<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2001
REGISTRATION NO. 333-11131
811-5338
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [_]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 23 [X]
THE NEW ENGLAND VARIABLE ACCOUNT
(EXACT NAME OF REGISTRANT)
METROPOLITAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE MADISON AVENUE, NEW YORK, NEW YORK 10010
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER: (212) 578-5364
NAME AND ADDRESS OF AGENT FOR SERVICE: COPY TO:
Gary A. Beller, Esq. Stephen E. Roth, Esquire
Metropolitan Life Insurance Company Sutherland, Asbill & Brennan LLP
One Madison Avenue 1275 Pennsylvania Avenue, N.W.
New York, New York 10010 Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on January 22, 2001 pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Individual Variable Annuity Contracts.
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<PAGE>
This registration statement incorporates by reference the prospectus dated
May 1, 2000, the supplement dated May 1, 2000 to the prospectus dated April 30,
1999, the supplement dated May 1, 2000 to the prospectus dated May 1, 2000 and
the Statement of Additional Information dated May 1, 2000 for the contracts,
each as filed in Post-Effective Amendment No. 5 to the Registration Statement on
Form N-4 (File No. 333-11131) filed on April 27, 2000.
<PAGE>
ZENITH ACCUMULATOR
METROPOLITAN LIFE INSURANCE COMPANY
THE NEW ENGLAND VARIABLE ACCOUNT
Supplement dated January 22, 2001
To
Prospectuses Dated May 1, 2000
This supplement updates certain information contained in the prospectuses
dated May 1, 2000 and April 30, 1999, as supplemented May 1, 2000.
1. PAGE A-1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING ELIGIBLE
FUNDS:
METROPOLITAN SERIES FUND, INC. ("METROPOLITAN FUND")
Putnam Large Cap Growth Portfolio
State Street Research Aurora Small Cap Value Portfolio*
Janus Mid Cap Portfolio*
Lehman Brothers(R) Aggregate Bond Index Portfolio*
MetLife Stock Index Portfolio*+
MetLife Mid Cap Stock Index Portfolio*
Morgan Stanley EAFE(R) Index Portfolio*
Russell 2000(R) Index Portfolio*
--------
* Availability is subject to any necessary state insurance department
approval.
+ Available to contracts purchased AFTER May 1, 1995.
2. During the second quarter of 2001, Metropolitan Life Insurance Company
anticipates replacing the Westpeak Stock Index Series of the New England
Zenith Fund with the MetLife Stock Index Portfolio of the Metropolitan Fund
for all contracts purchased prior to May 1, 1995.
3. On December 1, 2000, the Putnam International Stock Portfolio was
substituted for the Morgan Stanley International Magnum Equity Series, which
is no longer available for investment under the Contract.
4. You may allocate contract value to a maximum of twenty sub-accounts
(including the Fixed Account) at any time.
5. THE "EXPENSE TABLE" IS REPLACED WITH THE FOLLOWING:
EXPENSE TABLE
The purpose of the table and the examples below is to explain the various
costs and expenses you will bear, directly or indirectly, as a Contract Owner.
These are deducted from purchase payments, the Variable Account, or the
Eligible Funds. In the examples following the table, we assume that you
allocated your entire purchase payment to one sub-account, with no transfers.
A-1
<PAGE>
VARIABLE ACCOUNT
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES(1)
Sales Charge Imposed on Purchases (as a percentage
of Contract Value)................................. 0%
Maximum Contingent Deferred Sales Charge(2) (as a
percentage of Contract Value)...................... 6.5%
Transfer Fee (per Contract Year)(3)................. $0 on the first twelve
$10 each thereafter
ANNUAL CONTRACT FEE
Administration Contract Charge (per Contract)(4) ... $30
SEPARATE ACCOUNT ANNUAL EXPENSES(5)
(as percentage of average net assets)
Mortality and Expense Risk Charge................... .95%
Administration Asset Charge......................... .40%
----
Total Separate Account Annual Expenses.......... 1.35%
</TABLE>
NEW ENGLAND ZENITH FUND
OPERATING EXPENSES FOR THE YEAR ENDED 12/31/99
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
OTHER TOTAL OTHER TOTAL
EXPENSES EXPENSES EXPENSES EXPENSES
MANAGEMENT BEFORE BEFORE AFTER AFTER
FEES* REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Back Bay Advisors Money
Market Series.......... .35% .05% .40% .05% .40%
Back Bay Advisors Bond
Income Series.......... .40% .08% .48% .08% .48%
Salomon Brothers
Strategic Bond
Opportunities Series... .65% .16% .81% .16% .81%
Salomon Brothers U.S.
Government Series(6)... .55% .17% .72% .15% .70%
Back Bay Advisors
Managed Series(8)...... .50% .08% .58% .08% .58%
Balanced Series......... .70% .07% .77% .07% .77%
Alger Equity Growth
Series................. .75% .05% .80% .05% .80%
Capital Growth Series... .62% .04% .66% .04% .66%
Davis Venture Value
Series................. .75% .06% .81% .06% .81%
Harris Oakmark Mid Cap
Value Series(6)........ .75% .13% .88% .13% .88%
Loomis Sayles Small Cap
Series(6)(7)........... .90% .20% 1.10% .10% 1.00%
Westpeak Growth and
Income Series.......... .68% .06% .74% .06% .74%
Westpeak Stock Index
Series(8).............. .25% .10% .35% .10% .35%
</TABLE>
--------
* Our affiliate, New England Investment Management, LLC, is the investment
adviser for the Series of the Zenith Fund.
A-2
<PAGE>
METROPOLITAN SERIES FUND, INC.
OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999
(ANTICIPATED EXPENSES FOR 2000 FOR THE PUTNAM LARGE CAP GROWTH, STATE STREET
RESEARCH AURORA SMALL CAP VALUE AND METLIFE MID CAP STOCK INDEX PORTFOLIOS)
(AS A PERCENTAGE OF NET ASSETS)
<TABLE>
<CAPTION>
OTHER TOTAL OTHER TOTAL
12B-1 EXPENSES EXPENSES EXPENSES EXPENSES
MANAGEMENT DISTRIBUTION BEFORE BEFORE AFTER AFTER
FEES* FEE REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT REIMBURSEMENT
---------- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Putnam Large Cap Growth
Portfolio(9)........... .80% N/A .59% 1.39% .20% 1.00%
Putnam International
Stock Portfolio........ .90% N/A .22% 1.12% .22% 1.12%
State Street Research
Aurora Small Cap Value
Portfolio(9)........... .85% N/A .23% 1.08% .20% 1.05%
Janus Mid Cap
Portfolio(9)(10)....... .67% .25% .04% .96% .04% .96%
Lehman Brothers
Aggregate Bond Index
Portfolio(9)(10)....... .25% .25% .15% .65% .15% .65%
MetLife Stock Index
Portfolio(10)(11)...... .25% .25% .04% .54% .04% .54%
MetLife Mid Cap Stock
Index
Portfolio(9)(10)....... .25% .25% .65% 1.15% .20% .70%
Morgan Stanley EAFE
Index
Portfolio(9)(10)....... .30% .25% 1.47% 2.02% .40% .95%
Russell 2000 Index
Portfolio(9)(10)....... .25% .25% .64% 1.14% .30% .80%
</TABLE>
--------
* Metropolitan Life Insurance Company ("MetLife") is the investment adviser for
the Portfolios of the Metropolitan Fund.
VARIABLE INSURANCE PRODUCTS FUND
OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1999
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
TOTAL
PORTFOLIO
MANAGEMENT OTHER OPERATING
FEES* EXPENSES EXPENSES
---------- -------- ---------
<S> <C> <C> <C>
VIP Overseas Portfolio (12)....................... .73% .18% .91%
VIP Equity Income Portfolio (12).................. .48% .09% .57%
</TABLE>
--------
* The investment adviser for VIP is Fidelity Management & Research Company
("FRM").
A-3
<PAGE>
6. THE "EXAMPLE" CHART IS AMENDED TO INCLUDE THE FOLLOWING:
EXAMPLE (NOTE: The examples below are hypothetical. Although we base them on
the expenses shown in the expense tables above, the examples are not
representations of past or future performance or expenses. Actual performance
and/or expenses may be more or less than shown.(13)) For purchase payments
allocated to each of the Series indicated:
You would pay the following expenses on a
$1,000 purchase payment assuming 1) 5% annual
return on the underlying New England Zenith
Fund Series, Metropolitan Fund Portfolio or
VIP Portfolio and 2) that you surrender your
Contract or that you elect to annuitize under
a period certain option for a specified period
of less than 15 years, at the end of each time
period (a contingent deferred sales charge
will apply at the end of 1 year, 3 years and 5
years):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Putnam Large Cap Growth................... 84.44 128.57 174.45 285.65
Putnam International Stock................ 85.57 131.97 180.15 297.33
State Street Research Aurora Small Cap
Value *.................................. 84.91 129.99 176.83 290.53
Janus Mid Cap*............................ 84.06 127.44 172.55 281.73
Lehman Brothers Aggregate Bond Index*..... 81.14 118.59 157.62 250.70
MetLife Stock Index*...................... 80.10 115.42 152.27 239.43
MetLife Mid Cap Stock Index*.............. 81.61 120.02 160.05 255.77
Morgan Stanley EAFE Index*................ 83.97 127.15 172.07 280.74
Russell 2000 Index*....................... 82.56 122.87 164.87 265.84
VIP Overseas.............................. 83.59 126.02 170.15 276.80
VIP Equity-Income......................... 80.39 116.29 153.74 242.53
</TABLE>
You would pay the following expenses on a
$1,000 purchase payment assuming 1) 5% annual
return on the underlying New England Zenith
Fund Series, Metropolitan Fund Portfolio or
VIP Portfolio and 2) that you do not surrender
your Contract or that you elect to annuitize
under a life contingency option, or under a
period certain option for a minimum specified
period of 15 years, at the end of each time
period (no contingent deferred sales charge
will apply)(14):
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Putnam Large Cap Growth................... 24.48 75.28 128.65 274.14
Putnam International Stock................ 25.68 78.87 134.62 285.96
State Street Research Aurora Small Cap
Value*................................... 24.98 76.78 131.14 279.08
Janus Mid Cap*............................ 24.08 74.08 126.65 270.17
Lehman Brothers Aggregate Bond Index*..... 20.97 64.73 111.01 238.78
MetLife Stock Index*...................... 19.87 61.39 105.40 227.38
MetLife Mid Cap Stock Index*.............. 21.47 66.24 113.55 243.91
Morgan Stanley EAFE Index*................ 23.98 73.78 126.15 269.17
Russell 2000 Index*....................... 22.48 69.26 118.61 254.10
VIP Overseas.............................. 23.58 72.58 124.14 265.18
VIP Equity-Income......................... 20.17 62.30 106.94 230.51
</TABLE>
--------
* Availability of these portfolios is subject to any necessary state insurance
department approval.
A-4
<PAGE>
7. THE "NOTES" TO THE EXPENSE TABLE IS REPLACED WITH THE FOLLOWING:
NOTES:
(1) Premium tax charges are not shown. They range from 0% (in most states)
to 3.5% of Contract Value (or if applicable purchase payments).
(2) We calculate the applicable Contingent Deferred Sales Charge as a
percentage of Contract Value. The maximum possible charge, as a
percentage of Contract Value, occurs in the first Contract Year and
reduces after each Contract Year to 0% by the eleventh Contract Year.
(3) We reserve the right to impose a charge of $10 on each transfer in
excess of four per year.
(4) We do not impose this charge after annuitization.
(5) We do not impose these charges on the Fixed Account or after
annuitization if annuity payments are made on a fixed basis.
(6) New England Investment Management voluntarily limits the expenses (other
than brokerage costs, interest, taxes or extraordinary expenses) of
certain series with either an expense cap or expense deferral
arrangement. Under the expense cap, New England Investment Management
bears expenses of the Loomis Sayles Small Cap Series that exceed 1.00%
of average daily net assets. Under the expense deferral agreement, New
England Investment Management bears expenses which exceed a certain
limit in the year the series incurs them and charges those expenses to
the series in a future year if actual expenses of the series are below
the limit. The limit on expenses for these series are: .90% of average
daily net assets for the Harris Oakmark Mid Cap Value; and .70% of
average daily net assets for the Salomon Brothers U.S. Government
Series. New England Investment Management may end these expense limits
at any time.
(7) In 1999, the management fee for the Loomis Sayles Small Cap Series was
1.00%.
(8) The Westpeak Stock Index Series and the Back Bay Advisors Managed Series
are not Eligible Funds for Contracts purchased after May 1, 1995.
(9) MetLife voluntarily pays expenses (other than the management fee,
brokerage commissions, amounts payable pursuant to a plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
taxes, interest and other loan costs, and any unusual one-time expenses)
of certain Portfolios in excess of a certain percentage of net assets
until the earlier of either total net assets of the Portfolio reaching
$100 million or a certain date as follows:
<TABLE>
<CAPTION>
SUBSIDIZED EXPENSES
PORTFOLIO IN EXCESS OF DATE
--------- ------------------- ------
<S> <C> <C>
Putnam Large Cap Growth....................... 0.20% 5/1/02
State Street Research Aurora Small Cap Value.. 0.20% 7/1/02
MetLife Mid Cap Stock Index................... 0.20% 7/1/02
</TABLE>
--------
Prior to 11/8/00, MetLife paid all Expenses in excess of .25% of the
average net assets for the Morgan Stanley EAFE Index Portfolio until the
Portfolio's total assets reached $100 million or November 8, 2000
whichever came first. Beginning on 11/8/00, MetLife will pay all expenses
in excess of .40% of the average net assets of the Morgan Stanley EAFE
Index Portfolio until the Portfolio's assets reach $200 million, or until
May 1, 2001, whichever comes first.
MetLife also paid all Expenses that exceeded .20% of average net assets
for the Russell 2000 Index Portfolio until December 3, 1999 and for the
Lehman Brothers Aggregate Bond Index Portfolio until July 13, 1999.
Beginning on February 22, 2000, MetLife will pay all expenses in excess of
0.30% of the average net assets for the Russell 2000 Index Portfolio until
the Portfolio's assets reach $200 million, or until April 30, 2001,
whichever comes first. MetLife also paid all Expenses that exceeded .20%
of average net assets for the Janus Mid Cap Portfolio until the
Portfolio's assets reached $100 million or until March 2, 1999, whichever
came first. These subsidies and other prior expense reimbursement
arrangements can increase the performance of the Portfolios. MetLife can
terminate this arrangement at anytime upon notice to the Board of
Directors and to Fund Shareholders.
(10) The Metropolitan Fund has adopted a Distribution Plan under Rule 12b-1
of the Investment Company Act of 1940. Under the Distribution Plan the
Portfolios pay an annual fee to compensate certain other parties for
promoting, selling and servicing the shares of the Portfolio. These
other parties may include the Insurance Companies (or their affiliates)
and other broker-dealers and financial intermediaries involved in the
offer and sale of the contracts. The Distribution Plan is described in
more detail in the Fund's prospectus.
(11) The MetLife Stock Index Portfolio is only available to contracts
purchased after May 1, 1995.
(12) Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we
included these reductions, total annual expenses would have been .56%
for VIP Equity-Income Portfolio and .87% for VIP Overseas Portfolio.
A-5
<PAGE>
(13) In these examples, the average Administration Contract Charge of .07%
has been used. (See (4), above.)
(14) The same would apply if you elect to annuitize under a fixed life
contingency option unless your Contract has been in effect less than
five years, in which case the expenses shown in the first three columns
of the preceding example would apply. (See "Contingent Deferred Sales
Charge.")
8. THE "INVESTMENTS OF THE VARIABLE ACCOUNT" SECTION IS AMENDED TO INCLUDE THE
FOLLOWING:
PUTNAM LARGE CAP GROWTH PORTFOLIO*
The Putnam Large Cap Growth Portfolio's investment objective is capital
appreciation.
STATE STREET RESEARCH AURORA SMALL CAP VALUE PORTFOLIO*
The State Street Research Aurora Small Cap Value Portfolio's investment
objective is high total return, consisting principally of capital
appreciation.
JANUS MID CAP PORTFOLIO*
The Janus Mid Cap Portfolio's investment objective is long-term growth of
capital.
LEHMAN BROTHERS AGGREGATE BOND INDEX PORTFOLIO*
The Lehman Brothers Aggregate Bond Index Portfolio's investment objective is
to equal the performance of the Lehman Brothers Aggregate Bond Index.
METLIFE STOCK INDEX PORTFOLIO*+
The MetLife Stock Index Portfolio's investment objective is to equal the
performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index").
METLIFE MID CAP STOCK INDEX PORTFOLIO*
The MetLife Mid Cap Stock Index Portfolio's investment objective is to equal
the performance of the Standard & Poor's MidCap 400 Composite Stock Index
("S&P MidCap 400 Index").
MORGAN STANLEY EAFE INDEX PORTFOLIO*
The Morgan Stanley EAFE Index Portfolio's investment objective is to equal
the performance of Morgan Stanley Capital International Europe Australasia Far
East Index ("MSCI EAFE Index").
RUSSELL 2000 INDEX PORTFOLIO*
The Russell 2000 Index Portfolio's investment objective is to equal the
return of the Russell 2000 Index.
9. THE "INVESTMENT ADVICE" SECTION IS AMENDED TO INCLUDE THE FOLLOWING:
Putnam Investment Management, Inc. is sub-investment manager of the
Putnam Large Cap Growth Portfolio. State Street Research & Management
Company is the sub-investment manager for the State Street Research Aurora
Small Cap Value Portfolio. Janus Capital Corporation is the sub-investment
manager for the Janus Mid Cap Portfolio.
An investment adviser or affiliates thereof may compensate NELICO and/or
certain affiliates for administrative, distribution, or other services
relating to the Eligible Funds. We (or our affiliates) may also be
compensated with 12b-1 fees from Eligible Funds. This compensation is based
on assets of the Eligible Funds attributable to the Contracts and certain
other variable insurance products that we and our affiliates issue. Some
advisers, affiliates and/or Eligible Funds may pay us more than others.
--------
* Availability of these Portfolios is subject to any necessary state
insurance department approvals.
+ Available to contracts purchased AFTER May 1, 1995.
A-6
<PAGE>
10. "THE CONTRACTS" SECTION IS AMENDED TO INCLUDE THE FOLLOWING:
ASSET REBALANCING
We offer an asset rebalancing program for Contract Value. Contract Value
allocated to the sub-accounts can be expected to increase or decrease at
different rates due to market fluctuations. An asset rebalancing program
automatically reallocates your Contract Value among the sub-accounts
periodically (quarterly, semi-annually or annually) to return the allocation
to the allocation percentages you specify. Asset rebalancing is intended to
transfer Contract Value from those sub-accounts that have increased in value
to those that have declined, or not increased as much, in value. Over time,
this method of investing may help you "buy low and sell high," although there
can be no assurance that this objective will be achieved. Asset rebalancing
does not guarantee profits, nor does it assure that you will not have losses.
You may select an asset rebalancing program when you apply for the contract
or at a later date by contacting our Home Office. You specify the percentage
allocations to which your contract value will be reallocated among the sub-
accounts (excluding the Fixed Account). You may not participate in the asset
rebalancing program while you are participating in the dollar cost averaging
program. On the last day of each period on which the New York Stock Exchange
is open, we will transfer Contract Value among the sub-accounts to the extent
necessary to return the allocation to your specifications. Asset rebalancing
will continue until you notify us in writing or by telephone at our Home
Office. Asset rebalancing cannot continue beyond the Maturity Date or once
annuity payments have commenced. Currently, we don't count transfers made
under an asset rebalancing program for purposes of the transfer rules.
11. THE "REQUESTS AND ELECTIONS" SECTION IS AMENDED TO INCLUDE THE FOLLOWING:
CONFIRMING TRANSACTIONS
We will send out written statements confirming that a transaction was
recently completed. Certain transactions may be confirmed quarterly. Unless
you inform us of any errors within 60 days of receipt, we will consider these
communications to be accurate and complete.
12. "FUND TOTAL RETURN ADJUSTED FOR CONTRACT CHARGES" CHART IS AMENDED TO
INCLUDE THE FOLLOWING:
For purchase payment allocated to the Janus Mid Cap Portfolio
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1999
-------------------------------
<S> <C>
1 Year.......................................................... 108.46%
Since Inception................................................. 56.01%
</TABLE>
For purchase payment allocated to the Lehman Brothers Aggregate Bond Index
Portfolio
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1999
-------------------------------
<S> <C>
1 Year.......................................................... -11.06%
Since Inception................................................. -8.98%
</TABLE>
For purchase payment allocated to the MetLife Stock Index Portfolio
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1999
-------------------------------
<S> <C>
1 Year............................................................. 9.85%
5 Years............................................................ 23.65%
Since Inception.................................................... 15.38%
</TABLE>
For purchase payment allocated to the Morgan Stanley EAFE Index Portfolio
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1999
-------------------------------
<S> <C>
1 Year............................................................. 13.48%
Since Inception.................................................... 19.11%
</TABLE>
For purchase payment allocated to the Russell 2000 Index Portfolio
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31, 1999
-------------------------------
<S> <C>
1 Year............................................................. 11.45%
Since Inception.................................................... 14.60%
</TABLE>
A-7
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
ZENITH ACCUMULATOR
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
ISSUED BY METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION
(PART B)
JANUARY 22, 2001
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information relates to the Prospectus dated May 1, 2000 as
supplemented January 22, 2001 and the Prospectus dated April 30, 1999 as
supplemented May 1, 2000 and January 22, 2001 and should be read in
conjunction therewith. A copy of the Prospectus may be obtained by writing to
New England Securities Corporation ("New England Securities") 399 Boylston
Street, Boston, Massachusetts 02116.
VA-205-01
II-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
History................................................................... II-3
Services Relating to the Variable Account and the Contracts............... II-3
Performance Comparisons................................................... II-3
Calculation of Performance Data........................................... II-4
Net Investment Factor..................................................... II-25
Annuity Payments.......................................................... II-25
Hypothetical Illustrations of Annuity Income Payouts...................... II-27
Historical Illustrations of Annuity Income Payouts........................ II-30
Experts................................................................... II-33
Legal Matters............................................................. II-33
Appendix A................................................................ II-34
Financial Statements...................................................... F-1
</TABLE>
II-2
<PAGE>
HISTORY
The New England Variable Account (the "Variable Account") is a separate
account of Metropolitan Life Insurance Company (the "Company"). The Variable
Account was originally a separate account of New England Mutual Life Insurance
Company, and became a separate account of the Company when New England Mutual
Life Insurance Company merged with and into the Company on August 30, 1996.
The Company is a wholly-owned subsidiary of MetLife, Inc., a publicly traded
company.
SERVICES RELATING TO THE VARIABLE ACCOUNT AND THE CONTRACTS
Auditors. DELOITTE & TOUCHE LLP, LOCATED AT 200 BERKELEY STREET, BOSTON,
MASSACHUSETTS 02116, CONDUCTS AN ANNUAL AUDIT OF THE VARIABLE ACCOUNT'S
FINANCIAL STATEMENTS.
Administrative Services Agreement. Pursuant to an administrative services
agreement between New England Life Insurance Company ("NELICO") and the
Company, NELICO serves as the Designated Office for servicing the Contracts
and performs certain other administrative services for the company relating to
the variable account and the Contracts. NELICO is compensated for these
services based on the expenses it incurs in providing them. NELICO was a
wholly-owned subsidiary of New England Mutual Life Insurance Company before it
merged into the Company, and became a subsidiary of the Company as a result of
the merger. For services rendered, the Company paid NELICO $12,580,160.06 for
the period ended December 31, 1998, $12,320,436.64 for the period ended
December 31, 1999 and $12,299,597.07 for the period ended December 31, 2000.
Principal Underwriter. New England Securities Corporation ("New England
Securities"), an indirect subsidiary of the Company, serves as principal
underwriter for the Variable Account pursuant to a distribution agreement with
the Company. The Contracts are offered continuously and are sold by NELICO's
life insurance agents and insurance brokers who are registered representatives
of New England Securities. Contracts also may be sold by registered
representatives of broker-dealers that have selling agreements with New
England Securities. The Company pays commissions, none of which are retained
by New England Securities, to the registered representatives involved in
selling Contracts. for the years ended December 31, 1998, 1999 and 2000 the
Company paid commissions in the amount of $5,427,972.77, $2,240,122.51 and
$1,611,358.39, respectively.
PERFORMANCE COMPARISONS
Articles and releases, developed by the Company, the Eligible Funds (as
defined in the Prospectus) and other parties, about the Account or the
Eligible Funds regarding performance, rankings, statistics and analyses of the
Account's, the individual Eligible Funds' and fund groups' asset levels and
sales volumes, statistics and analyses of industry sales volumes and asset
levels, and other characteristics may appear in publications, including, but
not limited to, those publications listed in Appendix A to this Statement of
Additional Information. In particular, some or all of these publications may
publish their own rankings or performance reviews including the Account or the
Eligible Funds. References to or reprints of such articles may be used in the
Company's promotional literature. Such literature may refer to personnel of
the advisers, who have portfolio management responsibility, and their
investment style. The references may allude to or include excerpts from
articles appearing in the media.
The advertising and sales literature of the Contract and the Account may
refer to historical, current and prospective economic trends and may include
historical and current performance and total returns of investment
alternatives.
In addition, sales literature may be published concerning topics of general
investor interest for the benefit of registered representatives and
prospective Contractholders. These materials may include, but are not limited
to, discussions of college planning, retirement planning, reasons for
investing and historical examples of the investment performance of various
classes of securities, securities markets and indices.
II-3
<PAGE>
CALCULATION OF PERFORMANCE DATA
The Variable Account was not established until July, 1987. The Contracts
were not available until September, 1988. The Capital Growth, Back Bay
Advisors Bond Income and Back Bay Advisors Money Market Series commenced
operations on August 26, 1983. The Westpeak Growth and Income and Harris
Oakmark Mid Cap Value (formerly the Goldman Sachs Midcap Value Series)
commenced operations on April 30, 1993. The VIP Equity-Income Portfolio
commenced operations on October 9, 1986, and the VIP Overseas Portfolio
commenced operations on January 28, 1987. The Westpeak Stock Index and Back
Bay Managed Series commenced operations on May 1, 1987. The Loomis Sayles
Small Cap Series commenced operations on May 2, 1994. The other Zenith Fund
Series commenced operations on October 31, 1994. The Putnam International
Stock Portfolio commenced operations on October 31, 1994 and became available
to Zenith Accumulator Contractholders on May 1, 2000. (On December 1, 2000,
the Putnam International Stock Portfolio was substituted for the Morgan
Stanley International Magnum Equity series, which is no longer available for
investment under the Contract. The Morgan Stanley International Magnum Equity
Series commenced operations on October 31, 1994. Performance figures for dates
on or before December 1, 2000 reflect the performance of the Morgan Stanley
International Magnum Equity Series.) The remaining Portfolios of the
Metropolitan Fund became available to contractholders on January 22, 2001 and
commenced operations as follows: Putnam Large Cap Growth Portfolio, May 1,
2000; State Street Research Aurora Small Cap Value and the MetLife Mid Cap
Stock Index Portfolios, July 5, 2000; Janus Mid Cap Portfolio, March 3, 1997;
Lehman Brothers Aggregate Bond Index, Morgan Stanley EAFE Index, and Russell
2000 Index Portfolios, November 9, 1998; and MetLife Stock Index Portfolio,
May 1, 1990.
Calculations of average annual total return are based on the assumption that
a single investment of $1,000 was made at the beginning of each period shown.
The figures do not reflect the effect of any premium tax charges, which apply
in certain states, and which would reduce the results shown.
