Inc.,
235 East 42nd Street,
New York, NY 10016
</TABLE>
II-3
<PAGE>
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, Chief Executive Officer and
Director
Gerald Clark ............ Vice-Chairman, Chief Investment Officer
and Director
Stewart G. Nagler ....... Vice-Chairman, Chief Financial Officer
and Director
Gary A. Beller .......... Senior Executive Vice-President and
General Counsel
James H. Benson ......... President, Individual Business; Chairman,
Chief Executive Officer and President,
New England Life Insurance Company
C. Robert Henrikson ..... President, Institutional Business
Catherine A. Rein ....... Senior Executive Vice-President;
President and Chief Executive Officer of
Metropolitan Property and Casualty
Insurance Company
Stanley J. Talbi ........ Senior Vice President and Chief Actuary
William J. Toppeta ...... President, Client Services and Chief
Administrative Officer
John H. Tweedie ......... Senior Executive Vice-President
Lisa M. Weber ........... Executive Vice-President
Judy E. Weiss ........... Executive Vice-President
</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, which
is a wholly-owned subsidiary of MetLife Inc. The following outline indicates
those persons who are controlled by or under common control with Metropolitan
Life Insurance Company:
II-4
<PAGE>
ORGANIZATIONAL STRUCTURE OF METLIFE AND SUBSIDIARIES
AS OF SEPTEMBER 30, 2000
Metropolitan Life Insurance Company ("Metropolitan") is a wholly-owned
subsidiary of MetLife, Inc, a publicly-traded company. The following is a list
of subsidiaries of Metropolitan updated as of September 30, 2000. Metropolitan
sold its interests in Nvest Corporation and all of Nvest Corporation affiliates
on October 30, 2000. Nvest Corporation and its affiliates and the note following
the list that refers to Nvest Corporation and its affiliates are marked with an
asterisk (*). 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 the irrespective
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. (DE)
1. Metropolitan Property and Casualty Insurance Company (RI)
a. Metropolitan Group Property and Casualty Insurance Company (RI)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great Britain)
b. Metropolitan Casualty Insurance Company (RI)
c. Metropolitan General Insurance Company (RI)
d. Metropolitan Direct Property and Casualty Insurance Company (GA)
e. MetLife Auto & Home Insurance Agency, Inc. (RI)
f. Metropolitan Lloyds, Inc. (TX)
g. Met P&C Managing General Agency, Inc. (TX)
h. Economy Fire & Casualty Company (RI)
i. Economy Preferred Insurance Company (RI)
ii. Economy Premier Assurance Company (RI)
2. Metropolitan Insurance and Annuity Company (DE)
a. MetLife Europe I, Inc. (DE)
b. MetLife Europe II, Inc. (DE)
c. MetLife Europe III, Inc. (DE)
d. MetLife Europe IV, Inc. (DE)
e. MetLife Europe V, Inc. (DE)
3. MetLife General Insurance Agency, Inc. (DE)
a. MetLife General Insurance Agency of Alabama, Inc. (AL)
b. MetLife General Insurance Agency of Kentucky, Inc. (KY)
c. MetLife General Insurance Agency of Mississippi, Inc. (MS)
d. MetLife General Insurance Agency of Texas, Inc. (TX)
e. MetLife General Insurance Agency of North Carolina, Inc. (NC)
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f. MetLife General Insurance Agency of Massachusetts, Inc. (MA)
4. Metropolitan Asset Management Corporation (DE)
a. MetLife Capital, Limited Partnership (DE). Partnership interests in
MetLife Capital, Limited Partnership are Limited Partnership held by
Metropolitan (90%) and General Partnership by Metropolitan Asset
Management Corporation (10%).
b. MetLife Capital Credit L.P. (Delaware). Partnership interests in
MetLife Capital Credit L.P. are Limited Partnership held by
Metropolitan (90%) and General Partnership by Metropolitan Asset
Management Corporation (10%).
