<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
REGISTRATION NO. 33-91226
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-6
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
------------------------
METROPOLITAN LIFE SEPARATE ACCOUNT UL
(EXACT NAME OF TRUST)
METROPOLITAN LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1 Madison Avenue
New York, New York 10010
(COMPLETE ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
GARY A. BELLER, ESQ.
Executive Vice-President, and Chief Legal Officer
Metropolitan Life Insurance Company
1 Madison Avenue
New York, New York 10010
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
------------------------------
Copies to:
GARY O. COHEN, ESQ. AND
THOMAS C. LAUERMAN, ESQ.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
------------------------
It is proposed that the filing will become effective (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
X on August 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date), pursuant to paragraph (a) of Rule 485
------------------------
This filing is made pursuant to Rule 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 to register interests in Metropolitan Life Separate Account
UL which funds certain flexible premium multifunded life insurance policies.
------------------------
Registrant elects to be governed (a) by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940 with respect to the policies described in this
Registration Statement that incorporate a contingent deferred sales load and (b)
by Rule 6e-3(T)(b)(13)(i)(B) with respect to other policies described in this
Registration Statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of securities. THE REGISTRANT'S
RULE 24f-2 NOTICE WAS FILED WITH THE COMMISSION ON FEBRUARY 29, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
METROPOLITAN LIFE INSURANCE COMPANY
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------------- ------------------------------------------------------------------------
<S> <C>
1........................................ Cover Page
2........................................ SUMMARY--Who is the Issuer of the Group Policies and Certificates?
3........................................ Inapplicable
4........................................ SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES;
SUMMARY--Who is the Issuer of the Group Policies and Certificates?
5, 6, 7.................................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate Account;
STATE REGULATION
8........................................ FINANCIAL STATEMENTS
9........................................ Inapplicable
10(a)..................................... OTHER CERTIFICATE PROVISIONS--Owner; Beneficiary; Collateral Assignment
10(c), 10(d).............................. DEFINITIONS--Valuation Date; SUMMARY--May the Certificate be Surrendered
or the Cash Value Partially With-drawn; Is There a "Free Look"
Period?; CERTIFICATE BENEFITS--Benefit at Final Date; CERTIFICATE
RIGHTS--Surrender and Withdrawal Privileges; Exchange Privilege;
PAYMENT AND ALLOCATION OF PREMIUMS--Allocation of Premiums and Cash
Value, Cash Value Transfers; THE FIXED ACCOUNT--Death Benefit
Transfer, Withdrawal, Surrender, and Loan Rights; OTHER POLICY
PROVISIONS--Payment and Deferment
10(e)..................................... PAYMENT AND ALLOCATION OF PREMIUMS--Policy Termination and Reinstatement
While the Group Policy is in Effect
10(f)..................................... VOTING RIGHTS
10(g)(1)-(3), 10(h)(1)-(3)................ RIGHTS RESERVED BY METLIFE
10(g)(4), 10(h)(4)........................ Inapplicable
10(i)..................................... CERTIFICATE BENEFITS--Death Benefit; Cash Value; Optional Income Plans;
Optional Insurance Benefits; PAYMENT AND ALLOCATION OF
PREMIUMS--Issuance of a Certificate; Premiums; Allocation of Premiums
and Cash Value; Certificate Termination and Reinstatement While the
Group Policy is in Effect
11........................................ SUMMARY--What are Separate Account UL, the Fixed Account and the
Metropolitan Series Fund? SEPARATE ACCOUNT AND METROPOLITAN SERIES
FUND-- Metropolitan Series Fund
12(a)..................................... Cover Page
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------------- ------------------------------------------------------------------------
<S> <C>
12(b), 12(e).............................. Inapplicable
12(c), 12(d).............................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan Series Fund
13(a), 13(b), 13(c), 13(d)................ SUMMARY--What are Separate Account UL, the Fixed Account and
Metropolitan Series Fund?; What Charges are Assessed in Connection
with the Certificate? CHARGES AND DEDUCTIONS; SEPARATE ACCOUNT AND
METROPOLITAN SERIES FUND--The Separate Account; CERTIFICATE
BENEFITS--Death Benefit Increases
13(e)..................................... SALES AND ADMINISTRATION OF THE CERTIFICATE
13(f), 13(g).............................. Inapplicable
14........................................ PAYMENT AND ALLOCATION OF PREMIUMS--Issuance of a Certificate; SALES AND
ADMINISTRATION OF THE CERTIFICATES
15........................................ PAYMENT AND ALLOCATION OF PREMIUMS
16........................................ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan Series Fund
17(a), 17(b).............................. Captions referenced under Items 10(c), 10(d), 10(e) and 10(i) above
17(c)..................................... Inapplicable
18(a), 18(c).............................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
18(b), 18(d).............................. Inapplicable
19........................................ SALES AND ADMINISTRATION OF THE CERTIFICATES; VOTING RIGHTS; REPORTS
RIGHTS RESERVED BY METLIFE
20(a), 20(b).............................. SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate Account
20(c), 20(d), 20(e), 20(f)................ Inapplicable
21(a), 21(b).............................. CERTIFICATE RIGHTS--Loan Privileges; OTHER CERTIFICATE
PROVISIONS--Payment and Deferment
21(c), 22................................. Inapplicable
23........................................ SALES AND ADMINISTRATION OF THE CERTIFICATES
24........................................ OTHER CERTIFICATE PROVISIONS
25........................................ SUMMARY--Who is the Issuer of the Policies and Certificates?
26........................................ CHARGES AND DEDUCTIONS--Other Charges
27........................................ SUMMARY--Who is the Issuer of the Policies and Certificates?
28........................................ MANAGEMENT
29........................................ Inapplicable
30, 31, 32, 33, 34........................ Inapplicable
35........................................ STATE REGULATION
36, 37.................................... Inapplicable
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
ITEMS OF
FORM N-8B-2 CAPTIONS IN PROSPECTUS
- --------------------------------------------- ------------------------------------------------------------------------
<S> <C>
38........................................ SALES AND ADMINISTRATION OF THE CERTIFICATES; DISTRIBUTION OF THE
CERTIFICATES
39........................................ SUMMARY--Who is the Issuer of the Group Policies and Certificates?;
SALES AND ADMINISTRATION OF THE CERTIFICATES; DISTRIBUTION OF THE
CERTIFICATES
40(a)..................................... Inapplicable
40(b)..................................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan Series Fund;
CHARGES AND DEDUCTIONS--Other Charges
41(a)..................................... SUMMARY--Who is the Issuer of the Group Policies and Certificates?;
SALES AND ADMINISTRATION OF THE CERTIFICATES
41(b), 41(c), 42, 43...................... Inapplicable
44(a)..................................... SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--Metropolitan Series Fund;
CERTIFICATE BENEFITS--Cash Value
44(b)..................................... Inapplicable
44(c)..................................... CHARGES AND DEDUCTIONS--Monthly Deduction From Cash Value
45........................................ Inapplicable
46........................................ Captions referenced under Item 44 above
47........................................ Captions referenced under Items 10(c) and 16 above
48, 49.................................... Inapplicable
50........................................ SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND--The Separate Account
51(a), 51(b).............................. SUMMARY--Who is the Issuer of the Group Policies and Certificates?;
Cover Page; CERTIFICATE BENEFITS-- Optional Insurance Benefits;
CERTIFICATE RIGHTS-- Exchange Privileges
51(c), 51(d), 51(e)....................... Captions referenced under Item 10(i) above
51(f)..................................... PAYMENT AND ALLOCATION OF PREMIUMS--Certificate Termination and
Reinstatement While the Group Policy is in Effect
51(g)..................................... Captions referenced under Items 10(i) and 13 above
51(h), 51(j).............................. Inapplicable
51(i)..................................... DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES
52(a), 52(c).............................. RIGHTS RESERVED BY METLIFE
52(b), 52(d).............................. Inapplicable
53(a)..................................... FEDERAL TAX MATTERS
53(b), 54 through 58...................... Inapplicable
59........................................ FINANCIAL STATEMENTS
</TABLE>
iii
<PAGE>
Form of Supplement. Information in brackets will vary based upon the Group
Policy under which the Certificate is issued.
SUPPLEMENT DATED [DECEMBER 1, 1996]
TO
PROSPECTUS DATED AUGUST 1, 1996
FOR
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES AND
CERTIFICATES ISSUED UNDER THE GROUP POLICIES
The Prospectus describes the provisions of the Policies and Certificates
that generally are applicable to all purchasers. Certain provisions, however,
may vary depending upon the Group in connection with which a Policy or
Certificate is issued. Accordingly, this Supplement provides Owners with
additional, specific information about the Group Policy and Certificates issued
to Owners in the [XYZ Group]. Words used in this Supplement have the same
meanings given to them in the Prospectus, unless the context indicates
otherwise.
THE INFORMATION SET FORTH BELOW MERELY SUPPLEMENTS THE INFORMATION INCLUDED
IN THE PROSPECTUS. IT IS NOT A SUMMARY OF THE PROSPECTUS AND IS NOT NECESSARILY
MORE IMPORTANT THAN THE INFORMATION THAT IS INCLUDED IN THE PROSPECTUS.
[MONEY MARKET INVESTMENT DIVISION: In addition to the six investment
divisions described in the Prospectus, the Money Market investment division is
also available to Owners of Certificates. The Money Market investment division
invests in a corresponding portfolio of the Metropolitan Series Fund. The
following is a brief summary of the investment objective of the Money Market
portfolio:
Money Market Portfolio. The investment objective of this portfolio is to
achieve the highest possible current income consistent with the preservation of
capital and maintenance of liquidity, by investing primarily in short-term money
market instruments.]
PORTABILITY: A Certificate becomes portable when one of the following
events occurs: [(1) termination of employment other than through retirement; (2)
retirement as defined by the employer; or (3) sale of the division for which the
employee works such that the employee no longer works for the employer who is
the participating entity of the Policy.] (See "Definitions-- Portable" in the
Prospectus, "Payment and Allocation of Premiums--Termination of Participating
Entity Participation in the Group Policy" in the Prospectus and "Payment and
Allocation of Premiums--Effect of Termination of Group Policy Participation on
Owners" in the Prospectus.)
SPECIFIED FACE AMOUNT: The minimum specified face amount for which a
Certificate may be issued is [$10,000]. [Automatic increases in the specified
face amount of a Certificate will be effective on the January 1 next following
each eligible employee's salary increase. The amount of the automatic increase
in specified face amount will be equal to the amount of the salary increase
rounded to the nearest five thousand dollars. Other] requests for increases in
specified face amount may be made [1 time a year on January 1st]. The minimum
amount of requested specified face amount increases is [the greater of one times
the Owner's salary or $5,000]. (See "Certificate Benefits--Death Benefit," in
the Prospectus.)
[ALLOCATION OF NET PREMIUMS: The participating entity has retained the
right to allocate the portion of the net premiums that it (rather than the
Owner) pays among the Fixed Account and the investment divisions of the Separate
Account, unless and until the covered person retires, as determined by the
participating entity (if the covered person is employed by the participating
entity) or the Owner's Certificate becomes portable (See "Payment and Allocation
of Premiums--Allocation of Net Premiums" in the Prospectus).]
[CASH VALUE TRANSFERS: The participating entity has retained the right to
transfer the portion of the cash value attributable to net premiums that it
(rather than the Owner) pays among the Fixed Account and the investment
divisions of the Separate Account, unless and until the covered person retires,
as determined by the participating entity (if the covered person is employed by
the participating entity) or the Owner's Certificate
S-1
<PAGE>
becomes portable (see "Payment and Allocation of Premiums--Cash Value Transfers"
in the Prospectus). In addition, the restrictions on transfers from the Fixed
Account described under "Payment and Allocation of Premiums--Cash Value
Transfers" in the Prospectus are applicable to the Certificates.]
SYSTEMATIC INVESTMENT STRATEGIES: The systematic investment strategies
described under "Payment and Allocation of Premiums--Systematic Investment
Strategies" are [not] available under Certificates issued to Owners.
TERMINATION BY METLIFE OF PARTICIPATING ENTITY PARTICIPATION IN THE GROUP
POLICY: MetLife may terminate the participating entity's participation in the
Group Policy if during any twelve month period, the aggregate specified face
amount for all Owners under the Group Policy [decreases by 15%] or the number of
Certificates [decreases by 20%]. (See "Payment and Allocation of
Premiums--Termination of Participating Entity Participation in the Group Policy"
in the Prospectus.)
EFFECT OF CERTAIN TERMINATIONS OF GROUP POLICY PARTICIPATION ON CERTAIN
OWNERS: If the participating entity does not replace the Group Policy with
another life insurance product, Owners who have not yet exercised the paid up
Certificate provision and whose Certificates are not already in the portable
class, may elect to [become Owners of portable Certificates or paid-up
Certificates or to receive their Certificates' cash surrender values]. (As to
cases where the participating entity replaces the Group Policy with another life
insurance product, or as to employees who have exercised the paid up Certificate
option or whose Certificates are already in a portable class, see "Payment and
Allocation of Premiums--Effect of Termination of Group Policy Participation on
Owners" in the Prospectus.)
PREMIUM EXPENSE CHARGES: A charge of [3%] of premiums paid will be deducted
from all premium payments (see "Charges and Deductions--Sales Load," in the
Prospectus). A charge for state premium taxes will be deducted from each premium
payment equal to [2.5%] of premium (see "Charges and Deductions-- Tax Charges"
in the Prospectus). (As to the charge deducted for the purpose of recovering a
portion of the federal income tax treatment of deferred acquisition costs of
MetLife, see "Charges and Deductions--Tax Charges" in the Prospectus.)
COST OF INSURANCE RATE: The guaranteed cost of insurance rate for the Group
is [100%] of the maximum rates that could be charged based on the 1980 CSO
Table. (See "Charges and Deductions--Cost of Insurance Charge" in the
Prospectus.)
ADMINISTRATION CHARGES: [The administration charge that is part of the
monthly combined charge is equal to [45%] of the monthly combined charge. In
addition to the administration charge that is deducted as part of the monthly
combined charge,] there will be an [additional] administration charge of [$1.50]
per Certificate per month. (See "Charges and Deductions-- Administration Charge"
in the Prospectus.)
CHARGE FOR MORTALITY AND EXPENSE RISKS: The current charge for mortality
and expense risks assumed by MetLife is equal to [.45%] of the average daily
value of the assets in the Separate Account attributable to the Certificates.
(See "Charges and Deductions--Charge for Mortality and Expense Risks" in the
Prospectus.)
SURRENDER CHARGES: [A sales charge will be deducted in the form of a
surrender charge from the cash value if the Certificate is surrendered or
terminated after a grace period during the first [5] Certificate years after
issue. In addition, a surrender charge will be deducted upon surrender or
termination of a Certificate during the first [5] years after an increase (other
than an automatic increase). Finally, a surrender charge may also be deducted
from the cash value if the Certificate is terminated because the Group Policy is
terminated by the participating entity during the first [5] Group Policy years.
(See "Charges and Deductions--Surrender Charges" in the Prospectus.)]
[There is also a surrender transaction charge of [$25.00] or, if less, 2% of
the amount withdrawn].
LOAN PRIVILEGES: [Certificates are subject to a transaction charge of [$25]
for each loan.] The interest charged on a Certificate loan is currently [8%] per
year and the interest currently being credited on amounts in the Loan Account is
[6%] per year. (See "Certificate Rights--Loan Privileges" in the Prospectus.)
This Supplement should be read in conjunction with the accompanying
Prospectus for the Policies and Certificates.
S-2
<PAGE>
METLIFE -REGISTERED TRADEMARK-
GVUL
PROSPECTUSES FOR
- GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES AND CERTIFICATES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
- METROPOLITAN SERIES FUND, INC.
<PAGE>
AUGUST 1, 1996
PROSPECTUS
FOR
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES AND CERTIFICATES ISSUED UNDER
THE GROUP POLICIES
(Minimum Specified Face Amount For A Certificate--$10,000)
(Minimum Group Size--200 eligible lives)
Issued by
METROPOLITAN LIFE INSURANCE COMPANY
Group variable universal life insurance policies ("Group Policies") and
certificates available through the Group Policies ("Certificates") are offered
by this Prospectus. The Group Policies and Certificates are issued by
Metropolitan Life Insurance Company, New York, NY ("MetLife"). Generally, so
long as the Group Policy remains in force, the Certificates are designed to
provide lifetime insurance coverage on the covered persons named in the
Certificates, as well as maximum flexibility in connection with premium
payments. This flexibility allows an owner of a Certificate to provide for
changing insurance needs within the confines of a single insurance product.
Group Policies may be issued to an employer (referred to herein as
"participating entity") or to a trust that is adopted by a participating entity.
Employees (including employees' spouses where specified in the Group Policy) of
adopting employers may own Certificates issued under their respective
participating entity's Group Policy. Unless the Certificate provides otherwise,
only the owner of the Certificate (the "Owner") may exercise the rights set
forth in the Certificate.
The Certificate provides for a death benefit payable at the covered person's
death. The death benefit varies because it includes the Certificate's cash value
in addition to a fixed insurance amount.
The premiums paid, less premium expense charges, will generally be allocated
at the Owner's discretion among one or more of the available investment
divisions of MetLife Separate Account UL ("Separate Account") and/or a fixed
interest account ("Fixed Account") within the General Account of MetLife. The
participating entity may select which investment divisions will be available to
Owners. If the participating entity is contributing premiums to Certificates
issued under its Group Policy, it may limit the ability of Owners to allocate
any premiums contributed by such participating entity among the available
investment divisions. The assets in each investment division are invested in
shares of a corresponding portfolio of the Metropolitan Series Fund, Inc.
("Fund"). The accompanying prospectus for the Fund describes the investment
objectives and certain attendant risks of the six currently available portfolios
of the Fund: Growth Portfolio, Income Portfolio, Diversified Portfolio,
Aggressive Growth Portfolio, International Stock Portfolio and Stock Index
Portfolio. The International Stock Portfolio is NOT available in California.
The Certificate's cash value will vary with the investment experience of the
Separate Account investment divisions to which amounts are allocated and the
fixed rates of interest earned by allocations to the Fixed Account. The cash
value will also be adjusted for other factors, including the amount of charges
imposed and the premium payments made.
The Owner may withdraw or borrow a portion of the Certificate's cash
surrender value, or the Certificate may be fully surrendered, at any time,
subject to certain limitations and charges.
The Owner has the flexibility to vary the frequency and amount of premium
payments, subject to certain restrictions and conditions.
MetLife is the investment manager of the Fund and the distributor of its
shares. MetLife also distributes and administers the Certificates. State Street
Research & Management Company ("State Street Research") is the sub-investment
manager with respect to the Growth, Income, Diversified and Aggressive Growth
Portfolios of the Fund. State Street Research is a wholly-owned subsidiary of
MetLife. GFM International Investors Limited ("GFM") is the sub-investment
manager with respect to the International Stock Portfolio of the Fund. GFM is a
subsidiary of MetLife.
As in the case of other life insurance policies, it may not be advantageous
to purchase group variable universal life insurance as a replacement for an
existing life insurance policy or in addition to an existing variable universal
insurance policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE
METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE
FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
1 Madison Avenue, New York, New York 10010 Telephone (800) 523-2894
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DEFINITIONS....................................... 3
SUMMARY........................................... 5
Who is the Issuer of the Group Policies and
Certificates?.................................... 5
What are Separate Account UL, the Fixed Account
and the Metropolitan Series Fund?................ 5
What Death Benefit is Available under the
Certificate?..................................... 6
What Flexibility Does an Owner have to Adjust the
Amount of the Death Benefit?..................... 6
What Flexibility Does an Owner have in Connection
with Premium Payments?........................... 7
What Happens to Certificates when the
Participating Entity's Active Participation in
the Group Policy is Terminated?.................. 7
If the Participating Entity Continues to
Participate in the Group Policy, How Long Will
the Certificate Remain in Force?................. 7
How are Net Premiums Allocated?................... 7
May the Certificate be Surrendered or the Cash
Value Partially Withdrawn?....................... 8
Is There a "Free Look" Period?.................... 8
What is the Loan Privilege?....................... 8
What Charges are Assessed in Connection with the
Certificate?..................................... 8
What is the Tax Treatment of Cash Value?.......... 9
Is the Beneficiary Subject to Federal Income Tax
on the Death Benefit?............................ 10
Is the Death Benefit or the Cash Value Subject to
Federal Estate Tax?.............................. 10
How Should Premium Payments, Owner Requests and
Other Communications be sent to MetLife?......... 10
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND..... 10
The Separate Account.............................. 10
Metropolitan Series Fund.......................... 11
CERTIFICATE BENEFITS.............................. 12
Death Benefit..................................... 12
Cash Value........................................ 13
Benefit at Final Date............................. 20
Optional Income Plans............................. 20
Optional Insurance Benefits....................... 21
PAYMENT AND ALLOCATION OF PREMIUMS................ 21
Issuance of a Certificate......................... 21
<CAPTION>
PAGE
-----
<S> <C>
Premiums.......................................... 21
Allocation of Premiums and Cash Value............. 22
Termination of Participating Entity Participation
in the Group Policy.............................. 24
Effect of Termination of Group Policy
Participation on Owners.......................... 24
Certificate Termination and Reinstatement While
the Group Policy is in Effect.................... 25
CHARGES AND DEDUCTIONS............................ 26
Premium Expense Charges........................... 26
Transfer Charge................................... 26
Monthly Deduction From Cash Value................. 27
Charges Against the Separate Account.............. 28
Surrender Charges................................. 28
Guarantee of Certain Charges...................... 30
Other Charges..................................... 30
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUES, CASH
SURRENDER VALUES AND ACCUMULATED PREMIUMS........ 30
CERTIFICATE RIGHTS................................ 34
Loan Privileges................................... 34
Surrender and Withdrawal Privileges............... 35
Exchange Privilege................................ 35
THE FIXED ACCOUNT................................. 36
General Description............................... 36
Fixed Account Cash Value.......................... 36
Death Benefit, Transfer, Withdrawal, Surrender,
and Certificate Loan Rights...................... 37
RIGHTS RESERVED BY METLIFE........................ 37
OTHER CERTIFICATE PROVISIONS...................... 37
SALES AND ADMINISTRATION OF THE GROUP POLICIES AND
CERTIFICATES..................................... 38
DISTRIBUTION OF THE GROUP POLICIES AND
CERTIFICATES..................................... 39
FEDERAL TAX MATTERS............................... 39
MANAGEMENT........................................ 42
VOTING RIGHTS..................................... 45
Right to Instruct Voting of Fund Shares........... 45
REPORTS........................................... 45
STATE REGULATION.................................. 46
REGISTRATION STATEMENT............................ 46
LEGAL MATTERS..................................... 46
EXPERTS........................................... 46
FINANCIAL STATEMENTS.............................. 46
APPENDIX TO PROSPECTUS............................ 84
</TABLE>
THE GROUP POLICY AND CERTIFICATE ARE NOT AVAILABLE IN ALL STATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE. METLIFE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED PROSPECTUS OR ANY SUPPLEMENT
THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY METLIFE.
2
<PAGE>
DEFINITIONS
ADMINISTRATIVE OFFICE--The office of MetLife at 177 South Commons Drive,
Aurora, Illinois 60507, to which all Owner communications are to be sent.
MetLife may, by written notice, name other locations within the United States to
serve as designated offices, in place of or in addition to the office above.
AGE--For each covered person in a particular group, Age is defined as of a
day selected by the participating entity and set forth in the Group Policy. Age
can be measured from the Date of the Group Policy or from December 31st of a
given year, or from any other date agreed to by MetLife and the participating
entity.
ALLOCATION DATE--The date the first premium is applied to the Separate
Account pursuant to the designation in the Certificate enrollment form and/or
Group Policy application, as applicable. During the first Group Policy year, it
is set at twenty days after the Investment Start Date with respect to any
Certificate. During this twenty day period the net premium allocated to the
investment divisions of the Separate Account under any new Certificate will be
applied to the Fixed Account. After the first Group Policy year, the Allocation
Date for all new Certificates issued with respect to that Group is the
Investment Start Date.
BENEFICIARY--The beneficiary is the person or persons designated by the
Owner to receive the insurance proceeds upon the death of the covered person.
CASH SURRENDER VALUE--The cash value less any indebtedness and applicable
surrender charge (computed as set forth under "Surrender Charges") and any
accrued and unpaid monthly deduction.
CASH VALUE--The sum of the Certificate cash values in the Fixed Account, the
investment divisions of the Separate Account and the Loan Account.
CERTIFICATE--The group variable universal life insurance certificates issued
under the group variable universal life insurance policy offered by MetLife and
described in this Prospectus.
CERTIFICATE MONTH--The month beginning on the monthly anniversary.
COVERED PERSON--The person upon whose life the Certificate is issued.
DATE OF RECEIPT--The date premiums and communications are actually received
at an Administrative Office. Premium payments and communications will be deemed
to be received on the Date of Receipt with three exceptions: (1) when they are
received on any day that is not a Valuation Date; (2) when they are received by
means other than U.S. mail after 4:00 p.m. New York City time. With regard to
(1) and (2) above, the Date of Receipt will be deemed to be the next Valuation
Date. The third exception is the date of receipt for the first premium payment
with regard to each Certificate. In this case, and subject to the exceptions set
forth in (1) and (2) above, the Date of Receipt is the later of (1) the Date of
Certificate and (2) the date the first premium for a Certificate is received at
the Administrative Office.
DATE OF CERTIFICATE--The effective date for life insurance protection under
the Certificate. The Date of Certificate is set forth in the Certificate and is
used to determine Certificate years and Certificate months from issue.
Certificate anniversaries are measured from the Date of Certificate.
DATE OF GROUP POLICY--The date set forth in the Group Policy that is used to
determine Group Policy years and Group Policy months. Group Policy anniversaries
are measured from the Date of Group Policy.
FINAL DATE--The certificate anniversary on which the covered person is age
95 or later if specified in the Certificate.
FIXED ACCOUNT--An account which is part of the General Account and to which
MetLife will allocate net premiums as directed by the Owner or participating
entity, as applicable, and credit certain fixed rates of interest.
GENERAL ACCOUNT--The assets of MetLife other than those allocated to the
Separate Account or any other legally-segregated separate account.
GROUP--A participating entity and all Owners and/or people eligible to
become Owners under the participating entity's Group Policy.
3
<PAGE>
GROUP POLICY--For ease of reference in this Prospectus, this term includes
both the group variable universal life insurance policy that the participating
entity either participates in, is a party to or owns and which is offered by
MetLife and described in this Prospectus together with any administration
agreement entered into between the participating entity and MetLife.
GUIDELINE ANNUAL PREMIUM--The level annual amount of premium that would be
payable through the Final Date of a Certificate for the specified face amount of
the Certificate, or any amount of increase in the specified face amount, if
premiums therefor were fixed by MetLife as to both timing and amount and were
based on 1980 Commissioners Standard Ordinary Mortality Tables, net investment
earnings at an annual effective rate of 5%, and fees and charges as set forth in
the Certificate and any Certificate riders.
INDEBTEDNESS--The total of any unpaid Certificate loan and loan interest.
INVESTMENT START DATE--The Date of Receipt of the first premium with respect
to a Certificate.
INVESTMENT DIVISION--A subdivision of the Separate Account. The assets in
each investment division are invested exclusively in the shares of a specified
portfolio.
LOAN ACCOUNT--An account within the General Account to which cash value from
the Separate Account and/or the Fixed Account in an amount equal to a
Certificate loan requested by an Owner is transferred.
MINIMUM GROUP SIZE--The minimum number of people in a group that is
necessary before an employer can purchase a Group Policy. The minimum group size
is currently 200 lives. However, MetLife reserves the right to issue a Group
Policy or provide coverage to a participating entity that does not meet the
minimum group size.
MINIMUM SPECIFIED FACE AMOUNT--The minimum specified face amount of
insurance for which a Certificate may be issued. The amount is set forth in the
Certificate. The Certificate will never specify a minimum specified face amount
of less than $10,000.
MINIMUM PREMIUM--The amount set forth in the Certificate which will make an
Owner eligible to keep the Certificate in force for the first two Certificate
years.