The average annual total return is related to surrender value and is
calculated as follows. The amount of the assumed $1,000 purchase payment for a
Contract issued at the beginning of the period is divided by the Accumulation
Unit Value of the sub-account at the beginning of the period shown to arrive
at the number of Accumulation Units purchased. The number of Accumulation
Units is reduced on each Contract anniversary to reflect deduction of the
annual $30 Administration Contract Charge from the Contract Value. Each such
$30 deduction reduces the number of units held under the Contract by an amount
equal to $30 divided by the Accumulation Unit Value on the date of the
deduction. The total number of units held under the Contract at the beginning
of the last Contract Year covered by the period shown is multiplied by the
Accumulation Unit Value on December 31, 1999 to arrive at the Contract Value
on that date. This Contract Value is then reduced by the applicable Contingent
Deferred Sales Charge and by the portion of the $30 Administration Contract
Charge which would be deducted upon surrender on December 31, 1999 to arrive
at the surrender value. The average annual total return is the annual
compounded rate of return which would produce the surrender value on December
31, 1999. In other words, the average annual total return is the rate which,
when added to 1, raised to a power reflecting the number of years in the
period shown, and multiplied by the initial $1,000 investment, yields the
surrender value at the end of the period. The average annual total returns
assume that no premium tax charge has been deducted. See Appendix C of the
prospectus for Sub-Account average annual total return and Fund total return
adjusted for contract charges.
The following chart illustrates how the average annual total return was
determined for the five year period ending December 31, 1999 for the sub-
account investing in the Capital Growth Series based on the assumptions used
above. The units column below shows the number of accumulation units
hypothetically purchased by the investment in the Capital Growth Series in the
first year (assuming that no premium tax is deducted). The units are reduced
on each Contract anniversary to reflect the deduction of the $30
Administration Contract Charge. The illustration assumes no premium tax charge
is deducted.
The unit values of the sub-accounts reflect the change in the net asset
value of the underlying Eligible Funds plus the reinvestment of dividends from
net investment income and of distributions from net realized gains, if any.
The unit values also reflect the deduction of the Mortality and Expense Risk
Charge as well as the Administration Asset Charge.
II-4
<PAGE>
<TABLE>
<CAPTION>
AVERAGE
UNIT CONTRACT SURRENDER ANNUAL TOTAL
DATE UNITS VALUE VALUE VALUE RETURN
---- -------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
December 31, 1994............ 120.5171 8.297578 1,000.00 -- --
December 31, 1995............ 117.8627 11.300017 1,331.85 1,259.93 25.99
December 31, 1996............ 115.6402 13.496435 1,560.73 1,483.47 21.80
December 31, 1997............ 113.8157 16.441932 1,871.35 1,787.14 21.35
December 31, 1998............ 112.4364 21.752481 2,445.77 2,346.72 23.77
December 31, 1999............ 111.2282 24.830578 2,761.86 2,662.43 21.63
</TABLE>
The following charts illustrate what would have been the growth and value of
a $10,000 purchase payment for a Contract if it had been invested in each of
the Eligible Funds on the first day of the first month after those Eligible
Funds commenced operations if the Contract had been offered at that time:
September 1, 1983 in the case of the Back Bay Advisors Money Market, Back Bay
Advisors Bond Income and Capital Growth Series; November 1, 1986 in the case
of the VIP Equity-Income Portfolio; February 1, 1987 in the case of the VIP
Overseas Portfolio; May 1, 1987 in the case of the Westpeak Stock Index Series
and the Back Bay Advisors Managed Series; May 1, 1993 in the case of the
Westpeak Growth and Income and Harris Oakmark Mid Cap Value Series (formerly
Goldman Sachs Midcap Value Series); May 2, 1994 in the case of the Loomis
Sayles Small Cap Series; November 1, 1994 for the other Zenith Fund Series;
November 1, 1994 for the Putnam International Stock Portfolio (performance
figures for dates on or before December 1, 2000 reflect the performance of the
Morgan Stanley International Magnum Equity Series); March 3, 1997 for the
Janus Mid Cap Portfolio; December 1, 1998 for the Lehman Brothers Aggregate
Bond Index, Morgan Stanley EAFE Index and Russell 2000 Index Portfolios; and
May 1, 1990 for the MetLife Stock Index Portfolio of the Metropolitan Series
Fund. The figures shown do not reflect the deduction of any premium tax
charge. During the period when the Contingent Deferred Sales Charge applies,
the percentage return on surrender value from year to year (after the 1st
year) will be greater than the percentage return on Contract Value for the
same years. This is because the percentage return on surrender value reflects
not only investment experience but also the annual reduction in the applicable
Contingent Deferred Sales Charge. In the first chart, the Contract Value and
surrender value on each date shown are calculated in the manner described in
the preceding illustrations of average annual total return, assuming that no
premium tax charge is deducted.
In the second and third charts, the difference between the Contract Value or
surrender value at the beginning and at the end of each year is divided by the
beginning Contract Value or surrender value to arrive at the annual percentage
change. The cumulative return information set forth in these charts is
determined by taking the difference between the $10,000 investment and the
ending Contract Value or surrender value and dividing it by $10,000. The
annual effective rate of return in this illustration is calculated in the same
manner as the average annual total return described in the preceding
illustration, assuming that no premium tax charge is deducted.
II-5
<PAGE>
$10,000 SINGLE PURCHASE PAYMENT CONTRACT
INVESTMENT RESULTS
<TABLE>
<CAPTION>
CONTRACT VALUE(1)
-------------------------------------------------------------------------------------------------------
SALOMON
BACK BAY BACK BAY BROTHERS SALOMON
ADVISORS ADVISORS STRATEGIC BROTHERS BACK BAY ALGER DAVIS
MONEY BOND BOND U.S. MANAGED EQUITY CAPITAL VENTURE
MARKET INCOME OPPORTUNITIES GOVERNMENT SERIES(2) BALANCED(3) GROWTH GROWTH VALUE
---------- ---------- ------------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $10,258.59 $10,339.37 $ 10,470.12
1984............ 11,175.34 11,453.64 10,237.14
1985............ 11,905.86 13,388.01 16,941.91
1986............ 12,514.94 15,137.25 32,599.29
1987............ 13,122.50 15,242.29 $ 9,844.68 49,087.62
1988............ 13,889.20 16,265.40 10,602.14 44,141.97
1989............ 14,941.00 17,990.50 12,423.10 56,919.65
1990............ 15,916.76 19,151.95 12,617.64 54,170.04
1991............ 16,648.66 22,256.25 14,926.64 82,262.43
1992............ 17,018.47 23,722.98 15,680.56 76,212.70
1993............ 17,259.12 26,326.49 17,086.43 86,417.09
1994............ 17,674.12 25,071.19 $ 9,838.87 $10,038.07 16,639.55 $ 9,968.28 $ 9,695.00 79,208.42 $ 9,628.96
1995............ 18,401.19 29,948.07 11,557.83 11,360.92 21,514.34 12,242.06 14,193.96 107,838.80 13,201.25
1996............ 19,053.28 30,873.63 13,008.06 11,548.68 24,379.98 14,087.95 15,815.91 128,763.66 16,356.09
1997............ 19,770.95 33,745.25 14,224.45 12,328.54 30,407.16 16,117.12 19,572.63 156,835.46 21,511.40
1998............ 20,502.34 36,272.33 14,289.07 13,058.43 35,864.34 17,317.95 28,501.23 207,454.79 24,249.51
1999............ 21,201.50 35,588.76 14,270.63 12,875.72 38,880.28 16,191.16 37,682.20 236,777.25 28,083.49
<CAPTION>
HARRIS LOOMIS
OAKMARK SAYLES
MID CAP SMALL
VALUE(4) CAP
---------- ----------
<S> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............
1988............
1989............
1990............
1991............
1992............
1993............ $11,370.39
1994............ 11,157.06 $ 9,590.97
1995............ 14,313.48 12,156.37
1996............ 16,574.48 15,637.59
1997............ 19,149.94 19,225.09
1998............ 17,837.09 18,619.12
1999............ 17,631.72 24,161.33
</TABLE>
<TABLE>
<CAPTION>
CONTRACT VALUE(1)
-----------------------------------------------------------------------------------------------------
WESTPEAK LEHMAN
GROWTH WESTPEAK PUTNAM BROTHERS METLIFE MORGAN
AND STOCK INTERNATIONAL JANUS AGGREGATE STOCK STANLEY RUSSELL VIP
INCOME INDEX(2) STOCK(5) MID CAP BOND INDEX INDEX(6) EAFE INDEX 2000 INDEX OVERSEAS
---------- ---------- ------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 8,700.98 $ 9,345.49
1988............ 9,954.81 9,936.28
1989............ 12,748.34 12,343.46
1990............ 12,025.47 $10,110.39 11,945.10
1991............ 15,441.83 12,951.64 12,695.83
1992............ 16,313.91 13,717.25 11,156.05
1993............ $11,321.11 17,628.00 14,764.19 15,078.13
1994............ 11,004.57 17,555.45 $10,237.83 14,673.69 15,104.86
1995............ 14,780.39 23,679.19 10,698.65 19,790.14 16,311.44
1996............ 17,185.98 28,573.33 11,227.90 23,899.30 18,185.02
1997............ 22,593.88 37,314.92 10,904.04 $12,638.78 31,130.36 19,981.29
1998............ 27,709.41 47,066.35 11,508.95 17,142.64 $10,006.50 39,355.34 $10,546.25 $10,578.68 22,194.68
1999............ 29,864.28 55,866.17 14,116.24 37,557.28 9,677.86 46,848.66 12,934.63 12,746.40 31,190.25
<CAPTION>
VIP
EQUITY-
INCOME
----------
<S> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............ $ 9,888.64
1987............ 9,615.25
1988............ 11,611.24
1989............ 13,412.67
1990............ 11,176.22
1991............ 14,462.11
1992............ 16,645.30
1993............ 19,396.57
1994............ 20,460.15
1995............ 27,238.96
1996............ 30,677.47
1997............ 38,742.01
1998............ 42,634.76
1999............ 44,695.45
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SURRENDER VALUE(1)
-------------------------------------------------------------------------------------------------------
SALOMON
BACK BAY BACK BAY BROTHERS SALOMON
ADVISORS ADVISORS STRATEGIC BROTHERS BACK BAY ALGER DAVIS
MONEY BOND BOND U.S. MANAGED EQUITY CAPITAL VENTURE
MARKET INCOME OPPORTUNITIES GOVERNMENT SERIES(2) BALANCED(3) GROWTH GROWTH VALUE
---------- ---------- ------------- ---------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $ 9,648.46 $ 9,724.51 $ 9,847.62
1984............ 10,561.87 10,825.14 9,674.33
1985............ 11,306.52 12,715.30 16,131.91
1986............ 11,941.77 14,446.07 31,789.29
1987............ 12,581.04 14,614.97 $ 9,248.76 48,277.62
1988............ 13,379.19 15,669.85 10,009.63 43,331.97
1989............ 14,460.36 17,413.80 11,788.16 56,109.65
1990............ 15,477.01 18,624.85 12,029.85 53,360.04
1991............ 16,338.98 21,845.84 14,302.11 81,452.43
1992............ 16,855.30 23,499.47 15,096.06 75,516.79
1993............ 17,249.12 26,316.49 16,528.21 86,407.09
1994............ 17,664.12 25,061.19 $ 9,258.29 $ 9,445.85 16,170.28 $ 9,380.13 $ 9,122.84 79,198.42 $ 9,060.66
1995............ 18,391.19 29,938.07 10,928.71 10,742.43 21,107.08 11,575.99 13,422.49 107,828.80 12,483.38
1996............ 19,043.28 30,863.63 12,359.16 10,972.02 24,140.56 13,385.59 15,028.03 128,753.66 15,551.09
1997............ 19,760.95 33,735.25 13,579.35 11,768.76 30,387.16 15,386.85 18,767.63 156,825.48 20,706.40
1998............ 20,492.34 36,262.33 13,705.37 12,524.57 35,844.34 16,611.57 27,696.23 207,444.79 23,444.51
1999............ 21,191.50 35,578.76 13,751.89 12,407.20 38,860.28 15,603.28 36,877.20 236,767.25 27,278.49
<CAPTION>
HARRIS LOOMIS
OAKMARK SAYLES
MID CAP SMALL
VALUE(4) CAP
---------- ----------
<S> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............
1988............
1989............
1990............
1991............
1992............
1993............ $10,685.22
1994............ 10,534.58 $ 9,012.40
1995............ 13,584.96 11,482.43
1996............ 15,808.63 14,846.03
1997............ 18,354.37 18,407.59
1998............ 17,174.95 17,847.54
1999............ 17,056.32 23,343.83
</TABLE>
<TABLE>
<CAPTION>
SURRENDER VALUE(1)
--------------------------------------------------------------------------------------------------
LEHMAN
WESTPEAK BROTHERS MORGAN
GROWTH WESTPEAK PUTNAM AGGREGATE METLIFE STANLEY RUSSELL
AND STOCK INTERNATIONAL JANUS MID BOND STOCK EAFE 2000 VIP
INCOME INDEX(2) STOCK(5) CAP INDEX INDEX(6) INDEX INDEX OVERSEAS
---------- ---------- ------------- ---------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 8,171.98 $ 8,771.28
1988............ 9,397.25 9,372.22
1989............ 12,097.30 11,704.96
1990............ 11,464.32 $ 9,501.44 11,380.07
1991............ 14,796.43 12,234.75 12,154.15
1992............ 15,706.61 13,020.74 10,726.94
1993............ $10,638.82 17,052.72 14,082.31 14,575.67
1994............ 10,390.32 17,061.45 $ 9,633.91 14,061.90 14,669.53
1995............ 14,028.76 23,232.96 10,115.92 19,060.20 15,990.34
1996............ 16,392.61 28,296.17 10,667.11 23,128.97 17,993.85
1997............ 21,773.88 37,294.92 10,408.36 $11,876.91 30,312.86 19,953.79
1998............ 26,889.41 47,046.35 11,037.84 16,320.14 $9,391.12 38,629.45 $9,899.29 $9,929.83 22,167.18
1999............ 29,044.28 55,846.17 13,603.05 36,734.78 9,125.26 46,409.52 12,206.16 12,028.09 31,162.75
<CAPTION>
VIP
EQUITY-
INCOME
----------
<S> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............ $ 9,305.15
1987............ 9,091.03
1988............ 11,031.48
1989............ 12,804.10
1990............ 10,718.58
1991............ 13,936.47
1992............ 16,115.97
1993............ 18,867.86
1994............ 20,086.86
1995............ 26,988.81
1996............ 30,672.47
1997............ 38,737.01
1998............ 42,629.76
1999............ 44,690.45
</TABLE>
II-7
<PAGE>
ANNUAL PERCENTAGE CHANGE IN CONTRACT VALUE(1)
<TABLE>
<CAPTION>
SALOMON
BACK BAY BACK BAY BROTHERS SALOMON BACK BAY
ADVISORS ADVISORS STRATEGIC BROTHERS ADVISORS ALGER
MONEY BOND BOND U.S. MANAGED EQUITY
MARKET INCOME OPPORTUNITIES GOVERNMENT SERIES(2) BALANCED(3) GROWTH
-------- -------- ------------- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 2.59% 3.39%
1984................... 8.94 10.78
1985................... 6.54 16.89
1986................... 5.12 13.07
1987................... 4.85 0.69 -1.55%
1988................... 5.84 6.71 7.69
1989................... 7.57 10.61 17.18
1990................... 6.53 6.46 1.57
1991................... 4.60 16.21 18.30
1992................... 2.22 6.59 5.05
1993................... 1.41 10.97 8.97
1994................... 2.40 -4.77 -1.61% 0.38% -2.62 -0.32% -3.05%
1995................... 4.11 19.45 17.47 13.18 29.30 22.81 46.40
1996................... 3.54 3.09 12.55 1.65 13.32 15.08 11.43
1997................... 3.77 9.30 9.35 6.75 24.72 14.40 23.75
1998................... 3.70 7.49 0.45 5.92 17.95 7.45 45.62
1999................... 3.41 -1.88 -0.13 -1.40 8.41 -6.51 32.21
Cumulative Return....... 112.01 255.89 42.71 28.76 288.80 61.91 276.82
Annual Effective Rate of
Return................. 4.71 8.08 7.13 5.02 11.31 9.78 29.29
</TABLE>
<TABLE>
<CAPTION>
HARRIS LOOMIS
DAVIS OAKMARK SAYLES WESTPEAK WESTPEAK PUTNAM
CAPITAL VENTURE MID CAP SMALL GROWTH STOCK INTERNATIONAL
GROWTH VALUE VALUE(4) CAP AND INCOME INDEX(2) STOCK(5)
-------- ------- -------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... 4.70%
1984................... -2.23
1985................... 65.49
1986................... 92.42
1987................... 50.58 -12.99%
1988................... -10.08 14.41
1989................... 28.95 28.06
1990................... -4.83 -5.67
1991................... 51.86 28.41
1992................... -7.35 5.65
1993................... 13.39 13.70% 13.21% 8.06
1994................... -8.34 -3.71% -1.88 -4.09% -2.80 -0.41 2.38%
1995................... 36.15 37.10 28.29 26.75 34.31 34.88 4.50
1996................... 19.40 23.90 15.80 28.64 16.28 20.67 4.95
1997................... 21.80 31.52 15.54 22.94 31.47 30.59 -2.88
1998................... 32.28 12.73 -6.86 -3.15 22.64 26.13 5.55
1999................... 14.13 15.81 -1.15 29.77 7.78 18.70 22.65
Cumulative Return....... 2,267.77 180.83 76.32 141.61 198.64 458.66 41.16
Annual Effective Rate of
Return................. 21.38 22.13 8.88 16.85 17.83 14.55 6.90
</TABLE>
<TABLE>
<CAPTION>
LEHMAN
LEHMAN INTERMEDIATE
BROTHERS MORGAN GOVERNMENT/
JANUS AGGREGATE MET LIFE STANLEY RUSSELL VIP DOW JONES S&P 500 CORPORATE CONSUMER
MID BOND STOCK EAFE 2000 VIP EQUITY- INDUSTRIAL STOCK BOND PRICE
CAP INDEX INDEX(6) INDEX INDEX OVERSEAS INCOME AVERAGE(7) INDEX(8) INDEX(9) INDEX(10)
------ --------- -------- ------- ------- -------- ------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ 5.11% 1.79% 4.51% 1.07%
1984............ 1.35 6.27 14.37 3.95
1985............ 33.62 31.73 18.06 3.77
1986............ -1.11% 27.25 18.66 13.13 1.13
1987............ -6.55% -2.76 5.55 5.25 3.66 4.41
1988............ 6.32 20.76 16.21 16.61 6.67 4.42
1989............ 24.23 15.51 32.24 31.69 12.77 4.65
1990............ 1.10 -3.23 -16.67 -0.54 -3.10 9.16 6.11
1991............ 28.10 6.28 29.40 24.25 30.47 14.62 3.06
1992............ 5.91 -12.13 15.10 7.40 7.62 7.17 2.90
1993............ 7.63 35.16 16.53 16.97 10.08 8.79 2.75
1994............ -0.61 0.18 5.48 5.02 1.32 -1.93 2.67
1995............ 34.87 7.99 33.13 36.94 37.58 15.33 2.54
1996............ 20.76 11.49 12.62 28.91 22.96 4.05 3.32
1997............ 26.39 30.26 9.88 26.29 24.91 33.36 7.87 1.83
1998............ 35.64 0.07 26.42 5.46 5.79 11.08 10.05 18.14 28.52 8.44 1.61
1999............ 119.09 -3.28 19.04 22.65 20.49 40.53 4.83 27.21 21.04 -2.15 2.68
Cumulative
Return.......... 275.57 -3.22 368.49 29.35 27.46 211.90 346.95 1,791.58 1,653.04 357.92 72.44
Annual Effective
Rate of Return.. 59.61 -2.98 17.32 26.84 25.14 9.21 12.05 18.88 18.35 9.36 3.26
</TABLE>
II-8
<PAGE>
ANNUAL PERCENTAGE CHANGE IN SURRENDER VALUE(1)
<TABLE>
<CAPTION>
SALOMON
BACK BAY BACK BAY BROTHERS SALOMON BACK BAY
ADVISORS ADVISORS STRATEGIC BROTHERS ADVISORS ALGER
MONEY BOND BOND U.S. MANAGED EQUITY
MARKET INCOME OPPORTUNITIES GOVERNMENT SERIES(2) BALANCED(3) GROWTH
-------- -------- ------------- ---------- --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... -3.52% -2.75%
1984................... 9.47 11.32
1985................... 7.05 17.46
1986................... 5.62 13.61
1987................... 5.35 1.17 -7.51
1988................... 6.34 7.22 8.23
1989................... 8.08 11.13 17.77
1990................... 7.03 6.95 2.05
1991................... 5.57 17.29 18.89
1992................... 3.16 7.57 5.55
1993................... 2.34 11.99 9.49
1994................... 2.41 -4.77 -7.42% -5.54% -2.17 -6.20% -8.77%
1995................... 4.12 19.46 18.04 13.73 30.53 23.41 47.13
1996................... 3.55 3.09 13.09 2.14 14.37 15.63 11.96
1997................... 3.77 9.30 9.87 7.26 25.88 14.95 24.88
1998................... 3.70 7.49 0.93 6.42 17.96 7.96 47.57
1999................... 3.41 -1.89 0.34 -0.94 8.41 -6.07 33.15
Cumulative Return....... 111.92 255.79 37.52 24.07 288.60 56.03 268.77
Annual Effective Rate of
Return................. 4.71 8.08 6.36 4.26 11.31 9.00 28.75
</TABLE>
<TABLE>
<CAPTION>
HARRIS LOOMIS
DAVIS OAKMARK SAYLES WESTPEAK WESTPEAK PUTNAM
CAPITAL VENTURE MID CAP SMALL GROWTH STOCK INTERNATIONAL
GROWTH VALUE VALUE(4) CAP AND INCOME INDEX(2) STOCK(5)
-------- ------- -------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983................... -1.52%
1984................... -1.76
1985................... 66.75
1986................... 97.06
1987................... 51.87 -18.28
1988................... -10.24 14.99
1989................... 29.49 28.73
1990................... -4.90 -5.23
1991................... 52.65 29.07
1992................... -7.29 6.15
1993................... 14.42 6.85% 6.39% 8.57
1994................... -8.34 -9.39% -1.41 -9.88% -2.34 0.05 -3.66%
1995................... 36.15 37.78 28.96 27.41 35.02 36.17 5.00
1996................... 19.41 24.57 16.37 29.29 16.85 21.79 5.45
1997................... 21.80 33.15 16.10 23.99 32.83 31.80 -2.43
1998................... 32.28 13.22 -6.43 -3.04 23.49 26.15 6.05
1999................... 14.14 16.35 -0.69 30.80 8.01 18.70 23.24
Cumulative Return....... 2,267.67 172.78 70.56 133.44 190.44 458.46 36.03
Annual Effective Rate of
Return................. 21.38 21.45 8.34 16.14 17.34 14.54 6.14
</TABLE>
<TABLE>
<CAPTION>
LEHMAN
LEHMAN INTERMEDIATE
BROTHERS MORGAN GOVERNMENT/
AGGREGATE MET LIFE STANLEY RUSSELL VIP DOW JONES S&P 500 CORPORATE CONSUMER
JANUS BOND STOCK EAFE 2000 VIP EQUITY- INDUSTRIAL STOCK BOND PRICE
MID CAP INDEX INDEX(6) INDEX INDEX OVERSEAS INCOME AVERAGE(7) INDEX(8) INDEX(9) INDEX(10)
------- --------- -------- ------- ------- -------- ------- ---------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December
31:
1983............ 5.11% 1.79% 4.51% 1.07%
1984............ 1.35 6.27 14.37 3.95
1985............ 33.62 31.73 18.06 3.77
1986............ -6.95% 27.25 18.66 13.13 1.13
1987............ -12.29% -2.30 5.55 5.25 3.66 4.41
1988............ 6.85 21.34 16.21 16.61 6.67 4.42
1989............ 24.89 16.07 32.24 31.69 12.77 4.65
1990............ -4.99 -2.78 -16.29 -0.54 -3.10 9.16 6.11
1991............ 28.77 6.80 30.02 24.25 30.47 14.62 3.06
1992............ 6.42 -11.74 15.64 7.40 7.62 7.17 2.90
1993............ 8.15 35.88 17.08 16.97 10.08 8.79 2.75
1994............ -0.14 0.64 6.46 5.02 1.32 -1.93 2.67
1995............ 35.54 9.00 34.36 36.94 37.58 15.35 2.54
1996............ 21.35 12.53 13.65 28.91 22.96 4.05 3.32
1997............ 18.77 31.06 10.89 26.29 24.91 33.36 7.87 1.83
1998............ 37.41 -6.09 27.44 -1.01 -0.70 11.09 10.05 18.14 28.52 8.44 1.61
1999............ 125.09 -2.83 20.14 23.30 21.13 40.58 4.83 27.21 21.04 -2.15 2.68
Cumulative
Return.......... 267.35 -8.75 364.10 22.06 20.28 211.63 346.90 1,791.58 1,653.04 357.92 72.44
Annual Effective
Rate of Return.. 58.37 -8.11 17.21 20.23 18.61 9.20 12.04 18.88 18.35 9.36 3.26
</TABLE>
II-9
<PAGE>
--------
NOTES:
(1) The Contract Value, surrender value and annual percentage change figures
assume reinvestment of dividends and capital gain distributions. The
Contract Value figures are net of all deductions and expenses except
premium tax. Each surrender value shown equals the Contract Value less
any applicable Contingent Deferred Sales Charge and a pro rata portion of
the annual $30 Administration Contract Charge. (See "Administration
Charges, Contingent Deferred Sales and Other Deductions.") 1983 figures
for the Capital Growth, Back Bay Advisors Bond Income and Back Bay
Advisors Money Market Series are from September 1 through December 31,
1983. The 1986 figure for the VIP Equity-Income Portfolio is from
November 1, 1986 through December 31, 1986; the 1987 figure for the VIP
Overseas Portfolio is from February 1, 1987 through December 31, 1987.
The 1987 figures for the Westpeak Stock Index and Back Bay Advisors
Managed Series are from May 1, 1987 through December 31, 1987. The 1993
figures for the Harris Oakmark Mid Cap Value and Westpeak Growth and
Income Series are from May 1, 1993 through December 31, 1993. The 1994
figure for the Loomis Sayles Small Cap Series is from May 2, 1994 through
December 31, 1994. The 1994 figures for the other Zenith Fund Series are
from November 1, 1994 through December 31, 1994. The 1994 figure for the
Putnam International Portfolio is from November 1, 1994 through December
31, 1994 (see footnote 4 for more information). The 1997 figure for the
Janus MidCap Portfolio is from March 3, 1997 through December 31, 1997.
The 1998 figures for the Lehman Brothers Aggregate Bond Index, Morgan
Stanley EAFE Index and Russell 2000 Index Portfolios are from December 1,
1998 through December 31, 1998. The 1990 figure for the MetLife Stock
Index Portfolio is from May 1, 1990 through December 31, 1990.
(2) The Westpeak Stock Index and Back Bay Advisors Managed Series are only
available through Contracts purchased prior to May 1, 1995.
(3) Wellington Management Company LLP became the subadviser of the Balanced
Series on May 1, 2000. Prior to that time, Loomis Sayles & Company, L.P.
served as the sub-adviser.
(4) Harris Associates L.P. became the subadviser on May 1, 2000. Prior to
that time, other entities served as subadviser.