1. MetLife Capital CFLI Holdings, LLC (DE)
a. MetLife Capital CFLI Leasing, LLC (DE)
c. MetLife Financial Acceptance Corporation (DE). Metropolitan Asset
Management Co. Inc. holds 100% of the voting preferred stock of
MetLife Financial Acceptance Corporation. Metropolitan Property and
Casualty Insurance Company holds 100% of the non voting common stock
of MetLife Financial Acceptance Corporation.
d. MetLife Investments Limited (United Kingdom). 23rd Street Investments,
Inc. holds one share of MetLife Investments Limited.
e. 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.
f. MetLife Investments, S.A. (Argentina) 23rd Street Investment, Inc.
holds one share of MetLife Investments, S.A.
5. SSRM Holdings, Inc. (DE)
a. State Street Research & Management Company (DE) is the sub-investment
manager for the State Street Research Aggressive Growth Portfolio,
State Street Research Diversified Portfolio, State Street Research
Growth Portfolio, State Street Research Income Portfolio and State
Street Research Aurora Small Cap Value Portfolio of Metropolitan Series
Fund, Inc.
i. State Street Research Investment Services, Inc. (MA)
b. SSR Realty Advisors, Inc. (DE)
i. Metric Management Inc. (DE)
ii. Metric Property Management, Inc. (DE)
1. Metric Realty (DE). SSR Realty Advisors, Inc. and Metric
Property Management, Inc. each hold 50% of the common stock of
Metric Realty.
2. Metric Colorado, Inc. (CO). Metric Property Management, Inc.
holds 80% of the common stock of Metric Colorado, Inc.
iii. Metric Capital Corporation (CA)
iv. Metric Assignor, Inc. (CA)
v. SSR AV, Inc. (DE)
6. MetLife Holdings, Inc. (DE)
a. MetLife Funding, Inc. (DE)
b. MetLife Credit Corp. (DE)
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7. Metropolitan Tower Realty Company, Inc. (DE)
8. 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 Financial Agency, Inc. (TX)
9. Natiloportem Holdings, Inc. (DE)
a. Services Administrativos Gen, S.A. de C.V. One Share of Servicos
Administrativos Gen. S.A. de C.V. is held by a nominee of Natiloportem
Holdings, Inc.
10. Metlife CC Holding Company (DE)
a. Conning Corporation (MO) 60.4% of the voting shares of Conning
Corporation are held by MetLife CC Holding Company and 39.6% are held
by Gen Am Holding Company.
i.Conning, Inc. (DE)
(1.) Conning & Company (CT)
(a) Conning Asset Management Company (MO)
(b) American Horizon Holdings Inc. (DE) 28.6% of the shares of
American Horizon Holdings Inc. are held by Metropolitan
Property and Casualty Insurance Company.
(i) American Horizon Services, Inc. (DE)
(ii) American Horizon Property & Casualty Insurance Company.
(IL)
(1.) Texas American Horizon Insurance Services Agency, Inc.
(TX)
(iii)American Horizon Insurance Company (AZ)
(1.)American Horizon General Agency, Inc. (FL)
B. Metropolitan Tower Life Insurance Company (DE)
C. MetLife Security Insurance Company of Louisiana (LA)
D. MetLife Texas Holdings, Inc. (DE)
1. Texas Life Insurance Company (TX)
a. Texas Life Agency Services, Inc. (TX)
b. Texas Life Agency Services of Kansas, Inc. (KS)
E. MetLife Securities, Inc. (DE)
F. 23rd Street Investments, Inc. (DE)
1. Mezzanine Investment Limited Partnership-BDR (DE). Metropolitan Life
Insurance Company holds a 99% limited partnership interest in Mezzanine
Investment Limited Partnership-BDR.