MONTHLY ANNIVERSARY--The same date in each month as the Date of Group Policy
or the date the Certificate is issued, as applicable . For purposes of the
Separate Account, whenever the monthly anniversary date falls on a date other
than a valuation date, the next valuation date will be deemed to be the monthly
anniversary.
MONTHLY DEDUCTION--Charges deducted monthly from the cash value of a
Certificate and which include any monthly cost of insurance, monthly cost of
benefits provided by riders and monthly administration charge.
OWNER--The person so designated in the enrollment form for the Certificate
or as subsequently changed.
PAID-UP--An election under the Certificate whereby the Owner may terminate
the death benefit (and any riders in effect) and use all or part of the cash
surrender value as a single premium for a paid-up benefit under the Certificate.
If the paid-up election is made, all or part of the remaining cash value in the
Certificate will be transferred to the General Account and may no longer be
allocated to the Separate Account or Fixed Account. The Owner will receive any
remaining cash surrender value that is not used to purchase a paid-up benefit.
The paid-up benefit elected must not be more than can be purchased using the
Certificate's cash surrender value or more than the death benefit under the
Certificate at the time the election is made and must not be less than $10,000.
PLANNED PERIODIC PREMIUM--An Owner's self-determined amount of premium
planned to be paid at fixed intervals over a specified period of time. The Owner
is not required to follow this schedule after the first premium payment.
PORTABLE--A status that occurs when a covered person is no longer part of
the participating entity's group. A Certificate becomes portable when an event
specified in the Certificate occurs. These events may include: termination of
the covered person's employment (other than through retirement) and retirement
as determined by the participating entity. An Owner of a portable Certificate
will no longer be deemed to be a member of the participating entity's group for
purposes of determining cost of insurance rates and charges.
4
<PAGE>
PORTFOLIO--A portfolio represents a different class (or series) of stock of
Metropolitan Series Fund, Inc., a mutual fund in which the Separate Account
assets are invested.
PRO RATA BASIS--Allocations made in the same proportion that the
Certificate's cash value in the Fixed Account and the Certificate's cash value
in each investment division of the Separate Account bear to the Certificate's
total cash value (except for the cash value, if any, in the Loan Account) as of
the Date of Receipt of a request.
SEPARATE ACCOUNT--Metropolitan Life Separate Account UL, a separate
investment account of MetLife through which premiums paid under the Certificate
are invested to the extent allocated to the Separate Account by the Owner.
SPECIFIED FACE AMOUNT--The amount set forth in the Certificate.
SURRENDER CHARGE CAP--The maximum surrender charge amount set forth in the
Certificate.
VALUATION DATE--Each day on which the New York Stock Exchange is open for
trading or, on days other than when the New York Stock Exchange is open, on
which it is determined that there is a sufficient degree of trading in the
Fund's portfolio securities that the current net asset value of its redeemable
securities might be materially affected. Valuations for any date other than a
Valuation Date will be determined as of the next Valuation Date.
VALUATION PERIOD--The period between two successive Valuation Dates,
commencing at 4:00 p.m., New York City time, on each valuation date and ending
at 4:00 p.m., New York City time, on the next succeeding Valuation Date.
SUMMARY
Unless the context indicates otherwise, this summary and the discussion in
the rest of this Prospectus assume that cash surrender values are sufficient to
pay all charges deducted on monthly anniversaries, that no Certificate loans
have been made and that no riders are in effect (see "Loan Privileges--Effect of
a Certificate Loan," "Payment and Allocation of Premiums--Certificate
Termination and Reinstatement While the Group Policy is in Effect," and
"Appendix to Prospectus").
This Prospectus describes only those aspects of the Certificate that relate
to the Separate Account since only interests in the Separate Account are being
offered by this Prospectus. Aspects of the Fixed Account are briefly summarized
in order to give a better understanding of how the Certificate functions (see
"The Fixed Account").
WHO IS THE ISSUER OF THE GROUP POLICIES AND CERTIFICATES?
MetLife, the issuer of the Group Policies and Certificates, is a mutual life
insurance company. It was incorporated under the laws of the State of New York
in 1866 and since 1868 it has been engaged in the life insurance business under
the name Metropolitan Life Insurance Company. Its Home Office is located at 1
Madison Avenue, New York, New York 10010. It is authorized to transact business
in all states of the United States, the District of Columbia, Puerto Rico and
all Provinces of Canada. MetLife, serving millions of people, is one of the
largest financial services companies in the world with many of the largest
United States corporations for its clients. On December 31, 1995, MetLife had
total life insurance in force of approximately $1.3 trillion and total assets
under management of over $179 billion.
WHAT ARE SEPARATE ACCOUNT UL, THE FIXED ACCOUNT AND THE METROPOLITAN SERIES
FUND?
The Owner may allocate the net premiums paid under the Certificate to one or
more of the investment divisions of the Separate Account, a separate investment
account of MetLife (see "The Separate Account") and/or to a Fixed Account
established by MetLife. In some cases, however, the participating entity may
select the investment divisions available to Owners. Also the participating
entity may retain the right to allocate any net premiums it pays unless and
until the covered person retires (as determined by the participating entity) or
the Owner's Certificate becomes portable.
5
<PAGE>
There are currently six investment divisions available in the Separate
Account. The assets in each division are invested in a separate class (or
series) of stock of the Fund, a "series" type of mutual fund (see "Metropolitan
Series Fund"). Each class of stock represents a separate portfolio within the
Fund. The six portfolios of the Fund which are currently available to Owners are
the Growth Portfolio, the Income Portfolio, the Diversified Portfolio, the
Aggressive Growth Portfolio, the International Stock Portfolio and the Stock
Index Portfolio. The International Stock Portfolio is not available in
California. Net premiums allocated to the Fixed Account are held in the General
Account of MetLife.
Each portfolio of the Fund has a different investment objective and is
managed by MetLife. For providing investment management services to the Fund,
MetLife receives a fee from the Fund equivalent to an annual rate of .25% of the
average daily value of the aggregate net assets of the Growth, Income,
Diversified, and Stock Index Portfolios and an annual rate of .75% of the
average daily value of the aggregate net assets of the International Stock and
Aggressive Growth Portfolios. State Street Research provides sub-investment
management services with respect to the Growth, Income, Aggressive Growth and
Diversified Portfolios. GFM provides sub-investment management services with
respect to the International Stock Portfolio. For these services, State Street
Research and GFM receive an annual percentage fee from MetLife. State Street
Research and GFM are subsidiaries of MetLife and their fees are the sole
responsibility of MetLife, and not the Fund. In addition to the investment
management fees, other direct expenses are charged against the assets of the
Fund.
For a full description of the Fund, see the prospectus for the Fund, which
is attached at the end of this Prospectus, and the Fund's Statement of
Additional Information referred to therein.
WHAT DEATH BENEFIT IS AVAILABLE UNDER THE CERTIFICATE?
The Certificate provides for the payment of a benefit upon the death of the
covered person. The death benefit is the specified face amount of the
Certificate plus the cash value on the date of death. If greater than the death
benefit otherwise payable a minimum death benefit equivalent to a percentage,
determined by age at death, of the cash value will be paid. The insurance
proceeds payable will be reduced by any outstanding indebtedness and any accrued
and unpaid charges (see "Certificate Benefits--Death Benefit"). The Certificate
also provides a guaranteed death benefit under which the specified face amount
is guaranteed for the first two Certificate years, provided that an amount equal
to the total minimum premiums is paid.
In addition, an Owner has the flexibility to add optional insurance benefits
by riders specified in the Certificate. These may include a waiver of monthly
deduction during total disability rider; an accelerated death benefit rider, a
living benefits rider; an accidental death benefit rider; an accidental death or
dismemberment benefit rider; and a dependent life benefits rider (see
"Certificate Benefits--Optional Insurance Benefits"). The cost of these optional
insurance benefits will be deducted from the cash value as part of the monthly
deduction (see "Charges and Deductions--Monthly Deduction From Cash Value").
Proceeds under the Certificate may be received in cash or under one of the
available optional income plans described in the Appendix to Prospectus (see
"Certificate Benefits--Optional Income Plans").
WHAT FLEXIBILITY DOES AN OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH BENEFIT?
After the first Certificate year, the Owner may increase the specified face
amount of the Certificate on a date or dates determined by the participating
entity and set forth in the Group Policy (see "Certificate Benefits"). For
qualifying employees of a participating entity, automatic increases in specified
face amount will be made in conjunction with each employee's salary increase on
a date or dates specified by the participating entity. Any increases in the
death benefit are subject to MetLife's underwriting rules (see "Certificate
Benefits--Change in Specified Face Amount"). Any specified face amount increase
also will result in additional charges (see "Certificate Benefits--Increases,"
and "Effect of Changes in Specified Face Amount on Charges"). The specified face
amount may also be decreased by the Owner after the first Certificate year. The
specified face amount may never be less than the minimum specified face amount
set forth in the Certificate. In no event will the specified face amount be less
than $10,000. A decrease in the specified face amount may result in the
imposition of a sales charge (see "Charges and Deductions--Surrender Charges").
An increase or decrease in the death benefit may have tax consequences (see
"Federal Tax Matters").
6
<PAGE>
WHAT FLEXIBILITY DOES AN OWNER HAVE IN CONNECTION WITH PREMIUM PAYMENTS?
If elected by a participating entity and authorized by the Owner, premiums
are paid through payroll deduction and are remitted to MetLife by such employer
on at least a monthly basis. If payroll deduction is not available, the Owner
may remit premiums to MetLife directly on a quarterly or annual basis. Premium
payments will not be credited to the Owner's Certificate until received by
MetLife. An Owner has considerable flexibility concerning the amount and
frequency of premium payments. In order to keep the guaranteed death benefit in
effect, minimum premiums must be paid during each of the first two Certificate
years (see "Premiums--Premium Limitations"). Otherwise, an Owner need not pay
the minimum premium. Instead, an Owner may, subject to certain restrictions,
make premium payments in any amount and at any frequency. However, the Owner may
be required to make an unscheduled premium payment in order to keep the
Certificate in force (see "Payment and Allocation of Premiums").
WHAT HAPPENS TO CERTIFICATES WHEN THE PARTICIPATING ENTITY'S ACTIVE
PARTICIPATION IN THE GROUP POLICY IS TERMINATED?
If the participating entity or MetLife decides to terminate the
participating entity's participation in the Group Policy, the participating
entity will cease remitting any payroll deductions of premiums. In addition, no
future Certificates will be issued under the Group Policy. The current
Certificates may also be terminated by MetLife under certain circumstances. A
surrender charge may apply to the termination of a Certificate due to the
termination of the Group Policy by the participating entity up to 5 years after
the Group Policy is issued. There are also circumstances where an Owner may
continue the Certificate even after the participating entity's termination of
its participation in the Group Policy. If the Certificate is not terminated,
different current charges may apply but the guaranteed charges will not be
greater than they were prior to the termination of the Group Policy. (See
"Effect of Termination of Group Policy Participation on Owners").
IF THE PARTICIPATING ENTITY CONTINUES TO PARTICIPATE IN THE GROUP POLICY, HOW
LONG WILL THE CERTIFICATE REMAIN IN FORCE?
The Certificate will terminate only (a) when its cash surrender value is
insufficient to pay the monthly deduction (see "Charges and Deductions--Monthly
Deduction from Cash Value"), and the grace period expires without a sufficient
payment being made (see "Certificate Termination and Reinstatement While the
Group Policy is in Effect--Termination"), or (b) in the first two Certificate
years, if the cash surrender value on any Certificate monthly anniversary is
insufficient to pay the monthly deduction and the total premiums paid as of such
monthly anniversary do not equal at least the minimum premiums required as of
that date, and the grace period expires without a sufficient payment being made.
Therefore, failure to pay minimum premiums after the first two Certificate years
will not automatically cause the Certificate to terminate. Nevertheless, after
the first two Certificate years, under the circumstances described above, the
Certificate can terminate, even if minimum premiums have been paid. Thus, after
the first two Certificate years, payment of the minimum premiums does not
guarantee that the Certificate will remain in force until its final date.
HOW ARE NET PREMIUMS ALLOCATED?
The portion of the premium available for allocation ("net premium") equals
the premium paid less premium expense charges (see "Charges and Deductions
Premium Expense Charges"). The participating entity or Owner, as applicable,
determines in the application for the Group Policy or enrollment form for the
Certificate, respectively, what portions, if any, of net premiums paid by each
are to be allocated to the investment divisions of the Separate Account and/or
to the Fixed Account. Allocations with respect to the Fixed Account are
effective as of the Investment Start Date. Allocations with respect to the
investment divisions of the Separate Account are effective as of the Allocation
Date, as explained more fully under "Payment and Allocation of
Premiums--Allocation of Premiums and Cash Value." An Owner or participating
entity, as applicable, may change allocations of future net premiums at any time
without charge by notifying MetLife in writing, subject to certain limitations
(see "Payment and Allocation of Premiums--Allocation of Premiums and Cash
Value"). Because investment performance of a Separate Account investment
division (unlike that of the Fixed Account) is not guaranteed by MetLife,
allocation of net premiums to the Separate
7
<PAGE>
Account investment divisions increases the amount of investment risk to the
Owner, and allocation to the Fixed Account decreases such risk. On the other
hand, the potential benefit of the Fixed Account is limited to the return
guaranteed by MetLife plus any discretionary return declared by MetLife from
time to time.
Subject to certain restrictions, currently, an Owner may transfer amounts
among the investment divisions of the Separate Account or between the Separate
Account and the Fixed Account without charge (see "Charges and Deductions"). In
the first 24 Certificate months, an Owner may transfer the entire amount in the
Separate Account to the Fixed Account without charge (see "Certificate
Rights--Exchange Privilege" and "The Fixed Account--Death Benefit, Transfer,
Withdrawal, Surrender, and Certificate Loan Rights"). An Owner may also elect to
participate in one of the systematic investment strategies (see "Allocation of
Premiums and Cash Value--Systematic Investment Strategies").
MAY THE CERTIFICATE BE SURRENDERED OR THE CASH VALUE PARTIALLY WITHDRAWN?
The Owner may surrender the Certificate at any time and receive the cash
surrender value of the Certificate. Subject to certain limitations, the Owner
also may make partial withdrawals from the cash surrender value at any time
prior to the final date (see "Certificate Rights--Surrender and Withdrawal
Privileges"). Certificates under some Group Policies may be subject to a
transaction charge of up to $25. Also, a sales load may be imposed on certain
surrenders (see "Charges and Deductions--Surrender Charges"). Surrenders and
withdrawals may have certain tax consequences (see "Federal Tax Matters").
IS THERE A "FREE LOOK" PERIOD?
The Certificate provides for a free-look period that lasts until 10 days
after receipt (except where state law requires a longer period for replacement
policies or other reasons), 45 days after the enrollment form has been
completed, or 10 days after MetLife mails the Owner a notice of free look
whichever is later. The Owner may return the Certificate within this period and
MetLife will send the Owner a complete refund of any premiums paid within 7
days. The refund of any premium paid by check, however, may be delayed until the
check has cleared the Owner's bank.
Following an increase in specified face amount requested by an Owner, there
is a similar free look period that extends until the later of 10 days after the
Owner receives revised Certificate pages reflecting the increase, 45 days after
the request for the increase has been completed, or 10 days after MetLife mails
the Owner a notice of cancellation right. During this period, the Owner may
elect to terminate the increase, and all Certificate values will be restored to
what they would have been had the increase not occurred. MetLife will also
refund the amount of any premiums paid, to the extent necessary for the
Certificate to continue to be within the definition of life insurance for
federal income tax purposes (see "Premiums--Premium Limitations").
WHAT IS THE LOAN PRIVILEGE?
An Owner may obtain a Certificate loan at any time that the Certificate has
a loan value. Loans may be repaid at any time prior to the Final Date (see
"Certificate Rights--Loan Privileges"). Certificates under some Group Policies
may be subject to a transaction charge of up to $25. Loans are not available for
Owners who have exercised the paid-up Certificate provision, except as otherwise
required by law.
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE CERTIFICATE?
The various charges assessed in connection with the Certificates are
outlined below. There are costs associated with the Certificates that are not
associated with a fixed life insurance product because the Certificates are for
a flexible premium variable universal life insurance product. For this reason,
some individuals who do not believe they will ever use the variable universal
life features included in the Certificates may find it more economical to
purchase fixed life insurance coverage, rather than the Certificates.
PREMIUM EXPENSE CHARGES. Premium expense charges vary based on the Group
Policy under which the Certificate is issued. These charges may consist of a
sales charge of up to 3% of each premium payment, a charge of .35% of each
premium payment to recover a portion of MetLife's estimated cost for the federal
income tax treatment of deferred acquisition costs ("DAC tax charge") and a
state premium tax charge of up to 5% of each premium payment (see "Charges and
Deductions--Premium Expense Charges").
8
<PAGE>
TRANSFER CHARGES. At the present time, there is no charge assessed when
amounts are transferred among the different investment divisions of the Separate
Account and between the investment divisions and the Fixed Account. MetLife
reserves the right in the future to assess a charge of up to $25 against each
transfer (see "Charges and Deductions--Transfer Charge").
MONTHLY DEDUCTION. The charges deducted as part of the monthly deduction
can vary based upon the Group Policy under which an Owner's Certificate is
issued. Cash value may be reduced by a monthly deduction equal to the sum of any
applicable: (1) charge for the cost of insurance. MetLife uses simplified
underwriting and guaranteed issue procedures. While the current costs of
insurance rates are generally lower than 100% of the 1980 Commissioners Standard
Ordinary Mortality Table Males, age last birthday ("1980 CSO Table"), the
guaranteed rates are up to 150% of the maximum rates that could be charged based
on the 1980 CSO table. The use of simplified underwriting and guaranteed issue
procedures may result in the cost of insurance charges being higher for some
healthy individuals. This charge will be deducted as part of a monthly combined
charge consisting of the cost of insurance charge and a component of the charge
for administration; (2) cost of any optional insurance benefits added by rider;
(3) monthly administration charge. The monthly administration charge is
comprised of two components. The first is a charge that is deducted as part of
the monthly combined charge (the other part of the monthly combined charge is
the cost of insurance, as described above). This component will never exceed 50%
of this monthly combined charge. The second component is a charge which may be
up to $3.00 per Certificate per month as specified in the Certificate. No profit
is expected to be derived from the aggregate of the administration charges set
forth in this paragraph. (See "Charges and Deductions--Monthly Deduction from
Cash Value.")
CHARGES AGAINST SEPARATE ACCOUNT. A daily charge equivalent to an effective
annual rate of at least .45% and not to exceed .90% of the average daily net
asset value attributable to the Policies of each investment division of the
Separate Account is imposed to compensate MetLife for its assumption of certain
mortality and expense risks (see "Charges and Deductions--Charge for Mortality
and Expense Risks").
No charges are currently made against the Separate Account for federal or
state income taxes with respect to earnings or capital gains which may be
attributable to the Separate Account. Should MetLife determine that such taxes
will be imposed, MetLife may make deductions from the Separate Account to pay
these taxes (see "Federal Tax Matters"). The imposition of such taxes would
result in a reduction of the cash value in the Separate Account.
SURRENDER CHARGE. While the Group Policy is in force, a sales charge may be
deducted in the form of a surrender charge if the Certificate is surrendered or
there is a decrease of the specified face amount. The surrender charge will be
deducted from the cash value of a Certificate if such surrender or decrease in
specified face amount occurs during up to the first 5 Certificate years after
issue or up to 5 years after an increase in the specified face amount (other
than an automatic increase). The surrender charge will not exceed the surrender
charge cap on the date of the surrender or specified face amount decrease. In
some cases, beginning no later than the 2nd Certificate year (or the 2nd year
after any applicable increase in specified face amount) this maximum declines.
In other cases the surrender charge will remain level through up to the fifth
Certificate year (or the fifth year after any applicable increase). In both
cases the surrender charge becomes zero no later than Certificate year 6 (or 6
years after the last specified face amount increase) (see "Charges and
Deductions--Surrender Charges").
A sales charge may also be deducted in the form of a surrender charge from
the cash value of a Certificate if the Certificate is terminated because the
Group Policy is terminated by the participating entity during up to the first 5
Group Policy years. The surrender charge will be the same surrender charge
described above; however, its elimination after not more than 5 years, will be
based on the number of years the Group Policy is in force, rather than the
number of years the Certificate is in force or the number of years since an
increase in specified face amount (see "Charges and Deductions--Surrender
Charges").
WHAT IS THE TAX TREATMENT OF CASH VALUE?
Cash value under a Certificate is subject to the same federal income tax
treatment as cash value under a conventional fixed benefit life insurance
policy. Under existing tax law, if a Certificate is not a modified
9
<PAGE>
endowment contract as discussed in the following paragraph, a Certificate owner
generally will be taxed on cash value withdrawn from the Certificate, the cash
value received upon surrender of the Certificate or the cash value distributed
at the Final Date of a Certificate only to the extent these amounts, when added
to previous distributions, exceed the total premiums paid. Amounts received upon
surrender or withdrawal or on the Final Date of a Certificate in excess of
premiums paid will be treated as ordinary income.
Special rules regarding taxation, including the imposition of a tax penalty,
govern pre-death withdrawals from life insurance contracts referred to as
modified endowment contracts. For more information, see "Federal Tax Matters."
IS THE BENEFICIARY SUBJECT TO FEDERAL INCOME TAX ON THE DEATH BENEFIT?
Like death benefits payable under conventional fixed benefit life insurance
policies, death benefit proceeds payable under the Certificate under current law
are generally completely excludable from the gross income of the beneficiary. As
a result, the beneficiary generally will not be taxed on death benefit proceeds
(see "Federal Tax Matters").
IS THE DEATH BENEFIT OR THE CASH VALUE SUBJECT TO FEDERAL ESTATE TAX?
The death benefit under the Certificate or the cash value may be subject to
federal estate tax (see "Federal Tax Matters").
HOW SHOULD PREMIUM PAYMENTS, OWNER REQUESTS AND OTHER COMMUNICATIONS BE SENT TO
METLIFE?
Premium payments and other communications (such as transfer requests, loan
requests, loan repayments, withdrawal requests, surrender requests, changes of
beneficiary, changes of the specified face amount, or changes of premium
allocation) should be sent to the Administrative Office for the Certificate.
MetLife may name different Administrative Offices for different transactions. In
the future MetLife may permit transfer and withdrawal or other requests to be
made by telephone.
To exercise rights under a Certificate, the Owner must follow the procedures
stated in the Certificate. To request a payment, change the allocation among the
investment divisions, change the beneficiary, change the specified face amount,
change an address or request any other action by MetLife, the Owner should
utilize the forms prepared by MetLife for each purpose. The forms are available
from the Administrative Offices.
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
THE SEPARATE ACCOUNT
The Separate Account, which is a separate investment account of MetLife, was
established by MetLife pursuant to the New York Insurance Law on December 13,
1988. The Separate Account also receives premium payments in connection with
other variable universal life insurance products issued by MetLife. The assets
allocated to the Separate Account are the property of MetLife, and MetLife is
not a trustee by reason of the Separate Account.
The Separate Account meets the definition of "separate account" under the
federal securities laws. All income, gains and losses, whether or not realized,
from assets allocated to the Separate Account are credited to or charged against
the Separate Account without regard to other income, gains or losses of MetLife.
Each Certificate provides that such portion of the assets in the Separate
Account as equals the liabilities (and reserves) of MetLife with respect to the
Separate Account shall not be chargeable with liabilities arising out of any
other business of MetLife. The liabilities are the actuarially determined amount
of MetLife's total commitments under the Certificates; the reserves are the
assets allocated to pay these commitments. The values of the assets in the
Separate Account will not at any time be less than the sum of all amounts then
allocated to the Separate Account under variable life insurance policies.
MetLife may accumulate in the Separate Account mortality and expense risk
charges, mortality gains and investment gains on those assets (which represent
such charges) in the Separate Account and other amounts in excess of MetLife's
liabilities and reserves with respect to the Separate Account. MetLife may from
time to time transfer to its general account any assets in the Separate Account
in excess of such reserves and liabilities.
10
<PAGE>
Although the Separate Account is an integral part of MetLife, the Separate
Account is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940 ("1940 Act").
Registration does not involve supervision of management or investment practices
or policies of the Separate Account or of MetLife by the Commission.
There are currently six investment divisions available in the Separate
Account. The assets in each investment division are invested in a separate class
(or series) of stock issued by the Fund. Each class of stock represents a
separate portfolio within the Fund. New investment divisions may be added as new
portfolios are added to the Fund and made available to Owners. In addition,
investment divisions may be eliminated from the Separate Account. One division,
not listed below, has been eliminated from the Separate Account except for
Groups that had received a written quotation regarding the Group Policy and the
Certificates from MetLife, including a quotation for the cost of insurance rates
applicable to such Group, before May 15, 1996.
METROPOLITAN SERIES FUND
The Fund is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the 1940 Act. The Fund has served as the investment
medium for the Separate Account since the Separate Account commenced operations.
A brief summary of the investment objectives of each Fund portfolio that may be
available to Owners is set forth below.
GROWTH PORTFOLIO. The investment objective of this portfolio is to achieve
long-term growth of capital and income, and moderate current income, by
investing primarily in common stocks that are believed to be of good quality or
to have good growth potential or which are considered to be undervalued based on
historical investment standards.
INCOME PORTFOLIO. The investment objective of this portfolio is to achieve
the highest possible total return, by combining current income with capital
gains, consistent with prudent investment risk and the preservation of capital,
by investing primarily in fixed-income, high-quality debt securities.
DIVERSIFIED PORTFOLIO. The investment objective of this portfolio is to
achieve a high total return while attempting to limit investment risk and
preserve capital by investing in equity securities, fixed-income debt
securities, or short-term money market instruments, or any combination thereof,
at the discretion of State Street Research.
AGGRESSIVE GROWTH PORTFOLIO. The investment objective of this portfolio is
to achieve maximum capital appreciation by investing primarily in common stocks
(and equity and debt securities convertible into or carrying the right to
acquire common stocks) of emerging growth companies, undervalued securities or
special situations.
INTERNATIONAL STOCK PORTFOLIO. The investment objective of this portfolio
is to achieve long-term growth of capital by investing primarily in common
stocks and equity-related securities of non-United States companies. This
portfolio is not available in connection with Group Policies and Certificates
issued in California.
STOCK INDEX PORTFOLIO. The investment objective of this portfolio is to
equal the performance of the Standard & Poor's 500 Composite Stock Price Index
(adjusted to assume reinvestment of dividends) by investing in the common stock
of companies which are included in the index.
MetLife purchases and redeems Fund shares for the Separate Account at their
net asset value without the imposition of any sales or redemption charges. Such
shares represent an interest in one of the portfolios of the Fund which
correspond to the investment divisions of the Separate Account. Any dividend or
capital gain distributions received from the Fund are likewise reinvested in
Fund shares at net asset value as of the dates paid. The distributions have the
effect of reducing the value of each share of the Fund and increasing the number
of Fund shares outstanding. However, the total cash value in the Separate
Account does not change as a result of such distributions.
On each Valuation Date, shares of each portfolio are purchased or redeemed
by MetLife for the Separate Account, based on, among other things, the amounts
of net premiums allocated to the Separate Account,
11
<PAGE>
dividends and distributions reinvested, transfers to and among investment
divisions, Certificate loans, loan repayments and benefit payments to be
effected pursuant to the terms of the Certificates as of that date. Such
purchases and redemptions for the Separate Account are effected at the net asset
value per share for each portfolio determined as of 4:00 p.m., New York City
time, on that same Valuation Date.
A full description of the Fund, its investment policies and restrictions,
its charges and other aspects of its operation is contained in the prospectus
for the Fund, which is attached at the end of this Prospectus, and in the
Statement of Additional Information referred to therein. See "The Fund and its
Purpose," in the prospectus for the Fund for a discussion of the different
separate accounts for MetLife and its affiliates that invest in the Fund and the
risks related thereto.
CERTIFICATE BENEFITS
DEATH BENEFIT
As long as the Certificate remains in force (see "Certificate Termination
and Reinstatement While the Group Policy is in Effect--Termination"), MetLife
will, upon due proof of the covered person's death, pay the insurance proceeds
of the Certificate to the named beneficiary. The proceeds may be received by the
beneficiary in a single sum or under one or more of the available optional
income plans as described in the Appendix to Prospectus.