(5) On December 1, 2000, the Putnam International Stock Portfolio was
substituted for the Morgan Stanley International Magnum Equity Series,
which is no longer available for investment under the Contract.
Performance figures on or before December 1, 2000 reflect the performance
of the Morgan Stanley International Magnum Equity Series. Putnam
Investment Management, Inc. became the sub-investment manager of the
Putnam International Stock Portfolio on January 24, 2000. Prior to that
time, Santander Global Advisors, Inc. served as sub-investment manager.
(6) The MetLife Stock Index Portfolio is only available through Contracts
purchased after May 1, 1995.
(7) The Dow Jones Industrial Average is an unmanaged index of 30 large
industrial stocks traded on the New York Stock Exchange. The annual
percentage change figures have been adjusted to reflect reinvestment of
dividends. 1983 figures are from September 1 through December 31, 1983.
(8) The S&P 500 Stock Index is an unmanaged weighted index of the stock
performance of 500 industrial, transportation, utility and financial
companies. The annual percentage change figures have been adjusted to
reflect reinvestment of dividends. 1983 figures are from September 1
through December 31, 1983.
(9) The Lehman Intermediate Government/Corporate Bond Index is a subset of
the Lehman Government/ Corporate Bond Index covering all issues with
maturities between 1 and 10 years which is comprised of taxable, publicly
issued, non-convertible debt obligations issued or guaranteed by the U.S.
Government or its agencies and another Lehman Index that is comprised of
taxable, fixed rate publicly issued, investment grade non-convertible
corporate debt obligations. 1983 figures are from September 1 through
December 31, 1983.
(10) The Consumer Price Index, published by the U.S. Bureau of Labor
Statistics, is a statistical measure of changes, over time, in the
prices of goods and services. 1983 figures are from September 1 through
December 31, 1983.
II-10
<PAGE>
The chart below illustrates what would have been the change in value of a
$100 monthly investment in each of the Eligible Funds if monthly purchase
payments for a Contract had been made on the first day of each month starting
with September 1, 1983 for the Capital Growth, Back Bay Advisors Bond Income
and Back Bay Advisors Money Market Series; November 1, 1986 for the VIP
Equity-Income Portfolio; February 1, 1987 for the VIP Overseas Portfolio; May
1, 1987 for the Westpeak Stock Index Series and Back Bay Advisors Managed
Series; May 1, 1993 for the Harris Oakmark Mid Cap Value and Westpeak Growth
and Income Series; May 2, 1994 for the Loomis Sayles Small Cap Series,
November 1, 1994 for the other six Zenith Fund Series; November 1, 1994 for
the Putnam International Stock Portfolio; March 3, 1997 for the Janus Mid Cap
Portfolio, December 1, 1998 for the Lehman Brothers Aggregate Bond Index,
Morgan Stanley EAFE Index and Russell 2000 Index Portfolios and May 1, 1990
for the MetLife Stock Index Portfolio. The figures shown do not reflect the
deduction of any premium tax charge, and only surrender values, not Contract
Values, reflect the deduction of any applicable Contingent Deferred Sales
Charge. Each purchase payment is divided by the Accumulation Unit Value of
each sub-account on the date of the investment to calculate the number of
Accumulation Units purchased. The total number of units under the Contract is
reduced on each Contract anniversary as a result of the $30 Administration
Contract Charge, as described in the illustrations of average annual total
return. The Contract Value and the surrender value are calculated according to
the methods described in the preceding examples. The annual effective rate of
return in this illustration represents the compounded annual rate that the
hypothetical purchase payments shown would have had to earn in order to
produce the Contract Value and surrender value illustrated on December 31,
1999. In other words, the annual effective rate of return is the rate which,
when added to 1 and raised to a power equal to the number of months for which
the payment is invested divided by twelve, and multiplied by the payment
amount, for all monthly payments, would yield the contract value or surrender
value on the ending date of the illustration.
INVESTMENT RESULTS
<TABLE>
<CAPTION>
CONTRACT VALUE
-----------------------------------------------------------------------------------------------------------
BACK BAY BACK BAY SALOMON
ADVISORS ADVISORS BROTHERS SALOMON ALGER
CUMULATIVE MONEY BOND CAPITAL CUMULATIVE STRATEGIC BOND BROTHERS U.S. EQUITY
PAYMENTS MARKET INCOME GROWTH PAYMENTS OPPORTUNITIES GOVERNMENT BALANCED(1) GROWTH
---------- ---------- ---------- ---------- ---------- -------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $ 400 $ 406.44 $ 405.13 $ 409.40
1984............ 1,600 1,673.57 1,720.27 1,648.95
1985............ 2,800 2,999.59 3,304.19 4,277.11
1986............ 4,000 4,362.45 4,982.85 9,765.58
1987............ 5,200 5,788.99 6,208.12 15,890.14
1988............ 6,400 7,350.98 7,835.43 15,451.37
1989............ 7,600 9,142.45 9,915.71 21,215.12
1990............ 8,800 10,970.63 11,807.13 21,316.48
1991............ 10,000 12,694.15 15,037.48 33,833.21
1992............ 11,200 14,182.75 17,272.18 32,549.81
1993............ 12,400 15,588.48 20,405.31 38,177.72
1994............ 13,600 17,179.87 20,609.31 36,110.66 $ 200 $ 196.89 $ 200.97 $ 200.89 $ 199.08
1995............ 14,800 19,112.88 25,924.91 50,536.57 1,400 1,507.66 1,476.06 1,543.68 1,671.74
1996............ 16,000 21,015.28 27,970.49 61,680.44 2,600 2,953.92 2,704.81 3,072.43 3,119.42
1997............ 17,200 23,035.65 31,839.31 76,386.05 3,800 4,468.88 4,116.70 4,784.73 5,139.40
1998............ 18,400 25,117.66 35,471.79 102,421.14 5,000 5,665.15 5,577.70 6,376.35 8,979.85
1999............ 19,600 27,204.91 36,000.18 118,236.35 6,200 6,851.58 6,681.23 7,090.73 13,293.36
Annual Effective
Rate of Return... 3.87 7.02 19.54 3.82% 2.85% 5.14% 29.94%
<CAPTION>
DAVIS BACK BAY WESTPEAK
VENTURE CUMULATIVE ADVISORS STOCK
VALUE PAYMENTS MANAGED(2) INDEX(2)
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 800 $ 770.01 $ 692.54
1988............ 2,000 2,043.71 2,035.10
1989............ 3,200 3,667.24 3,919.94
1990............ 4,400 4,943.00 4,866.74
1991............ 5,600 7,152.27 7,578.85
1992............ 6,800 8,757.01 9,255.04
1993............ 8,000 10,767.63 11,234.80
1994............ $ 197.97 9,200 11,675.61 12,385.13
1995............ 1,632.30 10,400 16,460.59 18,094.48
1996............ 3,373.37 11,600 19,948.81 23,166.00
1997............ 5,782.92 12,800 26,213.90 31,612.17
1998............ 7,808.14 14,000 32,236.96 41,250.07
1999............ 10,329.36 15,200 36,210.56 50,300.40
Annual Effective
Rate of Return... 19.81% 12.87% 17.51%
</TABLE>
II-11
<PAGE>
INVESTMENT RESULTS
<TABLE>
<CAPTION>
CONTRACT VALUE
---------------------------------------------------------------------------------------------------------------
WESTPEAK PUTNAM
CUMULATIVE HARRIS OAKMARK GROWTH & CUMULATIVE LOOMIS SAYLES INTERNATIONAL CUMULATIVE JANUS CUMULATIVE
PAYMENTS MID CAP VALUE(3) INCOME PAYMENTS SMALL CAP STOCK(4) PAYMENTS MID CAP PAYMENTS
---------- ---------------- ---------- ---------- ------------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............
1988............
1989............
1990............
1991............
1992............
1993............ $ 800 $ 848.90 $ 848.38
1994............ 2,000 2,021.49 2,002.46 $ 800 $ 782.65 $ 204.56
1995............ 3,200 3,907.29 4,059.83 2,000 2,337.57 1,436.32
1996............ 4,400 5,786.10 6,026.98 3,200 4,363.73 2,706.36
1997............ 5,600 7,957.27 9,279.81 4,400 6,686.43 3,767.74 $2,500 $1,142.23
1998............ 6,800 8,532.56 12,712.04 5,600 7,671.86 5,140.59 5,500 3,044.25 $ 250
1999............ 8,000 9,587.90 14,933.13 6,800 11,512.35 7,695.58 8,500 8,728.45 3,250
Annual Effective
Rate of Return... 5.35% 18.45% 18.51% 8.29% 77.33%
</TABLE>
<TABLE>
<CAPTION>
CONTRACT VALUE
-------------------------------------------------------------------------------------------------------
LEHMAN BROTHERS
AGGREGATE CUMULATIVE METLIFE CUMULATIVE MORGAN STANLEY RUSSELL 2000 CUMULATIVE VIP
BOND INDEX PAYMENTS STOCK INDEX(5) PAYMENTS EAFE INDEX INDEX PAYMENTS OVERSEAS
--------------- ---------- -------------- ---------- -------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 1,100 $ 1,007.13
1988............ 2,300 2,306.86
1989............ 3,500 4,229.80
1990............ $ 2,000 $ 800.28 4,700 5,222.71
1991............ 5,000 2,343.33 5,900 6,778.08
1992............ 8,000 3,722.50 7,100 7,031.68
1993............ 11,000 5,227.94 8,300 10,872.84
1994............ 14,000 6,379.38 9,500 12,048.05
1995............ 17,000 9,982.60 10,700 14,272.33
1996............ 20,000 13,378.58 11,900 17,185.14
1997............ 23,000 18,771.91 13,100 20,101.70
1998............ $ 100.07 26,000 25,102.91 $ 250 $ 105.46 $ 105.79 14,300 23,575.58
1999............ 1,255.00 29,000 31,214.38 3,250 1,518.99 1,517.53 15,500 34,699.35
Annual Effective
Rate of Return... - 5.89% 19.51% 29.86% 29.65% 11.74%
<CAPTION>
VIP
CUMULATIVE EQUITY-
PAYMENTS INCOME
---------- -----------
<S> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............ $ 200 $ 195.78
1987............ 1,400 1,215.08
1988............ 2,600 2,714.98
1989............ 3,800 4,346.48
1990............ 5,000 4,721.63
1991............ 6,200 7,427.49
1992............ 7,400 9,840.29
1993............ 8,600 12,731.03
1994............ 9,800 14,650.43
1995............ 11,000 20,892.48
1996............ 12,200 24,811.34
1997............ 13,400 32,682.67
1998............ 14,600 37,233.40
1999............ 15,800 40,235.68
Annual Effective
Rate of Return... 13.26%
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE
PAYMENTS
----------
<S> <C>
As of December 31:
1983............ $ 400
1984............ 1,600
1985............ 2,800
1986............ 4,000
1987............ 5,200
1988............ 6,400
1989............ 7,600
1990............ 8,800
1991............ 10,000
1992............ 11,200
1993............ 12,400
1994............ 13,600
1995............ 14,800
1996............ 16,000
1997............ 17,200
1998............ 18,400
1999............ 19,600
Annual Effective
Rate of Return...
<CAPTION>
SURRENDER VALUE
--------------------------------------------------------------------------------------------------------
BACK BAY BACK BAY SALOMON SALOMON
ADVISORS ADVISORS BROTHERS BROTHERS ALGER DAVIS
MONEY BOND CAPITAL CUMULATIVE STRATEGIC BOND U.S. EQUITY VENTURE
MARKET INCOME GROWTH PAYMENTS OPPORTUNITIES GOVERNMENT BALANCED(1) GROWTH VALUE
---------- ---------- ---------- ---------- -------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............ $ 372.66 $ 371.43 $ 375.45
1984............ 1,573.20 1,617.37 1,549.91
1985............ 2,841.11 3,130.63 4,055.39
1986............ 4,156.14 4,748.62 9,435.58
1987............ 5,544.54 5,946.69 15,464.14
1988............ 7,076.34 7,543.35 14,929.37
1989............ 8,844.46 9,593.36 20,597.12
1990............ 10,664.43 11,478.34 20,730.94
1991............ 12,455.65 14,756.80 33,214.21
1992............ 14,045.10 17,106.73 32,246.86
1993............ 15,578.48 20,395.31 38,167.72
1994............ 17,169.67 20,599.31 36,100.66 $ 200 $ 180.37 $ 184.22 $ 184.14 $ 182.44 $ 181.39
1995............ 19,102.88 25,914.91 50,526.57 1,400 1,421.25 1,391.35 1,455.32 1,576.47 1,539.15
1996............ 21,005.28 27,960.49 61,670.44 2,600 2,802.70 2,565.93 2,915.35 2,950.51 3,201.39
1997............ 23,025.65 31,829.31 26,193.90 3,800 4,262.78 3,926.45 4,564.41 4,903.13 5,517.69
1998............ 25,107.66 35,461.79 102,411.14 5,000 5,430.72 5,346.90 6,113.11 8,611.17 7,486.91
1999............ 27,194.91 35,990.18 118,226.35 6,200 6,599.92 6,435.71 6,830.46 12,809.80 9,952.50
Annual Effective
Rate of Return... 3.87 7.02 19.54 2.39% 1.42% 3.70% 28.44% 18.34%
</TABLE>
<TABLE>
<CAPTION>
SURRENDER VALUE
-------------------------------------------------------------------
HARRIS WESTPEAK
BACK BAY WESTPEAK OAKMARK GROWTH
CUMULATIVE ADVISORS STOCK CUMULATIVE MID CAP AND
PAYMENTS MANAGED(2) INDEX(2) PAYMENTS VALUE(3) INCOME
---------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 800 $ 704.96 $ 632.03
1988............ 2,000 1,913.35 1,905.21
1989............ 3,200 3,465.71 3,705.90
1990............ 4,400 4,700.56 4,627.74
1991............ 5,600 6,842.60 7,251.91
1992............ 6,800 8,421.76 8,901.86
1993............ 8,000 10,408.45 10,860.90 $ 800 $ 779.24 $ 778.75
1994............ 9,200 11,340.37 12,030.73 2,000 1,892.33 1,874.32
1995............ 10,400 16,144.30 17,748.78 3,200 3,693.88 3,838.86
1996............ 11,600 19,749.27 22,937.51 4,400 5,505.72 5,735.76
1997............ 12,800 26,193.90 31,592.17 5,600 7,615.01 8,883.98
1998............ 14,000 32,216.96 41,230.07 6,800 8,205.39 12,234.41
1999............ 15,200 36,190.56 50,280.40 8,000 9,265.88 14,442.73
Annual Effective
Rate of Return... 12.88% 17.50% 4.35% 17.46%
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE
PAYMENTS
----------
<S> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............
1988............
1989............
1990............
1991............
1992............
1993............
1994............ $ 800
1995............ 2,000
1996............ 3,200
1997............ 4,400
1998............ 5,600
1999............ 6,800
Annual Effective
Rate of Return...
<CAPTION>
SURRENDER VALUE
---------------------------------------------------------------------------------------------------------------
LEHMAN
LOOMIS BROTHERS MORGAN
SAYLES PUTNAM AGGREGATE METLIFE STANLEY
SMALL INTERNATIONAL CUMULATIVE JANUS MID CUMULATIVE BOND CUMULATIVE STOCK CUMULATIVE EAFE
CAP STOCK (4) PAYMENTS CAP PAYMENTS INDEX PAYMENTS INDEX(5) PAYMENTS INDEX
---------- ------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............
1988............
1989............
1990............ $ 2,000 $ 735.96
1991............ 5,000 2,199.29
1992............ 8,000 3,520.73
1993............ 11,000 4,975.18
1994............ $ 719.36 $ 187.60 14,000 6,103.51
1995............ 2,193.84 1,353.76 17,000 9,605.73
1996............ 4,130.23 2,567.39 20,000 12,939.66
1997............ 6,363.04 3,593.19 $2,500 $1,052.91 23,000 18,247.57
1998............ 7,341.15 4,927.40 5,500 2,857.36 $ 250 $ 64.21 26,000 24,633.56 $ 250 $ 69.29
1999............ 11,077.90 7,413.54 8,500 8,433.95 3,250 1,157.23 29,000 30,915.95 3,250 1,406.96
Annual Effective
Rate of Return... 17.14% 6.85% 74.02% -18.35% 19.33% 14.33
RUSSELL VIP
2000 CUMULATIVE VIP CUMULATIVE EQUITY-
INDEX PAYMENTS OVERSEAS PAYMENTS INCOME
---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
As of December 31:
1983............
1984............
1985............
1986............
1987............ $ 200 $ 179.32
1988............ $ 1,100 $ 920.71 1,400 1,144.47
1989............ 2,300 2,154.79 2,600 2,575.59
1990............ 3,500 3,992.93 3,800 4,145.89
1991............ 4,700 4,960.18 5,000 4,525.41
1992............ 5,900 6,476.07 6,200 7,155.10
1993............ 7,100 6,751.04 7,400 9,525.32
1994............ 8,300 10,502.85 8,600 12,382.29
1995............ 9,500 11,695.26 9,800 14,381.73
1996............ 10,700 13,987.92 11,000 20,699.45
1997............ 11,900 17,002.98 12,200 24,806.34
1998............ 13,100 20,074.20 13,400 32,677.67
1999............ $ 69.60 14,300 23,548.08 14,600 37,228.90
Annual Effective 1,405.58 15,500 34,671.85 15,800 40,230.68
Rate of Return...
</TABLE>
----
NOTES
(1) Wellington Management Company LLP became the subadviser of the Balanced
Series on May 1, 2000. Prior to that time, Loomis Sayles & Company, L.P.
served as subadviser.
(2) The Westpeak Stock Index Series and the Back Bay Advisors Managed Series
are only available through Contracts purchased prior to May 1, 1995.
(3) Harris Associates L.P. became the subadviser on May 1, 2000. Prior to that
time, other entities served as subadviser.
(4) On December 1, 2000, the Putnam International Stock Portfolio was
substituted for the Morgan Stanley International Magnum Equity Series,
which is no longer available for investment under the Contract.
Performance figures on or before December 1, 2000 reflect the performance
of the Morgan Stanley International Magnum Equity Series. Putnam
Investment Management, Inc. became the sub-investment manager of the
Putnam International Stock Portfolio on January 24, 2000. Prior to that
time, Santander Global Advisors, Inc. served as sub-investment manager.
(5)The MetLife Stock Index Portfolio is only available through Contracts
purchased after May 1, 1995.
II-13
<PAGE>
As discussed in the prospectus in the section entitled "Investment
Performance Information," the Variable Account may illustrate historical
investment performance by showing the percentage change in unit value and the
annual effective rate of return of each sub-account of the Variable Account
for every calendar year since inception of the corresponding Eligible Funds to
the date of the illustration and for the 10, 5 and 1 year periods and the
year-to-date period ending with the date of the illustration. Examples of such
illustrations follow. Such illustrations do not reflect the impact of any
Contingent Deferred Sales Charge, premium tax charge, or the annual $30
Administration Contract Charge. The method of calculating the percentage
change in unit value is described in the prospectus under "Investment
Experience Information." The annual effective rate of return in these
illustrations is calculated by dividing the unit value at the end of the
period by the unit value at the beginning of the period, raising this quantity
to the power of 1/n (where n is the number of years in the period), and then
subtracting 1.
Set forth on the following pages are illustrations of the percentage change
in unit value information and annual effective rate of return information
discussed above that may appear in the Variable Account's Annual and Semi-
Annual Reports and in other illustrations of historical investment
performance. Such illustrations do not reflect the impact of any Contingent
Deferred Sales Charge or the annual $30 Administration Contract Charge.
BACK BAY ADVISORS MONEY MARKET SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
August 26, 1983............................................. 1.000000
December 31, 1983........................................... 1.027165 2.7%
December 31, 1984........................................... 1.122053 9.2%
December 31, 1985........................................... 1.198477 6.8%
December 31, 1986........................................... 1.262853 5.4%
December 31, 1987........................................... 1.327245 5.1%
December 31, 1988........................................... 1.407892 6.1%
December 31, 1989........................................... 1.517621 7.8%
December 31, 1990........................................... 1.619846 6.7%
December 31, 1991........................................... 1.697425 4.8%
December 31, 1992........................................... 1.738206 2.4%
December 31, 1993........................................... 1.765866 1.6%
December 31, 1994........................................... 1.811432 2.6%
December 31, 1995........................................... 1.889065 4.3%
December 31, 1996........................................... 1.959126 3.7%
December 31, 1997........................................... 2.036045 3.9%
December 31, 1998........................................... 2.114493 3.9%
December 31, 1999........................................... 2.189734 3.6%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
16 years, 4 months ended December 31, 1999................... 119.0% 4.9%
10 years ended December 31, 1999............................. 44.3% 3.7%
5 years ended December 31, 1999.............................. 20.9% 3.9%
1 year ended December 31, 1999............................... 3.6% 3.6%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract Charge.
II-14
<PAGE>
BACK BAY ADVISORS BOND INCOME SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
August 26, 1983............................................. 1.000000
December 31, 1983........................................... 1.027196 2.7%
December 31, 1984........................................... 1.141109 11.1%
December 31, 1985........................................... 1.337005 17.2%
December 31, 1986........................................... 1.514752 13.3%
December 31, 1987........................................... 1.528314 0.9%
December 31, 1988........................................... 1.633970 6.9%
December 31, 1989........................................... 1.810362 10.8%
December 31, 1990........................................... 1.930406 6.6%
December 31, 1991........................................... 2.246568 16.4%
December 31, 1992........................................... 2.397657 6.7%
December 31, 1993........................................... 2.663825 11.1%
December 31, 1994........................................... 2.539801 -4.7%
December 31, 1995........................................... 3.037039 19.6%
December 31, 1996........................................... 3.134109 3.2%
December 31, 1997........................................... 3.428788 9.4%
December 31, 1998........................................... 3.688741 7.6%
December 31, 1999........................................... 3.622325 -1.8%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
16 years, 4 months ended December 31, 1999................... 262.2% 8.2%
10 years ended December 31, 1999............................. 100.1% 7.2%
5 years ended December 31, 1999.............................. 42.6% 7.4%
1 year ended December 31, 1999............................... -1.8% -1.8%
</TABLE>
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.983850 -1.6%
December 31, 1995.......................................... 1.158823 17.8%
December 31, 1996.......................................... 1.307292 12.8%
December 31, 1997.......................................... 1.432601 9.6%
December 31, 1998.......................................... 1.442191 0.7%
December 31, 1999.......................................... 1.443394 0.1%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract Charge.
II-15
<PAGE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 44.3% 7.4%
5 years ended December 31, 1999.............................. 46.7% 8.0%
1 year ended December 31, 1999............................... 0.1% 0.1%
</TABLE>
SALOMON BROTHERS U.S. GOVERNMENT SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994............................................ 1.000000
December 31, 1994........................................... 1.003770 0.4%
December 31, 1995........................................... 1.139109 13.5%
December 31, 1996........................................... 1.160957 1.9%
December 31, 1997........................................... 1.242399 7.0%
December 31, 1998........................................... 1.318989 6.2%
December 31, 1999........................................... 1.303556 -1.2%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 30.4% 5.3%
5 years ended December 31, 1999.............................. 29.9% 5.4%
1 year ended December 31, 1999............................... -1.2% -1.2%
</TABLE>
BACK BAY ADVISORS MANAGED SUB-ACCOUNT**
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
May 1, 1987................................................ 1.000000
December 31, 1987.......................................... .984530 -1.5%
December 31, 1988.......................................... 1.063444 8.0%
December 31, 1989.......................................... 1.249451 17.5%
December 31, 1990.......................................... 1.272224 1.8%
December 31, 1991.......................................... 1.508379 18.6%
December 31, 1992.......................................... 1.587827 5.3%
December 31, 1993.......................................... 1.733382 9.2%
December 31, 1994.......................................... 1.691157 -2.4%
December 31, 1995.......................................... 2.190193 29.5%
December 31, 1996.......................................... 2.485306 13.5%
December 31, 1997.......................................... 3.103331 24.9%
December 31, 1998.......................................... 3.663526 18.1%
December 31, 1999.......................................... 3.974735 8.5%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract Charge.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
II-16
<PAGE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
12 years, 8 months ended December 31, 1999................... 297.5% 11.5%
10 years ended December 31, 1999............................. 218.1% 12.3%
5 years ended December 31, 1999.............................. 135.0% 18.6%
1 year ended December 31, 1999............................... 8.5% 8.5%
</TABLE>
BALANCED SUB-ACCOUNT***
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.996791 -0.3%
December 31, 1995.......................................... 1.227281 23.1%
December 31, 1996.......................................... 1.415482 15.3%
December 31, 1997.......................................... 1.622453 14.6%
December 31, 1998.......................................... 1.746518 7.6%
December 31, 1999.......................................... 1.635868 -6.3%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 63.6% 10.0%
5 years ended December 31, 1999.............................. 64.1% 10.4%
1 year ended December 31, 1999............................... -6.3% -6.3%
</TABLE>
ALGER EQUITY GROWTH SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.955891 -4.4%
December 31, 1995.......................................... 1.402375 46.7%
December 31, 1996.......................................... 1.565675 11.6%
December 31, 1997.......................................... 1.940577 23.9%
December 31, 1998.......................................... 2.829403 45.8%
December 31, 1999.......................................... 3.744249 32.3%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract
Charge.
*** Wellington Management Company, LLP became the subadviser of the Balanced
Series on May 1, 2000. Prior to that time, Loomis Sayles & Company, L.P.
served as subadviser.
II-17
<PAGE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 274.4% 29.1%
5 years ended December 31, 1999.............................. 291.7% 31.4%
1 year ended December 31, 1999............................... 32.3% 32.3%
</TABLE>
CAPITAL GROWTH SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
August 26, 1983............................................ 1.000000
December 31, 1983.......................................... 1.086144 8.6%
December 31, 1984.......................................... 1.065136 -1.9%
December 31, 1985.......................................... 1.766488 65.8%
December 31, 1986.......................................... 3.402150 92.6%
December 31, 1987.......................................... 5.125504 50.7%
December 31, 1988.......................................... 4.612285 -10.0%
December 31, 1989.......................................... 5.950283 29.0%
December 31, 1990.......................................... 5.665855 -4.8%
December 31, 1991.......................................... 8.607664 51.9%
December 31, 1992.......................................... 7.978068 -7.3%
December 31, 1993.......................................... 9.049554 13.4%
December 31, 1994.......................................... 8.297578 -8.3%
December 31, 1995.......................................... 11.300017 36.2%
December 31, 1996.......................................... 13.496435 19.4%
December 31, 1997.......................................... 16.441932 21.8%
December 31, 1998.......................................... 21.752481 32.3%
December 31, 1999.......................................... 24.830578 14.2%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
16 years, 4 months ended December 31, 1999................... 2,383.1% 21.7%
10 years ended December 31, 1999............................. 317.3% 15.4%
5 years ended December 31, 1999.............................. 199.3% 24.5%
1 year ended December 31, 1999............................... 14.2% 14.2%
</TABLE>
DAVIS VENTURE VALUE SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 0.962860 -3.7%
December 31, 1995.......................................... 1.323183 37.4%
December 31, 1996.......................................... 1.642613 24.1%
December 31, 1997.......................................... 2.163463 31.7%
December 31, 1998.......................................... 2.442138 12.9%
December 31, 1999.......................................... 2.831476 15.9%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract Charge.