2. Mezzanine Investment Limited Partnership-LG (DE). 23rd Street
Investments, Inc. is a 1% partner of Mezzanine Investment Limited
Partnership-LG. Metropolitan Life Insurance
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Company holds a 99% limited partnership interest in Mezzanine Investment
Limited Partnership-LG.
a. Coating Technologies International, Inc (DE).
3. Mezzanine Investment Limited Partnership-8. (DE) 23rd Street Investments,
Inc. is a 1% partner of Mezzanine Investment Limited Partnership-8.
Metropolitan Life Insurance Company holds a 99% limited partnership
interest in Mezzanine Investment Limited Partnership-8.
G. 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)
H. MetLife Saengmyoung Insurance Company Ltd. (Korea).
I. Metropolitan Life Seguros de Vida S.A. (Argentina)
J. Metropolitan Life Seguros de Retiro S.A. (Argentina).
K. MetLife Holdings Luxembourg S.A. (Luxembourg)
L. Metropolitan Life Holdings, Netherlands BV (Netherlands)
M. MetLife International Holdings, Inc. (DE)
1. MetLife Insurance Company of the Philippines, Inc. (Philippines).
N. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
O. Metropolitan Marine Way Investments Limited (Canada)
P. P.T. MetLife Sejahtera (Indonesia) Shares of P.T. MetLife Sejahtera are held
by Metropolitan (94.3%) and by an entity (5.7%) unaffiliated with
Metropolitan.
Q. Seguros Genesis S.A. (Mexico) Metropolitan holds 85.49%, Metropolitan Tower
Corp. holds 7.31% and Metropolitan Asset Management Corporation holds 7.20%.
R. Metropolitan Life Seguros de Vida S.A. (Uruguay).
S. Metropolitan Life Seguros E Previdencia Privada S.A. (Brazil)
T. MetLife (India) Private Ltd.
U. Hyatt Legal Plans, Inc. (DE)
1. Hyatt Legal Plans of Florida, Inc. (FL)
V. One Madison Merchandising L.L.C. (CT) Ownership of membership interests in
One Madison Merchandising L.L.C. is as follows: Metropolitan Life Insurance
Company owns 99% and Metropolitan Tower Corp. owns 1%.
W. Metropolitan Realty Management, Inc. (DE)
1. Edison Supply and Distribution, Inc. (DE)
2. Cross & Brown Company (NY)
a. CBNJ, Inc. (NJ)
X. MetPark Funding, Inc. (DE)
Y. Transmountain Land & Livestock Company (MT)
Z. MetLife Trust Company, National Association. (United States)
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A.A. Benefit Services Corporation (GA)
A.B. G.A. Holding Corporation (MA)
A.C. CRH., Co, Inc. (MA)
A.D. 334 Madison Euro Investments, Inc.
1. Park Twenty Three Investments Company* 1% Voting Control of Park Twenty
Three Investment Company is held by St. James Fleet Investments Two
Limited
a. Convent Station Euro Investments Four Company. 1% voting control of
Convert Station Euro Investments Four Company (United Kingdom) is
held by 334 Madison Euro Investments, Inc. as nominee for Park Twenty
Three Investments Company.
A.E. L/C Development Corporation (CA)
A.F. One Madison Investments (Cayco) Limited (Cayman Islands). 1% Voting
Control of One Madison Investment (Cayco) Limited is held by Convent
Station Euro Investments Four Company.
A.G. New England Portfolio Advisors, Inc. (MA)
A.H. 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.I. Grand Cathay Securities Investment Trust Co. Ltd. (Hong Kong)
Metropolitan Life Insurance Company owns 20% of Grand Cathay Securities
Investment Trust Co. Ltd. (*Nvest Companies L.P. owns 14.81% of voting
control of Grand Cathay Securities Investment Trust Co., Ltd.)
A.J. 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.K. 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.L. St. James Fleet Investments Two Limited (Cayman Islands). Metropolitan
Life Insurance Company owns 34% of St. James Fleet Investments Two
Limited.