The insurance proceeds are: (a) the death benefit provided on the date of
death; plus (b) any additional insurance on the covered person's life that is
provided by rider; minus (c) any outstanding indebtedness and any accrued and
unpaid charges; and minus (d) certain amounts of death benefit previously
decreased as a result of a claim under a rider to the Policy.
The death benefit is equal to the specified face amount of insurance plus
the cash value.
MINIMUM DEATH BENEFIT--There is a minimum death benefit equal to the greater
of (1) the death benefit and (2) a percentage of the cash value as set forth in
the table below. The minimum death benefit is determined in accordance with
federal income tax laws, to ensure that the Certificate qualifies as a life
insurance contract and that the insurance proceeds will be excluded from the
gross income of the beneficiary.
TABLE
<TABLE>
<CAPTION>
ATTAINED AGE OF
COVERED PERSON AT
THE BEGINNING OF PERCENTAGE OF
THE CERTIFICATE YEAR CASH VALUE
- -------------------------------------- -----------------
<S> <C>
40 and less:.......................... 250%
45:................................... 215%
50:................................... 185%
55:................................... 150%
60:................................... 130%
65:................................... 120%
<CAPTION>
ATTAINED AGE OF
COVERED PERSON AT
THE BEGINNING OF PERCENTAGE OF
THE CERTIFICATE YEAR CASH VALUE
- -------------------------------------- -----------------
<S> <C>
70:................................... 115%
75:................................... 105%
80:................................... 105%
85:................................... 105%
90:................................... 105%
95:................................... 100%
</TABLE>
For the ages not listed, the percentage decreases by a ratable portion for each
full year.
In no event will the death benefit be lower than the minimum amount required
to maintain the Certificate as life insurance under federal income tax law and
applicable Internal Revenue Service rules.
The Certificate provides a guaranteed death benefit. For all Owners, the
specified face amount is guaranteed for the first two Certificate years provided
that an amount equal to the total minimum premiums due has been paid even if the
cash surrender value would otherwise be insufficient to keep the policy in force
(see "Certificate Termination and Reinstatement While the Group Policy is in
Effect"). If the requirements of the guaranteed death benefit are not met on any
Certificate monthly anniversary, a notice will be sent to the Owner stating that
the guarantee will terminate unless sufficient premiums are paid within the
greater of 61 days,
12
<PAGE>
measured from the Certificate monthly anniversary, or 30 days after the date
notice is mailed. If sufficient premiums are not received within that time, the
guaranteed death benefit will terminate and may not be reactivated.
The death benefit provides insurance protection as well as possible build-up
of cash value. The death benefit varies as the cash value changes.
If the covered person dies on a date that is not a Valuation Date, the
amount of death benefit proceeds payable will be determined as of the next
Valuation Date.
CHANGE IN SPECIFIED FACE AMOUNT. Subject to certain limitations, an Owner,
after the first Certificate year may request an increase in the specified face
amount of a Certificate on a date or dates determined by the participating
entity and set forth in the Group Policy (see "Decreases" and "Increases,"
below). For Owners who are qualifying employees of employers who are
participating entities, automatic increases in specified face amount will be
made in conjunction with each employee's salary increases on a date or dates
determined by the participating entity, unless such employee notifies MetLife in
writing that no such automatic increases are desired. Any increases in the
specified face amount are subject to MetLife's underwriting rules which may
include a requirement for satisfactory evidence of the covered person's
insurability. The specified face amount may also be decreased by the Owner after
the first Certificate year. An increase or decrease in the death benefit may
have tax consequences (see "Federal Tax Matters"). Any increase or decrease in
the specified face amount requested by the Owner will become effective on the
monthly anniversary on or next following the date of approval of the request.
DECREASES. The specified face amount remaining in force after any requested
decrease may not be less than the minimum specified face amount as specified in
the Certificate. A decrease in the specified face amount may result in the
imposition of a sales charge (see "Charges and Deductions--Surrender Charges").
No decrease in the specified face amount will be permitted if it would result in
total premiums paid exceeding the then current maximum premium limitations
determined by Internal Revenue Code rules (see "Premiums-- Premium
Limitations"). For purposes of determining the cost of insurance charge (see
"Charges and Deductions--Cost of Insurance," "Cost of Insurance Rate," and "Rate
Class"), a decrease in the specified face amount will reduce the specified face
amount in the following order: (a) the specified face amount provided by the
most recent increases successively; and (b) the specified face amount on the
Date of Certificate.
INCREASES. Any requirements as to the minimum amount of an increase are
specified in the Certificate. Any increases in specified face amount are subject
to MetLife's underwriting rules.
EFFECT OF CHANGES IN SPECIFIED FACE AMOUNT ON CHARGES. A change in the
specified face amount may affect the net amount at risk which may affect an
Owner's cost of insurance charge and the monthly administration charge (see
"Charges and Deductions--Cost of Insurance;" "Cost of Insurance Rate," "Rate
Class," "Administrative Charge"). This in turn can affect the level of
subsequent cash values and death benefit. A change in the specified face amount
may also affect the Certificate's status as a modified endowment contract for
tax purposes (see "Federal Tax Matters"). Finally, an increase in the specified
face amount requested by an Owner can result in an additional amount of
surrender charge being imposed (see "Charges and Deductions--Surrender
Charges").
CASH VALUE
The total cash value of a Certificate at any time is the sum of the
Certificate's cash values in the Fixed Account (see "The Fixed Account"), the
Loan Account (see "Certificate Rights--Loan Privileges"), and the investment
divisions of the Separate Account at such time. The Certificate's cash value in
the Separate Account may increase or decrease on each Valuation Date depending
on the investment return of the chosen investment divisions of the Separate
Account (see "Separate Account Net Investment Return"). There is no guaranteed
minimum cash value in the Separate Account.
13
<PAGE>
CALCULATION OF SEPARATE ACCOUNT CASH VALUE. The portion of the first net
premium allocated to the investment divisions of the Separate Account under a
Certificate that is issued within the first Group Policy year will automatically
be allocated to the Fixed Account from the Investment Start Date to the
Allocation Date. Otherwise, on each Valuation Date, the Certificate's cash value
in an investment division of the Separate Account will equal:
(1) The cumulative amount of all net premium payments, transfers of cash value,
loan repayments and interest credited on Certificate loans that are
allocated to the investment division; minus
(2) Any cash value transferred, surrendered or withdrawn from the investment
division (including transfers to the Loan Account); minus
(3) The portion of all charges and deductions allocated to the Certificate's
cash value in the investment division (see "Charges and Deductions"); plus
or minus
(4) The cumulative net investment return (discussed below) on the amount of cash
value in the investment division.
The Certificate's total cash value in the Separate Account equals the sum of
the Certificate's cash value in each investment division.
SEPARATE ACCOUNT NET INVESTMENT RETURN. An investment division's net
investment return is determined as of 4:00 p.m., New York City time, on each
Valuation Date. All transactions and calculations with respect to the
Certificates as of any Valuation Date are determined as of such time.
Each investment division is credited with a rate of net investment return
equal to its gross rate of investment return during the Valuation Period less
(1) an adjustment for the Separate Account's charge for mortality and expense
risks (equivalent to at least .45% and not more than .90% on an annual basis)
and (2) a charge for MetLife's taxes, if any such tax charge becomes necessary
in the future (see "Charges and Deductions--Charges Against the Separate
Account"). The investment division's gross rate of investment return is equal to
the rate of increase or decrease in the net asset value per share of the
underlying Fund portfolio over the Valuation Period, adjusted upward to take
appropriate account of any dividends paid by the portfolio during the period.
Depending primarily on the investment experience of the underlying Fund
portfolio, an investment division's net investment return may be either positive
or negative during a Valuation Period.
RATES OF RETURN. The rates of return for the portfolios of the Fund shown
below reflect all charges against the available Fund portfolios. THEY DO NOT
REPRESENT WHAT MAY HAPPEN IN THE FUTURE. IN ADDITION, THERE ARE SIGNIFICANT
CHARGES AGAINST THE SEPARATE ACCOUNT, PREMIUMS AND THE CASH VALUE IN EACH
CERTIFICATE THAT ARE NOT IMPOSED AGAINST THE AVAILABLE FUND PORTFOLIOS AND ARE
THEREFORE NOT REFLECTED. These charges, i.e. charges against premiums, charges
for mortality and expense risks, the administration charge, the surrender charge
and the cost of insurance (see "Charges and Deductions--Premium Expense
Charges," "Surrender Charges," and "Monthly Deduction from Cash Value"),
significantly decrease the rates of return on a given Certificate. The rate of
return is computed for each portfolio by subtracting the net asset value per
share at the beginning of the period from the net asset value per share at the
end of the period, adjusting for dividends declared on that portfolio's shares
and dividing the result by the net asset value per share at the beginning of the
period. The resulting ratio is then annualized to obtain the Average Annual
Return shown. The annualization makes the assumption that the rate of return
does not vary from any one year period to another and takes into account the
effect of compounding.
Rates of return are useful for reviewing the effectiveness of Fund
management and for comparing the investment returns of the underlying Fund
portfolios. HOWEVER, FOR THE REASONS STATED ABOVE, NO OWNER SHOULD EXPECT TO
RECEIVE FUND RETURN. The hypothetical historical illustrations that appear below
demonstrate the effect on the underlying Fund Portfolios' rates of return of all
charges against the separate account, premiums and the cash value in the Policy
illustrated.
14
<PAGE>
The first column shown for each investment division begins on the later of
the date the portfolio of the Fund in which it invests began operations and the
date the first registration statement relating to such portfolio was declared
effective by the Securities and Exchange Commission and ends on the date
indicated. Other periods shown begin on January 1st and end on December 31st of
the following year, except that the average annual return column is for the
entire period shown for the division in question. Thus the rates of return are
based on the actual historical experience of the available Fund portfolios. The
annual return for the International Stock Portfolio was increased due to the
voluntary assumption by MetLife of certain expenses for the International Stock
Portfolio of the Fund in 1993 (see "Management of the Fund," in the prospectus
for the Fund). This subsidization affected annual return only by .01%. There was
no subsidization in 1994 or 1995.
<TABLE>
<CAPTION>
6/24/83- 1/1/84- 1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91-
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH......... -4.60% 0.61% 34.80% 10.19% 5.67% 9.88% 39.96% -9.98% 33.18%
INCOME......... 2.00% 13.83% 27.21% 19.58% -1.98% 9.23% 13.42% 9.98% 17.42%
<CAPTION>
AVERAGE
1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/92 12/31/93 12/31/94 12/31/95 RETURN
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
GROWTH......... 11.57% 14.41% -3.75% 34.49% 12.94%
INCOME......... 6.90% 11.32% -3.32% 19.70% 11.29%
</TABLE>
<TABLE>
<CAPTION>
7/25/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94-
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIVERSIFIED.... 3.41% 3.54% 8.88% 23.26% -0.89% 24.94% 9.49% 12.79% -3.44%
<CAPTION>
AVERAGE
1/1/95- ANNUAL
12/31/95 RETURN
--------- ---------
<S> <C> <C>
DIVERSIFIED.... 27.87% 11.16%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
4/29/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGGRESSIVE
GROWTH........ 4.62% 33.11% -11.35% 66.46% 10.37% 22.66% -3.52% 31.00% 17.80%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
5/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STOCK INDEX.... 1.95% 29.76% 7.44% 9.55% 1.15% 37.95% 14.67%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
5/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL
STOCK......... -1.55% -10.21% 47.76% 4.45% 1.81% 7.29%
</TABLE>
15
<PAGE>
ILLUSTRATIONS. In order to demonstrate how the investment experience of the
available portfolios of the Fund would have affected the death benefit, cash
value and cash surrender value of a Certificate, hypothetical illustrations
showing the hypothetical net return of each investment division are set forth
below. These hypothetical illustrations are based on the actual historical
experience of the available Fund portfolios as if the Separate Account had been
in existence and a Certificate had been issued on the dates indicated. THEY DO
NOT REPRESENT WHAT MAY HAPPEN IN THE FUTURE.
The illustrations are based on the payment of monthly premiums of $175 for a
specified face amount of $100,000 for an individual aged 40. The illustrations
assume that no riders are in effect. The periods illustrated are based on the
rates of return for such periods set forth in "Rates of Return" above.
For each investment division, one illustration is based on the guaranteed
charge rates under a hypothetical representative standard Group Policy; the
other illustration is based as if the current charge rates were in effect during
the period illustrated that would be representative of such a Group Policy. The
actual maximum and current charge rates can be expected to vary from one Group
Policy to another (See "Charges and Deductions.")
The guaranteed illustrations assume: (1) that the covered person is in a
rate class that has cost of insurance charges equal to 100% of the maximum rates
that could be charged based on the 1980 Commissioners Standard Ordinary
Mortality Table, Males, age last birthday ("1980 CSO Table"); (2) a $3.00 per
Certificate per month administration charge plus a charge for administration
included as part of the monthly combined charge equal to the same amount charged
for the cost of insurance described in (1) above; (3) a .35% DAC tax charge; (4)
a 2.5% premium tax rate; (5) a 3% front end sales load; (6) a surrender charge
cap equal to $30.17 per thousand dollars of specified face amount in Certificate
Year 1; $24.62 per thousand dollars of specified face amount in Certificate Year
2; $18.85 per thousand dollars of specified face amount in Certificate Year 3;
$12.83 per thousand dollars of specified face amount in Certificate Year 4;
$6.55 per thousand dollars of specified face amount in Certificate Year 5; and
$0 in Certificate Year 6 and thereafter; (7) a daily charge against the Separate
Account for mortality and expense risks equivalent to an effective annual rate
of .90% of the average daily value of the assets in the Separate Account
attributable to the Certificates; and (8) a surrender transaction charge of $25.
The current illustrations assume: (1) that the covered person is in a rate
class that has standardized cost of insurance charges as set forth in the
following table:
<TABLE>
<CAPTION>
MONTHLY CURRENT COST
OF INSURANCE RATE
- ---------------------------------------
RATE PER THOUSAND DOLLARS
AGE OF INSURANCE
- ---------- ---------------------------
<S> <C>
40 to 44 $ 0.17
45 to 49 $ 0.29
50 to 54 $ 0.48
55 to 59 $ 0.75
60 to 64 $ 1.17
65 to 69 $ 2.10
</TABLE>
(2) a $1.50 per Certificate per month administration charge plus a charge for
administration included as part of the monthly combined charge equal to the 20%
of the amount charged for the cost of insurance described in (1) above; (3) a
0.35% DAC tax charge; (4) a 2.5% premium tax rate; (5) a 0% front end sales
load; (6) a surrender charge cap equal to $30.17 per thousand dollars of
specified face amount in Certificate Year 1; $24.62 per thousand dollars of
specified face amount in Certificate Year 2; $18.85 per thousand dollars of
specified face amount in Certificate Year 3; $12.83 per thousand dollars of
specified face amount in Certificate Year 4; $6.55 per thousand dollars of
specified face amount in Certificate Year 5; and $0 in Certificate Year 6 and
thereafter; (7) a daily charge against the Separate Account for mortality and
expense risks equivalent to an effective annual rate of .45% of the average
daily value of the assets in the Separate Account attributable to the
Certificates; and (8) no surrender transaction charge.
16
<PAGE>
These examples of Certificate performance are for a specific age, rate
class, and group mortality characteristics premium payment pattern and policy
anniversary as set forth above. The benefits are calculated for a specific
Certificate anniversary. The amount and timing of premium payments would affect
individual Certificate benefits as would any withdrawals or Certificate loans.
Performance may be shown for the systematic investment strategies made
available under the Certificates (see "Allocation of Premiums and Cash
Value--Systematic Investment Strategies"). Average annual return for each of the
systematic investment strategies may be calculated by presuming a certain dollar
value at the beginning of a period, and comparing this dollar value with the
dollar value, based on historical performance for the applicable investment
divisions or the Fixed Account, at the end of the period, expressed as a
percentage. The average annual return in each case will assume that no
withdrawals have occurred and will not reflect charges against premiums, cost of
insurance or other monthly policy charges.
This Prospectus also contains illustrations based on assumed rates of
return. See "Illustrations Of Death Benefit, Cash Values, Cash Surrender Values
And Accumulated Premiums."
The following examples show how the hypothetical net return of the
investment division which invests in the corresponding portfolio of the Fund
would have affected benefits for a Certificate issued on the January 1
immediately following the effective date of such portfolio if that Certificate
imposed the charges and had the other characteristics discussed above under
"Illustrations." These examples assume that net premiums and related cash values
were in the applicable investment division for the entire period.
GROWTH
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1984.................................... $ 2,183 $ 1,843 $ 1,284 $ 101,843
1985.................................... 5,390 4,539 3,420 104,539
1986.................................... 8,076 6,783 5,104 106,783
1987.................................... 10,413 8,723 7,440 108,723
1988.................................... 13,630 11,389 10,734 111,389
1989.................................... 21,529 17,737 17,737 117,737
1990.................................... 21,395 17,432 17,432 117,432
1991.................................... 30,949 24,982 24,982 124,982
1992.................................... 36,847 29,514 29,514 129,514
1993.................................... 44,398 35,324 35,324 135,324
1994.................................... 44,767 35,133 35,133 135,133
1995.................................... 62,655 48,586 48,586 148,586
</TABLE>
GROWTH
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1984.................................... $ 2,183 $ 1,356 $ 772 $ 101,356
1985.................................... 5,390 3,270 2,125 103,270
1986.................................... 8,076 4,785 3,081 104,785
1987.................................... 10,413 6,022 4,739 106,022
1988.................................... 13,630 7,664 7,009 107,664
1989.................................... 21,529 11,787 11,762 111,787
1990.................................... 21,395 11,392 11,367 111,392
1991.................................... 30,949 16,008 15,983 116,008
1992.................................... 36,847 18,521 18,496 118,521
1993.................................... 44,398 21,690 21,665 121,690
1994.................................... 44,767 21,212 21,187 121,212
1995.................................... 62,655 28,756 28,731 128,756
</TABLE>
17
<PAGE>
INCOME
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1984.................................... $ 2,330 $ 1,967 $ 1,408 $ 101,967
1985.................................... 5,408 4,555 3,435 104,555
1986.................................... 8,736 7,338 5,659 107,338
1987.................................... 10,677 8,945 7,662 108,945
1988.................................... 13,832 11,559 10,904 111,559
1989.................................... 17,941 14,767 14,767 114,767
1990.................................... 22,002 17,899 17,899 117,899
1991.................................... 28,167 22,701 22,701 122,701
1992.................................... 32,313 25,837 25,837 125,837
1993.................................... 38,166 30,306 30,306 130,306
1994.................................... 38,979 30,484 30,484 130,484
1995.................................... 48,962 37,782 37,782 137,782
</TABLE>
INCOME
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1984.................................... $ 2,330 $ 1,448 $ 863 $ 101,448
1985.................................... 5,408 3,281 2,137 103,281
1986.................................... 8,736 5,178 3,474 105,178
1987.................................... 10,677 6,167 4,884 106,167
1988.................................... 13,832 7,773 7,118 107,773
1989.................................... 17,941 9,800 9,775 109,800
1990.................................... 22,002 11,668 11,643 111,668
1991.................................... 28,167 14,502 14,477 114,502
1992.................................... 32,313 16,144 16,119 116,144
1993.................................... 38,166 18,486 18,461 118,486
1994.................................... 38,979 18,246 18,221 118,246
1995.................................... 48,962 22,099 22,074 122,099
</TABLE>
DIVERSIFIED
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1987.................................... $ 1,999 $ 1,688 $ 1,128 $ 101,688
1988.................................... 4,351 3,665 2,546 103,665
1989.................................... 7,687 6,459 4,780 106,459
1990.................................... 9,748 8,171 6,888 108,171
1991.................................... 14,583 12,193 11,538 112,193
1992.................................... 18,232 15,017 15,017 115,017
1993.................................... 22,781 18,551 18,551 118,551
1994.................................... 24,052 19,398 19,398 119,398
1995.................................... 33,137 26,509 26,509 126,509
</TABLE>
18
<PAGE>
DIVERSIFIED
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1987.................................... $ 1,999 $ 1,242 $ 657 $ 101,242
1988.................................... 4,351 2,635 1,491 102,635
1989.................................... 7,687 4,540 2,836 104,540
1990.................................... 9,748 5,605 4,322 105,605
1991.................................... 14,583 8,156 7,501 108,156
1992.................................... 18,232 9,918 9,893 109,918
1993.................................... 22,781 12,050 12,025 112,050
1994.................................... 24,052 12,345 12,320 112,345
1995.................................... 33,137 16,488 16,463 116,488
</TABLE>
STOCK INDEX
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1991.................................... $ 2,376 $ 2,006 $ 1,446 $ 102,006
1992.................................... 4,784 4,029 2,910 104,029
1993.................................... 7,436 6,248 4,569 106,248
1994.................................... 9,639 8,079 6,796 108,079
1995.................................... 15,785 13,195 12,540 113,195
</TABLE>
STOCK INDEX
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1991.................................... $ 2,376 $ 1,476 $ 891 $ 101,476
1992.................................... 4,784 2,901 1,757 102,901
1993.................................... 7,436 4,397 2,693 104,397
1994.................................... 9,639 5,547 4,264 105,547
1995.................................... 15,785 8,841 8,186 108,841
</TABLE>
AGGRESSIVE GROWTH
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1989.................................... $ 2,341 $ 1,976 $ 1,416 $ 101,976
1990.................................... 4,072 3,430 2,311 103,430
1991.................................... 9,514 7,994 6,315 107,994
1992.................................... 12,901 10,809 9,526 110,809
1993.................................... 18,181 15,189 14,534 115,189
1994.................................... 19,612 16,167 16,167 116,167
1995.................................... 28,031 22,867 22,867 122,867
</TABLE>
19
<PAGE>
AGGRESSIVE GROWTH
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
1989.................................... $ 2,341 $ 1,454 $ 869 $ 101,454
1990.................................... 4,072 2,467 1,323 102,467
1991.................................... 9,514 5,625 3,921 105,625
1992.................................... 12,901 7,444 6,161 107,444
1993.................................... 18,181 10,241 9,586 110,241
1994.................................... 19,612 10,769 10,744 110,769
1995.................................... 28,031 14,998 14,973 114,998
</TABLE>
INTERNATIONAL STOCK
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
1992.................................... $ 2,001 $ 1,689 $ 1,129 $ 101,689
1993.................................... 5,443 4,584 3,465 104,584
1994.................................... 7,700 6,468 4,789 106,468
1995.................................... 10,026 8,401 7,118 108,401
</TABLE>
INTERNATIONAL STOCK
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED CASH
CERTIFICATE YEAR ENDING AT FUND SURRENDER
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE VALUE DEATH BENEFIT
- ---------------------------------------- ---------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
1992.................................... $ 2,001 $ 1,243 $ 658 $ 101,243
1993.................................... 5,443 3,302 2,157 103,302
1994.................................... 7,700 4,563 2,859 104,563
1995.................................... 10,026 5,780 4,497 105,780
</TABLE>
From time to time the Separate Account may advertise its performance ranking
information among similar investments as compiled by Lipper Analytical Services
Inc., Morningstar, Inc. and other independent organizations.
From time to time the Separate Account may compare the performance of its
investment divisions with the performance of common stocks, long-term government
bonds, long-term corporate bonds, intermediate-term government bonds, Treasury
Bills, certificates of deposit and savings accounts. The Separate Account may
use the Consumer Price Index in its advertisements as a measure of inflation for
comparison purposes.
BENEFIT AT FINAL DATE
If the covered person is living, MetLife will pay to the Owner the cash
value of the Certificate on the Final Date, reduced by any outstanding
indebtedness (see "Certificate Benefits--Cash Value"). The Final Date of a
Certificate is the Certificate anniversary on which the covered person is 95 or
later, if so requested by the Owner and permitted by law (see "Federal Tax
Matters").
OPTIONAL INCOME PLANS
During the covered person's lifetime, the Owner may arrange for the cash
surrender value to be paid in a single sum, in an account that earns interest or
under one or more of the available optional income plans. For more specifics
regarding optional income plans, see the Appendix to Prospectus. These choices
are also available at the Final Date. If no election is made, MetLife will place
the amount in an account that earns interest. The payee will have immediate
access to all or any part of the account.
20
<PAGE>
When the insurance proceeds are payable in a single sum, the beneficiary
may, within one year of the covered person's death, select one or more of the
optional income plans, if no payments have yet been made. If the insurance
proceeds become payable under an optional income plan and the beneficiary has
the right to withdraw the entire amount, the beneficiary may name and change
contingent beneficiaries.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the optional insurance
benefits described in the Appendix to Prospectus, may be included with a
Certificate by rider. The cost of any optional insurance benefits will be
deducted as part of the monthly deduction (see "Charges and Deductions--Monthly
Deduction From Cash Value"). See the Appendix to Prospectus, for a discussion of
how certain riders affect the benefits and the exercise of certain rights under
the Certificate.
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees, and their spouses
when provided by the participating entity. Individuals wishing to purchase a
Certificate must complete an enrollment form which must be received in good
order by the Administrative Office before a Certificate will be issued or any
investment return will commence thereunder. A Certificate will not be issued
with a specified face amount less than the Minimum Specified Face Amount.
Acceptance is subject to MetLife's underwriting rules. MetLife reserves the
right to reject an enrollment for any reason permitted by law.
PREMIUMS
PAYMENT OF PREMIUMS. During the first two Certificate years in order to
keep the guaranteed death benefit in force, premium payments must be at least
equal to the minimum premium due. Otherwise, the Owner is not required to pay
minimum premium.
MOREOVER THE PAYMENT OF MINIMUM PREMIUMS WILL NOT GUARANTEE THAT THE
CERTIFICATE REMAINS IN FORCE AFTER THE FIRST TWO CERTIFICATE YEARS. Instead, the
duration of the Certificate after the first two Certificate years depends upon
the Certificate's cash surrender value, assuming the Group Policy remains in
force (see "Certificate Termination and Reinstatement While the Group Policy is
in Effect--Termination").
Premiums will be paid through payroll deduction, where provided by the
participating entity. A participating entity may remit payroll deductions to
MetLife as much as 30 days after the deduction is made. If there is no payroll
deduction available, an Owner may elect to pay the premium quarterly or
annually.
Subject to the minimum and maximum premium limitations described below, an
Owner may make unscheduled premium payments at any time in any amount. The
Certificate, therefore, provides the Owner with the flexibility to vary the
frequency and amount of premium payments to reflect changing financial
conditions.
During the first Group Policy year, the portion of the first premium payment
under each Certificate allocated to investment divisions of the Separate Account
will be allocated to the Fixed Account from the Investment Start Date until the
Allocation Date as discussed in detail under "Allocation of Net Premiums" below.
Thereafter, the portion of a premium payment allocated to the investment
divisions of the Separate Account under such Certificates and any portion of
premium payments allocated to the investment divisions of the Separate Account
under Certificates issued after the first Group Policy year are credited to the
Separate Account as of the Date of Receipt of the premium payment, together with
any necessary allocation instructions in good order from the participating
entity. The portion of each premium payment under each Certificate allocated to
the Fixed Account is credited to the Fixed Account as of the Date of Receipt.
21
<PAGE>
PREMIUM LIMITATIONS. During the first two Certificate years, premium
payments by an Owner must at least equal the minimum premiums in order to keep
the guaranteed death benefit in effect. Otherwise, the Certificate will
terminate after a grace period commencing on a monthly anniversary when the cash
surrender value is insufficient to pay the monthly deduction on that date.
Except as described below, the total of all premiums paid, both planned and
unplanned, can never exceed the then current maximum premium limitation
determined by Internal Revenue Code rules relating to the definition of life
insurance. If at any time a premium is paid that would result in total premiums
exceeding the then current maximum premium limitations, MetLife will accept only
that portion of the premium that will make total premiums equal the limit. Any
part of the premium in excess of that amount will be refunded, and no further
premiums will be accepted until allowed by the maximum premium limitations.
These limitations will not apply to any premium that is required to be paid in
order to prevent the Certificate from terminating.