II-18
<PAGE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 183.1% 22.3%
5 years ended December 31, 1999.............................. 194.1% 24.1%
1 year ended December 31, 1999............................... 15.9% 15.9%
</TABLE>
HARRIS OAKMARK MID CAP VALUE SUB-ACCOUNT**
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
April 30, 1993............................................. 1.000000
December 31, 1993.......................................... 1.137039 13.7%
December 31, 1994.......................................... 1.118794 -1.6%
December 31, 1995.......................................... 1.438865 28.6%
December 31, 1996.......................................... 1.669358 16.0%
December 31, 1997.......................................... 1.932280 15.7%
December 31, 1998.......................................... 1.802285 -6.7%
December 31, 1999.......................................... 1.784358 -1.0%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
6 years, 8 months ended December 31, 1999.................... 78.4% 9.1%
5 years ended December 31, 1999.............................. 59.5% 9.8%
1 year ended December 31, 1999............................... -1.0% -1.0%
</TABLE>
LOOMIS SAYLES SMALL CAP SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
May 1, 1994................................................ 1.000000
December 31, 1994.......................................... 0.959097 -4.1%
December 31, 1995.......................................... 1.219226 27.1%
December 31, 1996.......................................... 1.571807 28.9%
December 31, 1997.......................................... 1.936137 23.2%
December 31, 1998.......................................... 1.877786 -3.0%
December 31, 1999.......................................... 2.440858 30.0%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 8 months ended December 31, 1999.................... 144.1% 17.1%
5 years ended December 31, 1999.............................. 154.5% 20.5%
1 year ended December 31, 1999............................... 30.0% 30.0%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract
Charge.
** Harris Associates L.P. became the subadviser on May 1, 2000. Prior to that
time, other entities served as subadviser.
II-19
<PAGE>
WESTPEAK GROWTH AND INCOME SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
April 30, 1993............................................. 1.000000
December 31, 1993.......................................... 1.132111 13.2%
December 31, 1994.......................................... 1.103489 -2.5%
December 31, 1995.......................................... 1.485762 34.6%
December 31, 1996.......................................... 1.730922 16.5%
December 31, 1997.......................................... 2.279329 31.7%
December 31, 1998.......................................... 2.798615 22.8%
December 31, 1999.......................................... 3.019311 7.9%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
6 years, 8 months ended December 31, 1999.................... 201.9% 18.0%
5 years ended December 31, 1999.............................. 173.6% 22.3%
1 year ended December 31, 1999............................... 7.9% 7.9%
</TABLE>
WESTPEAK STOCK INDEX SUB-ACCOUNT**
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ---------
<S> <C> <C>
May 1, 1987............................................. 1.000000
December 31, 1987....................................... .865890 -13.4%
December 31, 1988....................................... .993885 14.8%
December 31, 1989....................................... 1.276255 28.4%
December 31, 1990....................................... 1.206894 -5.4%
December 31, 1991....................................... 1.553102 28.7%
December 31, 1992....................................... 1.644023 5.9%
December 31, 1993....................................... 1.779677 8.3%
December 31, 1994....................................... 1.775473 -0.2%
December 31, 1995....................................... 2.398452 35.1%
December 31, 1996....................................... 2.897629 20.8%
December 31, 1997....................................... 3.787806 30.3%
December 31, 1998....................................... 4.781003 26.2%
December 31, 1999....................................... 5.678233 18.8%
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
------------ ---------
<S> <C> <C>
12 years, 8 months ended December 31, 1999.............. 467.8% 14.7%
10 years ended December 31, 1999........................ 344.9% 16.1%
5 years ended December 31, 1999......................... 219.8% 26.2%
1 year ended December 31, 1999.......................... 18.8% 18.8%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract Charge.
** These sub-accounts are only available through Contracts purchased prior to
May 1, 1995.
II-20
<PAGE>
PUTNAM INTERNATIONAL STOCK SUB-ACCOUNT***
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 31, 1994........................................... 1.000000
December 31, 1994.......................................... 1.023745 2.4%
December 31, 1995.......................................... 1.073005 4.8%
December 31, 1996.......................................... 1.129151 5.2%
December 31, 1997.......................................... 1.099535 -2.6%
December 31, 1998.......................................... 1.163698 5.8%
December 31, 1999.......................................... 1.430688 22.9%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
5 years, 2 months ended December 31, 1999.................... 43.1% 7.2%
5 years ended December 31, 1999.............................. 39.8% 6.9%
1 year ended December 31, 1999............................... 22.9% 22.9%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge or the annual $30 Administration Contract
Charge.
*** On December 1, 2000, the Putnam International Stock Portfolio was
substituted for the Morgan Stanley International Magnum Equity Series,
which is no longer available for investment under the Contract.
Performance figures on or before December 1, 2000 reflect the performance
of the Morgan Stanley International Magnum Equity Series. Putnam
Investment Management, Inc. became the sub-investment manager of the
Putnam International Stock Portfolio on January 24, 2000. Prior to that
time, Santander Global Advisors, Inc. served as sub-investment manager.
II-21
<PAGE>
JANUS MID CAP SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION
VALUE UNIT %
DATE VALUE CHANGE
---- ------------ ------
<S> <C> <C>
March 3, 1997........................................ 1.000000
December 31, 1997.................................... 1.263878 26.4%
December 31, 1998.................................... 1.718073 35.9%
December 31, 1999.................................... 3.770460 119.5%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
2 years, 10 months ended December 31, 1999............. 277.0% 59.8%
1 year ended December 31, 1999......................... 119.5% 119.5%
</TABLE>
LEHMAN BROTHERS AGGREGATE BOND INDEX SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION
VALUE UNIT %
DATE VALUE CHANGE
---- ------------ ------
<S> <C> <C>
November 9, 1998..................................... 1.000000
December 31, 1998.................................... 1.011835 1.2%
December 31, 1999.................................... 0.981622 -3.0%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
1 year, 2 months ended December 31, 1999............... -1.8% -1.7%
1 year ended December 31, 1999......................... -3.0% -3.0%
</TABLE>
METLIFE STOCK INDEX SUB-ACCOUNT+
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION
VALUE UNIT %
DATE VALUE CHANGE
---- ------------ ------
<S> <C> <C>
May 1, 1990.......................................... 1.000000
December 31, 1990.................................... 1.011039 1.1%
December 31, 1991.................................... 1.298528 28.4%
December 31, 1992.................................... 1.378496 6.2%
December 31, 1993.................................... 1.486919 7.9%
December 31, 1994.................................... 1.480902 -0.4%
December 31, 1995.................................... 2.000905 35.1%
December 31, 1996.................................... 2.419812 20.9%
December 31, 1997.................................... 3.155636 30.4%
December 31, 1998.................................... 3.992725 26.5%
December 31, 1999.................................... 4.756286 19.1%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge, or the annual Administration Contract Charge.
+ The MetLife Stock Index Sub-Account is only available to contracts purchased
after May 1, 1995.
II-22
<PAGE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
9 years, 8 months ended December 31, 1999............ 375.6% 17.5%
5 years ended December 31, 1999...................... 221.2% 26.3%
1 year ended December 31, 1999....................... 19.1% 19.1%
</TABLE>
MORGAN STANLEY EAFE INDEX SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION
VALUE UNIT %
DATE VALUE CHANGE
---- ------------ ------
<S> <C> <C>
November 9, 1998..................................... 1.000000
December 31, 1998.................................... 1.079060 7.9%
December 31, 1999.................................... 1.326760 23.0%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
1 year, 2 months ended December 31, 1999............... 32.7% 28.2%
1 year ended December 31, 1999......................... 23.0% 23.0%
</TABLE>
RUSSELL 2000 INDEX SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION
VALUE UNIT %
DATE VALUE CHANGE
---- ------------ ------
<S> <C> <C>
November 9, 1998..................................... 1.000000
December 31, 1998.................................... 1.052780 5.3%
December 31, 1999.................................... 1.271835 20.8%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
1 year, 2 months ended December 31, 1999............... 27.2% 23.4%
1 year ended December 31, 1999......................... 20.8% 20.8%
</TABLE>
II-23
<PAGE>
VIP OVERSEAS SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
January 28, 1987........................................... 1.000000
December 31, 1987.......................................... 0.934480 -6.6%
December 31, 1988.......................................... 0.996890 6.7%
December 31, 1989.......................................... 1.242056 24.6%
December 31, 1990.......................................... 1.204901 -3.0%
December 31, 1991.......................................... 1.283814 6.5%
December 31, 1992.......................................... 1.130753 -11.9%
December 31, 1993.......................................... 1.532303 35.5%
December 31, 1994.......................................... 1.537887 0.4%
December 31, 1995.......................................... 1.664159 8.2%
December 31, 1996.......................................... 1.858653 11.7%
December 31, 1997.......................................... 2.045625 10.1%
December 31, 1998.......................................... 2.275536 11.2%
December 31, 1999.......................................... 3.202059 40.7%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
12 years, 11 months ended December 31, 1999.................. 220.2% 9.4%
10 years ended December 31, 1999............................. 157.8% 9.9%
5 years ended December 31, 1999.............................. 108.2% 15.8%
1 year ended December 31, 1999............................... 40.7% 40.7%
</TABLE>
VIP EQUITY-INCOME SUB-ACCOUNT
ANNUAL PERCENT CHANGE IN UNIT VALUE*
<TABLE>
<CAPTION>
ACCUMULATION %
DATE UNIT VALUE CHANGE
---- ------------ ------
<S> <C> <C>
October 9, 1986............................................ 1.000000
December 31, 1986.......................................... 0.998929 -0.1%
December 31, 1987.......................................... 0.974348 -2.5%
December 31, 1988.......................................... 1.179618 21.1%
December 31, 1989.......................................... 1.365709 15.8%
December 31, 1990.......................................... 1.141297 -16.4%
December 31, 1991.......................................... 1.480005 29.7%
December 31, 1992.......................................... 1.706687 15.3%
December 31, 1993.......................................... 1.991856 16.7%
December 31, 1994.......................................... 2.104085 5.6%
December 31, 1995.......................................... 2.804492 33.3%
December 31, 1996.......................................... 3.161755 12.7%
December 31, 1997.......................................... 3.996188 26.4%
December 31, 1998.......................................... 4.401039 10.1%
December 31, 1999.......................................... 4.616870 4.9%
</TABLE>
PERCENT CHANGE IN UNIT VALUE AND ANNUAL EFFECTIVE RATE OF RETURN*
<TABLE>
<CAPTION>
% CHANGE ANNUAL
IN UNIT EFFECTIVE
VALUE RATE
-------- ---------
<S> <C> <C>
13 years, 2 months ended December 31, 1999................... 361.7% 12.3%
10 years ended December 31, 1999............................. 238.1% 13.0%
5 years ended December 31, 1999.............................. 119.4% 17.0%
1 year ended December 31, 1999............................... 4.9% 4.9%
</TABLE>
--------
* Unit values do not reflect the impact of any Contingent Deferred Sales
Charge, premium tax charge, or the annual Administration Contract Charge.
II-24
<PAGE>
NET INVESTMENT FACTOR
The net investment factor ("Net Investment Factor") for each sub-account is
determined on each day on which the New York Stock Exchange is open for
trading as follows:
(1) The net asset value per share of the Eligible Fund held in the sub-
account determined as of the close of regular trading on the New York Stock
Exchange on a particular day;
(2) Plus the per share amount of any dividend or capital gains
distribution made by the Eligible Fund since the close of regular trading
on the New York Stock Exchange on the preceding trading day;
(3) Is divided by the net asset value per share of the Eligible Fund as
of the close of regular trading on the New York Stock Exchange on the
preceding trading day; and
(4) Finally, the daily charges for the Administration Asset Charge and
Mortality and Expense Risk Charge that have accumulated since the close of
regular trading on the New York Stock Exchange on the preceding trading day
are subtracted. (See "Administration Charges, Contingent Deferred Sales
Charge and Other Deductions" in the prospectus.) On an annual basis, the
total deduction for such charges equals 1.35% of the daily net asset value
of the Variable Account.
ANNUITY PAYMENTS
At annuitization, the Contract Value is applied toward the purchase of
monthly variable annuity payments. The amount of these payments will be
determined on the basis of (i) annuity purchase rates not lower than the rates
set forth in the Life Income Tables contained in the Contract that reflect the
age of the Payee at annuitization, (ii) the assumed interest rate selected,
(iii) the type of payment option selected, and (iv) the investment performance
of the Eligible Fund selected.
When a variable payment option is selected, the Contract proceeds will be
applied at annuity purchase rates, which vary depending on the particular
option selected and the age of the Payee, to calculate the basic payment level
purchased by the Contract Value. With respect to Contracts issued in New York
or Oregon for use in situations not involving an employer-sponsored plan,
annuity purchase rates used to calculate the basic payment level will also
reflect the sex of the Payee when the payment option involves a life
contingency. The impact of the choice of option and the sex and age of the
Payee on the level of annuity payments is described in the prospectus under
"Amount of Variable Annuity Payments."
The amount of the basic payment level is determined by applying the
applicable annuity purchase rate to the amount applied from each sub-account
to provide the annuity. This basic payment level is converted into annuity
units, the number of which remains constant. Each monthly annuity payment is
in an amount equal to that number of annuity units multiplied by the
applicable annuity unit value for that payment (described below). The
applicable annuity unit value for each sub-account will change from day to day
depending upon the investment performance of the sub-account, which in turn
depends upon the investment performance of the Eligible Fund in which the sub-
account invests.
The selection of an assumed interest rate ("Assumed Interest Rate") will
affect both the basic payment level and the amount by which subsequent
payments increase or decrease. The basic payment level is calculated on the
assumption that the Net Investment Factors applicable to the Contract will be
equivalent on an annual basis to a net investment return at the Assumed
Interest Rate. If this assumption is met following the date any payment is
determined, then the amount of the next payment will be exactly equal to the
amount of the preceding payment. If the actual Net Investment Factors are
equivalent to a net investment return greater than the Assumed Interest Rate,
the next payment will be larger than the preceding one; if the actual Net
Investment Factors are equivalent to a net investment return smaller than the
Assumed Interest Rate, then the next payment will be smaller than the
preceding payment. The definition of the Assumed Interest Rate, and the effect
of the level of the Assumed Interest Rate on the amount of monthly payments is
explained in the prospectus under "Amount of Variable Annuity Payments."
II-25
<PAGE>
The number of annuity units credited under a variable payment option is
determined as follows:
(1) The proceeds under a deferred Contract, or the net purchase payment
under an immediate Contract (at such time as immediate Contracts may be
made available), are applied at the Company's annuity purchase rates for
the selected Assumed Interest Rate to determine the basic payment level.
(The amount of Contract Value or Death Proceeds applied will be reduced by
any applicable Contingent Deferred Sales Charge, Administration Contract
Charge and the amount of any outstanding loan plus accrued interest.)
(2) The number of annuity units is determined by dividing the amount of
the basic payment level by the applicable annuity unit value(s) next
determined following the date of application of proceeds (in the case of a
deferred Contract) or net purchase payment (in the case of an immediate
Contract.)
The dollar amount of the initial payment will be at the basic payment level.
The dollar amount of each subsequent payment is determined by multiplying the
number of annuity units by the applicable annuity unit value which is
determined at least 14 days before the payment is due.
The value of an annuity unit for each sub-account depends on the Assumed
Interest Rate and on the Net Investment Factors applicable at the time of
valuation. The initial annuity unit values were set at $1.00 effective on or
about the date on which shares of the corresponding Eligible Funds were first
publicly available. The Net Investment Factor and, therefore, changes in the
value of an annuity unit under a variable payment option, reflect the
deduction of the Mortality and Expense Risk Charge and Administration Asset
Charge. (See "Net Investment Factor" above.)
The annuity unit value for each sub-account is equal to the corresponding
annuity unit value for the sub-account previously determined multiplied by the
applicable Net Investment Factor for that sub-account for the New York Stock
Exchange trading day then ended, and further multiplied by the assumed
interest factor ("Assumed Interest Factor") for each day of the valuation
period. The Assumed Interest Factor represents the daily equivalent of the
Contract's annual Assumed Interest Rate. In the calculation of annuity unit
values, the Assumed Interest Factor has the effect of reducing the Net
Investment Factor by an amount equal to the daily equivalent of the Contract's
Assumed Interest Rate. The result of this adjustment is that if the Net
Investment Factor for a valuation period is greater (when expressed as an
annual net investment return) than the Assumed Interest Rate, the annuity unit
value will increase. If the Net Investment Factor for the period is less (when
expressed as an annual net investment return) than the Assumed Interest Rate,
the annuity unit value will decrease. At an Assumed Interest Rate of 3.5%, the
Assumed Interest Factor is .9999058. Assumed Interest Factors for other
Assumed Interest Rates are computed on a consistent basis.
An illustration of annuity income payments under various hypothetical and
historical rates appear below. The monthly equivalents of the hypothetical
annual net returns of (2.09)%, 3.50%, 3.79%, 5.75% and 7.70% shown in the
tables at pages II-28 and II-29 are (.17)%, .29%, .31%, .47% and .62%.
II-26
<PAGE>
HYPOTHETICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity income
payments under the Contract change with investment performance over an
extended period of time. The tables illustrate how monthly annuity income
payments would vary over time if the return on assets in the selected
portfolios were a uniform gross annual rate of 0%, 5.71%, 6%, 8% or 10%. The
values would be different from those shown if the returns averaged 0%, 5.71%,
6%, 8% or 10%, but fluctuated over and under those averages throughout the
years.
The tables reflect the daily charge to the sub-accounts for assuming
mortality and expense risks, which is equivalent to an annual charge of .95%
and the daily administrative charge which is equivalent to an annual charge of
0.40%. The amounts shown in the tables also take into account the Eligible
Funds' management fees and operating expenses which are assumed to be at an
annual rate of .76% of the average daily net assets of the Eligible Funds
(based on an average of all the Eligible Funds). Actual fees and expenses of
the Eligible Funds associated with your Contract may be more or less than
.76%, will vary from year to year, and will depend on how you allocate your
Contract Value. See the section in your current prospectus entitled "Expense
Table" for more complete details. The monthly annuity income payments
illustrated are on a pre-tax basis. The federal income tax treatment of
annuity income considerations is generally described in the section of your
current prospectus entitled "Federal Income Tax Status."
The tables show both the gross rate and the net rate. The difference between
gross and net rates represents the 1.35% for mortality and expense risk and
administrative charges and the assumed 0.76% for investment management and
operating expenses. Since these charges are deducted daily from assets, the
difference between the gross and net rate is not exactly 2.11%.
Two tables follow. The first table assumes that 100% of the Contract Value
is allocated to a variable annuity income option, the second assumes that 50%
of the Contract Value is placed under a fixed annuity income option, using the
fixed crediting rate the Company offered on the fixed annuity income option at
the date of the illustration. Both illustrations assume that the final value
of the accumulation account is $100,000 and is applied at age 65 to purchase a
life annuity for a guaranteed period of 10 years certain and life thereafter.
When part of the Contract Value has been allocated to the fixed annuity
income option, the guaranteed minimum annuity income payment resulting from
this allocation is also shown. The illustrated variable annuity income
payments are determined through the use of standard mortality tables and an
assumed interest rate of 3.5% per year. Thus, actual performance greater than
3.5% per year will result in increasing annuity income payments and actual
performance less than 3.5% per year will result in decreasing annuity income
payments. The Company offers alternative Assumed Interest Rates from which you
may select. Fixed annuity income payments remain constant. Initial monthly
annuity income payments under a fixed annuity income payout are generally
higher than initial payments under a variable income payout option.
These tables show the monthly income payments for several hypothetical
constant assumed interest rates. Of course, actual investment performance will
not be constant and may be volatile. Actual monthly income amounts would
differ from those shown if the actual rate of return averaged the rate shown
over a period of years, but also fluctuated above or below those averages for
individual contract years. Upon request, and when you are considering an
annuity income option, the Company will furnish a comparable illustration
based on your individual circumstances.
II-27
<PAGE>
ANNUITY PAY-OUT ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT
VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 1/1/00
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED FOR AGE 65: $678.61
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.5%
VARIABLE MONTHLY ANNUITY INCOME PAYMENT ON THE DATE OF THE ILLUSTRATION: $581.00
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
<TABLE>
<CAPTION>
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN
WITH AN ASSUMED RATE OF RETURN OF:
-------------------------------------------------
GROSS 0% 5.71% 6% 8% 10%
PAYMENT CALENDAR ----- --------- --------- --------- --------- ---------
YEAR YEAR AGE NET** -2.09% 3.50% 3.79% 5.75% 7.70%
------- -------- --- ----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2000 65 $ 581.00 $ 581.00 $ 581.00 $ 581.00 $ 581.00
2 2001 66 549.63 581.00 582.61 593.61 604.60
3 2002 67 519.96 581.00 584.23 606.49 629.16
4 2003 68 491.89 581.00 585.86 619.65 654.72
5 2004 69 465.34 581.00 587.48 633.10 681.31
10 2009 74 352.58 581.00 595.69 704.83 831.40
15 2014 79 267.14 581.00 604.01 784.70 1,014.55
20 2019 84 202.41 581.00 612.45 873.61 1,238.05
</TABLE>
IT IS EMPHASIZED THAT THE ASSUMED RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
ACTUAL PERFORMANCE RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
THE CONTRACT OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THAT SHOWN IF THE
ACTUAL PERFORMANCE AVERAGED THE ASSUMED RATES OF RETURN SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL CONTRACT YEARS. SINCE IT IS HIGHLY LIKELY THAT PERFORMANCE WILL
FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME (BASED ON THE VARIABLE ACCOUNT)
WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS
THAT THIS HYPOTHETICAL PERFORMANCE CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
--------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period, payments
will be continued for the balance of the Certain Period. The cumulative
amount of income payments received under the annuity depends on how long the
Annuitant lives after the Certain Period. An annuity pools the mortality
experience of Annuitants. Annuitants who die earlier, in effect, subsidize
the payments for those who live longer.
** The illustrated Net Assumed Rates of Return reflect the deduction of
average fund expenses and the 1.35% Mortality and Expense Risk and
Administration Asset Charges from the Gross Rates of Return.
II-28
<PAGE>
ANNUITY PAY-OUT ILLUSTRATION
(50% VARIABLE--50% FIXED PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT
VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 1/1/00
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT FOR AGE 65 BASED ON CURRENT RATES, IF
100% FIXED ANNUITY OPTION SELECTED: $678.61
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 50% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT AND 50% TO FIXED PAYOUT
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.5%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE, BUT WILL NEVER
BE LESS THAN: $339.31. THE MONTHLY GUARANTEED PAYMENT OF $339.31 IS BEING
PROVIDED BY THE $50,000 APPLIED UNDER THE FIXED ANNUITY OPTION.
<TABLE>
<CAPTION>
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN
WITH AN ASSUMED RATE OF RETURN OF:
-------------------------------------------------
GROSS 0% 5.71% 6% 8% 10%
PAYMENT CALENDAR ----- --------- --------- --------- --------- ---------
YEAR YEAR AGE NET** -2.09% 3.50% 3.79% 5.75% 7.70%
------- -------- --- ----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 2000 65 $ 629.81 $ 629.81 $ 629.81 $ 629.81 $ 629.81
2 2001 66 614.12 629.81 630.61 636.11 641.61
3 2002 67 599.29 629.81 631.42 642.55 653.89
4 2003 68 585.25 629.81 632.23 649.13 666.66
5 2004 69 571.97 629.81 633.05 655.85 679.96
10 2009 74 515.59 629.81 637.15 691.72 755.01
15 2014 79 472.88 629.81 641.31 731.65 846.58
20 2019 84 440.51 629.81 645.53 776.11 958.33
</TABLE>
IT IS EMPHASIZED THAT THE ASSUMED RATES OF RETURN SHOWN ABOVE ARE ILLUSTRATIVE
ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE.
ACTUAL PERFORMANCE RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY
THE CONTRACT OWNER AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED.
THE AMOUNT OF THE INCOME PAYMENT WOULD BE DIFFERENT FROM THAT SHOWN IF THE
ACTUAL PERFORMANCE AVERAGED THE ASSUMED RATES OF RETURN SHOWN ABOVE OVER A
PERIOD OF YEARS, BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL CONTRACT YEARS. SINCE IT IS HIGHLY LIKELY THAT PERFORMANCE WILL
FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME (BASED ON THE VARIABLE ACCOUNT)
WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS
THAT THIS HYPOTHETICAL PERFORMANCE CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
--------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period, payments
will be continued for the balance of the Certain Period. The cumulative
amount of income payments received under the annuity depends on how long the
Annuitant lives after the Certain Period. An annuity pools the mortality
experience of Annuitants. Annuitants who die earlier, in effect, subsidize
the payments for those who live longer.
** The illustrated Net Assumed Rates of Return apply only to the variable
portion of the monthly payment and reflect the deduction of average fund
expenses and the 1.35% Mortality and Expense Risk and Administration Asset
Charges from the Gross Rate of Return.
II-29
<PAGE>
HISTORICAL ILLUSTRATIONS OF ANNUITY INCOME PAYOUTS
The following tables have been prepared to show how variable annuity income
payments under the Contract change with investment performance over an
extended period of time. In comparison with hypothetical illustrations based
on a uniform annual rate of return, the table uses historical annual returns
to illustrate that monthly annuity income payments vary over time based on
fluctuations in annual returns.
The tables reflect the daily charge to the sub-accounts for assuming
mortality and expense risks, which is equivalent to an annual charge of .95%
and the daily administrative charge which is equivalent to an annual charge of
.40%. The amounts shown in the tables also take into account the actual
Eligible Funds' management fees and operating expenses. Actual fees and
expenses of the Eligible Funds associated with your Contract may be more or
less than the historical fees, will vary from year to year, and will depend on
how you allocate your Contract Value. See the section in your current
prospectus entitled "Expense Table" for more complete details. The monthly
annuity income payments illustrated are on a pre-tax basis. The federal income
tax treatment of annuity income considerations is generally described in the
section of your current prospectus entitled "Federal Income Tax Status."
The following tables assume that 100% of the Contract Value is allocated to
a variable annuity income option, that the final value of the accumulation
account is $100,000 and is applied at age 65 to purchase a life annuity for a
guaranteed period of 10 years certain and life thereafter. The table assumes
that the Annuitant was age 65 in 1983, the year of inception for the Capital
Growth, Back Bay Advisors Bond Income and Back Bay Advisors Money Market
Series, and that the Annuitant's age had increased by the time the other
Eligible Funds became available. The historical variable annuity income
payments are based on an assumed interest rate of 3.5% per year. Thus, actual
performance greater than 3.5% per year resulted in an increased annuity income
payment and actual performance less than 3.5% per year resulted in a decreased
annuity income payment. The Company offers alternative Assumed Interest Rates
(AIR) from which you may select: 0% and 5%. An AIR of 0% will result in a
lower initial payment than a 3.5% or 5% AIR. Similarly, an AIR of 5% will
result in a higher initial payment than a 0% or 3.5% AIR. The illustrations
are based on the current annuity purchase rates used by the Company. The rates
may differ at the time you annuitize.
The table illustrates the amount of the first monthly payment for each year
shown. During each year, the monthly payments would vary to reflect
fluctuations in the actual rate of return on the Eligible Funds. Upon request,
and when you are considering an annuity income option, the Company will
furnish a comparable illustration based on your individual circumstances.
II-30
<PAGE>
ANNUITY PAY-OUT HISTORICAL ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT
VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 1/1/00
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED: FOR AGE 65: $678.61; FOR AGE 69: $727.77; AND FOR AGE
76: $834.43.