A.M. 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 Idaho, Inc. (ID)
(4) Hereford Insurance Agency of Minnesota, Inc. (MN)
(5) Hereford Insurance Agency of New Mexico, Inc. (NM)
(6) Hereford Insurance Agency of Wyoming, Inc (WY).
ii. TNE Information Services, Inc. (MA)
(1) First Connect Insurance Network, Inc. (DE)
(2) Interactive Financial Solutions, Inc. (MA)
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iii. 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)
iv. New England Investment Management Inc.
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 partnership interest in Nvest Companies, L.P. Nvest, L.P.
holds a 14.64% general partnership interest in Nvest Companies, L.P.
Metropolitan holds a 47.10% 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) *Reich & Tang Asset Management.
R & T Asset Management, Inc. holds a 0.5% general partner
interest and NEIC Holdings, Inc. hold a 99.5% limited partner
interest in Reich & Tang Asset Management, L.P.
(c) *Reich & Tang Services, Inc. (DE)
(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.
i. *Loomis Sayles (Australia) Holdings, LLC
(1) Loomis Sayles (Australia) Pty Limited
ii. *Loomis Sayles Distributors, L.P.
iii. *Loomis Sayles Distributors, Inc.
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iv. *Loomis Sayles (Euro) Limited
(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)
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
(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) *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.
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(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.
(c) *Nvest Services Company, Inc.
(9) *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.
(b) *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.
(i) *AEW II Corporation (MA)
(ii) *AEW Partners III, Inc. (DE)
(iii) *AEW Partners IV, Inc.
(iv) *AEW TSF, Inc. (DE)
(v) *AEWPN, LLC (DE)
(vi) *AEW Curzon Limited
(vii) *AEW Investment Group, Inc. (MA)
(1) *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.
(2) *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.
(3) *AEW Real Estate Advisors, Inc. (MA)
(i) *AEW Advisors, Inc. (MA)
(ii) *Copley Properties Company, Inc. (MA)
(iii) *Copley Properties Company II, Inc. (MA)
(iv) *Copley Properties Company III, Inc. (MA)
(v) *Fourth Copley Corp. (MA)
(vi) *Fifth Copley Corp. (MA)
(vii) *Sixth Copley Corp. (MA)
(viii) *Seventh Copley Corp. (MA).
(ix) *Eighth Copley Corp. (MA).
(x) *Second Income Corp. (MA).
(xi) *Third Income Corp. (MA).
(xii) *Fourth Income Corp. (MA).
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(xiii) *Third Singleton Corp. (MA).
(xiv) *Fourth Singleton Corp. (MA)
(xv) *Fifth Singleton Corp. (MA)
(xvi) *Sixth Singleton Corp. (MA).
(xvii) *BCOP Associates L.P. (MA) AEW Real Estate Advisors,
Inc. holds a 1% general partner interest in BCOP
Associates L.P.
(4) *CREA Western Investors I, Inc. (MA)
(5) *CREA Investors Santa Fe Springs, Inc. (MA)
(viii) *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.
(ix) *AEW Hotel Investment Corporation (MA)
(1.) *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) *Nvest Associates, Inc.
(11) *Snyder Capital Management, Inc.
(a) *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.
(12) *Jurika & Voyles, Inc.
(a) *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.
(13) *Nvest Partnerships, LLC ( )
(14) *Kobrick Funds LLC
A.N. GenAmerica Financial Corporation (MO)
1. General American Life Insurance Company (MO)
a. Paragon Life Insurance Company (MO)
b. Security Equity Life Insurance Company (NY)
c. Cova Corporation (MO)
i. Cova Financial Services Life Insurance Company (MO)
(1) Cova Financial Life Insurance Company (CA)
(2) First Cova Life Insurance Company (NY)
ii. Cova Life Management Company (DE)
(1) Cova Investment Advisory Corporation (IL)
(2) Cova Investment Allocation Corporation (IL)
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(3) Cova Life Sales Company (DE)
(4) Cova Life Administration Services Company (IL)
d. General Life Insurance Company (TX)
i. General Life Insurance Company of America (IL)
e. Equity Intermediary Company (MO)
i. Reinsurance Group of America, Incorporated. (MO) 9.6% of the
voting shares of Reinsurance Group of America, Incorporated is held
directly by Metropolitan Life Insurance Company. 48.3% is held by
GenAmerica Financial Corporation.