There may be cases where the total of all premiums paid could cause the
Certificate to be classified as a modified endowment contract (see "Federal Tax
Matters"). The annual statement (see "Reports") sent to each Owner will include
information regarding the modified endowment contract status of a Certificate.
In cases where a Certificate is not an irrevocable modified endowment contract,
the annual statement will indicate what action the Certificate owner can take to
reverse the modified endowment contract status of the Certificate.
The first premium may not be less than the planned periodic premium. Every
unplanned premium payment must be at least $100. Premium payments less than
these minimum amounts will be refunded to the Owner. These minimum premium
limits can be changed by MetLife. No increase will take effect until 90 days
after notice is sent to the Owner.
ALLOCATION OF PREMIUMS AND CASH VALUE
NET PREMIUMS. The net premium equals the premium paid less premium expense
charges (see "Charges and Deductions Premium Expense Charges").
ALLOCATION OF NET PREMIUMS. In the enrollment form for a Certificate, the
Owner indicates the initial allocation of net premiums among the Fixed Account
and the investment divisions of the Separate Account. In some cases, the
participating entity retains the right to allocate the portion of any net
premiums it pays rather than the Owner pays among the Fixed Account and the
investment divisions of the Separate Account unless and until the covered person
retires, as determined by the participating entity (if the covered person is
employed by the participating entity), or the Certificate becomes portable. The
Certificate includes a description of the Owner's right to allocate net
premiums. The minimum percentage of each premium that may be allocated to the
Fixed Account or any investment division of the Separate Account is 10%.
Allocation percentages must be in whole numbers; for example, 33 1/3% may not be
chosen. The Owner may change the allocation of future net premiums without
charge at any time by providing MetLife with written notification at the
Administrative Office. The change will be effective as of the Date of Receipt of
the notice at the Administrative Office.
A newly-issued Certificate is credited with an investment return commencing
with the date the first premium for that Certificate is received, or, if later,
the Date of Certificate. With one exception, the investment return that
commences on this "Investment Start Date" is based on the allocation among the
Fixed Account and the investment divisions of the Separate Account selected by
the Owner (or, to the extent mentioned in the preceding paragraph, the
participating entity). The one exception is for Certificates that are issued
during the first year that the related Group Policy has been in effect. For
those Certificates, the initial premium payments allocated to the investment
divisions of the Separate Account will be allocated to and earn the current
interest rate in the Fixed Account during the 20 day period of time from the
Investment Start Date to the Allocation Date. Thereafter, the investment return
is based on the investment allocation selected by the Owner or participating
entity as mentioned above.
22
<PAGE>
The Certificate's cash value in the investment divisions of the Separate
Account will vary with the investment experience of these investment divisions,
and the Owner bears this investment risk. Owners should periodically review
their allocations of net premiums and cash values in light of market conditions
and their overall financial planning requirements.
CASH VALUE TRANSFERS. Except as described below, on and after the
Allocation Date the Owner may transfer cash value among the Fixed Account and
investment divisions of the Separate Account. In some cases, the participating
entity may retain the right to transfer the portion of any cash value
attributable to net premiums it pays rather than the Owner pays among the Fixed
Account and the investment divisions of the Separate Account unless and until
the covered person retires, as determined by the participating entity (if the
covered person is employed by the participating entity) or the Owner's
Certificate becomes portable. In addition, in some cases, the maximum amount
that may be transferred from the Fixed Account in any Certificate year is the
greater of $200 or 25% of the largest amount in the Fixed Account over the last
four Certificate years, or, if the Certificate has been in effect for less than
that period, since the Certificate date. This limit does not apply to a full
surrender, to any loans taken or to any transfers made under a systematic
investment strategy (see "Systematic Investment Strategies"). The Certificate
includes a description of the Owner's cash value transfer rights. There is no
charge for transfers.
A transfer must be made in either dollar amounts or a percentage in whole
numbers. The minimum amount that may be transferred is the lesser of $200 or the
total amount in an investment division or, if the transfer is from the Fixed
Account, the total amount in the Fixed Account. Transferring cash value from one
or more investment divisions and/or the Fixed Account into one or more other
investment divisions and/or the Fixed Account counts as one transfer. MetLife
will effectuate transfers and determine all values in connection with transfers
as of the Date of Receipt of written notice at the Administrative Office, except
in the limited circumstances described under "Other Certificate
Provisions--Payment Deferment" and "The Fixed Account--Death Benefit, Transfer,
Withdrawal, Surrender and Certificate Loan Rights."
Transfers are not taxable transactions under current law. Transfer requests
must be in writing in a form acceptable to MetLife, or in another form of
communication acceptable to MetLife.
MetLife reserves the right, if permitted by state law, to allow Owners to
make transfer requests by telephone. If MetLife decides to permit this transfer
procedure, and an Owner elects to participate in the transfer procedure, the
following will apply: the Owner will authorize MetLife to act upon the telephone
instructions of any person purporting to be the Owner, assuming MetLife's
procedures have been followed, to make transfers both from amounts in the
Certificate's Fixed Account and in the Separate Account. MetLife will institute
reasonable procedures to confirm that any instructions communicated by telephone
are genuine. All telephone calls will be recorded, and the Owner will be asked
to produce the Owner's personalized data prior to MetLife initiating any
transfer requests by telephone. Additionally, as with other transactions, the
Owner will receive a written confirmation of any such transfer. Neither MetLife
nor the Separate Account will be liable for any loss, expense or cost arising
out of any requests that MetLife or the Separate Account reasonably believe to
be genuine. In the event that these transfer procedures are instituted and in
the further event that an Owner who has elected to use such procedures
encounters difficulty with them, such Owner should make the request to the
Administrative Office.
SYSTEMATIC INVESTMENT STRATEGIES. For certain groups, MetLife may permit
the Owner to submit a written authorization directing MetLife to make transfers
on a continuing periodic basis from one investment division to another or to the
Fixed Account. MetLife currently offers three such investment strategies: the
"Equity Generator," the "Equalizer" and the "Allocator." Both the "Equity
Generator" and the "Allocator" may be elected at any time. The "Equalizer" may
be elected only on a Certificate anniversary. Only one of these systematic
investment strategies may be in effect at any one time. The Owner may submit a
written request electing a strategy or directing MetLife to cancel a systematic
investment strategy at any time. The election of any systematic investment
strategy will become effective on the later of the Allocation Date and the end
of the free look period.
Under the "Equity Generator," Owners may have the interest earned on amounts
in the Fixed Account transferred to the Stock Index investment division. Any
such transfer from the Fixed Account to the Stock
23
<PAGE>
Index investment division will be made at the beginning of each Certificate
month following the Certificate month in which the interest is earned. The
transfer will only be made for a month during which at least $20.00 in interest
is earned. Amounts earned during a month in which less than $20.00 in interest
is earned will remain in the Fixed Account.
Under the "Equalizer," at the beginning of each Certificate month, a
transfer is made from the Stock Index investment division to the Fixed Account
or from the Fixed Account to the Stock Index investment division in order to
make the Fixed Account and Stock Index investment division equal in value. While
the "Equalizer" is in effect, any cash value transfer out of the Stock Index
investment division that is not part of this systematic investment strategy will
automatically terminate the "Equalizer" election. The Owner may then reelect the
"Equalizer" commencing on the next Certificate anniversary.
Under the "Allocator," at the beginning of each Certificate month, an amount
designated by the Owner is transferred from the Fixed Account to any investment
division(s) specified by the Owner. The Owner may choose to do this in one of
the following three ways: (1) designating an amount to be transferred from the
Fixed Account each month until amounts in that investment division are
exhausted; (2) designating an amount to be transferred from the Fixed Account
for a certain number of months; or (3) designating a total amount to be
transferred from the Fixed Account in equal monthly installments over a certain
number of months. The Owner's designations must allow the "Allocator" to remain
in effect for at least three months.
TERMINATION OF PARTICIPATING ENTITY PARTICIPATION IN THE GROUP POLICY
Participation in the Group Policy will terminate if the participating entity
decides to terminate its participation in the Group Policy. In addition, MetLife
may also terminate the participating entity's participation in the Group Policy
if during any twelve month period, the aggregate specified face amount for all
Owners under the Group Policy or the number of Certificates falls by certain
amounts or below the minimum permissible levels established by MetLife. Both the
participating entity and MetLife must provide ninety days' written notice to the
other as well to the Owners before terminating participation in the Group
Policy. Termination of participation in the Group Policy means that the
participating entity will no longer remit premiums to MetLife through payroll
deduction and that no new Certificates will be issued under the participating
entity's group. Owners of portable Certificates as defined in the Certificate as
of the Certificate monthly anniversary next following the termination of the
participating entity's participation in the Group Policy and Owners who
exercised the paid-up Certificate provision as of a date not later than the last
Certificate monthly anniversary immediately prior to notice of termination being
sent to Owners will remain Owners of the Certificates.
EFFECT OF TERMINATION OF GROUP POLICY PARTICIPATION ON OWNERS
A Termination by the participating entity or MetLife of the participating
entity's participation in the Group Policy will not affect Owners whose
Certificates have become portable or who have exercised their paid-up
Certificate option by the dates specified in the preceding paragraph. For all
other Owners, subject to the surrender charge waivers discussed in the first
paragraph below, the following applies: If the participating entity replaces the
Group Policy with another life insurance product that accumulates cash value,
Certificates will be terminated and cash surrender values of each Owner will be
transferred to the other life insurance product. If the Owner does not elect to
be covered under the new product or if the new product does not provide coverage
for the Owner, the Certificate's cash surrender value will be transferred to the
Owner. If the participating entity replaces the Group Policy with a life
insurance product that does not accumulate cash value, Certificates will be
terminated and Owners will receive their cash surrender value. In this case and
in any other case where Owners receive their cash surrender value, Owners may
purchase an annuity product from MetLife instead. If the Owner transfers the
Certificate's cash value to such an annuity, no surrender charge will be
assessed on the transfer. If the participating entity does not replace the Group
Policy with another life insurance product, then, depending on the terms of the
Certificate, Owners may have the option of electing to become Owners of portable
Certificates or Owners of paid-up Certificates, or Owners may have the option of
electing the standard conversion rights set forth in the Certificate or
receiving the cash surrender value of their Certificates. If an Owner becomes
the Owner of a portable Certificate, the current cost of insurance may change
but will never be higher than the guaranteed cost of insurance. If an Owner
elects the standard
24
<PAGE>
conversion rights, insurance provided will be substantially less (and in some
cases nominal) than the insurance provided under the Certificate. The Owner will
receive any cash surrender value not used to purchase such standard conversion
right.
Where the cash surrender value of a Certificate is paid out to the Owner or
transferred to another life insurance company, as described in the preceding
paragraph following termination of the participating entity's participation in
the Group Policy, special surrender charge waivers will apply. If participation
has been terminated by MetLife, no surrender charge will be imposed on any such
payouts or transfers. If participation has been terminated by the participating
entity, no surrender charge will be imposed on such payouts or transfers if more
than 5 Group Policy years have elapsed since the Date of Group Policy. See
"Charges and Deductions--Surrender Charges."
CERTIFICATE TERMINATION AND REINSTATEMENT WHILE THE GROUP POLICY IS IN EFFECT
TERMINATION. If, during the first two Certificate years, the cash surrender
value on any monthly anniversary is insufficient to cover the monthly deduction
and the total premiums paid as of such monthly anniversary are not equal to the
minimum premiums required as of that date, MetLife will notify the Owner and any
assignee of record of that difference. Also, if, after the first two Certificate
years, the cash surrender value on any monthly anniversary is insufficient to
cover the monthly deduction, MetLife will notify the Owner and any assignee of
record of that shortfall. In either case, the Owner will then have a grace
period of the greater of 61 days, measured from the Certificate monthly
anniversary, or 30 days after the date notice is mailed, to make sufficient
payment. In the first two Certificate years, the minimum necessary premium
payment will be an amount equal to the difference between the total premiums
previously paid and the minimum premiums. Failure to make a sufficient payment
within the grace period will result in termination of the Certificate without
any cash surrender value. If the covered person dies during the grace period,
the insurance proceeds will still be payable, but any accrued and unpaid monthly
deductions will be deducted from the proceeds.
REINSTATEMENT. Unless the Group Policy is terminated and the Owner would
not have been permitted to retain the Certificate on a portable or paid-up basis
(see, "Effect of Termination of Group Policy Participation on Owners" above), a
terminated Certificate may be reinstated any time within 3 years (or longer
where required by state law) after the end of the grace period and before the
Final Date by submitting the following items to MetLife: (1) a written request
for reinstatement; (2) evidence of insurability satisfactory to MetLife; and (3)
a premium that, after the deduction of the premium expense charges (see "Charges
and Deductions-- Premium Expense Charges"), is large enough to cover: (a) the
monthly deductions through the end of the grace period and for at least the two
Certificate months commencing with the effective date of reinstatement; (b) any
portion of the surrender charge which was not paid at termination because the
cash value at termination was insufficient to pay such portion of the charge;
and (c) interest at the rate of 6% per year on the amount set forth in (b) from
the commencement of the grace period to the date of reinstatement. MetLife
reserves the right to waive the interest due set forth in (c) above.
Notwithstanding the above, at the present time, with respect to the
reinstatement of a Certificate that is terminated during the first two
Certificate years, MetLife will accept as the premium required for reinstatement
the lesser of the amount as defined in the immediately preceding paragraph and
the following: the excess of the sum of (a) the monthly deductions through the
end of the grace period and for at least the two Certificate months commencing
with the effective date of reinstatement; and (b) the total of the minimum
premiums that would have been payable under the Certificate from the date of the
Certificate until the effective date of reinstatement had no termination
occurred, over the sum of all premiums paid by the Owner to the effective date
of the termination before any charges or deductions were applied. MetLife offers
this alternative calculation of the premium required for reinstatement at
present but reserves the right to modify or rescind this offer at its sole
discretion.
Indebtedness on the date of termination will be cancelled and need not be
repaid and will not be reinstated. The amount of cash surrender value on the
date of reinstatement will be determined in the manner set forth in the
Certificate.
25
<PAGE>
The date of reinstatement will be the monthly anniversary next following the
date of approval of the request. The terms of the original Certificate,
including the insurance rates provided therein, will apply to the reinstated
Certificate. However, a Certificate which was terminated and reinstated during
the first two Certificate years will be subject to termination after a grace
period when the cash surrender value is insufficient to pay a monthly deduction
even if all minimum premiums required to be paid during the first two
Certificate years have been paid. A reinstated Certificate is subject to a new
two year period of contestability (see "Other Certificate
Provisions--Incontestability").
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGES
SALES LOAD. A charge (which may be deemed to be a sales load as defined in
the 1940 Act) may be deducted from each premium payment received by MetLife as
described below. A charge of up to 3% of premiums paid may be deducted from all
premium payments. There may also be a charge (which may be deemed to be a sales
load) upon the surrender of a Certificate during the first 5 Certificate years
(see "Surrender Charges"). These charges can vary depending upon the Group
Policy under which an Owner's Certificate is issued. The Certificate describes
the charges applicable to each Owner.
The amount of any sales load (whether from either the premium expense charge
or upon surrender of the Certificate) in any Certificate year cannot be
specifically related to actual sales expenses for that year, which may include
sales commissions as well as costs of prospectuses, other sales material and
advertising. To the extent that sales expenses are not recovered from the
charges for sales load, such expenses will be recovered from other sources,
including any excess accumulated charges for mortality and expense risks under
the Certificate, any other gains attributable to operations with respect to the
Certificate and MetLife's general assets and surplus. MetLife does not
anticipate that all its total sales expenses will be recovered from the sales
charges.
TAX CHARGES. Two charges are currently made for taxes related to premiums.
These taxes include any federal, state or local taxes measured by or based on
the amount of premiums received by MetLife. A charge of .35% of each premium
payment is made for the purpose of recovering a portion of the DAC tax charge.
MetLife represents that this charge is reasonable in relation to MetLife's
increased federal income tax burden under the Internal Revenue Code resulting
from receipt of premiums. An additional charge is made for state premium taxes.
Premium taxes vary from state to state, and may be zero in some cases. One rate
will be charged for each group. The initial charge for each group will be an
estimate of anticipated taxes to be incurred on behalf of each Group Policy
during the first Group Policy year. For each Group Policy year after the first
Group Policy year, the state premium tax charge will be based on anticipated
taxes taking into account actual state and local premium taxes incurred on
behalf of each Group Policy in the prior year and known factors affecting the
coming year's taxes. This charge may vary based on changes in the law or changes
in residences of the Owners. This charge may vary from 0 to 5% of premium.
MetLife will waive state premium taxes for Internal Revenue Code section 1035
exchanges from any other policy to a Certificate. MetLife will waive the DAC tax
charge for Internal Revenue Code section 1035 exchanges from another MetLife
policy to a Certificate. MetLife does not anticipate making a profit on this
charge.
TRANSFER CHARGE
At the present time, no charge will be assessed against the cash value of a
Certificate when amounts are transferred among the investment divisions of the
Separate Account and between the investment divisions and the Fixed Account.
MetLife reserves the right in the future to assess a charge of up to $25 against
each transfer. If made, the charge would be allocated among the Fixed Account
and each investment division of the Separate Account on a Pro Rata Basis.
MONTHLY DEDUCTION FROM CASH VALUE
The monthly deduction from cash value includes the cost of insurance charge,
the charge for optional insurance benefits added by rider (see "Certificate
Benefits--Optional Insurance Benefits"), and the administration charges. The
cost of insurance charge, and the administration charges are discussed
separately in the
26
<PAGE>
paragraphs that follow. The charges that comprise the monthly deduction can vary
depending upon the Group Policy under which an Owner's Certificate is issued.
The Certificate describes the charges applicable to each Owner.
The monthly deduction accrues on each monthly anniversary commencing with
the Date of Certificate; however, the actual deduction may be made up to 45 days
after each such monthly anniversary. It will be allocated among the Fixed
Account and each investment division of the Separate Account on a Pro Rata
Basis. See "Payment and Allocation of Premiums--Issuance of a Certificate,"
regarding when insurance coverage starts under a newly issued Certificate.
COST OF INSURANCE. Because the cost of insurance depends upon a number of
variables, it can vary from month to month. MetLife will determine the monthly
cost of insurance charge by multiplying the applicable cost of insurance rate or
rates by the insurance amount for each Certificate month. The insurance amount
for a Certificate month is (a) the death benefit at the beginning of the
Certificate month, less (b) the cash value at the beginning of the Certificate
month.
The insurance amount will be affected by changes in the specified face
amount of the Certificate (see "Certificate Benefits--Death Benefit"). The
insurance amount and therefore the cost of insurance will be greater if the
specified face is increased. If the minimum death benefit is in effect (see
"Death Benefit-- Minimum Death Benefit"), then the cost of insurance will vary
directly with the cash value.
The cost of insurance charge will be deducted as part of a monthly combined
charge consisting of the cost of insurance charge and a component of the charge
for administration (see "Administration Charge").
COST OF INSURANCE RATE. Cost of insurance rates are based on the age and
rate class of the covered person and group mortality characteristics, the
particular characteristics (such as the rate class structure, the degree of
stability in the charges sought by the participating entity and portability
features) under the Group Policy that are agreed to by MetLife and the
participating entity, and the amount of any surplus to be transferred to MetLife
from any previous insurer (see "Other Certificate Provisions--Dividends"). The
actual monthly cost of insurance rates will be based on MetLife's expectations
as to future experience. They will not, however, be greater than the guaranteed
cost of insurance rates set forth in the Certificate. These guaranteed rates may
be up to 150% of the maximum rates that could be charged based on the 1980 CSO
Table. The maximum guaranteed rates are higher than the 1980 CSO Table because
MetLife uses simplified underwriting and guaranteed issue procedures whereby the
covered person may not be required to submit to a medical or paramedical
examination, and may provide coverage to groups that present substandard risk
characteristics according to underwriting criteria. Under certain circumstances
a covered person may be required to submit to a medical or paramedical
examination. The current cost of insurance rates for most groups are lower than
100% of the 1980 CSO Table. Any change in the cost of insurance rates will apply
to all persons of the same insuring age, rate class and group. MetLife reviews
its cost of insurance rates annually and adjusts the rates from time to time
based on several factors including the number of Certificates in force for each
group, the number of Certificates in the group surrendered or becoming portable
during the period and the actual experience of the group.
RATE CLASS. The rate class of a covered person affects the cost of
insurance rate. MetLife and the participating entity will agree to the number of
classes and characteristics of each class. The classes may vary by smokers and
nonsmokers, active and retired status, Owners of portable Certificates and other
Owners, and/or any other nondiscriminatory classes agreed to by the
participating entity. Where smoker and non-smoker divisions are provided, a
covered person who is in the non-smoker division of a rate class will have a
lower cost of insurance than a covered person in the smoker division of the same
rate class, even if each covered person has an identical Certificate.
ADMINISTRATION CHARGE. The monthly administration charge is comprised of
two components. The first component of the administration charge is a charge
that is deducted as part of the monthly combined charge (the other part of the
monthly combined charge is the cost of insurance, as described above). This
component will never exceed 50% of the monthly combined charge. Since this
component of the monthly administration charge will be related to the insurance
amount of the Certificate, any change in the specified face amount of a
27
<PAGE>
Certificate may result in a change in this component of the monthly
administration charge. The second component of the administration charge is a
charge which may be up to $3.00 per Certificate per month as specified in the
Certificate. The Certificate will describe the administration charge applicable
to each Owner.
This charge will be used to compensate MetLife for expenses incurred in the
administration of the Certificate as a group variable universal life
certificate. These expenses include the cost of processing enrollments,
determining insurability, and establishing and maintaining Certificate records.
Differences in the administration charge rates applicable to different Group
Policies will be determined by MetLife based on expected differences in the
administrative costs under the Certificates or in the amount of revenues that
MetLife expects to derive from the charge. Such differences may result, for
example, from features under each Group Policy that are agreed to by MetLife and
the participating entity; the extent to which certain administrative functions
in connection with the Group Policy are to be performed by MetLife or by the
participating entity; and the expected average Certificate size. No profit is
expected to be derived from the aggregate of these administration charges.
CHARGES AGAINST THE SEPARATE ACCOUNT
CHARGE FOR MORTALITY AND EXPENSE RISKS. A daily charge is made against the
Separate Account for mortality and expense risks assumed by MetLife. The amount
of the charge is equivalent to an effective annual rate of at least .45% and is
guaranteed not to exceed an effective annual rate of .90% of the average daily
value of the assets in the Separate Account which are attributable to the
Policies. MetLife reserves the right, if permitted by applicable law, to change
the structure of mortality and expense risk charge so that it is charged on a
monthly basis as a percentage of cash value attributable to the Separate Account
or so that it is charged as a component of the monthly combined charge.
The mortality risk assumed is that covered persons may live for a shorter
period of time than estimated and, thus, a greater amount of death benefits than
expected will be payable. The expense risk assumed is that expenses incurred in
issuing and administering the Certificates will be greater than estimated.
MetLife will realize a gain if the charges prove ultimately to be more than
sufficient to cover its actual costs of such mortality and expense commitments.
If the charges are not sufficient, the loss will fall on MetLife. If its
estimates of future mortality and expense experience are accurate, MetLife
anticipates that it will realize a profit from the mortality and expense risk
charge; however if such estimates are inaccurate, MetLife could incur a loss.
Differences in the mortality and expense risk charge rates applicable to
different Group Policies will be determined by MetLife based on differences in
the levels of mortality and expense risks under those Policies. Differences in
mortality and expense risk arise principally from the fact that (a) the factors
discussed above under "Monthly Deduction From Cash Value" on which the cost of
insurance and administration charges are based are more uncertain in some cases
than in others and (b) MetLife's ability to recover any unexpected mortality and
administrative expense costs from the cost of insurance and administration
charges also will vary from case to case, depending on the maximum rates for
such charges agreed upon by MetLife and the participating entity. MetLife will
determine cost of insurance, administration, and mortality and expense risk
charge rates pursuant to its established actuarial procedures, and in doing so
MetLife will not discriminate unreasonably or unfairly against the Owners of
Certificates under any Group Policy.
CHARGE FOR INCOME TAXES. Currently, no charge is made against the Separate
Account for income taxes. However, MetLife may decide to make such a charge in
the future (see "Federal Tax Matters").
SURRENDER CHARGES
A sales charge may be deducted in the form of a surrender charge from the
cash value if the Certificate is surrendered or terminated after a grace period
during up to the first 5 Certificate years after issue. A sales charge will also
be deducted upon surrender or termination of a Certificate during up to the
first 5 years after an increase in the specified face amount (other than an
automatic increase). The surrender charge will be no higher than the surrender
charge cap set forth the Certificate, or in the case of a specified face amount
increase, that portion of the surrender charge cap attributable to the increase.
In some cases, beginning no later than the 2nd Certificate year (or the 2nd year
after any increase in specified face amount), this surrender
28
<PAGE>
charge cap will decrease as set forth in the Certificate. In other cases, the
surrender charge will remain level through up to the fifth Certificate year (or
the fifth year after the applicable specified face amount increase). In both
cases the surrender charge becomes zero no later than Certificate year 6 (or 6
years after the last applicable specified face amount increase). The surrender
charge cap as of the Date of Certificate as well as the surrender charge
structure will be specified in the Certificate.
The surrender charge cap referred to in the preceding paragraph is designed
to meet certain applicable limitations under state insurance law. These
limitations are imposed by means of mathematical formulas that result in
maximums that vary based on the circumstances of individual Owners, making it
impractical to set forth such maximums here. Moreover, the Certificates
associated with a particular group are deemed to constitute a separate class or
series that, as a result of negotiations between MetLife and the participating
entity, may provide for a surrender charge cap that is lower, or decreases more
rapidly, than required by the state insurance law limitations referred to above.
The surrender charge cap applicable to all Certificates in a Group will be
determined pursuant to rules applied uniformly to that Group, based on such
factors as the Owner's Age at Certificate issue, the Owner's Age at any increase
in specified face amount as well as the specified face amount or any increase
therein. All variations in the surrender charge caps will be made pursuant to
MetLife's established actuarial procedures, which will not discriminate
unreasonably or unfairly against the Owners of Certificates under any Group
Policy.
Subject to the cap, the surrender charge during up to the first 5
Certificate years may be up to 26.65% of applicable premiums paid up to one
Guideline Annual Premium, plus up to 5.65% of all additional applicable
premiums. Subject to the cap attributable to the increase, the additional
surrender charge imposed during up to 5 years after a non-automatic increase in
specified face amount may be up to 26.65% of premium payments attributable to
the increase up to one Guideline Annual Premium for the increase, plus up to
5.65% of premium payments attributable to the increase that are in excess of
that amount. For these purposes, a portion of each premium payment made after
any non-automatic increase in specified face amount will be deemed to be
attributable to the increase. That portion will bear the same ratio to the total
premium payment as the Guideline Annual Premium for the specified face amount
increase bears to the Guideline Annual Premium for the entire Certificate.
A reduction in specified face amount, will be subject to the surrender
charge described above. Reductions in specified face amount will be applied
against the most recent increases (including automatic increases) in specified
face amount successively, and then to the specified face amount on the Date of
Certificate. Any applicable surrender charges will be assessed to each segment
surrendered in the order relinquished. For any segment that is surrendered in
full, the full surrender charge, if any, for that segment will be assessed. Any
surrender charge for the surrender of a fraction of a segment will be assessed
in proportion of the amount surrendered to the total segment and any related
surrender charge cap will be proportionately reduced.
A sales charge may also be deducted in the form of a surrender charge from
the cash value if the Certificate is terminated because the Group Policy is
terminated by the participating entity during up to the first 5 Group Policy
years. The surrender charge is the same as that imposed on surrender of a
Certificate when participation in the Group Policy is not being terminated;
however, its elimination after not more than 5 years will be based on the number
of years the Group Policy is in force, rather than the number of years the
Certificate is in force or the number of years since an increase in specified
face amount. The effect of this is that any surrender charge applicable upon
termination of a Certificate because of the participating entity's termination
of the Group Policy will not exceed, but may be less than, any surrender charge
that would otherwise be payable upon a surrender of the Certificate at that
time.