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN WITH
100% OF THE CONTRACT VALUE INVESTED IN:
<TABLE>
<CAPTION>
SALOMON
BACK BAY BACK BAY STRATEGIC SALOMON ALGER
PAYMENT CALENDAR MONEY BOND BOND U.S. BACK BAY EQUITY CAPITAL
YEAR YEAR AGE MARKET INCOME OPPORTUNITIES GOVERNMENT MANAGED BALANCED GROWTH GROWTH
------- -------- --- -------- --------- ------------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1983 65 $581.00 $ 581.00 $ 581.00
2 1984 66 589.21 593.85 601.36
3 1985 67 621.82 637.34 569.73
4 1986 68 641.71 721.50 912.93
5 1987 69 653.31 789.77 $ 642.00 1,698.78
6 1988 70 663.40 769.90 617.60 2,472.75
7 1989 71 679.85 795.21 644.48 2,149.71
8 1990 72 708.06 851.26 731.61 2,679.54
9 1991 73 730.20 877.02 719.75 2,465.18
10 1992 74 739.29 986.14 824.49 3,618.49
11 1993 75 731.38 1,016.77 838.49 3,240.10
12 1994 76 717.90 1,091.45 $765.00 $765.00 884.40 $ 765.00 $ 765.00 3,550.97
13 1995 77 711.52 1,005.44 748.36 763.51 833.68 758.20 737.42 3,145.80
14 1996 78 716.92 1,161.63 851.64 837.15 1,043.17 901.95 1,045.27 4,139.22
15 1997 79 718.30 1,158.11 928.18 824.28 1,143.60 1,004.99 1,127.42 4,776.14
16 1998 80 721.25 1,224.15 982.75 852.27 1,379.69 1,112.99 1,350.12 5,621.74
17 1999 81 723.71 1,272.43 955.87 874.22 1,573.66 1,157.58 1,901.94 7,185.99
18 2000 82 724.12 1,207.26 924.32 834.77 1,649.61 1,047.58 2,431.79 7,925.45
</TABLE>
INVESTMENT PERFORMANCE RESULTS CONTAINED IN THIS REPORT REPRESENT PAST
PERFORMANCE AND ARE NOT INDICATIVE OF FUTURE RETURNS. THE PERFORMANCE RESULTS
OF A CONTRACT MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE CONTRACT OWNER
AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED. SINCE IT IS HIGHLY
LIKELY THAT PERFORMANCE WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(BASED ON THE VARIABLE ACCOUNT) WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE
MADE BY THE COMPANY OR THE FUNDS THAT THESE HISTORICAL RETURNS CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THE PAYMENTS IN THIS ILLUSTRATION ARE NET OF ALL CHARGES: MORTALITY AND
EXPENSE RISK CHARGE AND ADMINISTRATION ASSET CHARGE (1.35%), MANAGEMENT FEES
AND OTHER EXPENSES (These may vary from year to year. The following expenses
are for the year ended December 31, 1999 after giving effect to current
expense caps or deferrals: 1.00% Loomis Sayles Small Cap, .80% Alger Equity
Growth, .88% Harris Oakmark Mid Cap Value, .81% Davis Venture Value, .74%
Westpeak Growth and Income, .35% Westpeak Stock Index, .77% Balanced, .58%
Back Bay Managed, .81% Salomon Strategic Bond Opportunities, .48% Back Bay
Bond Income, .70% Salomon US Government, .40% Back Bay Money Market, .95%
Morgan Stanley EAFE Index, and .80% Russell 2000 Index. The following expenses
are for the year ended December 31, 1999 and are unaffected by expense caps or
deferrals: .91% Fidelity VIP Overseas, .66% Capital Growth, .57% VIP Fidelity
Equity-Income, 1.12% Putnam International Stock, .96% Janus Mid Cap, .65%
Lehman Brothers Aggregate Bond Index, and .54% MetLife Stock Index.)
-------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period,
payments will be continued for the balance of the Certain Period. The
cumulative amount of income payments received under the annuity depends on
how long the Annuitant lives after the Certain Period. An annuity pools the
mortality experience of Annuitants. Annuitants who die earlier, in effect,
subsidize the payments for those who live longer.
II-31
<PAGE>
ANNUITY PAY-OUT HISTORICAL ILLUSTRATION
(100% VARIABLE PAYOUT)
<TABLE>
<C> <C> <S> <C>
ANNUITANT: John Doe GROSS AMOUNT OF CONTRACT
VALUE: $100,000
SEX: Unisex DATE OF ILLUSTRATION: 1/1/00
ANNUITY OPTION SELECTED: Life Income with 10 Years Certain*
FREQUENCY OF INCOME PAYMENTS: Monthly
</TABLE>
FIXED MONTHLY ANNUITY INCOME PAYMENT BASED ON CURRENT RATES, IF 100% FIXED
ANNUITY OPTION SELECTED: FOR AGE 68: $714.61; FOR AGE 69: $727.77; FOR AGE
72: $757.68; FOR AGE 73: $786.00; FOR AGE 75: $817.97; FOR AGE 76: $834.43;
FOR AGE 79: $873.74; and FOR AGE 80: $890.12.
ILLUSTRATIVE AMOUNTS BELOW ASSUME THAT 100% OF THE CONTRACT VALUE IS ALLOCATED
TO VARIABLE PAYOUT.
ASSUMED INTEREST RATE AT WHICH MONTHLY VARIABLE PAYMENTS REMAIN CONSTANT: 3.50%
MONTHLY INCOME PAYMENTS WILL VARY WITH INVESTMENT PERFORMANCE. NO MINIMUM
DOLLAR AMOUNT IS GUARANTEED.
AMOUNT OF FIRST MONTHLY PAYMENT IN YEAR SHOWN WITH
100% OF THE CONTRACT VALUE INVESTED IN:
<TABLE>
<CAPTION>
HARRIS LOOMIS WESTPEAK LEMAN
DAVIS OAKMARK SAYLES GROWTH WESTPEAK FIDELITY FIDELITY PUTNAM METLIFE BROTHERS
PAYMENT CALENDAR VENTURE MID CAP SMALL AND STOCK VIP VIP EQUITY- INTL. JANUS STOCK AGG.
YEAR YEAR AGE VALUE VALUE CAP INCOME INDEX OVERSEAS INCOME STOCK** MID CAP INDEX BOND
------- -------- --- --------- --------- --------- --------- --------- -------- ----------- ------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1983 65
2 1984 66
3 1985 67
4 1986 68 $ 626.00
5 1987 69 $ 642.00 $ 642.00 615.48
6 1988 70 545.85 581.39 580.03
7 1989 71 605.30 599.19 678.42
8 1990 72 750.98 721.30 758.88 $ 693.00
9 1991 73 686.15 676.06 612.74 684.66
10 1992 74 853.12 695.98 767.71 848.95
11 1993 75 $ 747.00 $ 747.00 872.44 592.22 855.28 908.54
12 1994 76 $ 765.00 829.98 $ 765.00 826.38 912.49 775.38 964.44 $765.00 943.36
13 1995 77 732.39 789.05 733.73 778.25 879.55 751.89 984.32 778.70 907.34
14 1996 78 972.43 980.46 901.19 1,012.42 1,147.99 786.11 1,267.62 788.57 1,171.45
15 1997 79 1,166.26 1,098.95 1,122.40 1,139.48 1,339.89 848.22 1,380.64 801.70 $ 819.00 1,361.49
16 1998 80 1,484.12 1,229.02 1,335.81 1,449.76 1,692.29 901.98 1,686.00 754.27 1,005.88 1,693.59 $836.00
17 1999 81 1,618.63 1,107.57 1,251.74 1,719.86 2,063.79 969.42 1,794.02 771.29 1,321.12 2,067,44 841.68
18 2000 82 1,813.22 1,059.48 1,572.07 1,792.74 2,368.20 1,318.01 1,818.36 916.18 2,801.26 2,374.17 788.93
<CAPTION>
MORGAN
STANLEY RUSSELL
PAYMENT EAFE 2000
YEAR INDEX INDEX
------- --------- ---------
<S> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16 $ 836.00 $ 836.00
17 897.60 875.74
18 1,066.32 1,022.18
</TABLE>
INVESTMENT PERFORMANCE RESULTS CONTAINED IN THIS REPORT REPRESENT PAST
PERFORMANCE AND ARE NOT INDICATIVE OF FUTURE RETURNS. THE PERFORMANCE RESULTS
OF A CONTRACT MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY THE CONTRACT OWNER
AND THE VARIOUS RATES OF RETURN OF THE PORTFOLIOS SELECTED. SINCE IT IS HIGHLY
LIKELY THAT PERFORMANCE WILL FLUCTUATE FROM MONTH TO MONTH, MONTHLY INCOME
(BASED ON THE VARIABLE ACCOUNT) WILL ALSO FLUCTUATE. NO REPRESENTATION CAN BE
MADE BY THE COMPANY OR THE FUNDS THAT THESE HISTORICAL RETURNS CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
THE PAYMENTS IN THIS ILLUSTRATION ARE NET OF ALL CHARGES: MORTALITY AND
EXPENSE RISK CHARGE AND ADMINISTRATION ASSET CHARGE (1.35%), MANAGEMENT FEES
AND OTHER EXPENSES (These may vary from year to year. The following expenses
are for the year ended December 31, 1999 after giving effect to current
expense caps or deferrals: 1.00% Loomis Sayles Small Cap, .80% Alger Equity
Growth, .88% Harris Oakmark Mid Cap Value, .81% Davis Venture Value, .74%
Westpeak Growth and Income, .35% Westpeak Stock Index, .77% Balanced, .58%
Back Bay Managed, .81% Salomon Strategic Bond Opportunities, .48% Back Bay
Bond Income, .70% Salomon US Government, .40% Back Bay Money Market, .95%
Morgan Stanley EAFE Index, and .80% Russell 2000 Index. The following expenses
are for the year ended December 31, 1999 and are unaffected by expense caps or
deferrals: .91% Fidelity VIP Overseas, .66% Capital Growth, .57% Fidelity VIP
Equity-Income and 1.12% Putnam International Stock, .96% Janus Mid Cap, .65%
Lehman Brothers Aggregate Bond Index, and .54% MetLife Stock Index.)
-------
* Income payments are made during the Annuitant's lifetime. If the Annuitant
dies before payments have been made for the 10 Year Certain Period,
payments will be continued for the balance of the Certain Period. The
cumulative amount of income payments received under the annuity depends on
how long the Annuitant lives after the Certain Period. An annuity pools
the mortality experience of Annuitants. Annuitants who die earlier, in
effect, subsidize the payments for those who live longer.
** On December 1, 2000, the Putnam International Stock Portfolio was
substituted for the Morgan Stanley International Magnum Equity Series,
which is no longer available under the Contract. Performance figures on or
before December 1, 2000 reflect the performance of the Morgan Stanley
International Magnum Equity Series.
II-32
<PAGE>
EXPERTS
The financial statements of The New England Variable Account of Metropolitan
Life Insurance Company ("MetLife") as of December 31, 1999 and for each of the
two years in the period ended December 31, 1999 and the consolidated financial
statements of MetLife as of December 31, 1999 and 1998 and for each of the
three years in 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 reports appearing herein, and have
been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
LEGAL MATTERS
Legal matters in connection with the Contracts described in this
registration statement have been passed on by Christopher P. Nicholas,
Associate General Counsel of the Company. Sutherland Asbill & Brennan LLP,
Washington, D.C., has provided advice on certain matters relating to the
Federal securities laws.
II-33
<PAGE>
APPENDIX A
ABC and affiliates Fortune Public Broadcasting
Atlanta Constitution Fox Newtwork and Service
Atlanta Journal affiliates Quinn, Jane Bryant
Austin American Fund Action (syndicated column)
Statesman Hartford Courant Registered
Baltimore Sun Houston Chronicle Representative
Barron's INC Research Magazine
Bond Buyer Indianapolis Star Resource
Boston Business Journal Institutional Investor Reuters
Boston Globe Investment Dealers Rukeyser's Business
Boston Herald Digest (syndicated column)
Broker World Investment Vision Sacramento Bee
Business Radio Network Investor's Daily San Francisco Chronicle
Business Week Journal of Commerce San Francisco Examiner
CBS and affiliates Kansas City Star San Jose Mercury
CFO LA Times Seattle Post-
Changing Times Leckey, Andrew Intelligencer
Chicago Sun Times (syndicated column) Seattle Times
Chicago Tribune Life Association News Smart Money
Christian Science Miami Herald St. Louis Post Dispatch
Monitor Milwaukee Sentinel St. Petersburg Times
Christian Science Money Standard & Poor's
Monitor News Service Money Maker Outlook
Cincinnati Enquirer Money Management Letter Standard & Poor's Stock
Cincinnati Post Morningstar Guide
CNBC National Public Radio Stanger's Investment
CNN National Underwriter Advisor
Columbus Dispatch NBC and affiliates Stockbroker's Register
Dallas Morning News New England Business Strategic Insight
Dallas Times-Herald New England Cable News Tampa Tribune
Denver Post New Orleans Times- Time
Des Moines Register Picayune Tobias, Andrew
Detroit Free Press New York Daily News (syndicated column)
Donoghues Money Fund New York Times UPI
Report Newark Star Ledger US News and World Report
Dorfman, Dan (syndicated Newsday USA Today
column) Newsweek Value Line
Dow Jones News Service Nightly Business Report Wall St. Journal
Economist Orange County Register Wall Street Letter
FACS of the Week Orlando Sentinel Wall Street Week
Financial News Network Pension World Washington Post
Financial Planning Pensions and Investments WBZ
Financial Services Week Personal Investor WBZ-TV
Financial World Philadelphia Inquirer WCVB-TV
Forbes Porter, Sylvia WEEI
Fort Worth Star-Telegram (syndicated column) WHDH
Portland Oregonian Worcester Telegram
Worth Magazine
WRKO
II-34
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Contract Owners of The New England Variable Account
of Metropolitan Life Insurance Company:
We have audited the accompanying statement of assets and liabilities and the
related statement of operations of The New England Variable Account (comprised
of the following Sub-Accounts: Capital Growth, Bond Income, Money Market,
Stock Index, Managed, Midcap Value (formerly Avanti Growth), Growth and Income
(formerly Value Growth), Small Cap, U.S. Government, Balanced, Equity Growth,
International Magnum Equity (formerly International Equity), Venture Value,
Strategic Bond Opportunities, Equity-Income and Overseas) of Metropolitan Life
Insurance Company as of and for the year ended December 31, 1999, and the
related statements of changes in net assets for each of the two years in the
period then ended for all Sub-Accounts. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, the financial statements referred to above present fairly, in
all material respects, the financial position and the results of operations of
the respective aforementioned Sub-Accounts comprising The New England Variable
Account of Metropolitan Life Insurance Company, as of and for the year ended
December 31, 1999, and the changes in net assets for each of the two years in
the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Boston, Massachusetts
April 26, 2000
F-1
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
------------- ------------ --------------
<S> <C> <C> <C>
ASSETS
Investments in sub-accounts, at value
(Note 2)
NEW ENGLAND ZENITH FUND:
Capital Growth Series.............. 1,915,867.620 $764,589,117 $ 832,885,131
Back Bay Advisors Bond Income
Series............................ 1,169,680.720 126,271,186 118,605,625
Back Bay Advisors Money Market
Series............................ 799,627.840 79,962,784 79,962,784
Westpeak Stock Index Series........ 372,111.140 43,970,941 85,898,507
Back Bay Advisors Managed Series... 756,025.970 123,679,221 148,793,471
Goldman Sachs Midcap Value Series.. 251,733.070 34,602,284 30,640,949
Westpeak Growth and Income Series.. 543,155.700 92,766,876 107,805,543
Loomis Sayles Small Cap Series..... 396,131.770 60,156,069 79,911,662
Salomon Brothers U. S. Government
Series............................ 1,245,288.970 14,360,263 13,461,574
Loomis Sayles Balanced Series...... 3,197,331.380 44,571,365 44,283,040
Alger Equity Growth Series......... 7,675,195.860 153,235,681 225,190,246
Morgan Stanley International Magnum
Equity Series..................... 1,467,890.810 16,689,953 20,770,655
Davis Venture Value Series......... 6,098,030.180 107,517,286 162,634,465
Salomon Brothers Strategic Bond
Opportunities Series.............. 2,746,317.780 32,493,271 29,303,211
VARIABLE INSURANCE PRODUCTS FUND:
Equity-Income Portfolio............ 6,773,787.310 128,040,852 174,154,072
Overseas Portfolio................. 4,235,131.160 79,859,392 116,211,999
--------------
Total investments in sub-accounts, at value..................... 2,270,512,934
Dividends receivable............................................ 11,970
--------------
Total assets................................................ 2,270,524,904
LIABILITIES
Due to Metropolitan Life Insurance Company...................... 2,671,697
--------------
NET ASSETS...................................................... $2,267,853,207
==============
CONTRACT OWNERS' EQUITY
Owners of annuity contracts..................................... $2,254,956,405
Annuity reserves (Note 2)....................................... 12,896,802
--------------
TOTAL FOR VARIABLE ANNUITY CONTRACTS........................ $2,267,853,207
==============
</TABLE>
See Notes to Financial Statements
F-2
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES COST MARKET VALUE
------------- ------------ --------------
<S> <C> <C> <C>
ASSETS
Investments in sub-accounts, at value
(Note 2)
NEW ENGLAND ZENITH FUND:
Capital Growth Series.............. 1,637,739.380 $666,207,331 $ 650,133,401
Back Bay Advisors Bond Income
Series............................ 945,692.680 102,286,178 100,687,899
Back Bay Advisors Money Market
Series............................ 708,693.910 70,869,391 70,869,391
Westpeak Stock Index Series........ 344,391.700 44,256,709 78,321,561
Back Bay Advisors Managed Series... 651,423.980 110,269,463 125,373,060
Goldman Sachs Midcap Value Series.. 211,365.070 28,857,136 28,944,333
Westpeak Growth and Income Series.. 472,620.540 84,779,418 90,521,012
Loomis Sayles Small Cap Series..... 477,499.350 81,447,169 107,327,530
Salomon Brothers U. S. Government
Series............................ 1,059,596.930 12,233,438 12,185,365
Loomis Sayles Balanced Series...... 2,370,226.580 34,463,074 32,661,722
Alger Equity Growth Series......... 8,429,091.570 183,172,367 246,972,383
Morgan Stanley International Magnum
Equity Series..................... 1,344,447.880 15,744,977 16,899,710
Davis Venture Value Series......... 6,334,066.470 118,262,256 183,307,884
Salomon Brothers Strategic Bond
Opportunities Series.............. 2,266,530.670 26,925,467 25,158,490
Putnam International Series........ 211,722.370 2,856,452 2,686,756
VARIABLE INSURANCE PRODUCTS FUND:
Equity-Income Portfolio............ 5,786,106.070 113,676,449 141,991,043
Overseas Portfolio................. 4,523,932.150 91,905,716 98,440,764
--------------
Total investments in sub-accounts, at value..................... 2,012,482,304
Dividends receivable............................................ 361,453
--------------
Total assets................................................ 2,012,843,757
LIABILITIES
Due to Metropolitan Life Insurance Company...................... 2,024,885
--------------
NET ASSETS...................................................... $2,010,818,872
==============
CONTRACT OWNERS' EQUITY
Owners of annuity contracts..................................... $1,998,016,573
Annuity reserves (Note 2)....................................... 12,802,299
--------------
TOTAL FOR VARIABLE ANNUITY CONTRACTS........................ $2,010,818,872
==============
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CAPITAL MONEY MIDCAP GROWTH AND
GROWTH BOND INCOME MARKET STOCK INDEX MANAGED VALUE INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends....... $162,137,176 $ 8,745,170 $3,521,617 $ 1,992,485 $ 20,962,434 $ 382,798 $14,145,526 $ 209,713
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
EXPENSES:
Mortality and
expense risk
charge.......... 7,725,456 1,247,852 695,977 760,324 1,451,137 329,194 1,016,255 634,485
Administrative
charge.......... 3,861,230 604,615 336,129 361,356 699,163 165,099 494,172 318,746
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Total expenses. 11,586,686 1,852,467 1,032,106 1,121,680 2,150,300 494,293 1,510,427 953,231
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net investment
income.......... 150,550,490 6,892,703 2,489,511 870,805 18,812,134 (111,495) 12,635,099 (743,518)
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
year........... 145,060,563 2,310,498 -- 35,395,038 39,832,342 (4,695,144) 23,551,474 3,419,848
End of year.... 68,296,013 (7,665,561) -- 41,927,566 25,114,250 (3,961,335) 15,038,667 19,755,593
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net change in
unrealized
appreciation
(depreciation). (76,764,550) (9,976,059) -- 6,532,528 (14,718,092) 733,809 (8,512,807) 16,335,745
Net realized
gain (loss) on
investments..... 31,243,383 474,439 -- 6,126,853 8,080,082 (942,117) 3,802,104 1,935,190
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
Net realized and
unrealized gain
(loss) on
investments.... (45,521,167) (9,501,620) -- 12,659,381 (6,638,010) (208,308) (4,710,703) 18,270,935
------------ ----------- ---------- ----------- ------------ ----------- ----------- -----------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... $105,029,323 $(2,608,917) $2,489,511 $13,530,186 $ 12,174,124 $ (319,803) $ 7,924,396 $17,527,417
============ =========== ========== =========== ============ =========== =========== ===========
<CAPTION>
U.S.
GOVERNMENT
SUB-ACCOUNT
-----------
<S> <C>
INCOME:
Dividends....... $ 804,807
-----------
EXPENSES:
Mortality and
expense risk
charge.......... 145,781
Administrative
charge.......... 68,199
-----------
Total expenses. 213,980
-----------
Net investment
income.......... 590,827
-----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
year........... (104,090)
End of year.... (898,689)
-----------
Net change in
unrealized
appreciation
(depreciation). (794,599)
Net realized
gain (loss) on
investments..... (1,476)
-----------
Net realized and
unrealized gain
(loss) on
investments.... (796,075)
-----------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... $(205,248)
===========
</TABLE>
See Notes to Financial Statements
F-4
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC
EQUITY INTERNATIONAL VENTURE BOND EQUITY-
BALANCED GROWTH MAGNUM EQUITY VALUE OPPORTUNITIES INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT TOTAL
----------- ----------- ------------- ----------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends........ $ 2,665,079 $27,730,944 $ 73,230 $ 3,171,598 $ 2,348,573 $ 8,886,140 $ 3,632,373 $261,409,663
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
EXPENSES:
Mortality and ex-
pense risk
charge.......... 474,133 1,701,611 179,517 1,467,503 309,920 1,776,914 914,897 20,830,956
Administrative
charge.......... 237,504 830,508 88,837 724,543 147,093 876,422 456,181 10,269,797
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
Total expenses... 711,637 2,532,119 268,354 2,192,046 457,013 2,653,336 1,371,078 31,100,753
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
Net investment
income.......... 1,953,442 25,198,825 (195,124) 979,552 1,891,560 6,232,804 2,261,295 230,308,910
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVEST-
MENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
year............. 6,569,059 50,532,653 504,963 39,486,146 (1,287,072) 52,711,019 9,403,008 402,690,305
End of year...... (288,325) 71,954,566 4,080,702 55,117,179 (3,190,060) 46,113,220 36,352,607 367,746,393
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
Net change in
unrealized ap-
preciation (de-
preciation)..... (6,857,384) 21,421,913 3,575,739 15,631,033 (1,902,988) (6,597,799) 26,949,599 (34,943,912)
Net realized gain
(loss) on in-
vestments....... 1,715,594 4,291,403 514,203 5,750,062 (32,516) 9,304,792 4,576,287 76,838,283
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
Net realized and
unrealized gain
(loss) on in-
vestments....... (5,141,790) 25,713,316 4,089,942 21,381,095 (1,935,504) 2,706,993 31,525,886 41,894,371
----------- ----------- ---------- ----------- ----------- ----------- ----------- ------------
NET INCREASE (DE-
CREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS.. $(3,188,348) $50,912,141 $3,894,818 $22,360,647 $ (43,944) $ 8,939,797 $33,787,181 $272,203,281
=========== =========== ========== =========== =========== =========== =========== ============
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL MONEY STOCK MIDCAP GROWTH AND
GROWTH BOND INCOME MARKET INDEX MANAGED VALUE INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends....... $ 4,218,349 $ -- $3,166,205 $ 59,488 $ 2,913,818 $ -- $ 2,387,042 $ 883,959
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
EXPENSES:
Mortality and
expense risk
charge......... 5,221,406 761,674 504,761 580,960 962,405 201,759 686,228 701,726
Administrative
charge......... 2,590,947 365,856 252,247 275,103 461,425 100,074 332,742 341,210
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
Total expenses.. 7,812,353 1,127,530 757,008 856,063 1,423,830 301,833 1,018,970 1,042,936
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
Net investment
income......... (3,594,004) (1,127,530) 2,409,197 (796,575) 1,489,988 (301,833) 1,368,072 (158,977)
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... 68,296,013 (7,665,561) -- 41,927,566 25,114,250 (3,961,335) 15,038,667 19,755,593
End of period... (16,073,930) (1,598,279) -- 34,064,852 15,103,597 87,197 5,741,594 25,880,361
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
Net change in
unrealized
appreciation
(depreciation). (84,369,943) 6,067,282 -- (7,862,714) (10,010,653) 4,048,532 (9,297,073) 6,124,768
Net realized
gain (loss) on
investments.... 19,029,166 (958,391) -- 6,585,138 7,024,574 (878,465) 5,539,394 2,617,874
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
Net realized and
unrealized gain
(loss) on
investments.... (65,340,777) 5,108,891 -- (1,277,576) (2,986,079) 3,170,067 (3,757,679) 8,742,642
------------ ---------- ---------- ----------- ----------- ---------- ----------- ----------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... $(68,934,781) $3,981,361 $2,409,197 $(2,074,151) $(1,496,091) $2,868,234 $(2,389,607) $8,583,665
============ ========== ========== =========== =========== ========== =========== ==========
<CAPTION>
U.S.