(1) Reinsurance Company of Missouri Incorporated (MO)
a. RGA Reinsurance Company (MO)
b. Fairfield Management Group, Inc. (MO)
i.Reinsurance Partners, Inc. (MO)
ii. Great Rivers Reinsurance Management, Inc. (MO)
iii. RGA (U.K.) Underwriting Agency Limited (United Kingdom)
(2) Triad Re, Ltd. (Barbados) Reinsurance Group of America,
Incorporated owns 100% of the preferred stock of Triad RE, Ltd.
and 67% of the common stock.
(3) RGA Americas Reinsurance Company, Ltd. (Barbados)
(4) RGA Reinsurance Company (Barbados) Ltd. (Barbados)
(a) RGA Financial Group, L.L.C. (DE)
(5) RGA International Ltd. (Canada)
(a) RGA Financial Products Limited (Canada)
(b) RGA Canada Management Company, Ltd. (Canada)
(i) RGA Life Reinsurance Company of Canada (Canada)
(6) Benefit Resource Life Insurance Company (Bermuda) Ltd.
(Bermuda)
(7) RGA Holdings Limited (United Kingdom)
(a) RGA Managing Agency Limited (United Kingdom)
(b) RGA Capital Limited (United Kingdom)
(c) RGA Reinsurance (UK) Limited (South America)
(8) RGA South African Holdings (Pty) Ltd. (South America)
(a) RGA Reinsurance Company of South Africa Limited (Australia)
(9) RGA Australian Holdings Pty Limited (Australia)
(a) RGA Reinsurance Company of Australia Limited (Australia)
(10) General American Argentina Seguros de Vida, S.A. (Argentina)
(11) RGA Argentina, S.A. (Argentina)
(12) Regal Atlantic Company (Bermuda) Ltd. (Bermuda)
(13) Malaysia Life Reinsurance Group Berhad. (Malaysia) Reinsurance
Group of America, Incorporated owns 30% of Malaysia Life
Reinsurance Group Berhad.
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f. GenAm Holding Company (DE)
i. Genelco Incorporated (MO)
ii. Genelco Asia Pacifica Limited (Hong Kong)
iii. Genelco de Mexico S.A. de C.V. (Mexico) 99% of the shares of
Genelco de Mexico S.A. de C.V. are held by Genelco Incorporated and
1% is held by General American Life Insurance Company.
iv. White Oak Royalty Company (OK)
v. GenMark Incorporated (MO)
(a) Stan Mintz Associates, Inc. (WI)
(b) GenMark Insurance Agency of Alabama, Inc. (AL)
(c) GenMark Insurance Agency of Massachusetts, Inc. (MA)
(d) GenMark Insurance Agency of Ohio, Inc. (OH)
(e) GenMark Insurance Agency of Texas, Inc. (TX)
2. Collaborative Strategies, Inc. (MO)
3. Virtual Finances.Com, Inc. (MO)
4. Missouri Reinsurance (Barbados) Inc. (Barbados)
5. GenAmerica Capital I (DE)
6. GenAmerica Management Corporation (MO) 22.5% of the voting shares of the
GenAmerica Management Corporation are owned by General American Life
Insurance Company and 10% of the voting shares of the GenAmerica
Management Corporation are owned by A.G. Edwards. 67% of the common
stock is owned by GenAmerica Financial Corporation.