For example, an Owner who is 40 years old purchases a Certificate with a
specified face amount of $100,000, with a corresponding minimum premium of $175
per month. The surrender charge cap for the entire initial specified face amount
is assumed to be $1,283 during Certificate year 4. Based on these assumptions
the guideline annual premium is $6,983. Assuming the premiums paid to the end of
Certificate year 4 are $8,400, the surrender charge would be $1,966.03 [26.65% X
$6,983 + 5.65% X ($8,400 -
29
<PAGE>
$6,983), plus $25 transaction charge]. The resulting surrender charge would then
be compared to the surrender charge cap, which would be calculated as $12.83 per
each $1,000 of specified face amount, or $1,283. The lesser of the two amounts
applies, i.e., $1,283.
No surrender charges are assessed against specified face amount automatic
increases or loans, but the amount of the applicable surrender charge which
would be deducted upon termination of a Certificate reduces the amount of cash
value which may be withdrawn or borrowed.
GUARANTEE OF CERTAIN CHARGES
MetLife guarantees, and may not increase the rates specified in the
Certificate for the following charges: the sales charges deducted from premiums;
the surrender charge; the charge for the estimated cost of Federal income tax
treatment of deferred acquisition costs, apart from any change in the law; the
maximum transfer charge; the maximum cost of insurance charge; the maximum
administration charge; and the maximum charge for mortality and expense risks
with respect to the Certificates.
OTHER CHARGES
Fund Investment Management Fee and Expenses. Shares of the Fund are
purchased for the Separate Account at their net asset value, which reflects Fund
fees and expenses as described more fully under "What are Separate Account UL,
the Fixed Account and the Metropolitan Series Fund?" and in the attached
prospectus for the Fund.
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUES, CASH SURRENDER VALUES
AND ACCUMULATED PREMIUMS
The tables in this section illustrate the way in which a Certificate's death
benefit, cash value and cash surrender value could vary over an extended period
of time assuming that all premiums are allocated to and remain in the Separate
Account for the entire period shown and hypothetical gross investment rates of
return for the Fund (i.e., investment income and capital gains and losses,
realized or unrealized) equivalent to constant gross (after tax) annual rates of
0%, 6% and 12%. The tables are based on the payment of monthly premiums (see
"Premiums--Premium Limitations"), for a specified face amount of $100,000 for an
individual who is age 40.
The guaranteed illustrations assume: (1) that the covered person is in a
risk class that has maximum guaranteed cost of insurance charges equal to 100%
of the maximum rates that could be charged based on the 1980 CSO Table; (2) a
$3.00 per Certificate per month administration charge, plus a charge for
administration included as part of the monthly combined charge equal to the same
amount charged for the cost of insurance described in (1) above; (3) a .35% DAC
tax charge; (4) a 2.5% premium tax rate; (5) a 3% front end sales load; (6) a
surrender charge cap equal to $30.17 per thousand dollars of specified face
amount in Certificate Year 1; $24.62 per thousand dollars of specified face
amount in Certificate Year 2; $18.85 per thousand dollars of specified face
amount in Certificate Year 3; $12.83 per thousand dollars of specified face
amount in Certificate Year 4; $6.55 per thousand dollars of specified face
amount in Certificate Year 5; and $0 in Certificate Year 6 and thereafter; (7) a
daily charge against the Separate Account for mortality and expense risks
equivalent to an effective annual rate of .90% of the average daily value of the
assets in the Separate Account attributable to the Certificates; and (8) a
surrender transaction charge of $25.
30
<PAGE>
The current illustrations assume: (1) that the covered person is in a rate
class that does not distinguish between smokers and nonsmokers and has current
standardized cost of insurance charges as set forth in the following table:
<TABLE>
<CAPTION>
MONTHLY CURRENT COST
OF INSURANCE RATE
- ---------------------------------------
RATE PER THOUSAND DOLLARS
AGE OF INSURANCE
- ---------- ---------------------------
<S> <C>
40 to 44 $ 0.17
45 to 49 $ 0.29
50 to 54 $ 0.48
55 to 59 $ 0.75
60 to 64 $ 1.17
65 to 69 $ 2.10
</TABLE>
Comparable illustrations for a covered person in MetLife's standard smoker
underwriting risk classification or in a substandard risk classification would
show lower cash values and cash surrender values and, therefore, a lower death
benefit. Conversely, comparable illustrations for a covered person in MetLife's
standard nonsmoker underwriting risk classification would show higher cash
values and cash surrender values and, therefore, a higher death benefit; (2) a
$1.50 per Certificate per month administration charge plus a charge for
administration included as part of the monthly combined charge equal 20% of the
amount charged for the cost of insurance described in (1) above; (3) a .35% DAC
tax charge; (4) a 2.5% premium tax rate; (5) a 0% front end sales load; (6) a
surrender charge cap equal to $30.17 per thousand dollars of specified face
amount in Certificate Year 1; $24.62 per thousand dollars of specified face
amount in Certificate Year 2; $18.85 per thousand dollars of specified face
amount in Certificate Year 3; $12.83 per thousand dollars of specified face
amount in Certificate Year 4; $6.55 per thousand dollars of specified face
amount in Certificate Year 5; and $0 in Certificate Year 6 and thereafter; (7) a
daily charge against the Separate Account for mortality and expense risks
equivalent to an effective annual rate of .45% of the average daily value of the
assets in the Separate Account attributable to the Certificates; and (8) no
surrender transaction charge.
The differences between the cash values and the cash surrender values in the
first five years are the surrender charges.
The amounts shown for the death benefits, cash values and cash surrender
values also take into account the daily charge to the Fund for investment
management services equivalent to an annual rate of .42% of the average daily
value of the aggregate net assets of the available Fund portfolios (an average
of the rates for the six available portfolios of the Fund) and .10% for direct
expenses of the available Fund portfolios (the average daily rate of such
expenses for the available Fund portfolios during 1995). Taking account of the
charges for investment management services and other Fund expenses, the gross
annual investment rates of return of 0%, 6% and 12% correspond to actual (or
net) annual rates of: -.96%, 4.98% and 10.92%, respectively. With the guaranteed
charges, the gross annual investment rates of return of 0%, 6% and 12%
correspond to actual (or net) annual rates of: -1.41%, 4.50% and 10.42%,
respectively.
The guaranteed maximum charge illustration is based on rates charged under a
hypothetical representative Standard Group Policy; the current charge
illustrations are based on rates that would be representative of such a Group
Policy (see "Monthly Deduction From Cash Value--Cost of Insurance Rate"). The
actual maximum current charge rates can be expected to vary from one Group
Policy to another.
The second column of the tables shows the amount which would accumulate if
an amount equal to the annual planned premium were invested to earn interest,
after taxes, at 5% compounded annually.
Upon request, MetLife will furnish an illustration reflecting the proposed
covered person's age, Certificate charges, the specified face amount or premium
amount requested, frequency of premium payments, and any available rider
requested.
31
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
GUARANTEED CHARGES
<TABLE>
<CAPTION>
TOTAL DEATH
BENEFIT(2)
ASSUMING
TOTAL CASH HYPOTHETICAL
TOTAL CASH VALUE(2) SURRENDER VALUE(2) GROSS ANNUAL
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL INVESTMENT
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT RATES OF
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RETURN OF
CERTIFICATE INTEREST -------------------------------- ----------------------------------- ------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0%
- ------------------------------ ----------- ---------- -------- -------- ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1............................ $ 2,156 $ 1,301 $1,343 $ 1,384 $ 716 $ 758 $ 799 $ 101,301
2............................ 4,421 2,530 2,691 2,855 1,386 1,547 1,711 102,530
3............................ 6,798 3,684 4,040 4,418 1,980 2,336 2,714 103,684
4............................ 9,295 4,759 5,385 6,077 3,476 4,102 4,794 104,759
5............................ 11,916 5,750 6,720 7,836 5,095 6,065 7,181 105,750
6............................ 14,668 6,656 8,042 9,702 6,631 8,017 9,677 106,656
7............................ 17,558 7,472 9,343 11,681 7,447 9,318 11,656 107,472
8............................ 20,592 8,195 10,618 13,779 8,170 10,593 13,754 108,195
9............................ 23,778 8,821 11,862 16,003 8,796 11,837 15,978 108,821
10........................... 27,124 9,340 13,060 18,355 9,315 13,035 18,330 109,340
15........................... 46,533 9,917 17,790 31,985 9,892 17,765 31,960 109,917
20........................... 71,305 5,916 18,459 48,347 5,916 18,459 48,347 105,916
25........................... 102,921 0(3) 11,284 66,015 0(3) 11,284 66,015 0(3)
30........................... 143,272 0(3) 0 (3) 80,079 0(3) 0(3) 80,079 0(3)
<CAPTION>
END OF
CERTIFICATE
YEAR 6% 12%
- ------------------------------ ------------ ---------
<S> <C> <C>
1............................ $ 101,343 $ 101,384
2............................ 102,691 102,855
3............................ 104,040 104,418
4............................ 105,385 106,077
5............................ 106,720 107,836
6............................ 108,042 109,702
7............................ 109,343 111,681
8............................ 110,618 113,779
9............................ 111,862 116,003
10........................... 113,060 118,355
15........................... 117,790 131,985
20........................... 118,459 148,347
25........................... 111,284 166,015
30........................... 0(3) 180,079
</TABLE>
- ---------
(1) Assumes monthly payments of $175 paid at the beginning of each Certificate
month. The values would vary from those shown if the amount or frequency of
payments varies.
(2) Assumes no loan or partial withdrawal has been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium payments
may cause the Certificate to terminate because of insufficient cash value.
(3) Zero value in cash value, cash surrender value and death benefit indicate
termination of insurance coverage in the absence of a sufficient additional
premium payment; see "Payment and Allocation of Premiums--Termination," on
page 26 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER
AND DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT,
CASH VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CERTIFICATE YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH
VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY
METLIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
CURRENT CHARGES
<TABLE>
<CAPTION>
TOTAL DEATH
BENEFIT(2)
TOTAL CASH ASSUMING
TOTAL CASH VALUE(2) SURRENDER VALUE(2) HYPOTHETICAL
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL GROSS ANNUAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF RATES OF RETURN OF
CERTIFICATE INTEREST ----------------------------- ----------------------------- --------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6%
- ------------------------------ ----------- -------- -------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1............................ $ 2,156 $ 1,768 $ 1,825 $ 1,881 $ 1,208 $ 1,265 $ 1,321 $ 101,768 $ 101,825
2............................ 4,421 3,519 3,741 3,967 2,400 2,621 2,848 103,519 103,741
3............................ 6,798 5,253 5,751 6,281 3,574 4,073 4,602 105,253 105,751
4............................ 9,295 6,970 7,862 8,847 5,687 6,579 7,564 106,970 107,862
5............................ 11,916 8,671 10,078 11,694 8,016 9,423 11,039 108,671 110,078
6............................ 14,668 10,183 12,227 14,668 10,183 12,227 14,668 110,183 112,227
7............................ 17,558 11,680 14,483 17,967 11,680 14,483 17,967 111,680 114,483
8............................ 20,592 13,164 16,851 21,626 13,164 16,851 21,626 113,164 116,851
9............................ 23,778 14,632 19,336 25,685 14,632 19,336 25,685 114,632 119,336
10........................... 27,124 16,087 21,946 30,187 16,087 21,946 30,187 116,087 121,946
15........................... 46,533 21,816 35,522 59,432 21,816 35,522 59,432 121,816 135,522
20........................... 71,305 25,377 50,623 105,967 25,377 50,623 105,967 125,377 150,623
25........................... 102,921 25,819 66,443 180,107 25,819 66,443 180,107 125,819 166,443
30........................... 143,272 19,706 79,015 295,757 19,706 79,015 295,757 119,706 179,015
<CAPTION>
END OF
CERTIFICATE
YEAR 12%
- ------------------------------ ---------
<S> <C>
1............................ $ 101,881
2............................ 103,967
3............................ 106,281
4............................ 108,847
5............................ 111,694
6............................ 114,668
7............................ 117,967
8............................ 121,626
9............................ 125,685
10........................... 130,187
15........................... 159,432
20........................... 205,967
25........................... 280,107
30........................... 395,757
</TABLE>
- ---------
(1) Assumes monthly payments of $175 paid at the beginning of each Certificate
month. The values would vary from those shown if the amount or frequency of
payments varies.
(2) Assumes no loan or partial withdrawal has been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium payments
may cause the Certificate to terminate because of insufficient cash value.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER
AND DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT,
CASH VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CERTIFICATE YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH
VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY
METLIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE>
CERTIFICATE RIGHTS
LOAN PRIVILEGES
CERTIFICATE LOAN. At any time, the Owner may borrow money from MetLife
using the Certificate as the only security for the loan. Certificates under some
Group Policies may be subject to a transaction charge of up to $25 for each
loan. The smallest amount the Owner can borrow at any one time is $200. The
maximum amount that may be borrowed at any time is the loan value. The loan
value equals 75% (or higher where required by state law) of the cash surrender
value. For situations where a Certificate loan may be treated as a taxable
distribution, see "Federal Tax Matters."
ALLOCATION OF CERTIFICATE LOAN. MetLife will allocate a Certificate loan
among the Fixed Account and the investment divisions of the Separate Account on
a Pro Rata Basis.
INTEREST. Interest charges can vary depending upon the Group Policy under
which an Owner's Certificate is issued. The Certificate describes the interest
charges applicable to each Owner. The interest rate may be up to 8% per year.
The Certificate specifies the current interest rate applicable to each Owner.
Interest payments are generally due at the beginning of each Certificate year.
However, MetLife reserves the right to make interest payments due in a different
manner. If unpaid within 31 days after it is due, interest will be treated as a
new loan subject to the interest rates applicable at that time and an amount
equal to such interest due will be transferred from the Fixed Account and the
investment divisions of the Separate Account on a Pro Rata Basis to the Loan
Account. Generally, interest paid to MetLife in connection with Certificate
loans is not deductible. For further information with respect to loan interest
deductibility, counsel and other competent advisors should be consulted.
EFFECT OF A CERTIFICATE LOAN. As of the Date of Receipt of the loan
request, cash value equal to the portion of the Certificate loan allocated to
the Fixed Account and to each investment division will be transferred from the
Fixed Account and/or such investment divisions to the Certificate Loan Account,
reducing the Certificate's cash value in the accounts from which the transfer
was made. The transfer will be allocated among the Fixed Account and investment
divisions of the Separate Account on a Pro Rata Basis (see "Charges and
Deductions--Monthly Deduction from Cash Value").
Cash value in the Loan Account equal to indebtedness will be credited with
interest at a rate equal to the rate of loan interest charged less a percentage
charge, determined by MetLife. This charge may be up to 2%. Thus, the interest
rate credited may be up to 8%. The Certificate indicates the current charge
applicable to each Owner and the current interest rate credited to the amounts
in the Loan Account. The minimum rate credited to the Loan Account will be 4%
per year. NO ADDITIONAL INTEREST WILL BE CREDITED TO THE CASH VALUE IN THE LOAN
ACCOUNT, NOR WILL THE CASH VALUE IN THE LOAN ACCOUNT PARTICIPATE IN ANY
INVESTMENT EXPERIENCE APPLICABLE TO THE SEPARATE ACCOUNT.
The Certificate's cash value in the Loan Account will be the outstanding
indebtedness on the Valuation Date plus any interest credited to the Loan
Account which has not yet been allocated to the Fixed Account or the investment
divisions of the Separate Account as of the Valuation Date. Interest credited to
amounts in the Loan Account will be allocated at least once a year among the
Fixed Account and the investment divisions of the Separate Account in the same
proportion as the net premiums are then being allocated.
INDEBTEDNESS. Indebtedness equals the outstanding Certificate loan and loan
interest. If, on a monthly anniversary, indebtedness exceeds the cash value
minus the monthly deduction, MetLife will notify the Owner and any assignee of
record. If a sufficient payment is not made to MetLife within the greater of 61
days, measured from the such monthly anniversary, or 30 days after the date
notice of the start of the grace period is mailed, the Certificate will
terminate without value. The Certificate may, however, later be reinstated,
subject to certain conditions (see "Certificate Termination and Reinstatement
While the Group Policy is in Effect").
REPAYMENT OF INDEBTEDNESS. Indebtedness may be repaid any time before the
Final Date while the covered person is living. If not repaid, MetLife will
deduct indebtedness from any amount payable under the Certificate. As of the
Date of Receipt of the repayment, the Certificate's cash value in the
Certificate Loan Account securing indebtedness will be allocated among the Fixed
Account and the investment divisions of the
34
<PAGE>
Separate Account in the same proportion that net premiums are being allocated to
those accounts at the time of repayment. The Owner should designate whether a
payment is intended as a loan repayment or a premium payment. Any payment for
which no designation is made will be treated as a premium payment.
SURRENDER AND WITHDRAWAL PRIVILEGES
Subject to the limitations set forth below, at any time before the earlier
of the death of the covered person and the Final Date, the Owner may make a
partial withdrawal or totally surrender the Certificate by sending a written
request to Administrative Office. The maximum amount available for surrenders or
withdrawal is the cash surrender value on the Date of Receipt of the request.
Certificates under some Group Policies may be subject to a transaction charge of
up to $25 (or, if less, 2% of the amount withdrawn) for each surrender,
withdrawal or partial withdrawal. This charge would be used to defray MetLife's
costs in effecting the transaction and it would not be designed to yield any
profit to MetLife. No transaction charge will apply to the termination of a
Certificate due to the termination of the Group Policy by either the
participating entity or MetLife. See "Charges and Deductions--Surrender Charge"
for a discussion of other surrender charges. For any tax consequences in
connection with a partial withdrawal or surrender, see "Federal Tax Matters."
SURRENDERS. The Owner may surrender the Certificate for its cash surrender
value. If the Certificate is being surrendered, MetLife may require that the
Certificate itself be returned along with the request. An Owner may elect to
have the proceeds paid in a single sum. If the covered person dies after the
surrender of the Certificate and payment to the Owner of the cash surrender
value but before the end of the Certificate month in which the surrender
occurred, a death benefit will be payable to the beneficiary in an amount equal
to the difference between the Certificate's death benefit and cash value, both
computed as of the surrender date.
PARTIAL WITHDRAWALS. The Owner may make a partial withdrawal from the
Certificate's cash surrender value. The minimum partial withdrawal is $200. The
amount withdrawn will be deducted from the Certificate's cash value as of the
Date of Receipt. The amount will be deducted from the Fixed Account and the
investment divisions of the Separate Account on a Pro Rata Basis. The death
benefit will be reduced by the amount withdrawn.
In some cases, the maximum amount that may be withdrawn through a partial
withdrawal from the Fixed Account in any Certificate year is the greater of $200
or 25% of the largest amount in the Fixed Account over the last four Certificate
years, or, if the Certificate has been in force less than such period, since the
Certificate date. The Certificate includes a description of the Owner's rights
to make partial withdrawals.
EXCHANGE PRIVILEGE
During the first 24 Certificate months following the issuance of the
Certificate, the Owner may exercise the Certificate exchange privilege, which
results in the transfer at any one time of the entire amount in the Separate
Account to the Fixed Account, and the allocation of all future net premiums to
the Fixed Account. This will, in effect, serve as an exchange of the Certificate
for the equivalent of a flexible premium fixed benefit life insurance policy. No
charge will be imposed on such transfer in exercising this exchange privilege.
Moreover, the Owner may subsequently transfer amounts back to one or more of the
investment divisions of the Separate Account at any time, within the limitations
described in "Allocation of Premiums and Cash Value--Cash Value Transfers."
Similarly, during the first 24 months following an increase in the specified
face amount requested by the Owner, the Owner may request a one time charge-free
transfer of the Separate Account cash value attributable to the increase to the
Fixed Account, including a transfer in the amount of any premium payments that
have been deemed attributable to the increase (see "Charges and Deductions--
Surrender Charge").
In those states which require it, the Owner may also, during the first 24
Certificate months following the issuance of the Certificate, without charge, on
one occasion exchange any Certificate still in force for a flexible premium
fixed benefit life insurance policy issued by MetLife. Upon such exchange, the
Certificate's cash value will be transferred to the general account of MetLife.
35
<PAGE>
THE FIXED ACCOUNT
An Owner may allocate net premiums and transfer cash value to the Fixed
Account, which is part of the General Account of MetLife. Because of exemptive
and exclusionary provisions, interests in the Fixed Account have not been
registered under the Securities Act of 1933 and neither the Fixed Account nor
the general account has been registered as an investment company under the 1940
Act. Accordingly, neither the general account, the Fixed Account nor any
interests therein are generally subject to the provisions of these Acts and
MetLife has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
This Prospectus is generally intended to serve as a disclosure document only
for the aspects of the Group Policy and Certificates involving the Separate
Account and contains only selected information regarding the Fixed Account. For
complete details regarding the Fixed Account, see the Certificate.
Subject to applicable law, MetLife has sole discretion over the investment
of the assets of the General Account, including those in the Fixed Account.
Unlike the assets of the Separate Account, the assets in the Fixed Account, as a
part of the general account, are chargeable with liabilities arising out of any
other business of MetLife.
The allocation or transfer of funds to the Fixed Account does not entitle an
Owner to share in the investment experience of the general account. Instead,
MetLife guarantees that cash value in the Fixed Account will accrue interest at
an effective annual rate of at least 4%, independent of the actual investment
experience of the general account. MetLife is not obligated to credit interest
at any higher rate, although MetLife may do so, in its sole discretion.
FIXED ACCOUNT CASH VALUE
Net premiums allocated to the Fixed Account are credited to the Certificate.
The Certificate's cash value in the Fixed Account will reflect the amount and
frequency of premium payments allocated to the Fixed Account, the amount of
interest credited to amounts in the Fixed Account, any partial withdrawals, any
transfers from or to the investment divisions of the Separate Account, any
Certificate indebtedness and any charges imposed on amounts in the Fixed Account
in connection with the Certificate. ANY INTEREST METLIFE CREDITS ON THE
CERTIFICATE'S CASH VALUE IN THE FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE
OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF METLIFE. THE OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO AMOUNTS OF CASH VALUE IN THE FIXED
ACCOUNT MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR. The cash
value in the Fixed Account will be calculated on each Valuation Date.
MetLife will declare a rate of excess interest which is guaranteed until the
end of the calendar year in which the Group Policy first becomes effective.
Thereafter, as of January 1 of each year, MetLife will declare the rate of
excess interest applicable to net premium payments allocated to the Fixed
Account during each such year. As of January 1 of each year, MetLife will also
declare the rate of excess interest applicable to cash value in the Fixed
Account. MetLife may also establish multiple bands of excess interest. This
means that different rates of excess interest may apply to premium payments
received in different years. Transfers made into the Fixed Account will be
treated as new premium payments for these purposes.
The guaranteed and excess interest are credited each Valuation Date. Once
credited, that interest will be guaranteed and become part of the Certificate's
cash value in the Fixed Account. The portion of the monthly deduction that is
deducted from the Fixed Account will be charged against the most recent premiums
paid and interest credited thereto.
36
<PAGE>
DEATH BENEFIT, TRANSFER, WITHDRAWAL, SURRENDER, AND CERTIFICATE LOAN RIGHTS
Amounts in the Fixed Account are generally subject to the same rights and
limitations as are amounts allocated to the investment divisions of the Separate
Account with respect to transfers, withdrawals, surrenders and Certificate loans
(see "Certificate Benefits--Death Benefit," "Allocation of Premiums and Cash
Value--Cash Value Transfers," "Loan Privileges," "Surrender and Withdrawal
Privileges"). However, transfers from the Fixed Account may be subject to
additional limitations as described under "Allocation of Premiums and Cash
Value."
MetLife reserves the right to delay transfers, withdrawals, surrenders and
the payment of the Certificate loans allocated to the Fixed Account for up to
six months (see "Other Certificate Provisions--Payment and Deferment"). Payments
to pay premiums on another policy with MetLife will not be delayed.
RIGHTS RESERVED BY METLIFE
MetLife reserves the right to make certain changes if, in its judgment, they
would best serve the interests of the Owners or would be appropriate in carrying
out the purposes of the Certificates. Any changes will be made only to the
extent and in the manner permitted by applicable laws. Also, when required by
law, MetLife will obtain Owner approval of the changes and approval from any
appropriate regulatory authority. Examples of the changes MetLife may make
include:
- To operate the Separate Account in any form permitted under the 1940 Act
or in any other form permitted by law.
- To take any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act.
- To transfer any assets in any investment division to another investment
division, or to one or more separate accounts, or to the Fixed Account; or
to add, combine or remove investment divisions in the Separate Account.
- To substitute, for the Fund shares held in any investment division, the
shares of another portfolio of the Fund or the shares of another
investment company or any other investment permitted by law.
- To change the way MetLife assesses charges, but without increasing the
aggregate amount charged to the Fixed Account or the Separate Account in
connection with the Certificates.
- To make any other necessary technical changes in the Certificate in order
to conform with any action the above provisions permit MetLife to take.
If any of these changes result in a material change in the underlying
investments of an investment division to which the net premiums of a Certificate
are allocated, MetLife will notify the Owner of such change, and the Owner may
then make a new choice of investment divisions or the Fixed Account without
charge.
OTHER CERTIFICATE PROVISIONS
OWNER. The Owner of a Certificate is the covered person unless another
owner has been named in the enrollment form for the Certificate. Unless
otherwise reserved by the participating entity, the Owner is entitled to
exercise all rights under a Certificate while the covered person is alive,
including the right to name a new owner or a contingent owner who would become
the owner if the Owner should die before the covered person dies.
BENEFICIARY. The beneficiary is the person or persons to whom the insurance
proceeds are payable upon the covered person's death. The Owner may name a
contingent beneficiary to become the beneficiary if all the beneficiaries die
while the covered person is alive. If no beneficiary or contingent beneficiary
is alive when the covered person dies, the Owner (or the Owner's estate) will be
the beneficiary. While the covered person is alive, the Owner may change any
beneficiary or contingent beneficiary.
If more than one beneficiary is alive when the covered person dies, they
will be paid in equal shares, unless the Owner has chosen otherwise.
37
<PAGE>
INCONTESTABILITY. MetLife will not contest the validity of a Certificate
after it has been in force during the covered person's lifetime for two years
from the Date of Certificate (or date of reinstatement if a terminated
Certificate is reinstated) except with respect to certain optional insurance
benefits that may be added subsequent to the Date of Certificate. MetLife will
not contest the validity of any increase requested by an Owner in the death
benefit after such increase has been in force during the covered person's
lifetime for two years from its effective date.
SUICIDE. The insurance proceeds will not be paid if the covered person
commits suicide, while sane or insane, within two years (or less if required by
state law) from the Date of Certificate. Instead, MetLife will pay the
beneficiary an amount equal to all premiums paid for the Certificate, without
interest, less any outstanding Certificate loan and less any partial cash
withdrawal. If the covered person commits suicide, while sane or insane, more
than two years after the Date of Certificate but within two years (or less if
required by state law) from the effective date of any increase in the death
benefit, MetLife's liability with respect to such increase will be limited to
the cost thereof.
MISSTATEMENT OF AGE. If the covered person's age as stated in the
enrollment form for a Certificate is not correct, benefits under a Certificate
will be adjusted to reflect the correct age.
COLLATERAL ASSIGNMENT. The Owner may assign a Certificate as collateral.
All rights under the Certificate will be transferred to the extent of the
assignee's interest. MetLife is not bound by an assignment or release thereof,
unless it is in writing and is recorded at the Administrative Office. MetLife is
not responsible for the validity of any assignment or release thereof.
PAYMENT AND DEFERMENT. With respect to amounts in the investment divisions
of the Separate Account, payment of the death benefit, all or a portion of the
cash surrender value, free look proceeds or a loan will ordinarily be made
within seven days after the Date of Receipt of all documents required for such
payment. MetLife will pay interest on the amount of death benefit at a rate
which is currently 6% per year (or such higher rate as may be required by state
law) from the date of death until the date of payment of the death benefit.
However, MetLife may defer the determination, application or payment of any
such amount or any transfer of cash value in the Separate Account for any period
during which the New York Stock Exchange is closed (other than customary weekend
and holiday closing), for any period during which any emergency exists as a
result of which it is not reasonably practicable for MetLife to determine the
investment experience for a Certificate or for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
Owners. MetLife will not defer a loan used to pay premiums on other policies or
certificates issued by it.