GOVERNMENT
SUB-ACCOUNT
-----------
<S> <C>
INCOME:
Dividends....... $ --
-----------
EXPENSES:
Mortality and
expense risk
charge......... 87,689
Administrative
charge......... 40,439
-----------
Total expenses.. 128,128
-----------
Net investment
income......... (128,128)
-----------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... (898,689)
End of period... (48,073)
-----------
Net change in
unrealized
appreciation
(depreciation). 850,616
Net realized
gain (loss) on
investments.... (100,971)
-----------
Net realized and
unrealized gain
(loss) on
investments.... 749,645
-----------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... $621,517
===========
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
STRATEGIC
EQUITY INTERNATIONAL VENTURE BOND PUTNAM EQUITY-
BALANCED GROWTH MAGNUM EQUITY VALUE OPPORTUNITIES INTERNATIONAL INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ----------- ------------- ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME:
Dividends....... $ 12,674 $2,640,450 $ 331,555 $ -- $ -- $ 15,806 $13,374,697 $ 11,606,075
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
EXPENSES:
Mortality and
expense risk
charge......... 262,133 1,761,299 137,212 1,258,526 191,264 6,132 1,064,664 781,605
Administrative
charge......... 130,827 846,509 66,916 609,517 89,462 3,054 522,149 382,351
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
Total expenses.. 392,960 2,607,808 204,128 1,868,043 280,726 9,186 1,586,813 1,163,956
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
Net investment
income......... (380,286) 32,642 127,427 (1,868,043) (280,726) 6,620 11,787,884 10,442,119
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... (288,325) 71,954,566 4,080,702 55,117,179 (3,190,060) -- 46,113,220 36,352,607
End of period... (1,801,352) 63,800,017 1,154,733 65,045,628 (1,766,976) (169,695) 28,314,593 6,535,048
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
Net change in
unrealized
appreciation
(depreciation). (1,513,027) (8,154,549) (2,925,969) 9,928,449 1,423,084 (169,695) (17,798,627) (29,817,559)
Net realized
gain (loss) on
investments.... 1,140,992 7,286,831 699,813 3,935,866 (366,997) 3,500 9,094,591 4,441,287
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
Net realized and
unrealized gain
(loss) on
investments.... (372,035) (867,718) (2,226,156) 13,864,315 1,056,087 (166,195) (8,704,036) (25,376,272)
---------- ---------- ----------- ----------- ---------- --------- ----------- ------------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... $ (752,321) $ (835,076) $(2,098,729) $11,996,272 $ 775,361 $(159,575) $ 3,083,848 $(14,934,153)
========== ========== =========== =========== ========== ========= =========== ============
<CAPTION>
TOTAL
-------------
<S> <C>
INCOME:
Dividends....... $ 41,610,118
-------------
EXPENSES:
Mortality and
expense risk
charge......... 15,171,443
Administrative
charge......... 7,410,828
-------------
Total expenses.. 22,582,271
-------------
Net investment
income......... 19,027,847
-------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net unrealized
appreciation
(depreciation)
on investments:
Beginning of
period......... 367,746,393
End of period... 224,269,315
-------------
Net change in
unrealized
appreciation
(depreciation). (143,477,078)
Net realized
gain (loss) on
investments.... 65,094,202
-------------
Net realized and
unrealized gain
(loss) on
investments.... (78,382,876)
-------------
NET INCREASE
(DECREASE) IN
NET ASSETS
RESULTING FROM
OPERATIONS...... ($59,355,029)
=============
</TABLE>
See Notes to Financial Statements
F-7
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CAPITAL MONEY MIDCAP GROWTH AND
GROWTH BOND INCOME MARKET STOCK INDEX MANAGED VALUE INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income.......... $ 150,550,490 $ 6,892,703 $ 2,489,511 $ 870,805 $ 18,812,134 $ (111,495) $ 12,635,099 $ (743,518)
Net realized and
unrealized
gain (loss) on
investments... (45,521,167) (9,501,620) -- 12,659,381 (6,638,010) (208,308) (4,710,703) 18,270,935
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
investment
activities..... 105,029,323 (2,608,917) 2,489,511 13,530,186 12,174,124 (319,803) 7,924,396 17,527,417
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 21,720,726 3,982,893 4,392,239 1,527,449 2,926,306 1,200,036 3,951,032 3,110,909
Net transfers
(to) from other
sub-accounts... (42,369,603) (7,990,514) 33,003,847 6,112,025 (2,356,625) (5,420,405) 7,476,182 (9,113,553)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (80,066,854) (15,975,607) (29,268,644) (8,149,748) (17,447,521) (3,254,109) (10,388,029) (7,026,279)
Annuity
benefits...... (4,177,571) (1,457,127) (2,066,596) (331,923) (1,861,017) (74,445) (677,026) (391,031)
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (104,893,302) (21,440,355) 6,060,846 (842,197) (18,738,857) (7,548,923) 362,159 (13,419,954)
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 136,021 (24,049,272) 8,550,357 12,687,989 (6,564,733) (7,868,726) 8,286,555 4,107,463
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 831,738,970 142,526,183 71,333,786 73,116,140 155,184,159 38,473,704 99,391,729 75,709,596
------------- ------------ ------------ ----------- ------------ ----------- ------------ ------------
NET ASSETS, AT
END OF THE YEAR. $ 831,874,991 $118,476,911 $ 79,884,143 $85,804,129 $148,619,426 $30,604,978 $107,678,284 $ 79,817,059
============= ============ ============ =========== ============ =========== ============ ============
<CAPTION>
U.S.
GOVERNMENT
SUB-ACCOUNT
------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income.......... $ 590,827
Net realized and
unrealized
gain (loss) on
investments... (796,075)
-----------
Increase
(decrease) in
net assets
derived from
investment
activities..... (205,248)
-----------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 483,391
Net transfers
(to) from other
sub-accounts... (1,523,591)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (1,810,602)
Annuity
benefits...... (375,865)
-----------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (3,226,667)
-----------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (3,431,915)
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 16,878,032
-----------
NET ASSETS, AT
END OF THE YEAR. $13,446,117
===========
</TABLE>
See Notes to Financial Statements
F-8
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
STRATEGIC
EQUITY INTERNATIONAL VENTURE BOND
BALANCED GROWTH MAGNUM EQUITY VALUE OPPORTUNITIES EQUITY-INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 1,953,442 $ 25,198,825 $ (195,124) $ 979,552 $ 1,891,560 $ 6,232,804 $ 2,261,295
Net realized and
unrealized gain
(loss) on
investments.... (5,141,790) 25,713,316 4,089,942 21,381,095 (1,935,504) 2,706,993 31,525,886
----------- ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
investment
activities..... (3,188,348) 50,912,141 3,894,818 22,360,647 (43,944) 8,939,797 33,787,181
----------- ------------ ----------- ------------ ----------- ------------ ------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 2,298,968 6,622,737 636,928 5,877,661 1,215,713 5,594,484 3,137,518
Net transfers
(to) from other
sub-accounts... (4,423,494) 43,747,487 (1,117,734) 5,314,675 (5,003,804) (11,857,048) (4,477,845)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (3,971,459) (14,945,949) (1,567,630) (13,755,714) (2,632,262) (16,625,208) (8,175,196)
Annuity
benefits...... (320,564) (775,266) (97,691) (869,039) (240,640) (1,027,216) (458,291)
----------- ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (6,416,549) 34,649,009 (2,146,127) (3,432,417) (6,660,993) (23,914,988) (9,973,814)
----------- ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (9,604,897) 85,561,150 1,748,691 18,928,230 (6,704,937) (14,975,191) 23,813,367
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 53,836,730 139,364,909 18,998,370 143,516,062 35,975,353 188,924,290 92,265,042
----------- ------------ ----------- ------------ ----------- ------------ ------------
NET ASSETS, AT
END OF THE YEAR. $44,231,833 $224,926,059 $20,747,061 $162,444,292 $29,270,416 $173,949,099 $116,078,409
=========== ============ =========== ============ =========== ============ ============
<CAPTION>
TOTAL
---------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 230,308,910
Net realized and
unrealized gain
(loss) on
investments.... 41,894,371
--------------
Increase
(decrease) in
net assets
derived from
investment
activities..... 272,203,281
--------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 68,678,990
Net transfers
(to) from other
sub-accounts... --
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (235,060,811)
Annuity
benefits...... (15,201,308)
--------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (181,583,129)
--------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 90,620,152
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 2,177,233,055
--------------
NET ASSETS, AT
END OF THE YEAR. $2,267,853,207
==============
</TABLE>
See Notes to Financial Statements
F-9
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CAPITAL MONEY MIDCAP GROWTH AND
GROWTH BOND INCOME MARKET STOCK INDEX MANAGED VALUE INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 97,821,413 $ 8,206,703 $ 2,326,567 $ 141,152 $ 11,399,822 $ 8,503,761 $ 5,704,275 $ 211,504
Net realized and
unrealized gain
(loss) on
investments.... 108,477,121 1,651,852 -- 15,283,573 13,486,856 (11,608,473) 11,264,348 (2,763,683)
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
Increase
(decrease) in
net assets
derived from
investment
activities..... 206,298,534 9,858,555 2,326,567 15,424,725 24,886,678 (3,104,712) 16,968,623 (2,552,179)
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 40,049,726 9,884,251 21,340,577 1,452,914 3,314,419 3,200,779 10,189,551 9,221,354
Net transfers
(to) from other
sub-accounts... (16,399,017) 7,345,385 10,492,616 1,106,109 (4,093,865) (5,037,997) 10,591,095 (1,407,877)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (55,755,674) (12,177,589) (15,124,947) (4,948,891) (13,125,043) (2,832,814) (7,306,989) (5,507,926)
Annuity
benefits...... (5,896,454) (1,217,314) (2,867,828) (319,600) (1,533,523) (366,760) (316,533) (449,424)
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (38,001,419) 3,834,733 13,840,418 (2,709,468) (15,438,012) (5,036,792) 13,157,124 1,856,127
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 168,297,115 13,693,288 16,166,985 12,715,257 9,448,666 (8,141,504) 30,125,747 (696,052)
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 663,441,855 128,832,895 55,166,801 60,400,883 145,735,493 46,615,208 69,265,982 76,405,648
------------ ------------ ------------ ----------- ------------ ------------ ----------- -----------
NET ASSETS, AT
END OF THE YEAR. $831,738,970 $142,526,183 $ 71,333,786 $73,116,140 $155,184,159 $ 38,473,704 $99,391,729 $75,709,596
============ ============ ============ =========== ============ ============ =========== ===========
<CAPTION>
U.S.
GOVERNMENT
SUB-ACCOUNT
------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 532,480
Net realized and
unrealized gain
(loss) on
investments.... 205,220
------------
Increase
(decrease) in
net assets
derived from
investment
activities..... 737,700
------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 1,780,311
Net transfers
(to) from other
sub-accounts... 4,991,367
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (1,299,860)
Annuity
benefits....... (39,667)
------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... 5,432,151
------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 6,169,851
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 10,708,181
------------
NET ASSETS, AT
END OF THE YEAR. $16,878,032
============
</TABLE>
See Notes to Financial Statements
F-10
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
STRATEGIC
EQUITY INTERNATIONAL VENTURE BOND
BALANCED GROWTH MAGNUM EQUITY VALUE OPPORTUNITIES EQUITY-INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------- ------------ ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 1,600,374 $ 3,400,965 $ 140,808 $ 2,031,528 $ 1,926,025 $ 8,910,295 $ 5,777,425
Net realized and
unrealized gain
(loss) on
investments.... 2,044,148 38,319,444 778,190 13,407,368 (1,779,711) 8,638,393 3,955,853
----------- ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
investment
activities... 3,644,522 41,720,409 918,998 15,438,896 146,314 17,548,688 9,733,278
----------- ------------ ----------- ------------ ----------- ------------ ------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 7,354,133 11,871,287 1,872,270 18,560,719 6,181,058 13,382,867 6,400,225
Net transfers
(to) from other
sub-accounts... 409,136 8,530,395 (1,287,125) 2,835,730 (476,855) (8,394,490) (9,204,607)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (3,955,175) (8,522,044) (1,383,343) (9,477,930) (2,850,826) (13,042,340) (6,886,447)
Annuity
benefits...... (523,862) (687,556) (105,037) (708,014) (193,496) (1,264,955) (628,414)
----------- ------------ ----------- ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... 3,284,232 11,192,082 (903,235) 11,210,505 2,659,881 (9,318,918) (10,319,243)
----------- ------------ ----------- ------------ ----------- ------------ ------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 6,928,754 52,912,491 15,763 26,649,401 2,806,195 8,229,770 (585,965)
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 46,907,976 86,452,418 18,982,607 116,866,661 33,169,158 180,694,520 92,851,007
----------- ------------ ----------- ------------ ----------- ------------ ------------
NET ASSETS, AT
END OF THE YEAR. $53,836,730 $139,364,909 $18,998,370 $143,516,062 $35,975,353 $188,924,290 $ 92,265,042
=========== ============ =========== ============ =========== ============ ============
<CAPTION>
TOTAL
---------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 158,635,097
Net realized and
unrealized gain
(loss) on
investments.... 201,360,499
---------------
Increase
(decrease) in
net assets
derived from
investment
activities... 359,995,596
---------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 166,056,441
Net transfers
(to) from other
sub-accounts... --
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (164,197,838)
Annuity
benefits...... (17,118,437)
---------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (15,259,834)
---------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... 344,735,762
NET ASSETS, AT
BEGINNING OF THE
YEAR............ 1,832,497,293
---------------
NET ASSETS, AT
END OF THE YEAR. $2,177,233,055
===============
</TABLE>
See Notes to Financial Statements
F-11
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
CAPITAL MONEY MIDCAP GROWTH AND
GROWTH BOND INCOME MARKET STOCK INDEX MANAGED VALUE INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ (3,594,004) $ (1,127,530) $ 2,409,197 $ (796,575) $ 1,489,988 $ (301,833) $ 1,368,072 $ (158,977)
Net realized and
unrealized gain
(loss) on
investments.... (65,340,777) 5,108,891 -- (1,277,576) (2,986,079) 3,170,067 (3,757,679) 8,742,642
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
Increase
(decrease) in
net assets
derived from
investment
activities..... (68,934,781) 3,981,361 2,409,197 (2,074,151) (1,496,091) 2,868,234 (2,389,607) 8,583,665
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 10,970,106 1,672,105 1,947,833 1,028,074 1,701,239 672,778 2,110,939 2,077,418
Net transfers
(to) from other
sub-accounts... (38,514,769) (10,368,470) (18,656,189) 4,603,529 (5,594,708) (1,491,891) (7,417,100) 27,748,864
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (82,545,405) (12,368,910) (20,732,535) (10,822,379) (17,131,922) (3,668,058) (9,159,311) (10,942,414)
Annuity
benefits...... (3,422,469) (811,381) 26,302,626 (301,425) (860,168) (72,801) (399,752) (71,007)
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
INCREASE
(DECREASE) IN
NET ASSETS
DERIVED FROM
CONTACT-RELATED
TRANSACTIONS.... (113,512,537) (21,876,656) (11,138,265) (5,492,201) (21,885,559) (4,559,972) (14,865,224) 18,812,861
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (182,447,318) (17,895,295) (8,729,068) (7,566,352) (23,381,650) (1,691,738) (17,254,831) 27,396,526
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 831,874,991 118,476,911 79,884,143 85,804,129 148,619,426 30,604,978 107,678,284 79,817,059
------------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
NET ASSETS, AT
END OF THE
PERIOD.......... $ 649,427,673 $100,581,616 $ 71,155,075 $ 78,237,777 $125,237,776 $28,913,240 $ 90,423,453 $107,213,585
============= ============ ============ ============ ============ =========== ============ ============
<CAPTION>
U.S.
GOVERNMENT
SUB-ACCOUNT
------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ (128,128)
Net realized and
unrealized gain
(loss) on
investments.... 749,645
------------
Increase
(decrease) in
net assets
derived from
investment
activities..... 621,517
------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 177,654
Net transfers
(to) from other
sub-accounts... (757,119)
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders..... (1,162,267)
Annuity
benefits...... (153,638)
------------
INCREASE
(DECREASE) IN
NET ASSETS
DERIVED FROM
CONTACT-RELATED
TRANSACTIONS.... (1,895,370)
------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (1,273,853)
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 13,446,117
------------
NET ASSETS, AT
END OF THE
PERIOD.......... $12,172,264
============
</TABLE>
See Notes to Financial Statements
F-12
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENT OF CHANGES IN NET ASSETS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
STRATEGIC
EQUITY INTERNATIONAL VENTURE BOND PUTNAM EQUITY-
BALANCED GROWTH MAGNUM EQUITY VALUE OPPORTUNITIES INTERNATIONAL INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
------------ ------------ ------------- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ (380,286) $ 32,642 $ 127,427 $ (1,868,043) $ (280,726) $ 6,620 $ 11,787,884 $ 10,442,119
Net realized and
unrealized gain
(loss) on
investments.... (372,035) (867,718) (2,226,156) 13,864,315 1,056,087 (166,195) (8,704,036) (25,376,272)
------------ ------------ ----------- ------------ ----------- ---------- ------------ ------------
Increase
(decrease) in
net assets
derived from
investment
activities..... (752,321) (835,076) (2,098,729) 11,996,272 775,361 (159,575) 3,083,848 (14,934,153)
------------ ------------ ----------- ------------ ----------- ---------- ------------ ------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 918,205 5,067,489 398,675 3,504,262 434,664 157,109 2,531,143 2,047,769
Net transfers
(to) from other
sub-accounts... (7,495,840) 46,574,397 459,086 23,725,066 (2,928,898) 2,874,050 (19,865,829) 7,105,821
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders...... (4,076,989) (28,688,351) (2,554,392) (18,336,897) (2,211,588) (66,183) (17,178,077) (11,551,172)
Annuity
benefits....... (198,568) (334,166) (49,162) (221,391) (208,784) (933) (684,051) (412,848)
------------ ------------ ----------- ------------ ----------- ---------- ------------ ------------
Increase
(decrease) in
net assets
derived from
contract-
related
transactions... (10,853,192) 22,619,369 (1,745,793) 8,671,040 (4,914,606) 2,964,043 (35,196,814) (2,810,430)
------------ ------------ ----------- ------------ ----------- ---------- ------------ ------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (11,605,513) 21,784,293 (3,844,522) 20,667,312 (4,139,245) 2,804,468 (32,112,966) (17,744,583)
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 44,231,833 224,926,059 20,747,061 162,444,292 29,270,416 -- 173,949,099 116,078,409
------------ ------------ ----------- ------------ ----------- ---------- ------------ ------------
NET ASSETS, AT
END OF THE
PERIOD.......... $ 32,626,320 $246,710,352 $16,902,539 $183,111,604 $25,131,171 $2,804,468 $141,836,133 $ 98,333,826
============ ============ =========== ============ =========== ========== ============ ============
<CAPTION>
TOTAL
---------------
<S> <C>
FROM INVESTMENT
ACTIVITIES:
Net investment
income......... $ 19,027,847
Net realized and
unrealized gain
(loss) on
investments.... (78,382,876)
---------------
Increase
(decrease) in
net assets
derived from
investment
activities..... (59,355,029)
---------------
FROM CONTRACT-
RELATED
TRANSACTIONS:
Net premiums
transferred
from
Metropolitan
Life Insurance
Company........ 37,417,462
Net transfers
(to) from other
sub-accounts... --
Net transfers to
Metropolitan
Life Insurance
Company
Surrenders...... (253,196,850)
Annuity
benefits....... 18,100,082
---------------
Increase
(decrease) in
net assets
derived from
contract-related
transactions... (197,679,306)
---------------
NET INCREASE
(DECREASE) IN
NET ASSETS...... (257,034,335)
NET ASSETS, AT
BEGINNING OF THE
PERIOD.......... 2,267,853,207
---------------
NET ASSETS, AT
END OF THE
PERIOD.......... $2,010,818,872
===============
</TABLE>
See Notes to Financial Statements
F-13
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
1. NATURE OF OPERATIONS.
The New England Variable Account (the "Account") is registered as a unit
investment trust under the Investment Company Act of 1940 and is a funding
vehicle for individual variable annuity contracts. The operations of the
Account are part of Metropolitan Life Insurance Company (the "Company"). Prior
to August 30, 1996, the Account was a part of New England Mutual Life
Insurance Company. Effective August 30, 1996, New England Mutual Life
Insurance Company merged into Metropolitan Life Insurance Company ("MetLife").
MetLife is a wholly-owned subsidiary of MetLife Inc., a publicly traded
company. The Account has seventeen investment sub-accounts as of September 30,
2000, each of which invests in one series of the New England Zenith Fund
("Zenith Fund"), one portfolio of the Metropolitan Series Fund, Inc. (Met
Series Fund) or one portfolio of the Variable Insurance Products Fund. The
Zenith Fund, Met Series Fund and the Variable Insurance Products Fund ("VIP")
are diversified, open-end management investment companies. The series of the
Zenith Fund and portfolios of the Met Series Fund and Variable Insurance
Products Fund in which the sub-accounts invest are referred to herein as the
"Eligible Funds."
2. SIGNIFICANT ACCOUNTING POLICIES.
The following is a summary of the significant accounting policies
consistently followed by the Account.
A. Security Valuation--The Eligible Fund shares are valued at the closing
net asset value per share as determined by each fund as of the close of
regular trading on the New York Stock Exchange (currently 4:00 p.m. Eastern
Standard Time) on each day the Exchange is open for trading.
B. Security Transactions and Related Investment Income--Security
transactions are accounted for on the trade date (the date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date. Net investment income and net realized and unrealized gains and
losses on investments are allocated to the contracts on each valuation date
based upon the contract's pro rata share of each sub-account. Realized
gains and losses from sales of investments are computed on the basis of
first in first out.
C. Federal Income Taxes--The operations of the Account are included in
the federal income tax return of the Company, which is taxed as a Life
Insurance Company under the provisions of the Internal Revenue Code (the
"Code"). Under the current provisions of the Code, the Company does not
expect to incur federal income taxes on the earnings of the Account to the
extent the earnings are credited under the contracts. Based on this, no
charge is being made currently to the Account for federal income taxes. The
Company will review periodically the status of such decision based on
changes in the tax law. Such a charge may be made in future years for any
federal income taxes that would be attributable to the earnings associated
with and credited to the contracts.
D. Annuity Reserves--Annuity reserves are computed for currently payable
contracts according to the 1983-a Mortality Tables. The assumed interest
rate may be 0%, 3.5%, or 5% as elected by the annuitant and as regulated by
laws of the respective states. Adjustments to annuity reserves are
reimbursed to or from the Company. For contracts payable on or after
January 1, 1998 annuity reserves will be computed according to the Annuity
2000 Mortality Tables.
E. Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
F-14
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
3. PURCHASES AND SALES OF INVESTMENT SECURITIES.
The following table shows the aggregate cost of shares purchased and proceeds
from sales of Eligible Funds for the year ended December 31, 1999:
<TABLE>
<CAPTION>
SERIES PURCHASES SALES
------ ------------ ------------
<S> <C> <C>
NEW ENGLAND ZENITH FUND:
Capital Growth..................................... $220,255,358 $174,544,013
Back Bay Advisors Bond Income...................... 27,023,792 41,580,649
Back Bay Advisors Money Market..................... 109,091,677 100,202,198
Westpeak Stock Index............................... 19,086,922 19,047,713
Back Bay Advisors Managed.......................... 32,319,395 32,250,206
Goldman Sachs Midcap Value......................... 6,760,219 14,428,676
Westpeak Growth and Income......................... 36,225,982 23,215,349
Loomis Sayles Small Cap............................ 10,951,094 25,106,284
Salomon Brothers U.S. Government................... 5,348,031 7,987,536
Loomis Sayles Balanced............................. 9,087,678 13,559,950
Alger Equity Growth................................ 102,102,808 42,152,577
Morgan Stanley International Magnum Equity......... 4,056,745 6,395,531
Davis Venture Value................................ 30,168,023 32,593,797
Salomon Brothers Strategic Bond Opportunities...... 6,637,500 11,415,825
VARIABLE INSURANCE PRODUCTS FUND:
Equity-Income Portfolio............................ 25,581,249 43,272,093
Overseas Portfolio................................. 28,029,034 35,711,603
</TABLE>
The Account purchases or redeems shares of the sixteen Eligible Funds based
on the amount of net premiums invested in the account, transfers among the sub-
accounts, policy loans, surrender payments, and annuity payments.
F-15
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
The following table shows the aggregate cost of shares purchased and
proceeds from sales of Eligible Funds for the nine months ended September 30,
2000:
<TABLE>
<CAPTION>
SERIES PURCHASES SALES
------ ----------- ------------
<S> <C> <C>
NEW ENGLAND ZENITH FUND:
Capital Growth...................................... $38,088,758 $155,499,709
Back Bay Advisors Bond Income....................... 5,881,245 28,906,998
Back Bay Advisors Money Market...................... 72,143,667 81,224,555
Westpeak Stock Index................................ 12,349,198 18,648,567
Back Bay Advisors Managed........................... 9,719,401 30,153,732
Goldman Sachs Midcap Value.......................... 6,307,153 11,173,834
Westpeak Growth and Income.......................... 13,031,853 26,558,705
Loomis Sayles Small Cap............................. 40,394,854 21,723,937
Salomon Brothers U.S. Government.................... 1,539,501 3,565,356
Loomis Sayles Balanced.............................. 2,996,025 14,245,307
Alger Equity Growth................................. 72,478,189 49,828,334
Morgan Stanley International Magnum Equity.......... 3,665,650 5,308,750
Davis Venture Value................................. 39,743,471 32,934,367
Salomon Brothers Strategic Bond Opportunities....... 2,563,521 7,764,329
METROPOLITAN SERIES FUND:
Putnam International Stock Portfolio................ 3,385,095 532,142
VARIABLE INSURANCE PRODUCTS FUND:
Equity-Income Portfolio............................. 21,400,933 44,859,926
Overseas Portfolio.................................. 39,876,377 32,271,341
</TABLE>
The Account purchases or redeems shares of the seventeen Eligible Funds
based on the amount of net premiums invested in the account, transfers among
the sub-accounts, policy loans, surrender payments, and annuity payments.
4. CHARGES DEDUCTED BY THE COMPANY.
A. Administrative charge--a fixed administrative charge of $30.00 per
contract year is deducted from the contract value on each contract
anniversary.
B. Mortality and expense risk and administrative asset charges--a charge for
the mortality/expense risk assumed by the Company and for administrative
expenses, equal to an annual rate of 1.35% of the net assets of the Account is
deducted on a daily basis. The mortality risk is the risk that guaranteed
annuity payments or minimum death benefit payments made by the Company exceed
amounts deducted from the net assets of the Account. The expense risk is the
risk that administrative costs incurred by the Company exceed amounts deducted
from the net assets of the account.
C. Contingent deferred sales charge--In the event of a partial or full
surrender, a contingent deferred sales charge may be imposed. Charges for
investment Advisory fees and other expenses are deducted from the assets of
the Eligible Funds.
F-16
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
5. INVESTMENT ADVISERS.
The investment adviser and sub-adviser for each of the Eligible Funds are
listed in the chart below. New England Investment Management, Inc. ("NEIM")
(formerly, TNE Advisers, Inc.), which is an indirect, wholly owned subsidiary
of the Company, and each of the sub-advisers are registered with the
Securities and Exchange Commission as investment advisers under the Investment
Advisers Act of 1940.
<TABLE>
<CAPTION>
SERIES ADVISER SUB-ADVISER
------ ------- -----------
<S> <C> <C>
Capital Growth.................... Capital Growth Management, L.P.* --
Back Bay Advisors Bond Income..... NEIM Back Bay Advisors, L.P.*
Back Bay Advisors Money Market.... NEIM Back Bay Advisors, L.P.*
Westpeak Stock Index.............. NEIM Westpeak Investment Advisors, L.P.*
Back Bay Advisors Managed......... NEIM Back Bay Advisors, L.P.*
Goldman Sachs Midcap Value........ NEIM Goldman Sachs & Co.
Westpeak Growth and Income........ NEIM Westpeak Investment Advisors, L.P.*
Loomis Sayles Small Cap........... NEIM Loomis Sayles & Company, L.P.*
Salomon Brothers U.S. Government.. NEIM Salomon Brothers Asset Management Inc
Loomis Sayles Balanced............ NEIM Loomis Sayles & Company, L.P.*
Alger Equity Growth............... NEIM Fred Alger Management, Inc.
Morgan Stanley International Morgan Stanley Dean Witter Investment
Magnum Equity.................... NEIM Management Inc.
Davis Venture Value............... NEIM Davis Selected Advisers, Inc. (a)
Salomon Brothers Strategic Bond
Opportunities.................... NEIM Salomon Brothers Asset Management Inc (b)
Putnam International Stock
Portfolio........................ Metropolitan Life Insurance Company Putnam Investment Management, Inc.
VIP Equity-Income Portfolio....... Fidelity Management & Research Co. --
VIP Overseas Portfolio... Fidelity Management & Research Co. --
</TABLE>
--------
* An Affiliate of the Company
(a). Davis Selected Advisers, L.P. may also delegate any of its
responsibilities to Davis Selected Advisers-NY, Inc. a wholly-owned
subsidiary of Davis Selected Advisers, L.P.
(b). In connection with Salomon Brothers Asset Management Inc's service as
subadviser to the Strategic Bond Opportunities Series, Salomon Brothers
Asset Management Inc's London based affiliate, Salomon Brothers Asset
Management Limited provides certain subadvisory services to Salomon
Brothers Asset Management Inc.