7. Walnut Street Securities, Inc. (MO)
a. WSS Insurance Agency of Alabama, Inc. (AL)
b. WSS Insurance Agency of Massachusetts, Inc. (MA)
c. WSS Insurance Agency of Nevada, Inc. (NV)
d. WSS Insurance Agency of Ohio, Inc. (OH)
e. WSS Insurance Agency of Texas, Inc. (TX)
f. Walnut Street Advisers, Inc. (MO)
A.O. Metropolitan Life Ubezpieczenna Zycie S.A. (Poland)
A.P. MetLife Central European Services Spolka z Organiczona
odpowiedzialmoscia (Poland)
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In addition to the entities listed above, Metropolitan (or where indicated an
affiliate) also owns an interest in the following entities, among others:
The voting securities (excluding directors' qualifying shares, if any) of
each subsidiary shown on the organizational chart are 100% owned by their
respective parent corporation, unless otherwise indicated.
In addition to the entities shown on the organizational chart, Metropolitan
(or where indicated, a subsidiary) also owns interests in the following
entities:
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) Metropolitan Structures is a general partnership in which Metropolitan
owns a 50% interest.
3) *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.
4) Metropolitan Lloyds Insurance Company of Texas, an affiliated
association, provides homeowner and related insurance for the Texas market.
It is an association of individuals designated as underwriters. Metropolitan
Lloyds, Inc., a subsidiary of Metropolitan Property and Casualty Insurance
Company, serves as the attorney-in-fact and manages the association.
5) 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.
6) 100% of the capital stock of Hereford Insurance Agency of Oklahoma,
Inc. is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such
officer's shares.
7) 100% of the capital stock of Fairfield Insurance Agency of Texas, Inc.
is owned by an officer. New England Life Insurance Company controls the
issuance of additional stock and has certain rights to purchase such
officer's shares.
8) New England Securities Corporation owns 100% of the non-voting preferred
stock of Hereford Insurance Agency of Ohio, Inc., an insurance agency. 100%
of the voting common stock of this company is held by an officer who has
agreed to vote such shares at the direction of New England Securities
Corporation, an indirect wholly owned subsidiary of Metropolitan.
9) 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
ownership and/or debt interests in certain companies. The various MILPs own,
directly or indirectly, 100% of the voting stock of the following: 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.
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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 $300 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 Life 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 Insurance Company acts in the following
capacities with respect to the following investment companies:
Metropolitan Tower Life Separate Account One (principal underwriter)
Metropolitan Tower Life Separate Account Two (principal underwriter)
Metropolitan Life Separate Account UL (principal underwriter)
Metropolitan Series Fund, Inc. (principal underwriter and investment adviser)
The New England Variable Annuity (depositor)
New England Variable Annuity Fund I (depositor)
(b) See response to Item 25 above.
(c)
(1)
NAME OF PRINCIPAL UNDERWRITER
Metropolitan Life Insurance (2)
Company NET UNDERWRITING DISCOUNTS AND
COMMISSIONS
(3) N/A
COMPENSATION ON REDEMPTION OR (4)
ANNUITIZATION BROKERAGE COMMISSIONS
N/A
(5) 0
COMPENSATION
0
---------------
* As regards this new contract, as of the date of this filing the Registrant has
issued no contracts.
II-17
<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-18
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant has caused this Registration Statement to be signed on its
behalf, in the City of New York, and State of New York on this 8th day of
December, 2000.
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-19
<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
Steward 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. December 8, 2000
-----------------------------
Richard G. Mandel, Esq.
Attorney-in-Fact
</TABLE>
II-20
<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
*
---------------------------------
Ruth J. Simmons, Ph.D. Director
* Director
---------------------------------
William C. Steere, Jr.
December 8, 2000
By: /s/ RICHARD G. MANDEL, ESQ.
-------------------------
Richard G. Mandel, Esq.
Attorney-in-Fact
</TABLE>
II-21