As with traditional life insurance, MetLife can delay payment of the entire
insurance proceeds or other Certificate benefits if entitlement to payment is
being questioned or is uncertain.
DIVIDENDS. The Group Policies and Certificates are participating. However,
in view of the manner in which MetLife has determined the premium rates and
charges, it is not anticipated that the Group Policies and Certificates will be
entitled to any dividend. In this connection, when a participating entity
transfers coverage from a prior insurer to a MetLife Group Policy, or transfers
coverage from a MetLife Group Policy to a successor insurer, certain amounts of
surplus may also be transferred, respectively, to MetLife or to the successor
insurance company, rather than being declared as dividends.
The description throughout this Prospectus of the features of the
Certificates is subject to the specific terms of the Certificates.
SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
MetLife performs the sales and administrative services relating to the Group
Policies and Certificates. The office of MetLife which administers the Group
Policies and Certificates is located in Aurora, Illinois. Each participating
entity and Owner will be notified which office will be the Administrative Office
for servicing the Certificates. MetLife may name different Administrative
Offices for different transactions.
38
<PAGE>
MetLife acts as the principal underwriter (distributor) of the Group
Policies and Certificates as defined in the 1940 Act (see "Distribution of the
Group Policies and Certificates," below). In addition to selling insurance and
annuities, MetLife also serves as investment adviser to certain other advisory
clients, and is also principal underwriter for Metropolitan Tower Separate
Accounts One and Two of Metropolitan Tower Life Insurance Company, a
wholly-owned subsidiary of MetLife, and Metropolitan Life Separate Account E of
MetLife, each of which is registered as a unit investment trust under the 1940
Act. Finally, MetLife acts as principal underwriter for other forms of variable
universal life insurance policies, premiums for which may also be allocated to
the Separate Account.
BONDING. The directors, officers and employees of MetLife are bonded in the
amount of $50,000,000, subject to a $5,000,000 deductible.
DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES
The Group Policies and Certificates will be sold by individuals who are
licensed life insurance sales representatives and registered representatives of
MetLife, the principal underwriter of the Certificates. MetLife is registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. No commissions are paid to MetLife's registered
representatives for distribution of the Group Policies or Certificates, although
MetLife representatives may earn certain incentive award credits.
Group Policies and Certificates may also be sold through other registered
broker-dealers who have entered into selling agreements with MetLife.
Commissions or fees which are payable to a broker-dealer or third party
administrator ("TPA") are set forth in MetLife's schedules of group insurance
commission rates. Payments or commissions to broker-dealers or TPAs normally
consist of two elements. The first element is based on the lowest premium
sufficient to keep the Certificate in force. Under this element, a commission is
payable to a maximum of 15% of premium, as described above, and is based upon
the services provided by the broker-dealer or TPA. The second element is a per
Certificate payment, based upon the total number of Certificates issued under
the Group Policy. Maximum first year payments and renewal payments per
Certificate are specified in MetLife's schedules of group insurance commission
rates. In no event will commissions exceed the maximum percentage of gross
premium commission payable under New York State law, for all Certificates.
All payments and commissions are paid by MetLife. They do not result in any
charges against the Group Policy or Certificates in addition to those set forth
under "Charges and Deductions." Since no Group Policies or Certificates were
sold during 1995, no compensation had been paid as of December 31, 1995.
FEDERAL TAX MATTERS
The following description is a brief summary of some of the tax rules,
primarily related to federal income and estate taxes, which in the opinion of
MetLife are currently in effect.
The Certificate receives the same federal income and estate tax treatment as
fixed benefit life insurance. The death benefit payable under the Certificate is
generally excludable from the gross income of the beneficiary under Section 101
of the Internal Revenue Code ("Code") and the Owner is not deemed to be in
constructive receipt of the cash values under the Certificate until actual
withdrawal or surrender.
Under existing tax law, an Owner generally will be taxed on cash value
withdrawn from the Certificate and cash value received upon surrender of the
Certificate. Under most circumstances, unless a Certificate is a modified
endowment contract as discussed below, and unless the distribution occurs during
the first 15 Certificate years, only the amount withdrawn, received upon
surrender or distributed at the Final Date of a Certificate that exceeds the
total premiums paid (less previous non-taxable withdrawals) will be treated as
ordinary income. During the first 15 Certificate years, cash distributions from
a Certificate, made as a result of a Certificate change that reduces the death
benefit or other benefits under a Certificate, will be taxable to the Owner,
under a complex formula, to the extent that cash value exceeds premiums paid
(less previous non-taxable withdrawals).
39
<PAGE>
Section 817(h) of Code and the Treasury Regulations thereunder set
diversification rules for the investments underlying the Group Policies, in
order for the Group Policies to be treated as life insurance. MetLife believes
that these diversification standards will be satisfied. There is a provision in
the regulations which allows for the correction of an inadvertent failure to
diversify. Failure to comply with the rules found in the regulations would
result in immediate taxation to Owners of all positive investment experience
credited to a Certificate for the period of non-compliance and until such time
as a settlement of the matter is reached with the Internal Revenue Service.
There is a possibility that regulations may be proposed or that a
controlling ruling may be issued in the future describing the extent to which
Owner control over allocation of cash value may cause Owners to be treated as
the owners of Separate Account assets for tax purposes. MetLife reserves the
right to amend the Group Policies in any way necessary to avoid any such result.
MetLife also believes that loans received under the Certificate will be
treated as indebtedness of an Owner for federal tax purposes, and, unless the
Certificate is or becomes a modified endowment contract as described below or
terminates, that no part of any loan received under a Certificate will
constitute income to the Owner. However, any remaining outstanding loan at the
time the Certificate is totally surrendered, exchanged, terminated or on the
Final Date may be subject to tax depending of the amount of gain in the
Certificate.
In the case of a modified endowment contract, amounts received before death,
including Certificate loans, are treated first as income (to the extent of gain)
and then as recovered investment. For purposes of determining the amount
includible in income, all modified endowment contracts issued by the same
company (or affiliate) to the same Owner during any calendar year will be
treated as one modified endowment contract. Finally, an additional 10% income
tax is generally imposed on the taxable portion of amounts received before age
59 1/2 under a modified endowment contract.
In general, a modified endowment contract is a life insurance contract
entered into or, generally, materially changed after June 20, 1988 that fails to
meet a "7-pay test". Each Certificate is tested separately for purposes of this
7-pay test. Under the 7-pay test, if the amount of premiums paid with respect to
a Certificate at any time during the first 7 Certificate years exceeds the sum
of the net level premiums which would have been paid if the Certificate provided
for paid-up future benefits after the payment of 7 level annual payments, the
Certificate is a modified endowment contract. A Certificate may have to be
reviewed under the 7-pay test even after the first seven Certificate years in
the case of certain events such as a material modification of the Certificate as
discussed below. If there is a reduction in benefits under the Certificate
during any 7-pay testing period, the 7-pay test is applied using the reduced
benefits level. Any distribution made within two years before a Certificate
fails the 7-pay test may be treated as made in anticipation of such failure.
Whether or not a particular Certificate meets these definitional
requirements is dependent on the date it was entered into, premium payments made
and the periodic premium payments to be made, the level of death benefit, any
changes in the level of death benefits, the extent of any prior cash
withdrawals, and other factors. Generally, a life insurance policy which is
received in exchange for a modified endowment contract will also be considered a
modified endowment contract.
A Certificate should be reviewed upon issuance, upon making a cash
withdrawal, upon making a change in future benefits and upon making a material
modification to the Certificate to determine to what extent, if any, these tax
rules apply. A material modification to a Certificate includes, but is not
limited to, any requested increase in the future benefits provided under the
Certificate. However, in general, increases that are attributable to the payment
of premiums necessary to fund the lowest death benefit payable in the first 7
Certificate years will not be considered material modifications. The annual
statement sent to each Owner will include information regarding the modified
endowment contract status of a Certificate (see "Premiums--Premium
Limitations").
Counsel and other competent advisors should be consulted to determine how
these rules apply to an individual situation and before making premium payments,
increasing or decreasing the total face insurance amount, or adding or removing
a rider.
40
<PAGE>
While employee pay all group variable universal life should generally be
treated as separate from any Internal Revenue Code Section 79 Group Term Life
Insurance Plan concurrently in effect, in some circumstances group variable
universal life could be viewed as being part of such a plan, giving rise to
adverse tax consequences.
Congress may, in the future, consider other legislation that, if enacted,
could adversely affect the tax treatment of life insurance policies. In
addition, the Treasury Department may by regulation or interpretation modify the
above described tax effects. Any legislative or administrative action could be
applied retroactively.
The death benefit payable under the Certificate is includable in the covered
person's gross estate for federal estate tax purposes if the death benefit is
paid to the covered person's estate or if the death benefit is paid to a
beneficiary other than the estate and the covered person either possessed
incidents of ownership in the Certificate at the time of death or transferred
incidents of ownership in the Certificate to another person within three years
of death.
Whether or not any federal estate tax is payable with respect to the death
benefit of the Certificate which is included in the covered person's gross
estate depends on a variety of factors including the following. A smaller size
estate may be exempt from federal estate tax because of a current estate tax
credit which generally is equivalent to an exemption of $600,000. In addition, a
death benefit paid to a surviving spouse may not be taxable because of a 100%
estate tax marital deduction. Furthermore, a death benefit paid to a tax-exempt
charity may not be taxable because of the allowance of an estate tax charitable
deduction.
If the Owner of the Certificate is not the covered person, and the Owner
dies before the covered person, the value of the Certificate, as determined
under Internal Revenue Service regulations, is includable in the federal gross
estate of the Owner for federal estate tax purposes. Whether a federal estate
tax is payable depends on a variety of factors, including those listed in the
preceding paragraph.
State and local income, estate, inheritance and other tax consequences of
ownership or receipt of Certificate proceeds depend on the circumstances of each
covered person, Owner or beneficiary.
Finally, employer involvement and other factors determine whether group
variable universal life is subject to the Employee Retirement Income Security
Act ("ERISA").
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisors should be consulted for more
complete information.
41
<PAGE>
MANAGEMENT
The present directors and the senior officers and secretary of Metropolitan
Life are listed below, together with certain information concerning them:
DIRECTORS, OFFICERS-DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METLIFE
- ----------------------------------- ----------------------------------------------- --------------------------------
<S> <C> <C>
Theodossios Athanassiades.......... Vice-Chairman of the Board, Vice-Chairman of the Board and
Metropolitan Life Insurance Company, Director
One Madison Avenue,
New York, NY 10010.
Curtis H. Barnette................. Chairman and Chief Executive Officer Director
Bethlehem Steel Corp.,
1170 Eighth Avenue,
Martin Tower 2118,
Bethlehem, PA 18016-7699.
Joan Ganz Cooney................... Chairman, Executive Committee, Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023.
James R. Houghton.................. Retired Chairman of the Board, Director
Corning Incorporated,
80 East Market Street,
2nd Floor,
Corning, NY 14830.
Harry P. Kamen..................... Chairman, President and Chairman, President, Chief
Chief Executive Officer, Executive Officer and Director
Metropolitan Life Insurance Company,
One Madison Avenue,
New York, NY 10010.
Helene L. Kaplan................... Of Counsel, Skadden, Arps, Slate, Director
Meagher & Flom,
919 Third Avenue,
New York, NY 10022.
Richard J. Mahoney................. Chairman of the Executive Director
Committee, Monsanto
Company - Mail Zone N3L
800 N. Lindbergh Blvd.,
St. Louis, MO 63167.
Allen E. Murray.................... Retired Chairman of the Board Director
and Chief Executive Officer,
Mobil Corporation,
P.O. Box 2072
New York, NY 10163.
John J. Phelan, Jr................. Retired Chairman and Director
Chief Executive Officer,
New York Stock Exchange, Inc.,
P.O. Box 312,
Mill Neck, NY 11765.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION & POSITIONS AND OFFICES
NAME BUSINESS ADDRESS WITH METLIFE
- ----------------------------------- ----------------------------------------------- --------------------------------
<S> <C> <C>
John B. M. Place................... Former Chairman of the Board, Director
Crocker National Corporation,
111 Sutter Street, 4th Fl.,
San Francisco, CA 94104.
Hugh B. Price...................... President and Chief Executive Officer, Director
National Urban League, Inc.,
500 East 62nd Street
New York, NY 10021.
Robert G. Schwartz................. Retired Chairman of the Board, Director
President and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700
New York, NY 10166.
Ruth J. Simmons.................... President, Director
Smith College,
College Hall 20,
Northhampton, MA 01063.
William S. Sneath.................. Retired Chairman of the Board, Director
Union Carbide Corporation,
41 Leeward Lane,
Riverside, CT 06878.
John R. Stafford................... Chairman of the Board, President Director
and Chief Executive Officer,
American Home Products Corporation,
Five Giralda Farms
Madison, NJ 07940.
</TABLE>
43
<PAGE>
OFFICERS*
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METLIFE
- --------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Harry P. Kamen............................... Chairman, President and Chief Executive Officer
Theodossios Athanassiades.................... Vice-Chairman of the Board
Gerald Clark................................. Senior Executive Vice-President and Chief Investment Officer
Stewart G. Nagler............................ Senior Executive Vice-President and Chief Financial Officer
Gary A. Beller............................... Executive Vice-President, Chief Legal Officer and General Counsel
Robert H. Benmosche.......................... Executive Vice-President
C. Robert Henrikson.......................... Executive Vice-President
John D. Moynahan, Jr......................... Executive Vice-President
Catherine A. Rein............................ Executive Vice-President
John H. Tweedie.............................. Executive Vice-President
Richard M. Blackwell......................... Senior Vice-President
James B. Digney.............................. Senior Vice-President
William T. Friedewald........................ Senior Vice-President and Chief Medical Director
Frederick P. Hauser.......................... Senior Vice-President & Controller
Anne E. Hayden............................... Senior Vice-President
Jeffrey J. Hodgman........................... Senior Vice-President
Leland C. Launer, Jr......................... Senior Vice-President
Terence I. Lennon............................ Senior Vice-President
David A. Levene.............................. Senior Vice-President
James L. Lipscomb............................ Senior Vice-President
James M. Logan............................... Senior Vice-President
Francis P. Lynch............................. Senior Vice-President
Thomas F. McDermott.......................... Senior Vice-President
John C. Morrison, Jr......................... Senior Vice-President
Dominick A. Prezzano......................... Senior Vice-President
Leo T. Rasmussen............................. Senior Vice-President
Vincent P. Reusing........................... Senior Vice-President
Robert E. Sollmann, Jr....................... Senior Vice-President
Thomas L. Stapleton.......................... Senior Vice-President & Tax Director
William J. Toppeta........................... Senior Vice-President
Arthur G. Typermass.......................... Senior Vice-President & Treasurer
James A. Valentino........................... Senior Vice-President
Judy E. Weiss................................ Senior Vice-President and Chief Actuary
Stephen E. White............................. Senior Vice-President
Richard F. Wiseman........................... Senior Vice-President
Harvey M. Young.............................. Senior Vice-President
Christine N. Markussen....................... Vice-President and Secretary
</TABLE>
- ---------
*The principal occupation of each officer, except for Gary A. Beller, Robert H.
Benmosche and Terence I. Lennon during the last five years has been as an
officer of MetLife or an affiliate thereof. Gary A. Beller has been an officer
of MetLife since November, 1994; prior thereto, he was a Consultant and
Executive Vice-President and General Counsel of the American Express Company.
Robert H. Benmosche has been an Officer of MetLife since September, 1995; prior
thereto, he was an Executive Vice President of Paine Webber. Terence I. Lennon
has been an officer of MetLife since March, 1994; prior thereto, he was
Assistant Deputy Superintendent and Chief Examiner of the New York State
Department of Insurance. The business address of each officer is 1 Madison
Avenue, New York, New York 10010.
44
<PAGE>
VOTING RIGHTS
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with its view of present applicable law, MetLife will usually
vote the shares of each of the portfolios of the Fund which are deemed
attributable to Certificates at regular and special meetings of the shareholders
of the Fund based on instructions received from persons having the voting
interest in corresponding investment divisions of the Separate Account. However,
if the 1940 Act or any rules thereunder should be amended or if the present
interpretation thereof should change, and as a result MetLife determines that it
is permitted to vote such shares of the Fund in its own right, it may elect to
do so.
Accordingly, the Owner will have a voting interest under a Certificate. The
number of shares held in each Separate Account investment division deemed
attributable to each Owner is determined by dividing a Certificate's cash value
in that division, if any, by the net asset value of one share in the
corresponding Fund portfolio in which the assets in that Separate Account
investment division are invested. Fractional votes will be counted. The number
of shares concerning which an Owner has the right to give instructions will be
determined as of the record date for the meeting.
Fund shares held in each registered separate account of MetLife or any
affiliate that are or are not attributable to life insurance policies (including
the Certificates) or annuity contracts and for which no timely instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received by that separate account. Fund shares held in the
general account or unregistered separate accounts of MetLife or its affiliates
will be voted in the same proportion as the aggregate of (i) the shares for
which voting instructions are received and (ii) the shares that are voted in
proportion to such voting instructions. However, if MetLife or an affiliate
determines that it is permitted to vote any such shares of the Fund in its own
right, it may elect to do so subject to the then current interpretation of the
1940 Act or any rules there-under.
The Owners may give instructions regarding, among other things, the election
of the Board of Directors of the Fund, ratification of the selection of the
Fund's independent auditors, and the approval of the Fund's investment manager
and sub-investment manager.
Each Owner having a voting interest will be sent voting instruction
soliciting material and a form for giving voting instructions to MetLife.
Current interpretations and rules under the 1940 Act permit fund shares to
be voted in a manner contrary to Owner voting instructions in certain
circumstances. In the event that MetLife does disregard voting instructions, a
summary of the action and the reasons for such action will be included in the
next semiannual report to Owners.
REPORTS
Owners will receive promptly statements of significant transactions such as
changes in specified face amount, transfers among investment divisions, partial
withdrawals, increases in loan principal by the Owner, loan repayments,
termination for any reason, reinstatement and premium payments. Transactions
pursuant to systematic investment strategies (see "Payment and Allocation of
Premiums") may be confirmed quarterly. Owners whose premiums are automatically
remitted under payroll deduction plans do not receive individual confirmation of
premium payments from MetLife apart from that provided by their bank or
employer. A statement will be sent at least annually to the Owner within thirty
days after the period covered summarizing all of the above transactions and
deductions of charges occurring during that Certificate year and setting forth
the status of the death benefit, cash and cash surrender values, amounts in the
investment divisions and Fixed Account, any policy loan and unpaid loan interest
added to loan principal. Any statement will also discuss the modified endowment
contract status of a Certificate (see "Premiums--Premium Limitations"). In
addition, an Owner will be sent semiannual reports containing financial
statements for the Fund, as required by the 1940 Act.
45
<PAGE>
STATE REGULATION
MetLife is subject to regulation and supervision by the Insurance Department
of the State of New York, which periodically examines its affairs. It is also
subject to the insurance laws and regulations of all jurisdictions where it is
authorized to do business. Where required, a copy of the form of Group Policy
and form of Certificate has been filed with, and approved by, insurance
officials in each jurisdiction where the Group Policy and Certificates are sold.
MetLife intends to satisfy the necessary requirements to distribute the
Certificates in all fifty states and the District of Columbia as soon as
possible.
MetLife is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business, for the purposes of determining solvency and
compliance with local insurance laws and regulations. Such statements are
available for public inspection at state insurance department offices.
REGISTRATION STATEMENT
A registration statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission relating to the offering described
in this Prospectus. This Prospectus does not contain all the information set
forth in the registration statement and amendments thereto and the exhibits
filed as a part thereof, to all of which reference is hereby made for additional
information concerning the Separate Account, MetLife and the Certificates. The
additional information may be obtained at the Commission's main office in
Washington, D.C., upon payment of the prescribed fees.
LEGAL MATTERS
The legality of the Group Policies and Certificates described in this
Prospectus has been passed upon by Christopher P. Nicholas, Associate General
Counsel of Metropolitan Life. Messrs. Freedman, Levy, Kroll & Simonds,
Washington, D.C., have advised MetLife on certain matters relating to the
federal securities laws.
EXPERTS
The financial statements included in this Prospectus of Metropolitan Life
Separate Account UL as of December 31, 1995 and for the two years then ended and
the financial statements of Metropolitan Life Insurance Company as of December
31, 1995 and 1994 and for the three years ended December 31, 1995 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 opinions given upon the authority of such firm as experts in auditing
and accounting.
Actuarial matters included in this Prospectus have been examined by George
J. Kalb, FSA, MAAA, Vice-President and Actuary of MetLife, as stated in his
opinion filed as an exhibit to the registration statement.
FINANCIAL STATEMENTS
The financial statements of MetLife included in this Prospectus should be
considered only as bearing upon the ability of MetLife to meet its obligations
under the Group Policies and Certificates.
The most current financial statements of MetLife are those as of the end of
the most recent fiscal year. MetLife does not prepare financial statements for
publication more often than annually and believes that any incremental benefit
to prospective Policy owners that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. In addition, MetLife represents that there have
been no adverse changes in its financial condition or operations between the end
of the most current fiscal year and the date of this Prospectus.
46
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Life Insurance
Company (the Company) as of December 31, 1995 and 1994 and the related
statements of operations and surplus and of cash flow for each of the three
years in the period ended December 31, 1995. 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 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 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1994
and the results of its operations and its cash flow for each of the three years
in the period ended December 31, 1995 in conformity with accounting practices
prescribed or permitted by insurance regulatory authorities and generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1996
47
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
NOTES 1995 1994
--------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Bonds............................................................................... 4,11 $ 70,955 $ 65,592
Stocks.............................................................................. 3,4,11 3,646 3,672
Mortgage loans...................................................................... 3,4,11 14,211 14,524
Real estate......................................................................... 9,470 10,417
Policy loans........................................................................ 11 3,956 3,964
Cash and short-term investments..................................................... 11 1,923 2,334
Other invested assets............................................................... 3 2,480 2,262
Premiums deferred and uncollected................................................... 1,568 1,250
Investment income due and accrued................................................... 1,589 1,440
Separate Account assets............................................................. 31,707 25,424
Other assets........................................................................ 627 298
----------- -----------
TOTAL ASSETS................................................................ $ 142,132 $ 131,177
----------- -----------
----------- -----------
LIABILITIES AND SURPLUS
Liabilities
Reserves for life and health insurance and annuities................................ 5,11 $ 76,249 $ 73,204
Policy proceeds and dividends left with the Company................................. 11 4,482 3,534
Dividends due to policyholders...................................................... 1,371 1,407
Premium deposit funds............................................................... 11 12,891 14,006
Interest maintenance reserve........................................................ 1,148 881
Other policy liabilities............................................................ 3,882 3,364
Investment valuation reserves....................................................... 1,860 1,981
Separate Account liabilities........................................................ 31,226 25,159
Other liabilities................................................................... 2,459 1,337
----------- -----------
TOTAL LIABILITIES........................................................... 135,568 124,873
----------- -----------
Surplus
Special contingency reserves........................................................ 754 682
Surplus notes....................................................................... 10 1,400 700
Unassigned funds.................................................................... 4,410 4,922
----------- -----------
TOTAL SURPLUS............................................................... 6,564 6,304
----------- -----------
TOTAL LIABILITIES AND SURPLUS........................................... $ 142,132 $ 131,177
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NOTES 1995 1994 1993
--------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums, annuity considerations and deposit funds.......................... 5 $ 19,972 $ 19,881 $ 19,442
Considerations for supplementary contracts and dividend accumulations....... 2,979 2,879 1,654
Net investment income....................................................... 7,825 7,143 7,356
Other income................................................................ 5 156 80 231
--------- --------- ---------
Total income........................................................ 30,932 29,983 28,683
--------- --------- ---------
BENEFITS AND EXPENSES
Benefit payments (other than dividends)..................................... 25,055 23,533 21,417
Changes to reserves, deposit funds and other policy liabilities............. 321 1,619 (439)
Insurance expenses and taxes (excluding tax on capital gains)............... 6 3,160 2,492 2,595
Net transfers to Separate Accounts.......................................... 675 503 3,239
Dividends to policyholders.................................................. 1,520 1,676 1,606
--------- --------- ---------
Total benefits and expenses......................................... 30,731 29,823 28,418
--------- --------- ---------
Net gain from operations.................................................... 201 160 265
Net realized capital losses................................................. 3,6 (873) (54) (132)
--------- --------- ---------
NET (LOSS) INCOME........................................................... (672) 106 133
SURPLUS ADDITIONS (DEDUCTIONS)
Change in general account net unrealized capital gains...................... 3 442 150 131
Change in investment valuation reserves..................................... 121 (306) (169)
Issuance of surplus notes................................................... 10 700 -- 700
Other adjustments--net...................................................... 1,5 (331) (52) 594
--------- --------- ---------
NET CHANGE IN SURPLUS....................................................... 260 (102) 1,389
SURPLUS AT BEGINNING OF YEAR................................................ 6,304 6,406 5,017
--------- --------- ---------
SURPLUS AT END OF YEAR...................................................... $ 6,564 $ 6,304 $ 6,406
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
49
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
CASH PROVIDED
Premiums, annuity considerations and deposit funds received.......................... $ 19,662 $ 19,983 $ 19,599
Considerations for supplementary contracts and dividend accumulations received....... 3,051 2,948 1,748
Net investment income received....................................................... 7,579 6,828 6,931
Other income received................................................................ 166 80 134
--------- --------- ---------
Total receipts................................................................. 30,458 29,839 28,412
--------- --------- ---------
Benefits paid (other than dividends)................................................. 23,939 22,387 20,092
Insurance expenses and taxes paid (excluding tax on capital gains)................... 2,337 2,366 2,532
Net cash transfers to Separate Accounts.............................................. 692 524 3,304
Dividends paid to policyholders...................................................... 1,473 1,684 1,596
Other--net........................................................................... (1,872) 368 (1,051)
--------- --------- ---------
Total payments................................................................. 26,569 27,329 26,473
--------- --------- ---------
Net cash from operations............................................................. 3,889 2,510 1,939
Proceeds from long-term investments sold, matured or repaid after deducting taxes on
capital gains of $102 for 1995, $60 for 1994 and $546 for 1993..................... 60,790 46,459 55,420
Issuance of surplus notes............................................................ 700 -- 700
Other cash provided.................................................................. 370 -- 369
--------- --------- ---------
TOTAL CASH PROVIDED.................................................................. 65,749 48,969 58,428
--------- --------- ---------
CASH APPLIED
Cost of long-term investments acquired............................................... 65,122 47,845 58,033
Other cash applied................................................................... 1,038 162 247
--------- --------- ---------
TOTAL CASH APPLIED................................................................... 66,160 48,007 58,280
--------- --------- ---------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS........................................ (411) 962 148
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR.................................................................... 2,334 1,372 1,224
--------- --------- ---------
END OF YEAR.......................................................................... $ 1,923 $ 2,334 $ 1,372
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND ACCOUNTING POLICIES
Metropolitan Life Insurance Company (the Company) principally provides life
insurance and annuity products and pension, pension-related and
investment-related services to individuals, corporations and other institutions.
The Company and its insurance subsidiaries also provide non-medical health,
disability and property and casualty insurance. Through its non-insurance
subsidiaries, the Company also offers investment management and advisory
services and commercial finance.
The Company's financial statements are prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
New York, which practices currently are considered to be generally accepted
accounting principles for mutual life insurance companies (see Note 12). The
primary interest of insurance regulatory authorities is the ability of the
Company to fulfill its obligations to policyholders; therefore, the financial
statements are oriented to the insured public. Significant accounting policies
applied in preparing the financial statements follow.
INVESTED ASSETS AND RELATED RESERVES
Bonds qualifying for amortization are stated at amortized cost; all other
bonds at prescribed values. Unaffiliated preferred stocks are stated principally
at cost; unaffiliated common stocks are carried at market value. Mortgage loans
are stated principally at their amortized indebtedness. Short-term investments
generally mature within one year and are carried at amortized cost. Policy loans
are stated at unpaid principal balances.