Effective May 1, 1998, Goldman Sachs Asset Management, ("Goldman Sachs"),
became the subadvisor of the Loomis Sayles Avanti Growth Series, succeeding
Loomis Sayles & Company, L.P., and the name of the Series was changed to the
"Goldman Sachs Midcap Value Series". Goldman Sachs is a separate operating
division of Goldman, Sachs & Co.
Effective March 26, 1999, TNE Advisers, Inc. changed its name to New England
Investment Management, Inc.
6. REGISTRATION EXPENSES.
The company has assumed the cost of registering the Account and its
contracts for distribution under applicable federal and state laws.
F-17
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
7. VARIABLE ANNUITY CONTRACT UNIT ACTIVITY.
A summary of units outstanding for variable annuity contracts at December
31, 1999:
<TABLE>
<CAPTION>
CAPITAL GROWTH BOND INCOME MONEY MARKET STOCK INDEX MANAGED MIDCAP VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Units
Outstanding
1/1/99.......... 38,236,510.5847 38,638,164.8915 33,735,645.3769 15,293,054.6164 42,359,235.0648 21,347,180.9398
Units Purchased. 887,085.3860 1,612,936.8887 22,633,109.9581 1,937,975.4491 1,488,929.2495 2,061,585.5997
Units Redeemed.. (5,621,567.0330) (7,543,680.1657) (19,887,546.6586) (2,119,968.4025) (6,457,136.7364) (6,256,951.7131)
--------------- --------------- ---------------- --------------- --------------- ---------------
Units
Outstanding
12/31/99........ 33,502,038.9377 32,707,421.6145 36,481,208.6764 15,111,061.6630 37,391,027.5779 17,151,814.8264
=============== =============== ================ =============== =============== ===============
Unit Value
12/31/99........ $ 24.830578 $ 3.622325 $ 2.189734 $ 5.678233 $ 3.974735 $ 1.784358
=============== =============== ================ =============== =============== ===============
<CAPTION>
INTERNATIONAL STRATEGIC BOND
U.S. GOVERNMENT BALANCED EQUITY GROWTH MAGNUM EQUITY VENTURE VALUE OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Units Outstand-
ing 1/1/99..... 12,796,188.5960 30,825,179.0133 49,255,941.6244 16,325,859.4584 58,766,565.1982 24,944,929.6244
Units Purchased. 1,600,855.9932 1,693,840.1258 16,105,744.3097 2,032,515.5048 4,844,041.6760 1,348,799.8282
Units Redeemed.. (4,082,093.0259) (5,480,264.7896) (5,289,276.4870) (3,856,917.6224) (6,239,718.2305) (6,014,847.8721)
--------------- --------------- ---------------- --------------- --------------- ---------------
Units Outstand-
ing 12/31/99... 10,314,951.5633 27,038,754.3495 60,072,409.4471 14,501,457.3408 57,370,888.6437 20,278,881.5805
=============== =============== ================ =============== =============== ===============
Unit Value
12/31/99....... $ 1.303556 $ 1.635868 $ 3.744249 $ 1.430688 $ 2.831476 $ 1.443394
=============== =============== ================ =============== =============== ===============
<CAPTION>
GROWTH
AND INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT
---------------- -----------------
<S> <C> <C>
Units
Outstanding
1/1/99.......... 35,514,613.1211 40,318,543.2206
Units Purchased. 4,186,617.5092 2,636,531.4514
Units Redeemed.. (4,038,033.2982) (10,254,663.9967)
---------------- -----------------
Units
Outstanding
12/31/99........ 35,663,197.3321 32,700,410.6753
================ =================
Unit Value
12/31/99........ $ 3.019311 $ 2.440858
================ =================
<CAPTION>
EQUITY INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT
---------------- -----------------
<S> <C> <C>
Units Outstand-
ing 1/1/99..... 42,927,201.9630 40,546,509.4817
Units Purchased. 1,643,864.8425 4,116,135.7036
Units Redeemed.. (6,894,221.0205) (8,411,467.7398)
---------------- -----------------
Units Outstand-
ing 12/31/99... 37,676,845.7850 36,251,177.4455
================ =================
Unit Value
12/31/99....... $ 4.616870 $ 3.202059
================ =================
</TABLE>
F-18
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
OF
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2000 IS
UNAUDITED.)
A summary of units outstanding for variable annuity contracts at September
30, 2000:
<TABLE>
<CAPTION>
CAPITAL GROWTH BOND INCOME MONEY MARKET STOCK INDEX MANAGED MIDCAP VALUE
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Units
Outstanding
1/1/00.......... 33,502,038.9377 32,707,421.6145 36,481,208.6764 15,111,061.6630 37,391,027.5779 17,151,814.8264
Units Purchased. 330,984.8424 419,430.3792 8,147,911.9792 907,816.4312 690,507.3933 1,239,095.2024
Units Redeemed.. (5,081,509.5975) (6,413,614.7057) (13,232,526.3364) (1,901,731.4989) (6,259,299.5135) (3,842,020.9744)
--------------- --------------- ---------------- --------------- --------------- ---------------
Units
Outstanding
9/30/00......... 28,751,514.1826 26,713,237.2880 31,396,594.3192 14,117,146.5953 31,822,235.4577 14,548,889.0544
=============== =============== ================ =============== =============== ===============
Unit Value
9/30/00......... $ 22.587599 $ 3.765235 $ 2.266331 $ 5.542039 $ 3.935543 $ 1.987316
=============== =============== ================ =============== =============== ===============
<CAPTION>
GROWTH AND
INCOME SMALL CAP
SUB-ACCOUNT SUB-ACCOUNT
---------------- ----------------
<S> <C> <C>
Units
Outstanding
1/1/00.......... 35,663,197.3321 32,700,410.6753
Units Purchased. 1,428,093.1808 11,652,304.5434
Units Redeemed.. (6,549,925.4653) (4,883,732.1783)
---------------- ----------------
Units
Outstanding
9/30/00......... 30,541,365.0476 39,468,983.0404
================ ================
Unit Value
9/30/00......... $ 2.960688 $ 2.716401
================ ================
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL STRATEGIC BOND
U.S. GOVERNMENT BALANCED EQUITY GROWTH MAGNUM EQUITY VENTURE VALUE OPPORTUNITIES
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Units
Outstanding
1/1/00.......... 10,314,951.5633 27,038,754.3495 60,072,409.4471 14,501,457.3408 57,370,888.6437 20,278,881.5805
Units Purchased. 1,536,385.5442 956,127.4080 10,978,234.7949 439,913.8912 8,747,457.1063 559,538.5808
Units Redeemed.. (2,984,814.2795) (7,753,119.5887) (5,099,346.1760) (1,743,222.5994) (5,916,802.0448) (3,931,922.2602)
--------------- --------------- --------------- --------------- --------------- ---------------
Units
Outstanding
9/30/00......... 8,866,522.8280 20,241,762.1688 65,951,298.0660 13,198,148.6326 60,201,543.7052 16,906,497.9011
=============== =============== =============== =============== =============== ===============
Unit Value
9/30/00......... $ 1.372834 $ 1.611832 $ 3.740796 $ 1.280675 $ 3.041643 $ 1.486480
=============== =============== =============== =============== =============== ===============
<CAPTION>
PUTNAM
INTERNATIONAL EQUITY INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------- ---------------- ----------------
<S> <C> <C> <C>
Units
Outstanding
1/1/00.......... 0.0000 37,676,845.7850 36,251,177.4455
Units Purchased. 1,834,258.1341 470,101.0752 1,799,288.0837
Units Redeemed.. (7,584.6848) (8,380,788.1949) (2,820,329.9411)
--------------- ---------------- ----------------
Units
Outstanding
9/30/00......... 1,826,673.4493 29,766,158.6653 35,230,135.5881
=============== ================ ================
Unit Value
9/30/00......... $ 1.535287 $ 4.765013 $ 2.791185
=============== ================ ================
</TABLE>
F-19
<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 INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA NINE
NINE MONTHS MONTHS ENDED
ENDED SEPTEMBER 30,
SEPTEMBER 30, (NOTE 4)
---------------- --------------
2000 1999 2000
------- ------- --------------
<S> <C> <C> <C>
REVENUES
Premiums $10,117 $ 8,724 $ 9,223
Universal life and investment-type product
policy fees 1,367 1,019 1,367
Net investment income 7,402 7,189 6,683
Other revenues 1,995 1,579 2,006
Net realized investment losses (net of
amounts allocable to other accounts of $14,
$37 and $3, respectively) (431) (177) (411)
Contribution from the closed block 36 -- 60
------- ------- -------
20,486 18,334 18,928
======= ======= =======
EXPENSES
Policyholder benefits and claims (includes
amounts directly related to net realized
investment losses of $3, $11 and $2,
respectively) 10,539 9,554 9,623
Interest credited to policyholder account
balances 2,175 1,832 2,176
Policyholder dividends 693 1,237 314
Payments to former Canadian policyholders 327 -- --
Other expenses (includes amounts directly
related to net realized investment losses of
$11, $26 and $1, respectively) 5,768 4,930 5,490
------- ------- -------
19,502 17,553 17,603
======= ======= =======
Income before provision for income taxes and
extraordinary item 984 781 1,325
Provision for income taxes 449 353 422
------- ------- -------
Income before extraordinary item 535 428 903
Extraordinary item--demutualization expense 170 77 --
------- ------- -------
Net income $ 365 $ 351 $ 903
======= ======= =======
Net income after date of demutualization
(Note 1) $ 585
=======
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-1
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value $ 85,709 $ 96,981
Equity securities, at fair value 2,276 2,006
Mortgage loans on real estate 16,110 19,739
Real estate and real estate joint ventures 5,638 5,649
Policy loans 4,259 5,598
Other limited partnership interests 1,619 1,331
Short-term investments 1,645 3,055
Other invested assets 1,695 1,501
-------- --------
118,951 135,860
Cash and cash equivalents 1,615 2,789
Accrued investment income 1,528 1,725
Premiums and other receivables 8,065 6,681
Deferred policy acquisition costs 6,923 9,069
Deferred income taxes 241 603
Other 4,606 3,564
Closed block assets 39,533 --
Separate account assets 75,103 64,941
-------- --------
$256,565 $225,232
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Future policy benefits $ 41,957 $ 73,582
Policyholder account balances 53,339 45,901
Other policyholder funds 5,446 4,498
Policyholder dividends payable 315 974
Short-term debt 1,765 4,208
Long-term debt 2,903 2,514
Current income taxes payable 355 548
Other 16,904 14,376
Closed block liabilities 43,113 --
Separate account liabilities 75,103 64,941
-------- --------
241,200 211,542
-------- --------
Commitments and contingencies (Note 7)
Company-obligated mandatorily redeemable securities of
subsidiary trusts holding solely junior subordinated
debentures of their Parents 118 --
-------- --------
Stockholders' Equity:
Common stock, par value $.01 per share; 1,000,000,000
shares authorized; 493,903,472 shares issued 5 --
Additional paid-in capital 14,559 --
Retained earnings 585 14,100
Accumulated other comprehensive income (loss) 98 (410)
-------- --------
15,247 13,690
-------- --------
$256,565 $225,232
======== ========
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-2
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN MILLIONS)
<TABLE>
<CAPTION>
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
-------------------------------------
NET FOREIGN MINIMUM
ADDITIONAL UNREALIZED CURRENCY PENSION
COMMON PAID-IN RETAINED INVESTMENT TRANSLATION LIABILITY
STOCK CAPITAL EARNINGS GAINS (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 3,642 3,642
Comprehensive income:
Net loss before date of
demutualization (220) (220)
Net income after date
of demutualization 585 585
Other comprehensive
income:
Unrealized investment
gains, net of related
offsets,
reclassification
adjustments and
income taxes 518 518
Foreign currency
translation
adjustments (10) (10)
Minimum pension
liability adjustment -- --
-------
Other comprehensive
income 508
-------
Comprehensive income 873
---- ------- -------- ----- ----- ---- -------
Balance at September 30,
2000 $ 5 $14,559 $ 585 $ 221 $(104) $(19) $15,247
==== ======= ======== ===== ===== ==== =======
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-3
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,560 $ 3,564
CASH FLOWS FROM INVESTING ACTIVITIES
Sales maturities and repayments:
Fixed maturities 28,919 56,979
Equity maturities 480 444
Mortgage loans on real estate 1,459 1,234
Real estate and real estate joint ventures 434 588
Other limited partnership interests 366 397
Purchases of:
Fixed maturities (33,796) (56,334)
Equity maturities (526) (270)
Mortgage loans on real estate (1,030) (3,491)
Real estate and real estate joint ventures (337) (234)
Other limited partnership interests (539) (290)
Net change in short-term investments 1,505 (3,043)
Net change in policy loans (179) 42
Purchase of business, net of cash acquired (416) (267)
Proceeds from sales of businesses 121 --
Net change in investment collateral 1,877 2,356
Other, net 137 (155)
-------- --------
Net cash used in investing activities (1,525) (2,044)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital Contribution from Parent 3,642 --
Cash payments for eligible policyholders (2,550) --
Policyholder account balances:
Deposits 20,236 17,420
Withdrawals (20,268) (18,873)
Short-term debt, net (2,442) 2,035
Long-term debt issued 204 66
Long-term debt repaid (31) (416)
-------- --------
Net cash provided by (used in) financing activities (1,209) 232
-------- --------
Change in cash and cash equivalents (1,174) 1,752
Cash and cash equivalents, beginning of period 2,789 3,301
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,615 $ 5,053
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 304 $ 283
======== ========
Income taxes $ 279 $ 354
======== ========
Non-cash transactions during the period:
Policy credits to eligible policyholders $ 408 $ --
======== ========
Business acquisitions--assets $ 23,729 $ --
======== ========
Business acquisitions--liabilities $ 22,482 $ --
======== ========
</TABLE>
See accompanying notes to unaudited interim condensed consolidated financial
statements.
F-4
<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 (the "date of demutualization"), 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, as
amended (the "plan").
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, as a result of a commitment made in connection with obtaining Canadian
regulatory approval of that sale.
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 included in MetLife's
Registration Statement on Form S-1 (registration no. 333-91517) filed with the
Securities and Exchange Commission.
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 income include
extraordinary charges of $170 (net of income tax benefit of $60) and $77 (net
of income tax benefit of $15) for the nine months ended September 30, 2000 and
1999, respectively, related to costs associated with the demutualization.
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
F-5
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
annual effective tax rate. Income tax expense for the nine months ended
September 30, 2000 reflects the effect of surplus tax for the period prior to
demutualization and the non-deductible payment in the second quarter 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 as 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 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 and, accordingly, will recognize only the expected cumulative
contribution in income with the excess recorded as a policyholder dividend
obligation. 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 policyholder dividend scales in the future,
which would be intended to increase future actual contributions until the
actual cumulative contributions equal the expected cumulative contributions.
The results of operations of the closed block are presented as a single line
item in the Company's condensed consolidated statements of income 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 sheets 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 currently in 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
F-6
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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 stockholders' equity or net income.
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, in each case
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.
DIVIDEND RESTRICTION
Under the New York Insurance Law, Metropolitan Life is permitted without
prior insurance regulatory clearance to pay a stockholder dividend to MetLife
as long as the aggregate amount of all such dividends in any calendar year
does not exceed the lesser of (i) 10% of its surplus to policyholders as of
the immediately preceding calendar year and (ii) its net gain from operations
for the immediately preceding calendar year (excluding realized capital
gains). Metropolitan Life will be permitted to pay a stockholder dividend to
MetLife in excess of the lesser of such two amounts only if it files notice of
its intention to declare such a dividend and the amount thereof with the New
York Superintendent of Insurance and the New York Superintendent does not
disapprove the distribution. Under the New York Insurance Law, the New York
Superintendent has broad discretion in determining whether the financial
condition of a stock life insurance company would support the payment of such
dividends to its stockholders. The New York Insurance Department has
established informal guidelines for such determinations. The guidelines, among
other things, focus on the insurer's overall financial condition and
profitability under statutory accounting practices.
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 nor 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 sheets as either assets or liabilities
and measured at fair value. The corresponding derivative
F-7
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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 September 2000, the FASB issued Statement of Financial Accounting
Standards No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities--a replacement of FASB Statement No. 125
("SFAS 140"). SFAS 140 is effective for transfers and extinguishments of
liabilities occurring after March 31, 2001 and is effective for disclosures
about securitizations and collateral and for recognition and reclassification
of collateral for fiscal years ending after December 15, 2000. The Company is
in the process of quantifying the impact, if any, of the requirements of SFAS
140.
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.
In March 1998, the National Association of Insurance Commissioners adopted
the Codification of Statutory Accounting Principles ("Codification") which is
effective on January 1, 2001. Codification provides a comprehensive guide of
statutory accounting principles. However, individual states retain the right
to adopt Codification in whole or in part. The impact of adopting Codification
will be reported as an adjustment to statutory surplus by insurance
enterprises on the effective date. The Company is in the process of
quantifying the impact on statutory surplus of the insurance subsidiaries of
Codification and the state prescribed accounting principles that may be
adopted by the various states of domicile.
2. INITIAL PUBLIC OFFERING AND RELATED TRANSACTIONS
On the date of demutualization, MetLife conducted an initial public offering
of 202,000,000 shares of its common stock and concurrent private placements of
an aggregate 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.
On June 27, 2000, MetLife's Board of Directors authorized the repurchase of
up to $1 billion of MetLife's outstanding common stock, over an unspecified
period of time. Under this authorization, MetLife may purchase the stock from
the Metropolitan Life policyholder trust, in the open market, and in private
transactions. Through September 30, 2000, 19,203,403 shares have been acquired
for $407.
On April 7, 2000, MetLife Capital Trust I, a Delaware statutory business
trust wholly owned by MetLife, issued 20,125,000 8.00% equity security units
("units"). Each unit consists of (i) a purchase contract under which the
holder agrees to purchase, for $50.00, shares of common stock of MetLife on
May 15, 2003 and (ii) 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
F-8
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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.
In connection with the contribution to Metropolitan Life of the net proceeds
from the initial public offering, the private placements and the units
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 September 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.
F-9
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
Closed block revenues and expenses were as follows:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA APRIL 7, 2000 NINE MONTHS
JANUARY 1, THROUGH ENDED
2000 THROUGH SEPTEMBER 30, SEPTEMBER 30,
APRIL 6, 2000 2000 2000
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES
Premiums $ 894 $1,829 $2,723
Net investment income and other
revenues 620 1,248 1,868
Net realized investment losses
(net of amounts allocable to
other accounts of $11, $28 and
$39, respectively) (20) (9) (29)
------ ------ ------
1,494 3,068 4,562
------ ------ ------
EXPENSES
Policyholder benefits and
claims (includes amounts
directly related to net
realized investment losses of
$--, $21 and $21,
respectively) 916 1,831 2,747
Policyholder dividends 379 745 1,124
Policholder dividend obligation -- 43 43
Other expenses (includes
amounts directly related to
net realized investment losses
of $11, $7 and $18,
respectively) 175 413 588
------ ------ ------
1,470 3,032 4,502
------ ------ ------
Contribution from the closed
block $ 24 $ 36 $ 60
====== ====== ======
</TABLE>
Closed block assets and liabilities at September 30, 2000 and April 7, 2000
were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 7,
2000 2000
------------- --------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value $24,699 $23,939
Equity securities, at fair value 33 --
Mortgage loans on real estate 5,422 4,744
Policy loans 3,794 3,762
Short-term investments 106 167
Other invested assets 398 325
------- -------
34,452 32,937
Cash and cash equivalents 725 643
Deferred policy acquisition costs 3,820 4,011
Other 536 810
------- -------
Total closed block assets $39,533 $38,401
======= =======
LIABILITIES
Future policy benefits $39,009 $38,662
Other policyholder liabilities 1,200 1,068
Other 2,904 2,377
------- -------
Total closed block liabilities $43,113 $42,107
======= =======
</TABLE>
F-10
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
4. PRO FORMA INFORMATION
The pro forma information for the nine months ended September 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:
--The elimination of surplus tax of $30, since Metropolitan Life will no
longer be subject to such tax as a stock life insurance company;
--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;
--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;
--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
--The establishment of the closed block (See Note 3 for pro forma amounts
of revenues and expenses).
5. GENAMERICA ACQUISITION
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, Incorporated ("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.
F-11
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
The Company's total revenues, income before extraordinary items and net
income for the nine months ended September 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:
For the nine months ended September 30, 1999
<TABLE>
<CAPTION>
INCOME BEFORE
TOTAL REVENUES EXTRAORDINARY ITEM NET INCOME
-------------- ------------------ ----------
<S> <C> <C> <C>
Historical $18,334 $428 $351
Pro forma $21,222 $357 $216
</TABLE>
6. NET REALIZED INVESTMENT LOSSES
Net realized investment losses, including changes in valuation allowances,
for nine months ended September 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
2000 1999
------ ------
<S> <C> <C>
Fixed maturities $ (572) $ (337)
Equity securities 104 16
Mortgage loans on real estate (14) (1)
Real estate and real estate joint ventures 56 169
Other limited partnership interests 8 28
Sales of businesses 3 --
Other (30) (89)
------ ------
(445) (214)
Amounts allocable to:
Deferred policy acquisition costs 11 26
Participating pension contracts 3 11
------ ------
$ (431) $ (177)
====== ======
</TABLE>
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
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
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
F-12
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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 with respect
to 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 excluded
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. At September 30, 2000,
approximately 300 of these "opt-outs" have filed individual lawsuits.
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 made some recoveries under those
reinsurance agreements and, although there is no assurance that other
reinsurance claim submissions will be paid, Metropolitan Life believes payment
is likely 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 as well as for the two class action settlements
described in the following paragraph.
Separate from the Metropolitan Life class action settlement, similar sales
practices class action litigation against New England and General American
Life Insurance Company has been settled. The New England case, a consolidated
multidistrict litigation in the United States District Court for the District
of Massachusetts, involves approximately 600,000 life insurance policies sold
during the period January 1, 1983 through August 31, 1996. The settlement of
this case was approved by the District Court on October 4, 2000, and one or
more appeals may be filed. The Company expects that the total cost of this
settlement to it will be approximately $150. The settlement of the
consolidated multidistrict sales practices class action case against General
American was preliminarily approved by the United States District Court for
the Eastern District of Missouri. The fairness hearing for the General
American settlement is scheduled for December 15, 2000. The General American
case involves approximately 250,000 life insurance policies sold during the
period 1982 through 1996.
The Metropolitan Life class action settlement does not resolve two putative
class actions involving sales practices claims filed against Metropolitan Life
in Canada. Two recent Ontario decisions involving other parties declined to
certify similar purported class actions. 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 the
United States District Court for the Southern District of New York and
settlement discussions are continuing.
In the past, some individual sales practices claims have been resolved
through settlement, won by dispositive motions, or, in a few instances, went
to trial. Most of the current cases seek substantial damages, including in
some cases punitive and treble damages and attorneys' fees. Additional
litigation relating to the Company's marketing and sales of individual life
insurance may be commenced in the future.
F-13
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
See Note 9 of Notes to Consolidated Financial Statements for the year ended
December 31, 1999 included in MetLife's Registration Statement on Form S-1
(registration no. 333-91517) filed with the Securities and Exchange Commission
for information regarding reinsurance contracts related to sales practices
claims.
Regulatory authorities in a small number of states have had investigations
or inquiries relating to Metropolitan Life's or New England's sales of
individual life insurance policies or annuities. Over the past several years,
Metropolitan Life has resolved a number of investigations by 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.
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 assurance
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 included in MetLife's Registration Statement on Form S-1
(registration no. 333-91517) filed with the Securities and Exchange Commission
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, and
discovery has commenced. 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
F-14
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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. The
action brought by the United States and Puerto Rico has been conditionally
settled. The Company can provide no assurance, however, that this action will
be settled.
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 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 the 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 New York
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, which have been consolidated, claim that the
Policyholder Information Booklets relating to the plan failed to disclose
certain material facts and seek rescission and compensatory damages. 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. The defendants have moved to dismiss each
of these actions, except for the Kings County action and the Article 78
proceeding, both of which are being voluntarily held in abeyance.
Two lawsuits were filed in July 2000 against Metropolitan Life alleging
racial discrimination in the marketing, sale, and administration of 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
F-15
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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. Metropolitan Life has moved for summary judgment
dismissing the New York action and has moved to transfer the Louisiana action
to the United States District Court for the Southern District of New York.
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
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 nine months ended September 30, 2000 and
1999 was as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------
2000 1999
----- -------
<S> <C> <C>
Net income (loss) before date of demutualization $(220) $ 351
Net income after date of demutualization 585 --
Accumulated other comprehensive income (loss):
Unrealized investment gains (losses), net of related offsets,
reclassification adjustments and income taxes 518 (1,686)
Foreign currency translation adjustments (10) 25
----- -------
Accumulated other comprehensive gain (loss) 508 (1,661)
----- -------
Comprehensive income (loss) $ 873 $(1,310)
===== =======
</TABLE>
F-16
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
9. BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AUTO & ASSET CONSOLIDATION/
2000 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL REINSURANCE MANAGEMENT CORPORATE ELIMINATION TOTAL
------------- ---------- ------------- ------ ------------- ----------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums $3,393 $5,055 $1,965 $481 $1,055 $-- $ -- $(1,832) $10,117
Universal life
and investment-
type product
policy fees 920 408 -- 39 -- -- -- -- 1,367
Net investment
income 4,766 2,902 132 190 278 63 422 (1,351) 7,402
Other revenues 619 518 23 7 20 651 109 48 1,995
Net realized
investment gains
(losses) (98) (216) -- 9 (1) -- (150) 25 (431)
Contribution from
the closed block -- -- -- -- -- -- -- 36 36
Income (loss)
before provision
for income taxes
and
extraordinary
item 818 475 (12) (284) 77 55 (97) (48) 984
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AUTO & ASSET CONSOLIDATION/
1999 INDIVIDUAL INSTITUTIONAL HOME INTERNATIONAL REINSURANCE MANAGEMENT CORPORATE ELIMINATION TOTAL
------------- ---------- ------------- ------ ------------- ----------- ---------- --------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Premiums $3,091 $4,174 $1,102 $357 $ -- $-- $ -- $ -- $ 8,724
Universal life
and investment-
type product
policy fees 614 371 -- 34 -- -- -- -- 1,019
Net investment
income 3,911 2,836 66 154 -- 58 377 (213) 7,189
Other revenues 410 456 14 5 -- 599 34 61 1,579
Net realized
investment gains
(losses) 11 (52) 1 3 -- -- (116) (24) (177)
Income (loss)
before provision
for income taxes
and
extraordinary
item 696 665 39 (5) -- 71 (608) (77) 781
</TABLE>
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
Assets
Individual $133,350 $109,401
Institutional 92,039 88,127
Auto & Home 4,613 4,443
International 4,842 4,381
Reinsurance 6,761 --
Asset Management 1,325 1,036
Corporate 16,528 20,499
Consolidation/Elimination (2,893) (2,655)
-------- --------
Total $256,565 $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
September 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.
F-17
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--
CONTINUED
(DOLLAR AMOUNTS ARE IN MILLIONS UNLESS OTHERWISE STATED.)
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, $29 and $38 for
the nine months ended September 30, 2000 and 1999, respectively. The
investment in Nvest was $189 and $218 at September 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 of the Company. 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. Revenues from U.S.
operations were $22,792 and $17,781 for the nine months ended September 30,
2000 and 1999, respectively, which represented 97% of consolidated revenues
for both the nine months ended September 30, 2000 and 1999.
10. SUBSEQUENT EVENTS
SALE OF NVEST
On October 30, 2000, the Company completed the sale of its 48% ownership
interest in its affiliates, Nvest, L.P. and Nvest Companies, L.P., to CDC
Asset Management, an affiliate of Caisse des Depots Group. CDC Asset
Management paid $40 per unit for Nvest, L.P. and Nvest Companies, L.P. The
Company received $858 in the transaction and will report the gain in the
fourth quarter of 2000. Total assets of the Nvest entities were approximately
$935 at September 30, 2000. Total revenues and net income (net of minority
interest) applicable to the Nvest entities were $474 and $29 for the nine
months ended September 30, 2000, respectively.
REINSURANCE OF CLOSED BLOCK
Metropolitan Life entered into a reinsurance agreement, effective October 1,
2000, under which it ceded 90 percent of the risk associated with the
participating life insurance policies constituting the Metropolitan Life U.S.
traditional life segment of the closed block, which was formed in connection
with the demutualization on April 7, 2000. The agreement will protect
Metropolitan Life against inadequate funding of the closed block to meet
policyholder contractual guarantees in the event of significantly adverse
closed block experience. The agreement is on a modified coinsurance basis
under which Metropolitan Life will continue to hold and manage the assets
backing the coinsured block of business.
CASH DIVIDENDS
On December 15, 2000, the Company paid a dividend of $763 to its parent,
MetLife.
F-18
<PAGE>
THE NEW ENGLAND VARIABLE ACCOUNT
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The following financial statements of the Registrant are included in Part
B of this Post-Effective Amendment on Form N-4:
Statements of Assets and Liabilities as of September 30, 2000 and December
31, 1999.
Statements of Operations for the nine month period ending September 30,
2000 and the year ended December 31, 1999.
Statements of Changes in Net Assets for the nine month period ending
September 30, 2000 and the years ended December 31, 1999 and 1998.
Notes to Financial Statements.
The following financial statements of the Depositor are included in Part B
of this Post-Effective Amendment on Form N-4:
Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999
and 1998.
Consolidated Statements of Income for the nine month periods ending
September 30, 2000 and 1999 and the years ended December 31, 1999, 1998 and
1997.
Consolidated Statements of Equity for the nine month period ending
September 30, 2000 and the years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the nine month periods ending
September 30, 2000 and 1999 and the years ended December 31, 1999, 1998 and
1997.
Notes to Consolidated Financial Statements.
(b) Exhibits
(1) (i) Resolutions of Board of Directors of New England Mutual Life Insurance
Company authorizing the Registrant are incorporated herein by reference to
the Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(ii) Resolutions of the Depositor adopting the Registrant as a separate
account are incorporated herein by reference to the Registration Statement
on Form N-4 (No. 333-11131) filed on August 30, 1996.
(2) None
<PAGE>
(3) (i) Distribution Agreement is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(ii) Form of Selling Agreement with other broker-dealers is incorporated
herein by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(4) (i) Form of New England Mutual Life Insurance Company Variable Annuity
Contract is incorporated herein by reference to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed on
May 1, 1998.
(ii) Form of New England Mutual Life Insurance Company Contract Loan
Endorsement is incorporated herein by reference to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed on
May 1, 1998.
(iii) Forms of New England Mutual Life Insurance Company Endorsements,
(Death of Owner, Individual Retirement Annuity, and Sample of Benefits for
Disability of Annuitant) are incorporated herein by reference to Post-
Effective Amendment No. 2 to the Registration Statement on Form N-4 (No.
333-11131) filed on May 1, 1998.
(iv) Forms of Metropolitan Life Insurance Company Endorsements (New
Contract Loan, Spousal/Beneficiary Continuation) are incorporated herein by
reference to Post-Effective Amendment No. 2 to the Registration Statement
on Form N-4 (No. 333-11131) filed on May 1, 1998.
(v) Form of Metropolitan Life Insurance Company Endorsement to New England
Mutual Life Insurance Company Variable Annuity Contract (See (4)(i) above)
is incorporated herein by reference to the Registration Statement on Form
N-4 (No. 333-11131) filed on August 30, 1996.
(vi) Metropolitan Life Insurance Company Variable Annuity Contract and
Application are incorporated herein by reference to the Registration
Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(vii) Forms of Metropolitan Life Insurance Company Endorsements (Fixed
Account, Contract Loans, Tax-Sheltered Annuity, Periodic Reports and
Postponement of Surrender) are incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(viii) Forms of New England Mutual Life Insurance Company Endorsements
(Contract Loans, Fixed Account, Tax-Sheltered Annuity and Rider Benefits of
Disability of Annuitant and Modification of Variable Life Income Section
and New York Endorsement) is incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-4 (No. 333-11131)
filed on February 26, 1999.
(ix) Form of Metropolitan Life Insurance Company Endorsement (Roth
Individual Retirement Annuity) is incorporated herein by reference to Post-
Effective Amendment
III-2
<PAGE>
No. 3 to the Registration Statement on Form N-4 (No. 333-11131) filed on
February 26, 1999.
(x) Forms of Endorsements (Fixed Account and Postponement of Fixed Account
Values) are incorporated herein by reference to Post-Effective Amendment
No. 4 to the Registration Statement on Form N-4 (No. 333-11131) filed on
April 26, 1999.
(xi) Forms of Endorsements (TSA) for Metropolitan Life Insurance Company
and New England Life Insurance Company are incorporated herein by reference
to Post-Effective Amendment No. 5 to the Registration Statement on Form N-4
(No. 333-11131) filed on April 27, 2000.
(5) (i) New England Mutual Life Insurance Company Application is incorporated
herein by reference to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-4 (No. 333-11131) filed on February 26, 1999.
(ii) For Metropolitan Life Insurance Company Application see (4)(vi) above.
(6) (i) Charter and By-Laws of Metropolitan Life Insurance Company are
incorporated herein by reference to the Registration Statement on Form N-4
(No. 333-11131) filed on August 30, 1996.
(ii) By-Laws Amendment is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(iii) Amended and Restated Charter and By-Laws of Metropolitan Life
Insurance Company are incorporated herein by reference to Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (No. 333-11131)
filed on April 27, 2000.
(7) None
(8) (i) Administrative Services Agreement is incorporated herein by reference
to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
(ii) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Mutual Life Insurance
Company is incorporated herein by reference to Post-Effective Amendment No.
2 to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1,
1998.
(iii) Amendment No. 1 to Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and New England Mutual
Life Insurance Company is incorporated by reference to Post-Effective
Amendment No. 15 to the Registration Statement on Form N-4 (No. 33-17377)
filed on April 1, 1996.
(iv) Assignment of Participation Agreement from New England Mutual Life
Insurance Company to Metropolitan Life Insurance Company is incorporated by
reference to the Registration Statement on Form N-4 (No. 333-11131) filed
on August 30, 1996.
III-3
<PAGE>
(v) Form of Participation Agreement among Metropolitan Series Fund, Inc.
and Metropolitan Life Insurance Company is incorporated by reference to
Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A
(File No. 2-80751) filed April 6, 2000.
(vi) Participation Agreement among New England Zenith Fund, New England
Investment Management, Inc., New England Securities Corporation and
Metropolitan Life Insurance Company.
(9) Opinion and consent of Christopher P. Nicholas, Esq.
(10) (i) Consent of Deloitte & Touche LLP.
(ii) Consent of Sutherland Asbill and Brennan LLP.
(11) None
(12) None
(13) Schedule of computations for performance quotations is incorporated herein
by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(14) Powers of Attorney are incorporated herein by reference to the Registration
Statement on Form N-4 (No. 333-11131) filed on August 30, 1996, except for
Gerald Clark, Burton A. Dole and Charles M. Leighton whose powers of
attorney were filed with Post-Effective Amendment No. 1 to the Registration
Statement (File No. 333-11131) on April 30, 1997; Robert H. Benmosche and
Stewart G. Nagler whose powers of attorney were filed with Post-Effective
Amendment No. 23 to the Registration Statement of Metropolitan Life
Separate Account E (File No. 2-90380) filed April 3, 1998; Power of
Attorney for William C. Steere is incorporated herein by reference to Post-
Effective Amendment No. 8 to the Registration Statement of Metropolitan
Life Separate Account UL (File No. 33-57320) filed April 23, 1999 and Power
of Attorney for Virginia M. Wilson is incorporated herein by reference to
Pre-Effective Amendment No. 2 to the Registration Statement of Metropolitan
Life Separate Account E (File No. 333-80547) filed November 1, 1999.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name Principal Occupation and Positions and Offices
Business Address with Depositor
Curtis H. Barnette Chairman Emeritus and Chief Director
Executive Officer
Bethlehem Steel Corporation
1170 Eighth Avenue
Martin Tower 101
Bethlehem, PA 18016-7699
III-4
<PAGE>
Name Principal Occupation and Positions and Offices
Business Address with Depositor
Robert H. Benmosche Chairman of the Board, President Chairman ofthe Board
and Chief Executive Officer President and
MetLife, Inc. and Metropolitan Chief Executive
Life Insurance Company Officer
One Madison Avenue,
New York, NY 10010
Gerald Clark Vice-Chairman of the Board and Vice-Chairman of the
Chief Investment Officer Board and Chief
MetLife, Inc. and Metropolitan Investment Officer
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
John C. Danforth Partner Director
Bryan Cave LLP,
One Metropolitan Square
211 North Broadway,
Suite 3600
St. Louis, MO 63102
Burton A. Dole, Jr. Retired Chairman, President and Director
Chief 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 of the Board and Director
Chief Executive Officer
Metropolitan Life Insurance Company
One Madison Avenue
New York, NY 10010
III-5
<PAGE>
Name Principal Occupation and Positions and Offices
Business Address with Depositor
Helene L. Kaplan Of Counsel, Skadden, Arps, Director
Slate, Meagher and Flom
Four Times Square
New York, NY 10036
Charles H. Leighton Retired Chairman and Chief Director
Executive Officer
CML Group, Inc.
524 Main Street
Bolton, MA 01720
Allen E. Murray Retired Chairman of the Board Director
and Chief Executive Officer
Mobil Corporation
375 Park Avenue, Suite 2901
New York, NY 10152
Stewart G. Nagler Vice-Chairman of the Board and Vice-Chairman of
Chief Financial Officer the Board and Chief
MetLife, Inc. and Metropolitan Financial Officer
Life Insurance Company
One Madison Avenue
New York, NY 10010
John J. Phelan, Jr. Former Chairman and Chief Director
Executive Officer
New York Stock Exchange, Inc.
108 Forest Avenue
Locust Valley, NY 11560
Hugh B. Price President and Chief Executive Director
Officer
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
North Hampton, MA 01063
III-6
<PAGE>
Name Principal Occupation and Positions and Offices
Business Address with Depositor
William C. Steere, Jr. Chairman of the Board and Chief Director
Executive Officer
Pfizer, Inc.
235 East 42nd Street
New York, NY 10016
Set forth below is a list of certain principal officers of Metropolitan Life.
The principal business address of each officer of Metropolitan Life is One
Madison Avenue, New York, New York 10010.
Name Position with Metropolitan Life
Robert H. Benmosche Chairman of the Board, President and Chief Executive
Officer
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
Gerald Clark Vice-Chairman of the Board and Chief Investment Officer
C. Robert Henrikson President, Institutional Business
Stewart G. Nagler Vice Chairman and Chief Financial Officer
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
Virginia M. Wilson Senior Vice President and Controller
The principal occupation of each officer, except the following officers during
the last five years has been as an officer of Metropolitan Life Insurance
Company or an affiliate thereof. Lisa Weber has been an officer of Metropolitan
Life since March 16, 1998; prior thereto she was a Director of Diversity
Strategy and Development and an Associate Director of Human Resources of
PaineWebber. Stanley J. Talbi was Senior Vice President and Chief Actuary of
MetLife in July, 2000; prior thereto, he was appointed Senior Vice President of
Financial Management and Business Development of the Institutional Business
Department of MetLife since 1996. The business address of each officer is One
Madison Avenue, New York, New York 10010.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE INSURANCE
COMPANY 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.
Metropolitan Life Insurance Company is a wholly-owned subsidiary of MetLife,
Inc. a publicly traded company. The following outline indicates those persons
who are controlled by or under common control with Metropolitan Life Insurance
Company:
III-7
<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)
<PAGE>
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)
<PAGE>
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
<PAGE>
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)
<PAGE>
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)
<PAGE>
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.
<PAGE>
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)
Harris Associates, Inc. holds a 0.33% general partner
interest and NEIC Operating Partnership, L.P. holds a
99.67% limited partner interest in Harris Associates
L.P.
(i) *Harris Partners, Inc. (DE)
(ii) *Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1% membership
interest and Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(1) *Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(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.
<PAGE>
(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).
<PAGE>
(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)
<PAGE>
(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.
<PAGE>
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)
<PAGE>
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.
<PAGE>
ITEM 27. NUMBER OF CONTRACTHOLDERS
As of December 31, 2000, there were 20,086 owners of tax-qualified Contracts and
11,149 owners of non-qualified contracts.
ITEM 28. INDEMNIFICATION
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
maintains a directors' and officers' liability policy with a maximum coverage of
$300 million under which Metropolitan and New England Securities Corporation,
the Registrant's underwriter (the "Underwriter") as well as certain other
subsidiaries of Metropolitan are covered. A provision in Metropolitan's by-laws
provides for the indemnification (under certain circumstances) of individuals
serving as directors or officers of Metropolitan.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of
Metropolitan pursuant to the foregoing provisions, or otherwise, Metropolitan
Life Insurance Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification 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 Life Insurance Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Metropolitan will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) New England Securities Corporation also serves as principal underwriter
for:
New England Zenith Fund
New England Variable Annuity Fund I
New England Life Retirement Investment Account
New England Variable Life Separate Account
New England Variable Annuity Separate Account
(b) The directors and officers of the Registrant's principal underwriter,
New England Securities Corporation, and their addresses are as follows:
III-8
<PAGE>
Name Principal and Offices with Positions and Offices
Principal Underwriter with Depositor
Thomas W. McConnell* Chairman of the Board, Director, None
President and CEO
Steven J. Brash*** Assistant Treasurer None
Mary M. Diggins** Vice President, General Counsel, None
Secretary and Clerk
Thom A. Faria** Director None
Anne M. Goggin** Director None
Mark A. Greco* Vice President and Chief Operating None
Officer
Gregory M. Harrison*** Assistant Treasurer None
Laura A. Hutner* Vice President None
Mitchell A. Karman** Vice President None
Rebecca Kovatch* Vice President None
Joanne Logue** Vice President None
Genevieve Martin* Vice President None
John Peruzzi* Assistant Vice President and None
Controller
Robert F. Regan** Vice President None
Jonathan M. Rozek* Vice President None
Michael E. Toland* Vice President, Chief Compliance None
Officer, Chief Financial Officer,
Treasurer, Assistant Secretary and
Assistant Clerk
Principal Business Address: *399 Boylston Street, Boston, MA 02116
**501 Boylston Street, Boston, MA 02116
***MetLife - One Madison Avenue, New York, NY 10010
(c)
(1) (2) (3) (4) (5)
Net Underwriting Compensation
Name of Principal Discounts and Redemption or Brokerage Other
Underwriter Commissions Annuitization Commissions Compensation
New England
Securities $1,611,358.39 0 0 0
Corporation
Commissions are paid by the Company directly to agents who are registered
representatives of the Principal Underwriter or to broker-dealers that have
entered into a selling agreement with the principal underwriter with respect to
sales of the Contracts.
III-9
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The following companies will maintain possession of the documents required
by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder:
(a) Registrant
(b) New England Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02116
(c) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(d) New England Securities Corporation
399 Boylston Street
Boston, Massachusetts 02116
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby makes the following undertakings:
(1) To file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
contained in the registration statement are never more than 16 months old for so
long as payments under the variable annuity contracts may be accepted;
(2) To include either (a) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information or (b) a postcard or similar written
communication affixed to or included in the prospectus that the applicant can
remove to send for a Statement of Additional Information;
(3) To deliver a Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly upon
written or oral request;
(4) To offer Contracts to participants in the Texas Optional Retirement Program
in reliance upon Rule 6c-7 of the Investment Company Act of 1940 and to comply
with paragraphs (a)-(d) of that Rule; and
(5) To comply with and rely upon the Securities and Exchange Commission No-
Action Letter to the American Council of Life Insurance, dated November 28,
1988, regarding Sections 22(e), 27(c)(1) and 27(d) of the Investment Company Act
of 1940.
III-10
<PAGE>
Metropolitan Life Insurance Company represents that the fees and charges
deducted under the Contracts 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 Contracts.
III-11
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant, The New England Variable Account, certifies that it
meets the requirements of Securities Act Rule 485(b) for effectiveness of this
Amendment to the Registration Statement and has duly caused this Amendment to
the Registration Statement to be signed on its behalf, in the City of New York,
and the State of New York on the 19th day of January, 2001.
THE NEW ENGLAND VARIABLE ACCOUNT
BY: METROPOLITAN LIFE INSURANCE COMPANY
BY: /s/ GARY A. BELLER, ESQ.
-------------------------
GARY A. BELLER, ESQ.
SENIOR EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL
Attest: /s/ Cheryl D. Martino
---------------------
Cheryl D. Martino
Assistant Secretary
III-12
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company
Act of 1940, Metropolitan Life Insurance Company certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this Amendment
to the Registration Statement and has duly caused this Amendment to the
Registration Statement to be signed on its behalf, in the City of New York, and
the State of New York on the 19th day of January, 2001.
METROPOLITAN LIFE INSURANCE COMPANY
BY: /s/ GARY A. BELLER, ESQ.
-----------------------
GARY A. BELLER, ESQ.
SENIOR EXECUTIVE VICE PRESIDENT
AND GENERAL COUNSEL
Attest: /s/ Cheryl D. Martino
---------------------
Cheryl D. Martino
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the registration statement has been signed by the following
persons, in the capacities indicated, on the dates indicated.
SIGNATURE Title Date
--------- ----- ----
Chairman of the Board, President
* and Chief Executive Officer January 19, 2001
----------------------- ----------------
ROBERT H. BENMOSCHE
Vice-Chairman of the Board and
* Chief Financial Officer (Principal January 19, 2001
----------------------- Financial Officer) ----------------
STEWART G. NAGLER
Senior Vice President and Controller
* (Principal Accounting Officer) January 19, 2001
----------------------- ----------------
VIRGINIA M. WILSON
* Director January 19, 2001
----------------------- ----------------
CURTIS H. BARNETTE
III-13
<PAGE>
SIGNATURE Title Date
--------- ----- ----
Vice Chairman of the Board and
* Chief Investment Officer January 19, 2001
-------------------------- ----------------
GERALD CLARK
* Director January 19, 2001
-------------------------- ----------------
JOAN GANZ COONEY
-------------------------- Director January 19, 2001
JOHN C. DANFORTH ----------------
* Director January 19, 2001
-------------------------- ----------------
BURTON A. DOLE, JR.
* Director January 19, 2001
-------------------------- ----------------
JAMES R. HOUGHTON
* Director January 19, 2001
-------------------------- ----------------
HARRY P. KAMEN
* Director January 19, 2001
-------------------------- ----------------
HELENE L. KAPLAN
* Director January 19, 2001
-------------------------- ----------------
CHARLES H. LEIGHTON
* Director January 19, 2001
-------------------------- ----------------
ALLEN E. MURRAY
* Director January 19, 2001
-------------------------- ----------------
JOHN J. PHELAN, JR.
III-14
<PAGE>
SIGNATURE Title Date
--------- ----- ----
* Director January 19, 2001
-------------------------- ----------------
HUGH B. PRICE
* Director January 19, 2001
-------------------------- ----------------
RUTH J. SIMMONS, Ph.D.
* Director January 19, 2001
-------------------------- ----------------
WILLIAM C. STEERE, JR.
January 19, 2001
/s/ CHRISTOPHER P. NICHOLAS ----------------
-----------------------------
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
* Executed by Christopher P. Nicholas, Esq. on behalf of those indicated
pursuant to Powers of Attorney filed with the Registration Statement on Form N-4
(No. 333-11131) filed on August 30, 1996 except for Gerald Clark, Burton A. Dole
and Charles M. Leighton whose powers of attorney were filed with Post-Effective
Amendment No. 1 to the Registration Statement (File No. 333-11131) on April 30,
1997; Robert H. Benmosche and Stewart G. Nagler whose powers of attorney were
filed with Post-Effective Amendment No. 23 to the Registration Statement of
Metropolitan Life Separate Account E (File No. 2-90380) filed April 3, 1998;
Power of Attorney for William C. Steere is incorporated herein by reference to
Post-Effective Amendment No. 8 to the Registration Statement of Metropolitan
Life Separate Account UL (File No. 33-57320) filed April 23, 1999 and Power of
Attorney for Virginia M. Wilson is incorporated herein by reference to Pre-
Effective Amendment No. 2 to the Registration Statement of Metropolitan Life
Separate Account E (File No. 333-80547) filed November 1, 1999.
III-15
<PAGE>
EXHIBIT INDEX
(1) (i) Resolutions of Board of Directors of New England Mutual Life Insurance
Company authorizing the Registrant are incorporated herein by reference to
the Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(ii) Resolutions of the Depositor adopting the Registrant as a separate
account are incorporated herein by reference to the Registration Statement
on Form N-4 (No. 333-11131) filed on August 30, 1996.
(2) None
(3) (i) Distribution Agreement is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(ii) Form of Selling Agreement with other broker-dealers is incorporated
herein by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(4) (i) Form of New England Mutual Life Insurance Company Variable Annuity
Contract is incorporated herein by reference to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed on
May 1, 1998.
(ii) Form of New England Mutual Life Insurance Company Contract Loan
Endorsement is incorporated herein by reference to Post-Effective Amendment
No. 2 to the Registration Statement on Form N-4 (No. 333-11131) filed on
May 1, 1998.
(iii) Forms of New England Mutual Life Insurance Company Endorsements,
(Death of Owner, Individual Retirement Annuity, and Sample of Benefits for
Disability of Annuitant) are incorporated herein by reference to Post-
Effective Amendment No. 2 to the Registration Statement on Form N-4 (No.
333-11131) filed on May 1, 1998.
(iv) Forms of Metropolitan Life Insurance Company Endorsements (New
Contract Loan, Spousal/Beneficiary Continuation) are incorporated herein by
reference to Post-Effective Amendment No. 2 to the Registration Statement
on Form N-4 (No. 333-11131) filed on May 1, 1998.
(v) Form of Metropolitan Life Insurance Company Endorsement to New England
Mutual Life Insurance Company Variable Annuity Contract (See (4)(i) above)
is incorporated herein by reference to the Registration Statement on Form
N-4 (No. 333-11131) filed on August 30, 1996.
(vi) Metropolitan Life Insurance Company Variable Annuity Contract and
Application are incorporated herein by reference to the Registration
Statement on Form N-4 (No. 333-11131) filed on August 30, 1996.
(vii) Forms of Metropolitan Life Insurance Company Endorsements (Fixed
Account, Contract Loans, Tax-Sheltered Annuity, Periodic Reports and
Postponement of Surrender) are incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
<PAGE>
(viii) Forms of New England Mutual Life Insurance Company Endorsements
(Contract Loans, Fixed Account, Tax-Sheltered Annuity and Rider Benefits of
Disability of Annuitant and Modification of Variable Life Income Section
and New York Endorsement) is incorporated by reference to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-4 (No. 333-11131)
filed on February 26, 1999.
(ix) Form of Metropolitan Life Insurance Company Endorsement (Roth
Individual Retirement Annuity) is incorporated herein by reference to Post-
Effective Amendment No. 3 to the Registration Statement on Form N-4 (No.
333-11131) filed on February 26, 1999.
(x) Forms of Endorsements (Fixed Account and Postponement of Fixed Account
Values) are incorporated herein by reference to Post-Effective Amendment
No. 4 to the Registration Statement on Form N-4 (No. 333-11131) filed on
April 26, 1999.
(xi) Forms of Endorsements (TSA) for Metropolitan Life Insurance Company
and New England Life Insurance Company are incorporated herein by reference
to Post-Effective Amendment No. 5 to the Registration Statement on Form N-4
(No. 333-11131) filed on April 27, 2000.
(5) (i) New England Mutual Life Insurance Company Application is incorporated
herein by reference to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-4 (No. 333-11131) filed on February 26, 1999.
(ii) For Metropolitan Life Insurance Company Application see (4)(vi) above.
(6) (i) Charter and By-Laws of Metropolitan Life Insurance Company are
incorporated herein by reference to the Registration Statement on Form N-4
(No. 333-11131) filed on August 30, 1996.
(ii) By-Laws Amendment is incorporated herein by reference to the
Registration Statement on Form N-4 (No. 333-11131) filed on August 30,
1996.
(iii) Amended and Restated Charter and By-Laws of Metropolitan Life
Insurance Company are incorporated herein by reference to Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (No. 333-11131)
filed on April 27, 2000.
(7) None
(8) (i) Administrative Services Agreement is incorporated herein by reference
to the Registration Statement on Form N-4 (No. 333-11131) filed on
August 30, 1996.
(ii) Participation Agreement Among Variable Insurance Products Fund,
Fidelity Distributors Corporation and New England Mutual Life Insurance
Company is incorporated herein by reference to Post-Effective Amendment No.
2 to the Registration Statement on Form N-4 (No. 333-11131) filed on May 1,
1998.
(iii) Amendment No. 1 to Participation Agreement Among Variable Insurance
Products Fund, Fidelity Distributors Corporation and New England Mutual
Life Insurance Company
2
<PAGE>
is incorporated by reference to Post-Effective Amendment
No. 15 to the Registration Statement on Form N-4 (No. 33-17377) filed on
April 1, 1996.
(iv) Assignment of Participation Agreement from New England Mutual Life
Insurance Company to Metropolitan Life Insurance Company is incorporated by
reference to the Registration Statement on Form N-4 (No. 333-11131) filed
on August 30, 1996.
(v) Form of Participation Agreement among Metropolitan Series Fund, Inc.
and Metropolitan Life Insurance Company is incorporated by reference to
Post-Effective Amendment No. 26 to the Registration Statement on Form N-1A
(File No. 2-80751) filed April 6, 2000.
(vi) Participation Agreement among New England Zenith Fund, New England
Investment Management, Inc., New England Securities Corporation and
Metropolitan Life Insurance Company.
(9) Opinion and consent of Christopher P. Nicholas, Esq.
(10) (i) Consent of Deloitte & Touche LLP.
(ii) Consent of Sutherland Asbill and Brennan LLP.
(11) None
(12) None
(13) Schedule of computations for performance quotations is incorporated herein
by reference to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-4 (No. 333-11131) filed on May 1, 1998.
(14) Powers of Attorney are incorporated herein by reference to the Registration
Statement on Form N-4 (No. 333-11131) filed on August 30, 1996, except for
Gerald Clark, Burton A. Dole and Charles M. Leighton whose powers of
attorney were filed with Post-Effective Amendment No. 1 to the Registration
Statement (File No. 333-11131) on April 30, 1997; Robert H. Benmosche and
Stewart G. Nagler whose powers of attorney were filed with Post-Effective
Amendment No. 23 to the Registration Statement of Metropolitan Life
Separate Account E (File No. 2-90380) filed April 3, 1998; Power of
Attorney for William C. Steere is incorporated herein by reference to Post-
Effective Amendment No. 8 to the Registration Statement of Metropolitan
Life Separate Account UL (File No. 33-57320) filed April 23, 1999; and
Power of Attorney for Virginia M. Wilson is incorporated herein by
reference to Pre-Effective Amendment No. 2 to the Registration Statement of
Metropolitan Life Separate Account E (File No. 333-80547) filed November 1,
1999.
3