Investments in subsidiaries are stated at equity in net assets and are
included in stocks. Changes in net assets, excluding additional amounts
invested, are included in unrealized capital gains or losses. Dividends from
subsidiaries are reported by the Company as earnings in the year the dividends
are declared. The excess of the purchase prices of non-insurance subsidiaries
over the fair values of the net assets acquired (goodwill) is amortized on a
straight-line basis.
Investment real estate, other than real estate joint ventures and
subsidiaries, is stated at depreciated cost net of non-recourse debt and an
allowance for losses on real estate expected to be disposed of in the near term.
Depreciation is generally calculated by the constant yield method for real
estate purchased prior to December 1990 and the straight-line method if
purchased thereafter. Real estate acquired in satisfaction of debt is valued at
the lower of cost or estimated fair value at date of foreclosure and is
subsequently stated at depreciated cost. Investments in real estate joint
ventures, included in other invested assets, and real estate subsidiaries,
included in stocks, are reported using the equity method and are generally
adjusted to reflect the constant yield method of depreciation for real estate
assets acquired by such entities prior to December 1990.
In 1994, the Company changed to the straight-line method of determining
depreciation on real estate acquired prior to December 1990 if the estimated
fair value of the real estate is less than ninety percent of depreciated cost.
This change had the effect of increasing depreciation expense by approximately
$80 million in 1994.
Investments in non-real estate partnerships are included in other invested
assets and are accounted for using the equity method. The carrying value
generally reflects the Company's share of unrealized gains and losses relating
to the market value of publicly traded common stocks held by the partnerships.
Impairments of individual investments that are considered to be other than
temporary are recognized when incurred.
Mandatory reserves have been established for general account investments in
accordance with guidelines prescribed by insurance regulatory authorities. Such
reserves consist of an Asset Valuation Reserve
51
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AVR) for all invested assets and an Interest Maintenance Reserve (IMR), which
defers the recognition of realized capital gains and losses (net of income tax)
attributable to interest rate fluctuations on fixed income investments over the
estimated remaining duration of the investments sold. Prior to 1994, the Company
also established voluntary investment valuation reserves for certain general
account investments. Changes to the AVR and voluntary investment reserves are
reported as direct additions to or deductions from surplus. Transfers to the IMR
are deducted from realized capital gains; IMR amortization is included in net
investment income.
Net realized capital gains or losses are presented net of federal capital
gains tax or benefit, respectively, and transfers to the IMR.
POLICY RESERVES
Reserves for permanent plans of individual life insurance sold after 1959,
universal life plans and certain term plans sold after 1982 are computed
principally on the Commissioners' Reserve Valuation Method. Reserves for other
life insurance policies are computed on the net level premium method. Reserves
for individual annuity contracts are computed on the net level premium method,
the net single premium method or the Commissioners' Annuity Reserve Valuation
Method, as appropriate. Reserves for group annuity contracts are computed on the
net single premium method. The reserves are based on mortality, morbidity and
interest rate assumptions prescribed by New York State Insurance Law. Such
reserves are sufficient to provide for contractual surrender values.
Periodically to reflect changes in circumstances, the Company may change the
assumptions, methodologies or procedures used to calculate reserves. During
1993, the Company and certain of its wholly-owned life insurance subsidiaries
made certain changes which increased the Company's surplus by $667 million
(substantially all of which related to interest rate changes).
INCOME AND EXPENSES
Premiums are recognized over the premium-paying period. Investment income is
reported as earned. Expenses, including policy acquisition costs and federal
income taxes, are charged to operations as incurred.
During 1995, the Company recorded a restructuring charge of $72 million
related primarily to the consolidation of office space leased for administration
and agency sales offices. The Company anticipates additional restructuring
charges over the next few years.
SEPARATE ACCOUNT OPERATIONS
Investments held in the Separate Accounts (stated at market value) and
liabilities of the Separate Accounts (including participants' corresponding
equity in the Separate Accounts) are reported separately as assets and
liabilities. The Separate Accounts' operating results are reflected in the
changes to these assets and liabilities.
ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities and generally
accepted accounting principles requires that management 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.
2. MERGER
During 1995, the Company and New England Mutual Life Insurance Company (The
New England) entered into a definitive agreement pursuant to which The New
England will be merged with and into the
52
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Company (the Merger) subject to various conditions, including but not limited
to, regulatory approvals and the necessary approvals of the policyholders of the
Company and The New England. Upon consummation of the proposed Merger, the
Company will be the surviving company. It is currently anticipated that the
Merger will occur during the first half of 1996.
If the proposed Merger is consummated, the financial statements of the
Company and The New England will be combined to present the financial position
and results of operations of the combined entity. Summary unaudited pro forma
combined balance sheet information relating to the combined entity and summary
historical balance sheet information relating to The New England as of December
31, 1995 and 1994 and summary unaudited pro forma combined statement of
operations information and summary historical statement of operations
information relating to The New England for the years ended December 31, 1995,
1994, and 1993, are shown below (in millions):
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA THE NEW ENGLAND
COMBINED HISTORICAL
------------------------ --------------------
1995 1994 1995 1994
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
At December 31:
Total assets........................................................ $ 157,773 $ 146,260 $ 16,261 $ 15,753
Investment valuation reserves....................................... 2,012 1,987 429 362
Total surplus (including combined pro forma surplus notes of $1,548
for 1995 and $848 for 1994 and The New England historical surplus
notes of $148 for 1995 and 1994)................................... 6,802 6,564 624 632
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED THE NEW ENGLAND HISTORICAL
------------------------------- -------------------------------
1995 1994 1993 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31:
Total income....................................... $ 33,668 $ 32,811 $ 31,533 $ 2,758 $ 2,844 $ 2,878
Dividends to policyholders......................... 1,731 1,883 1,833 211 207 227
Net gain from operations........................... 346 231 303 159 88 57
Net (loss) income.................................. (566) 124 70 60 42 89
</TABLE>
Certain adjustments will be made to the Company's financial statements if
the Merger is consummated in order to conform the accounting policies and
practices reflected in the financial statements of the combined entities. The
unaudited pro forma combined amounts presented above include management's
estimate of the effects of such adjustments, related principally to differences
in accounting for real estate and mortgage loans, on summary combined
information as if the Merger had occurred on January 1, 1993. The amount of the
adjustments will be finalized upon consummation of the planned Merger.
3. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
The Company's subsidiary operations primarily include insurance, real estate
investment and brokerage activities, investment management and advisory
services, mortgage originations and servicing, and commercial finance. At
December 31, 1995 and 1994, subsidiary assets were $23,008 million and $21,476
million, respectively. At December 31, 1995 and 1994, subsidiary liabilities
were $20,393 million and $18,905 million, respectively. Subsidiary revenues were
$4,588 million, $4,715 million and $4,525 million in 1995, 1994 and 1993,
respectively. Dividends from subsidiaries amounted to $558 million, $186 million
and $175 million in 1995, 1994 and 1993, respectively.
53
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Unamortized goodwill was $129 million at December 31, 1994. There was no
unamortized goodwill at December 31, 1995.
The Company incurs charges on behalf of its subsidiaries which are
reimbursed pursuant to agreements for shared use of property, personnel and
facilities. Charges under such agreements were approximately $194 million, $307
million and $355 million in 1995, 1994 and 1993, respectively.
The Company's net equity in joint ventures and other partnerships was $2,424
million and $2,250 million at December 31, 1995 and 1994, respectively. The
Company's share of income from such entities was $97 million, $26 million and
$76 million for 1995, 1994 and 1993, respectively.
Many of the Company's real estate joint ventures have loans with the
Company. The carrying values of such mortgages were $1,054 million and $1,372
million at December 31, 1995 and 1994, respectively. The Company had other loans
outstanding to its affiliates with carrying values of $2,599 million and $2,073
million at December 31, 1995 and 1994, respectively.
In January 1995, the Company and The Travelers Insurance Company (Travelers)
contributed their respective group medical health care benefits businesses to a
corporate joint venture, The MetraHealth Companies, Inc. (MetraHealth). In
October 1995, the Company and Travelers sold their investments in MetraHealth to
a non-affiliated health care management services company. For its interest in
MetraHealth, a subsidiary of the Company received $485 million face amount of
shares of redeemable preferred stock of the purchaser, $276 million in cash and
rights to additional consideration based on the 1995 earnings of MetraHealth.
The transaction resulted in post-tax income of $443 million to the Company,
including an amount based on the 1995 estimated financial results of
MetraHealth. The Company also has the right to receive up to an additional $169
million in cash for each of 1996 and 1997, based on the consolidated financial
results of the purchaser for each of such years.
During 1995, the Company sold Century 21 Real Estate Corporation (real
estate brokerage operation), Metmor Financial Inc. (mortgage banking) and
Metropolitan Trust Company of Canada (trust operation and mortgage
administration) for $127 million, $56 million and $41 million, respectively,
resulting in pre-tax realized capital losses of $167 million, $247 million and
$86 million, respectively. The sales also resulted in $452 million of unrealized
capital gains representing the reversal of prior period unrealized capital
losses relating to the subsidiaries.
54
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. INVESTMENTS
DEBT SECURITIES
The carrying value, gross unrealized gain (loss) and estimated fair value of
bonds and redeemable preferred stocks (debt securities), by category, as of
December 31, 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
GROSS UNREALIZED
CARRYING -------------------- ESTIMATED
VALUE GAIN (LOSS) FAIR VALUE
--------- --------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995:
Bonds:
U. S. Treasury securities and obligations of U.S. government
corporations and agencies........................................... $ 12,871 $ 1,556 $ (2) $ 14,425
States and political subdivisions..................................... 1,865 582 (2) 2,445
Foreign governments................................................... 1,871 221 -- 2,092
Corporate............................................................. 29,992 1,872 (105) 31,759
Mortgage-backed securities............................................ 18,888 749 (27) 19,610
Other................................................................. 5,468 336 (16) 5,788
--------- --------- --------- -----------
Total bonds............................................................. $ 70,955 $ 5,316 $ (152) $ 76,119
--------- --------- --------- -----------
--------- --------- --------- -----------
Redeemable preferred stocks............................................. $ 39 $ -- $ (3) $ 36
--------- --------- --------- -----------
--------- --------- --------- -----------
DECEMBER 31, 1994:
Bonds:
U. S. Treasury securities and obligations of U.S. government
corporations and agencies........................................... $ 9,807 $ 322 $ (546) $ 9,583
States and political subdivisions..................................... 1,483 69 (21) 1,531
Foreign governments................................................... 1,931 26 (60) 1,897
Corporate............................................................. 31,262 291 (1,682) 29,871
Mortgage-backed securities............................................ 17,485 251 (851) 16,885
Other................................................................. 3,624 18 (215) 3,427
--------- --------- --------- -----------
Total bonds............................................................. $ 65,592 $ 977 $ (3,375) $ 63,194
--------- --------- --------- -----------
--------- --------- --------- -----------
Redeemable preferred stocks............................................. $ 44 $ -- $ (14) $ 30
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
55
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The carrying value and estimated fair value of bonds, by contractual
maturity, at December 31, 1995 are shown below. Bonds not due at a single
maturity date have been included in the table in the year of final maturity.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without prepayment
penalties.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................................... $ 2,171 $ 2,191
Due after one year through five years............................. 17,277 17,717
Due after five years through ten years............................ 17,188 18,381
Due after ten years............................................... 15,431 18,220
--------- -----------
Subtotal...................................................... 52,067 56,509
Mortgage-backed securities........................................ 18,888 19,610
--------- -----------
--------- -----------
Total......................................................... $ 70,955 $ 76,119
--------- -----------
--------- -----------
</TABLE>
Proceeds from the sales of debt securities during 1995, 1994 and 1993 were
$50,831 million, $36,401 million and $50,395 million, respectively. During 1995,
1994 and 1993, respectively, gross gains of $814 million, $577 million and
$1,316 million, and gross losses of $352 million, $561 million and $96 million
were realized on those sales. Realized investment gains and losses are
determined by specific identification.
MORTGAGE LOANS
Mortgage loans are collateralized by properties located throughout the
United States and Canada. Approximately 15 percent and 9 percent of the
properties are located in California and Illinois, 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.
As of December 31, 1995 and 1994, the mortgage loan investments were
categorized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Office Buildings......................................................... 32% 36%
Retail................................................................... 18% 17%
Residential.............................................................. 20% 21%
Agricultural............................................................. 20% 18%
Other.................................................................... 10% 8%
--- ---
Total................................................................ 100% 100%
--- ---
--- ---
</TABLE>
FINANCIAL INSTRUMENTS
The Company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms. Company
policy requires a minimum of 102 percent of the fair value of the loaned
securities to be separately maintained as collateral for the loans. The
collateral is recorded in memorandum records and not reflected in the
accompanying balance sheets. To further minimize the credit risks related to
this lending program, the Company regularly monitors the financial condition of
counterparties to these agreements.
During the normal course of business, the Company agrees with independent
parties to purchase or sell bonds over fixed or variable periods of time. The
off-balance sheet risks related to changes in the quality of the
56
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
underlying bonds are mitigated by the fact that commitment periods are generally
short in duration and provisions in the agreements release the Company from its
commitments in case of significant changes in the financial condition of the
independent party or the issuer of the bond.
The Company engages in a variety of derivative transactions with respect to
the general account. Those derivatives, such as forwards, futures, options,
foreign exchange agreements and swaps, which do not themselves generate interest
or dividend income, are acquired or sold in order to hedge or reduce risks
applicable to assets held, or expected to be purchased or sold, and liabilities
incurred or expected to be incurred. The Company does not engage in trading of
these derivatives.
In 1995 and 1994, the Company engaged in three primary derivatives
strategies. The Company entered into a number of anticipatory hedges using
forwards to limit the interest rate exposures of investments in debt securities
expected to be acquired within one year. The Company also hedged a number of
investments in debt securities denominated in foreign currencies by executing
swaps and forwards to ensure a United States dollar rate of return. In addition,
the Company purchased a limited number of interest rate caps to hedge against
rising interest rates on a portfolio of assets which the Company purchased to
match the liabilities it incurred.
Income and expenses related to derivatives used to hedge or manage risks are
recorded on the accrual basis as an adjustment to the yield of the related
securities over the periods covered by the derivative contracts. Gains and
losses relating to early terminations of interest rate swaps used to hedge or
manage interest rate risk are deferred and amortized over the remaining period
originally covered by the swap. Gains and losses relating to derivatives used to
hedge the risks associated with anticipated transactions are deferred and
utilized to adjust the basis of the transaction once it has closed. If it is
determined that the transaction will not close, such gains and losses are
included in realized capital gains and losses.
ASSETS ON DEPOSIT
As of December 31, 1995 and 1994, the Company had assets on deposit with
regulatory agencies of $5,281 million and $5,145 million, respectively.
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies.
The Company acquired, in part through reinsurance effective in January 1995,
the group life, dental, disability, accidental death and dismemberment, vision
and long-term care insurance businesses from Travelers and certain of its
subsidiaries for $403 million. Commissions of $142 million and $4 million were
charged to earnings during 1995 and 1994, respectively, and considerations in
excess of commissions of $208 million and $49 million were recorded as a direct
charge to surplus in 1995 and 1994, respectively. In January, 1995, the Company
received assets with a fair market value equal to the $1,565 million of
liabilities assumed under the reinsurance agreements. The reinsured businesses
convert to Company contracts at policy anniversary date.
During 1995, the Company entered into reinsurance agreements with
MetraHealth to facilitate the transfer of certain of its group medical health
care business to MetraHealth.
The Company also has reinsurance agreements with certain of its life
insurance subsidiaries. Reserves for insurance assumed pursuant to these
agreements are included in reserves for life and health insurance and annuities
and amounted to $2,143 million and $1,193 million at December 31, 1995 and 1994,
respectively.
57
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
In 1993, the Company assumed $1,540 million of life insurance and annuity
reserves of a New York life insurance company under rehabilitation and received
assets having a fair value equal to the reserves assumed.
The financial statements are shown net of ceded reinsurance. The amounts
related to reinsurance agreements, including agreements described above but
excluding certain agreements with non-affiliates for which the Company provides
administrative services, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Reinsurance premiums assumed..................................... $ 890 $ 237 $ 264
Reinsurance ceded:
Premiums....................................................... 457 77 86
Other income................................................... 26 1 3
Reduction in insurance liabilities (at December 31)............ 71 31 28
</TABLE>
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
Activity in the liability for unpaid group accident and health policy and
contract claims is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Balance at January 1....................................... $ 1,708 $ 1,588 $ 1,517
Less reinsurance recoverables............................ 1 1 1
--------- --------- ---------
Net balance at January 1................................... 1,707 1,587 1,516
--------- --------- ---------
Incurred related to:
Current year............................................. 2,424 1,780 1,797
Prior years.............................................. (23) (7) (40)
--------- --------- ---------
Total incurred............................................. 2,401 1,773 1,757
--------- --------- ---------
Paid related to:
Current year............................................. 1,464 1,260 1,306
Prior years.............................................. 417 393 380
--------- --------- ---------
Total paid................................................. 1,881 1,653 1,686
--------- --------- ---------
Net balance at December 31................................. 2,227 1,707 1,587
Plus reinsurance recoverables............................ 93 1 1
--------- --------- ---------
Balance at December 31..................................... $ 2,320 $ 1,708 $ 1,588
--------- --------- ---------
--------- --------- ---------
</TABLE>
6. FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with certain
affiliates. The consolidating companies have executed a tax allocation
agreement. Under this agreement, the federal income tax provision is computed on
a separate return basis. Members receive reimbursement to the extent that their
losses and other credits result in a reduction of the current year's
consolidated tax liability.
Federal income tax expense has been calculated in accordance with the
provisions of the Internal Revenue Code, as amended (the Code). Under the Code,
the amount of federal income tax expense includes a tax on the Company's surplus
calculated by a prescribed formula that incorporates a differential earnings
58
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
rate between stock and mutual life insurance companies. In 1995, the Company
changed its calculation of surplus tax which resulted in an increase in 1995
federal income tax expense of $95 million. Had such change occurred prior to
1993, the Company's insurance expenses and taxes (excluding tax on capital
gains) and net loss for the year ended December 31, 1995 would have been $2,758
million and $270 million, respectively; the Company's surplus, insurance
expenses and taxes (excluding tax on capital gains) and net loss at and for the
year ended December 31, 1994 would have been $5,902 million, $2,894 million and
$296 million, respectively; and the Company's insurance expenses and taxes
(excluding tax on capital gains) and net income for the year ended December 31,
1993 would have been $2,702 million and $26 million, respectively. The change
would have had no effect on December 31, 1993 surplus and surplus at December
31, 1992 would have been $5,124 million.
Total federal income taxes on operations and realized capital gains of $479
million, $192 million and $596 million were incurred in 1995, 1994 and 1993,
respectively.
7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has defined benefit pension plans covering all eligible
employees and sales representatives of the Company and certain of its
subsidiaries. The Company is both the sponsor and administrator of these plans.
Retirement benefits are based on years of credited service and final average
earnings' history. The Company's funding policy is to make the minimum
contribution required by the Employee Retirement Income Security Act of 1974.
Components of the net periodic pension (credit) cost for the years ended
December 31, 1995, 1994 and 1993 for the defined benefit qualified and
non-qualified pension plans are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................... $ 58 $ 88 $ 71
Interest cost on projected benefit obligation.................. 215 209 191
Return on assets............................................... (262) 15 (380)
Net amortization and deferrals................................. (33) (298) 110
--------- --------- ---------
Net periodic pension (credit) cost............................. $ (22) $ 14 $ (8)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumed long-term rate of return on assets used in determining the net
periodic pension (credit) cost was 9.5 percent in 1995 and 8.5 percent in 1994
and 1993. The Company is recognizing the unrecognized net asset at transition,
attributable to the adoption of Statement of Financial Accounting Standards No.
87, EMPLOYERS' ACCOUNTING FOR PENSIONS, in 1993, over the average remaining
service period at the transition date of employees expected to receive benefits
under the pension plans.
59
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The funded status of the qualified and non-qualified defined benefit pension
plans and a comparison of the accumulated benefit obligation, plan assets and
projected benefit obligation at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................ $ (2,724) $ (2,266)
Non-vested........................................................ (43) (47)
--------- ---------
Accumulated benefit obligation...................................... $ (2,767) $ (2,313)
--------- ---------
--------- ---------
Projected benefit obligation........................................ $ (3,094) $ (2,676)
Plan assets at contract value....................................... 3,286 2,900
--------- ---------
Plan assets in excess of projected benefit obligation............... 192 224
Unrecognized prior service cost..................................... 73 92
Unrecognized net loss from past experience different from that
assumed........................................................... 79 33
Unrecognized net asset at transition................................ (326) (365)
Adjustment required to recognize minimum liability.................. (19) --
--------- ---------
Accrued pension cost at December 31................................. $ (1) $ (16)
--------- ---------
--------- ---------
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25 percent for 1995, 8.5 percent
for 1994 and 7.5 percent for 1993 in the United States and 8.0 percent for 1995,
7.25 percent for 1994 and 7.0 percent for 1993 in Canada. The weighted average
assumed rate of increase in future compensation levels was 4.5 percent in 1995
and 5.0 percent in 1994 and 1993. In addition, several other factors, such as
expected retirement dates and mortality, enter into the determination of the
actuarial present value of the accumulated benefit obligation.
The pension plans' assets are principally investment contracts issued by the
Company.
During 1995, the Company recognized a pension plan curtailment gain before
income tax of $8 million. This gain relates to the transfer of Company group
medical health care business personnel to MetraHealth.
SAVINGS AND INVESTMENT PLAN
The Company sponsors a savings and investment plan available for
substantially all employees under which the Company matches a portion of
employee contributions. During 1995, 1994 and 1993, the Company contributed $34
million, $42 million and $48 million, respectively, to the plan.
OTHER POSTRETIREMENT BENEFITS
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
The costs of non-pension postretirement benefits are recognized on an
accrual basis in accordance with guidelines prescribed by insurance regulatory
authorities. Such guidelines require the recognition of a postretirement benefit
obligation for current retirees and fully eligible or vested employees. As
prescribed by
60
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
the guidelines, the Company has elected to recognize over a period of twenty
years the unrecognized postretirement benefit asset and obligation (net asset
and obligation at transition) in existence on January 1, 1993 (effective date of
guidelines).
The following table sets forth the postretirement health care and life
insurance plans' combined status reconciled with the amounts included in the
Company's balance sheets at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
------------- --------------- ------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligations of retirees
and fully eligible participants............................ $ (295) $ (776) $ (262) $ (787)
Plan assets (Company insurance contracts) at contract
value...................................................... 397 411 393 358
------ ------ ------ ------
Plan assets in excess of (less than) accumulated
postretirement benefit obligation.......................... 102 (365) 131 (429)
Unrecognized net loss (gain) from past experience different
from that assumed and from changes in assumptions.......... 53 (83) (6) (44)
Prior service cost not yet recognized in net periodic
retirement benefit cost.................................... (5) -- (5) --
Unrecognized (asset) obligation at transition................ (102) 438 (108) 464
------ ------ ------ ------
Prepaid (Accrued) non-pension postretirement benefit cost at
December 31................................................ $ 48 $ (10) $ 12 $ (9)
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The components of the net periodic non-pension postretirement benefit cost
for the years ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost..................................................................................... $ 26 $ 31 $ 32
Interest cost on accumulated postretirement benefit obligation................................... 74 76 87
Return on plan assets (Company insurance contracts).............................................. (61) (37) (36)
Amortization of transition asset and obligation.................................................. 18 18 20
Net amortization and deferrals................................................................... (4) (10) (17)
--- --- ---
Net periodic non-pension postretirement benefit cost............................................. $ 53 $ 78 $ 86
--- --- ---
--- --- ---
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
non-pension postretirement benefit obligation was 10.0 percent in 1995, 11.0
percent in 1994 and 12.0 percent in 1993, gradually decreasing to 5.25 percent,
6.5 percent and 5.5 percent, respectively, over twelve years. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.25 percent, 8.5 percent, and 7.5 percent at December 31, 1995,
1994 and 1993, respectively.
If the health care cost trend rate assumptions were increased 1.0 percent,
the accumulated postretirement benefit obligation as of December 31, 1995, 1994
and 1993 would be increased 9.0 percent, 7.1 percent, and 7.2 percent,
respectively. The effect of this change on the sum of the service and interest
cost components of the net periodic postretirement benefit cost for the years
ended December 31, 1995, 1994 and 1993 would be an increase of 11.0 percent, 7.9
percent and 7.8 percent, respectively.
61
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. LEASES
LEASE INCOME
During 1995, 1994 and 1993, the Company received $1,742 million, $1,786
million and $1,482 million, respectively, in lease income related to its
investment real estate. In accordance with standard industry practice, certain
of the Company's lease agreements with retail tenants result in income that is
contingent on the level of the tenants' sales revenues.
LEASE EXPENSE
The Company has entered into various lease agreements for office space, data
processing and other equipment. Rental expense under such leases was $171
million, $193 million and $214 million for the years ended December 31, 1995,
1994 and 1993, respectively. Future gross minimum rental payments under non-
cancelable leases, including those leases for which the Company recorded a
restructuring charge in 1995, are as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------
<S> <C>
1996.......................................................... $ 107
1997.......................................................... 82
1998.......................................................... 66
1999.......................................................... 48
2000.......................................................... 32
Thereafter.................................................... 53
---------
Total..................................................... $ 388
---------
---------
</TABLE>
9. OTHER COMMITMENTS AND CONTINGENCIES
GUARANTEES
The Company has entered into certain arrangements in the course of its
business which, under certain circumstances, may impose significant financial
obligations on the Company. The Company has entered into a support agreement
with a subsidiary whereby the Company has agreed to maintain the subsidiary's
net worth at one dollar or more. At December 31, 1995, the subsidiary's assets,
which consist principally of loans to affiliates, amounted to $3,309 million and
its net worth amounted to $11 million.
In addition, the Company has entered into arrangements with certain of its
subsidiaries and affiliates to assist such subsidiaries and affiliates in
meeting various jurisdictions' regulatory requirements regarding capital and
surplus. The Company has also entered into a support arrangement with respect to
the reinsurance obligations of a subsidiary.
No material payments have been made under these arrangements and it is the
opinion of management that any payments required pursuant to these arrangements
would not likely have a material adverse effect on the Company's financial
position.
LITIGATION
In 1994, the Company entered into consent agreements (involving the payment
of fines and policyholder restitution payments) with state authorities,
including the insurance departments of all states, arising out of regulatory
proceedings and investigations relating to alleged improper practices in the
sale of individual life insurance. Litigation relating to the Company's
individual life insurance sales practices (including individual actions and
purported class actions) has also been instituted by or on behalf of
policyholders and others, and additional litigation relating to the Company's
sales practices may be commenced in the future. In addition, an
62
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
investigation by the Office of the United States Attorney for the Middle
District of Florida, in conjunction with a grand jury, into certain of the sales
practices that were the focus of the state investigations is ongoing. Various
litigation, claims and assessments against the Company, in addition to the
aforementioned, have arisen in the course of the Company's business, operations
and activities.
In certain of the matters referred to above, including actions with multiple
plaintiffs, 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 to make
a meaningful estimate of the amount or range of loss that could result from an
unfavorable outcome in all such matters, it is the opinion of the Company's
management that their outcome, after consideration of the provisions made in the
Company's financial statements, is not likely to have a material adverse effect
on the Company's financial position.
10. SURPLUS NOTES
The carrying values of surplus notes at December 31, 1995 and 1994 are shown
below:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
6.30% surplus notes scheduled to mature on November 1, 2003...................... $ 400 $ 400
7.00% surplus notes scheduled to mature on November 1, 2005...................... 250 --
7.70% surplus notes scheduled to mature on November 1, 2015...................... 200 --
7.45% surplus notes scheduled to mature on November 1, 2023...................... 300 300
7.80% surplus notes scheduled to mature on November 1, 2025...................... 250 --
--------- ---------
Total.................................................................... $ 1,400 $ 700
--------- ---------
--------- ---------
</TABLE>
Interest on the Company's surplus notes is scheduled to be paid
semi-annually; principal payments are scheduled to be paid upon maturity. Such
payments of interest and principal may be made only with the prior approval of
the Superintendent of Insurance of the State of New York (Superintendent).
Subject to the prior approval of the Superintendent, the 7.45 percent
surplus notes may be redeemed, as a whole or in part, at the election of the
Company at any time on or after November 1, 2003. During 1995 and 1994, the
Company obtained Superintendent approval for and made total interest payments of
$48 million on the surplus notes.
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below
have been determined by the Company using market information available as of
December 31, 1995 and 1994 and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
63
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The estimates presented below are not necessarily indicative of the amounts
the Company could have realized in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1995:
Assets
Bonds.............................................................................. $ 70,955 $ 76,119
Stocks, including subsidiaries..................................................... 3,646 3,608
Mortgage loans..................................................................... 14,211 14,818
Policy loans....................................................................... 3,956 4,023
Cash and short-term investments.................................................... 1,923 1,923
Liabilities
Investment contracts included in:
Reserves for life and health insurance and annuities............................. 18,137 18,211
Policy proceeds and dividends left with the Company.............................. 4,482 4,488
Premium deposit funds............................................................ 12,891 13,322
Other financial instruments
Bond purchase agreements........................................................... $ 601 3.3
Bond sales agreements.............................................................. 80 (0.5)
Interest rate swaps................................................................ 280 1.5
Interest rate caps................................................................. 231 --
Foreign currency swaps............................................................. 89 4.4
Foreign currency forwards.......................................................... 10 --
Covered call options............................................................... 25 (1.9) 1.9
Futures contracts.................................................................. 1,402 (19.5) --
Unused lines of credit............................................................. 1,600 1.1
</TABLE>
64
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
----------- --------- -----------
(IN MILLIONS)
DECEMBER 31, 1994:
<S> <C> <C> <C>
Assets
Bonds.............................................................................. $ 65,592 $ 63,194
Stocks, including subsidiaries..................................................... 3,672 3,660
Mortgage loans..................................................................... 14,524 14,269
Policy loans....................................................................... 3,964 3,645
Cash and short-term investments.................................................... 2,334 2,334
Liabilities
Investment contracts included in:
Reserves for life and health insurance and annuities............................. 16,354 16,370
Policy proceeds and dividends left with the Company.............................. 3,534 3,519
Premium deposit funds............................................................ 14,006 13,997
Other Financial Instruments
Bond purchase agreements........................................................... $ 2,755 4.1
Bond sales agreements.............................................................. 1,450 0.8
Interest rate swaps................................................................ 272 (7.1)
Interest rate caps................................................................. 185 (0.1)
Foreign currency swaps............................................................. 36 (0.4)
Foreign currency forwards.......................................................... 4 (0.2) (0.1)
Covered call options............................................................... 25 (1.9) 1.9
Unused lines of credit............................................................. 1,450 1.0
</TABLE>
For bonds that are publicly traded, estimated fair value was obtained from
an independent market pricing service. Publicly traded bonds represented
approximately 78 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1995 and 77 percent of the carrying value and
estimated fair value of the total bonds as of December 31, 1994. For all other
bonds, estimated fair value was determined by management, based on interest
rates, maturity, credit quality and average life. Included in bonds are loaned
securities with estimated fair values of $8,148 million and $5,154 million at
December 31, 1995 and 1994, respectively. Estimated fair values of stocks were
generally based on quoted market prices, except for investments in common stock
of subsidiaries, which are based on equity in net assets of the subsidiaries.
Estimated fair values of mortgage loans were generally based on discounted
projected cash flows using interest rates offered for loans to borrowers with
comparable credit ratings and for the same maturities. Estimated fair values of
policy loans were based on discounted projected cash flows using U.S. Treasury
rates to approximate interest rates and Company experience to project patterns
of loan repayment. For cash and short-term investments, the carrying amount is a
reasonable estimate of fair value.
Included in reserves for life and health insurance and annuities, policy
proceeds and dividends left with the Company and premium deposit funds are
amounts classified as investment contracts representing policies or contracts
that do not incorporate significant insurance risk. The fair values for these
liabilities are estimated using discounted projected cash flows, based on
interest rates being offered for similar contracts with maturities consistent
with those remaining for the contracts being valued. Policy proceeds and
dividends left with the Company also include other liabilities without defined
durations. The estimated fair value of such liabilities, which generally are of
short duration or have periodic adjustments of interest rates, approximates
their carrying value.
65
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Estimated fair values of bond purchase/sale agreements were based on fees
charged to enter into similar arrangements or on the estimated cost to terminate
the outstanding agreements. For interest rate and foreign currency swaps,
interest rate caps, interest rate futures, foreign currency forwards, futures
contracts and covered call options, estimated fair value is the amount at which
the contracts could be settled based on estimates obtained from dealers. The
Company had unused lines of credit under agreements with various banks. The
estimated fair values of unused lines of credit were based on fees charged to
enter into similar agreements.
12. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR MUTUAL LIFE INSURANCE
COMPANIES
The Company, as a mutual life insurance company, prepares its financial
statements in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York (statutory financial
statements) which currently are considered to be generally accepted accounting
principles (GAAP) for mutual life insurance companies. However, the Financial
Accounting Standards Board (FASB) has issued certain pronouncements effective
for 1996 annual financial statements and thereafter. Such pronouncements will no
longer allow statutory financial statements to be described as being prepared in
conformity with GAAP. Upon the effective date of the pronouncements, in order
for their financial statements to be described as being prepared in conformity
with GAAP, mutual life insurance companies will be required to adopt all
applicable accounting principles promulgated by the FASB in any general purpose
financial statements that they may issue. If permitted by insurance regulatory
authorities, the Company will issue 1996 general purpose financial statements
reflecting the adoption of all applicable GAAP pronouncements. However, the
Company has not finalized the quantification of the effects of the application
of the pronouncements on its financial statements.
66
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Metropolitan Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
Growth, Income, Money Market, Diversified, International Stock, Stock Index, and
Aggressive Growth Divisions of Metropolitan Life Separate Account UL (the
"Separate Account") as of December 31, 1995, and the related statements of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the custodian and the depositor of the Separate Account. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of the Growth, Income, Money Market, Diversified,
International Stock, Stock Index and Aggressive Growth Divisions of Metropolitan
Life Separate Account UL as of December 31, 1995 and the results of their
operations for the year ended and the changes in their net assets for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
February 19, 1996
67
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY INTERNATIONAL AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Metropolitan Series
Fund, Inc. at Value (Note 1A):
Growth Portfolio (4,099,345
shares; cost $96,789,176)....... $ 112,977,954 -- -- -- -- -- --
Income Portfolio (1,760,947
shares; cost $22,143,191)....... -- $ 22,416,853 -- -- -- -- --
Money Market Portfolio (282,752
shares; cost $3,047,618)........ -- -- $ 2,954,758 -- -- -- --
Diversified Portfolio (5,310,254
shares; cost $77,330,732)....... -- -- -- $ 84,698,553 -- -- --
International Stock Portfolio
(1,414,995 shares; cost
$17,940,365).................... -- -- -- -- $17,390,288 -- --
Stock Index Portfolio (725,046
shares; cost $11,289,160)....... -- -- -- -- -- $ 13,456,861 --
Aggressive Growth Portfolio
(2,111,288 shares; cost
$50,602,535).................... -- -- -- -- -- -- $ 54,619,026
------------------------------------------------------------------------------------
Total Investments................. 112,977,954 22,416,853 2,954,758 84,698,553 17,390,288 13,456,861 54,619,026
Cash and Accounts Receivable........ -- -- 20,391 -- -- -- --
------------------------------------------------------------------------------------
Total Assets...................... 112,977,954 22,416,853 2,975,149 84,698,553 17,390,288 13,456,861 54,619,026
LIABILITIES......................... 537,332 105,382 409 517,812 94,151 31,091 287,229
------------------------------------------------------------------------------------
NET ASSETS.......................... $ 112,440,622 $ 22,311,471 $ 2,974,740 $ 84,180,741 $17,296,137 $ 13,425,770 $ 54,331,797
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
68
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- --------- ----------------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)................... $ 5,497,071 $1,312,997 $ 161,198 $ 5,314,778 $ 152,268 $ 290,369 $5,091,762
Expenses:
Mortality and expense charges (Note
3)................................. 802,240 165,666 32,690 619,298 124,852 76,564 365,214
----------- ---------- --------- ----------------------- ---------- -----------
Net investment income.................... 4,694,831 1,147,331 128,508 4,695,480 27,416 213,805 4,726,548
----------- ---------- --------- ----------------------- ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions........................... 293,233 (8,290) 35,201 248,523 28,349 29,512 152,387
Change in unrealized appreciation of
investments............................ 19,543,807 1,977,261 4,641 10,898,818 136,578 2,271,366 4,188,117
----------- ---------- --------- ----------------------- ---------- -----------
Net realized and unrealized gain on
investments (Note 1B).................. 19,837,040 1,968,971 39,842 11,147,341 164,927 2,300,878 4,340,504
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $24,531,871 $3,116,302 $ 168,350 $15,842,821 $ 192,343 $2,514,683 $9,067,052
----------- ---------- --------- ----------------------- ---------- -----------
----------- ---------- --------- ----------------------- ---------- -----------
</TABLE>
See Notes to Financial Statements.
69
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH INCOME MONEY MARKET
DIVISION DIVISION DIVISION
----------------------------- --------------------------- ---------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 4,694,831 $ 1,529,435 $ 1,147,331 $ 971,668 $ 128,508 $ 130,231
Net realized gain (loss)
from security
transactions.............. 293,233 53,162 (8,290) (9,894) 35,201 (79,321)
Unrealized appreciation
(depreciation) of
investments............... 19,543,807 (4,282,800) 1,977,261 (1,415,108) 4,641 36,172
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations................ 24,531,871 (2,700,203) 3,116,302 (453,334) 168,350 87,082
------------- ------------- ------------ ------------ ------------ ------------
From capital transactions:
Net premiums................ 41,455,659 45,546,952 8,687,776 10,328,856 2,988,786 6,425,154
Net portfolio transfers..... (4,142,623) (2,746,223) (1,257,339) 48,939 (3,815,269) (6,647,524)
Other net transfers......... (17,287,875) (16,398,757) (3,439,203) (3,317,903) (661,810) (703,798)
Substitutions (Note 4)...... -- -- -- -- -- --
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
capital transactions...... 20,025,161 26,401,972 3,991,234 7,059,892 (1,488,293) (926,168)
------------- ------------- ------------ ------------ ------------ ------------
NET CHANGE IN NET ASSETS.... 44,557,032 23,701,769 7,107,536 6,606,558 (1,319,943) (839,086)
NET ASSETS--BEGINNING OF
YEAR...................... 67,883,590 44,181,821 15,203,935 8,597,377 4,294,683 5,133,769
------------- ------------- ------------ ------------ ------------ ------------
NET ASSETS--END OF YEAR..... $ 112,440,622 $ 67,883,590 $ 22,311,471 $ 15,203,935 $ 2,974,740 $ 4,294,683
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
70
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED INTERNATIONAL STOCK
DIVISION DIVISION
--------------------------- ---------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1995 1994
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 4,695,480 $ 1,734,612 $ 27,416 $ 485,015
Net realized gain (loss)
from security
transactions.............. 248,523 22,275 28,349 80,235
Unrealized appreciation
(depreciation) of
investments............... 10,898,818 (3,636,719) 136,578 (842,359)
------------ ----------- ------------ -----------
Net increase (decrease) in
net assets resulting from
operations................ 15,842,821 (1,879,832) 192,343 (277,109)
------------ ----------- ------------ -----------
From capital transactions:
Net premiums................ 31,888,789 41,263,327 12,024,423 11,498,165
Net portfolio transfers..... (5,102,550) (4,980,679) (1,502,438) 1,014,621
Other net transfers......... (13,529,725) (14,095,050) (4,797,949) (3,556,411)
Substitutions (Note 4)...... -- 2,235,074 -- --
------------ ----------- ------------ -----------
Net increase (decrease) in
net assets resulting from
capital transactions...... 13,256,514 24,422,672 5,724,036 8,956,375
------------ ----------- ------------ -----------
NET CHANGE IN NET ASSETS.... 29,099,335 22,542,840 5,916,379 8,679,266
NET ASSETS--BEGINNING OF
YEAR...................... 55,081,406 32,538,566 11,379,758 2,700,492
------------ ----------- ------------ -----------
NET ASSETS--END OF YEAR..... $ 84,180,741 $55,081,406 $ 17,296,137 $11,379,758
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
<CAPTION>
STOCK INDEX AGGRESSIVE GROWTH
DIVISION DIVISION
----------------------------- ------------------------------
1995 1994 1995 1994
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 213,805 $ 132,182 $ 4,726,548 $ (98,251)
Net realized gain (loss)
from security
transactions.............. 29,512 5,039 152,387 5,076
Unrealized appreciation
(depreciation) of
investments............... 2,271,366 (129,802) 4,188,117 (100,707)
------------- ------------ --------------- -----------
Net increase (decrease) in
net assets resulting from
operations................ 2,514,683 7,419 9,067,052 (193,882)
------------- ------------ --------------- -----------
From capital transactions:
Net premiums................ 7,870,004 4,316,325 32,859,273 28,325,697
Net portfolio transfers..... 876,498 (301,802) (190,487) (15,434)
Other net transfers......... (2,682,256) (1,454,580) (12,996,305) (10,302,089)
Substitutions (Note 4)...... -- -- -- --
------------- ------------ --------------- -----------
Net increase (decrease) in
net assets resulting from
capital transactions...... 6,064,246 2,559,943 19,672,481 18,008,174
------------- ------------ --------------- -----------
NET CHANGE IN NET ASSETS.... 8,578,929 2,567,362 28,739,533 17,814,292
NET ASSETS--BEGINNING OF
YEAR...................... 4,846,841 2,279,479 25,592,264 7,777,972
------------- ------------ --------------- -----------
NET ASSETS--END OF YEAR..... $ 13,425,770 $ 4,846,841 $ 54,331,797 $25,592,264
------------- ------------ --------------- -----------
------------- ------------ --------------- -----------
</TABLE>
71
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Metropolitan Life Separate Account UL (the "Separate Account") is a
multi-division unit investment trust registered under the Investment Company Act
of 1940 and presently consists of seven investment divisions used to support
variable universal life insurance policies. The assets in each division are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc. (the "Fund"). Each portfolio has varying investment objectives
relative to growth of capital and income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property of
Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principles, is set forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios. A summary of investments of the seven
designated portfolios of the Fund in which the seven investment divisions of the
Separate Account invest as of December 31, 1995 is included as Note 5. The
methods used to value the Fund's investments at December 31, 1995 are described
in Note 1A of the Fund's 1994 Annual Report.
B. SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified cost.
C. FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account will be
treated as a part of Metropolitan Life and its operations, and the Separate
Account will not be taxed separately as a "regulated investment company" under
existing law. Metropolitan Life is taxed as a life insurance company. The
policies permit Metropolitan Life to charge against the Separate Account any
taxes, or reserves for taxes, attributable to the maintenance or operation of
the Separate Account. Metropolitan Life is not currently charging any federal
income taxes against the Separate Account arising from the earnings or realized
capital gains attributable to the Separate Account. Such charges may be imposed
in future years depending on market fluctuations and transactions involving the
Separate Account.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge from
premiums before amounts are allocated to the Separate Account. In the case of
certain of the policies, Metropolitan Life also deducts a Federal income tax
charge before amounts are allocated to the Separate Account. The Federal income
tax charge is imposed in connection with certain of the policies to recover a
portion of the Federal income tax adjustment attributable to policy acquisition
expenses.
2. DIVIDENDS
On April 19, 1995 and December 19, 1995, the Fund declared dividends for all
shareholders of record on April 25, 1995 and December 27, 1995, respectively.
The amount of dividends received by the Separate Account was $17,820,443. The
dividends were paid to Metropolitan Life on April 26, 1995 and December 28,
1995, respectively, and were immediately reinvested in additional shares of the
portfolios in which the investment divisions invest. As a result of this
reinvestment, the number of shares of the Fund held by each of
72
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
the seven investment divisions increased by the following: Growth Portfolio
203,974 shares, Income Portfolio 103,768 shares, Money Market Portfolio 15,439
shares, Diversified Portfolio 334,236 shares, International Stock Portfolio
12,446 shares, Stock Index Portfolio 15,791 shares, and Aggressive Growth
Portfolio 199,098 shares.
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Life. This charge is
equivalent to the effective annual rate of .90% of the average daily value of
the net assets in the Separate Account which are attributable to such policies.
4. SUBSTITUTION OF DIVISION
On June 1, 1994, the net assets of the Equity Income Division were
transferred to the Diversified Division under a substitution plan.
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY MARKET DIVERSIFIED
GROWTH PORTFOLIO INCOME PORTFOLIO PORTFOLIO PORTFOLIO
---------------------------- ------------------------- ------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE VALUE VALUE VALUE
(NOTE 1A) (NOTE 1A) (NOTE 1A) (NOTE 1A)
COMMON STOCK
Aerospace................ $ 46,873,200 (4.3%) $ 24,440,850
Automotive............... 8,400,388 (0.8%) 3,604,913
Banking.................. 46,664,450 (4.3%) 27,106,325
Building................. 6,695,350 (0.6%) 3,872,713
Business Services........ 17,307,250 (1.6%) 10,205,126
Chemical................. 62,351,063 (5.7%) 37,025,888
Computer Software &
Service................. 64,486,020 (5.9%) 38,000,276
Drug..................... 68,975,425 (6.3%) 42,703,588
Electrical Equipment..... 18,014,400 (1.6%) 10,512,000
Electronics.............. 60,681,096 (5.5%) 37,210,134
Financial Services....... 50,077,876 (4.6%) 33,011,138
Food & Beverage.......... 56,499,225 (5.1%) 33,167,400
Hospital Management...... 23,432,125 (2.1%) 16,054,075
Hospital Supply.......... 46,253,650 (4.2%) 25,576,525
Hotel & Restaurant....... 22,954,525 (2.1%) 13,319,088
Insurance................ 31,977,600 (2.9%) 18,682,688
Machinery................ 47,891,562 (4.4%) 28,921,275
Metals & Mining.......... 7,637,612 (0.7%) 4,655,687
Office Equipment......... 68,138,213 (6.2%) 39,834,663
Oil...................... 69,771,787 (6.4%) 42,551,035
Oil Services............. 18,143,500 (1.7%) 10,505,225
Paper.................... 8,429,400 (0.8%) 4,914,800
Personal Care............ 24,817,000 (2.3%) 15,836,400
Retail Trade............. 82,486,135 (7.5%) 48,731,799
Tobacco.................. 26,525,550 (2.4%) 16,507,200
Toys & Musical
Instruments............. 9,913,984 (0.9%) 5,967,406
Utilities-Telephone...... 31,793,450 (2.9%) 18,417,625
Video.................... 49,360,428 (4.5%) 28,511,540
---------------- -------------
Total Common Stock....... 1,076,552,264 (98.3%) 639,847,382
---------------- -------------
CONVERTIBLE PREFERRED
STOCK
Oil Services............. 154,500
PREFERRED STOCK
Retail Trade............. 209,061
---------------- -------------
Total Stock Securities... $ 1,076,552,264 (98.3%) $ 640,210,943
---------------- -------------
LONG-TERM DEBT SECURITIES
Corporate Bonds:
Banking.................. $ 13,202,211 (3.7%) $ 20,432,477
Financial Services....... 27,942,460 (8.0%) 38,284,443
Industrial-Miscellaneous... 29,715,375 (8.5%) 39,027,649
Mortgage Backed.......... 12,183,305 (3.5%) 12,889,132
------------- -------------
Total Corporate Bonds.... 83,043,351 (23.7%) 110,633,701
------------- -------------
Federal Agency
Obligations............. 19,288,010 (5.5%) 24,303,049
Federal Treasury
Obligations............. 173,723,485 (49.7%) 227,577,120
Foreign Obligations...... 31,751,086 (9.1%) 43,686,100
Government Sponsored..... 5,854,471 (1.7%) 7,073,233
Yankee Bonds............. 18,464,936 (5.3%) 26,274,500
------------- -------------
Total Bonds.............. 249,081,988 (95.0%) 328,914,002
------------- -------------
SHORT-TERM OBLIGATIONS
Bank Note................ $ 1,999,841 (4.9%)
Bankers' Acceptance...... 1,966,149 (4.8%)
Commercial Paper......... $ 19,775,000 (1.8%) 13,785,000 (3.9%) 17,760,043 (43.9%) 31,189,000
Corporate Note........... 2,006,689 (5.0%)
Federal Agency
Obligations............. 9,613,137 (23.8%)
Federal Treasury
Obligations............. 6,874,040 (17.0%)
---------------- ------------- ------------- -------------
Total Short-Term
Obligations............. 19,775,000 (1.8%) 13,785,000 (3.9%) 40,219,899 (99.4%) 31,189,000
---------------- ------------- ------------- -------------
TOTAL INVESTMENTS........ 1,096,327,264 (100.1%) 345,910,339 (98.9%) 40,219,899 (99.4%) 1,110,947,646
Other Assets Less
Liabilities............. (1,576,667) (-0.1%) 4,002,689 (1.1%) 236,376 (0.6%) 3,885,951
---------------- ------------- ------------- -------------
NET ASSETS............... $ 1,094,750,597 (100.0%) $ 349,913,028 (100.0%) $ 40,456,275 (100.0%) $1,114,833,597
---------------- ------------- ------------- -------------
---------------- ------------- ------------- -------------
<CAPTION>
<S> <C>
COMMON STOCK
Aerospace................ (2.2%)
Automotive............... (0.3%)
Banking.................. (2.4%)
Building................. (0.4%)
Business Services........ (0.9%)
Chemical................. (3.3%)
Computer Software &
Service................. (3.4%)
Drug..................... (3.8%)
Electrical Equipment..... (1.0%)
Electronics.............. (3.3%)
Financial Services....... (3.0%)
Food & Beverage.......... (3.0%)
Hospital Management...... (1.4%)
Hospital Supply.......... (2.3%)
Hotel & Restaurant....... (1.2%)
Insurance................ (1.7%)
Machinery................ (2.6%)
Metals & Mining.......... (0.4%)
Office Equipment......... (3.6%)
Oil...................... (3.8%)
Oil Services............. (0.9%)
Paper.................... (0.4%)
Personal Care............ (1.4%)
Retail Trade............. (4.4%)
Tobacco.................. (1.5%)
Toys & Musical
Instruments............. (0.5%)
Utilities-Telephone...... (1.7%)
Video.................... (2.6%)
Total Common Stock....... (57.4%)
CONVERTIBLE PREFERRED
STOCK
Oil Services............. (0.0%)
PREFERRED STOCK
Retail Trade............. (0.0%)
Total Stock Securities... (57.4%)
LONG-TERM DEBT SECURITIES
Corporate Bonds:
Banking.................. (1.8%)
Financial Services....... (3.5%)
Industrial-Miscellaneous. (3.5%)
Mortgage Backed.......... (1.2%)
Total Corporate Bonds.... (10.0%)
Federal Agency
Obligations............. (2.2%)
Federal Treasury
Obligations............. (20.4%)
Foreign Obligations...... (3.9%)
Government Sponsored..... (0.6%)
Yankee Bonds............. (2.4%)
Total Bonds.............. (29.5%)
SHORT-TERM OBLIGATIONS
Bank Note................
Bankers' Acceptance......
Commercial Paper......... (2.8%)
Corporate Note...........
Federal Agency
Obligations.............
Federal Treasury
Obligations.............
Total Short-Term
Obligations............. (2.8%)
TOTAL INVESTMENTS........ (99.7%)
Other Assets Less
Liabilities............. (0.3%)
NET ASSETS............... (100.0%)
</TABLE>
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL STOCK
PORTFOLIO
--------------------------
VALUE
(NOTE 1A)
--------------
<S> <C> <C>
COMMON STOCK
Airlines......................... $ 778,273 (0.3%)
Automotive....................... 5,547,826 (1.9%)
Banking.......................... 9,258,655 (3.1%)
Beverages........................ 6,315,913 (2.1%)
Broadcasting & Publishing........ 755,063 (0.3%)
Building......................... 7,676,572 (2.6%)
Business Services................ 5,642,530 (1.9%)
Chemicals........................ 5,969,074 (2.0%)
Electrical Equipment............. 9,578,893 (3.2%)
Financial Services............... 9,274,046 (3.1%)
Foods............................ 6,130,161 (2.1%)
Health & Personal Care........... 10,013,145 (3.4%)
Industrial--Miscellaneous........ 5,939,198 (2.0%)
Insurance........................ 8,712,224 (2.9%)
Leisure.......................... 5,033,575 (1.7%)
Machinery........................ 10,540,444 (3.5%)
Metals--Steel & Iron............. 3,707,213 (1.2%)
Metals--Gold..................... 17,292,196 (5.8%)
Metals--Miscellaneous............ 11,269,782 (3.8%)
Miscellaneous.................... 1,417,500 (0.5%)
Miscellaneous Materials.......... 10,149,225 (3.4%)
Office Equipment................. 205,063 (0.1%)
Offshore Funds & Investment
Trusts......................... 5,181,098 (1.7%)
Oil--Domestic.................... 9,941,445 (3.3%)
Oil--International............... 783,833 (0.3%)
Paper............................ 527,824 (0.2%)
Railroad......................... 2,987,040 (1.0%)
Real Estate...................... 5,468,829 (1.8%)
Recreation....................... 3,126,583 (1.1%)
Retail Trade..................... 9,116,882 (3.1%)
Telecommunications............... 888,768 (0.3%)
Textiles & Apparel............... 1,304,293 (0.4%)
Transportation--Trucking......... 624,375 (0.2%)
Utilities--Electric.............. 4,080,974 (1.4%)
Utilities--Water................. 998,366 (0.3%)
Wholesale & International
Trade.......................... 4,857,355 (1.6%)
--------------
Total Common Stock............... 201,094,236 (67.6%)
Convertible Preferred Stock........ 426,075 (0.1%)
Preferred Stock.................... 2,488,326 (0.9%)
Total Equity Securities............ 204,008,637 (68.6%)
Convertible Bonds.................. 17,774,377 (6.0%)
--------------
TOTAL INVESTMENTS.................. 221,783,014 (74.6%)
Other Assets Less Liabilities.... 75,678,027 (25.4%)
--------------
NET ASSETS......................... $ 297,461,041 (100.0%)
--------------
--------------
</TABLE>
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
STOCK INDEX
PORTFOLIO
--------------------------
VALUE
(NOTE 1A)
-------------
<S> <C> <C>
COMMON STOCK
Aerospace................................................................................... $ 13,979,982 (2.2%)
Airlines.................................................................................... 2,644,937 (0.4%)
Automotive.................................................................................. 16,087,052 (2.5%)
Banking..................................................................................... 41,224,016 (6.5%)
Beverages................................................................................... 35,762,761 (5.6%)
Building.................................................................................... 6,721,186 (1.1%)
Chemical.................................................................................... 22,748,995 (3.6%)
Container................................................................................... 769,825 (0.1%)
Cosmetics................................................................................... 4,724,749 (0.7%)
Drug........................................................................................ 41,170,632 (6.5%)
Electrical Connectors....................................................................... 1,504,050 (0.2%)
Electrical Equipment........................................................................ 23,767,938 (3.7%)
Electronics................................................................................. 26,279,796 (4.1%)
Financial Services.......................................................................... 19,611,919 (3.1%)
Foods....................................................................................... 16,942,138 (2.7%)
Hospital Management......................................................................... 6,287,681 (1.0%)
Hospital Supply............................................................................. 19,150,108 (3.0%)
Hotel & Restaurant.......................................................................... 6,409,988 (1.0%)
Industrials--Miscellaneous.................................................................. 13,838,876 (2.2%)
Insurance................................................................................... 22,054,204 (3.5%)
Leisure..................................................................................... 1,010,300 (0.2%)
Machinery................................................................................... 9,363,339 (1.5%)
Metals--Aluminum............................................................................ 2,557,576 (0.4%)
Metals--Gold................................................................................ 3,688,584 (0.6%)
Metals--Miscellaneous....................................................................... 2,603,457 (0.4%)
Metals--Steel & Iron........................................................................ 2,102,738 (0.3%)
Office Equipment............................................................................ 35,293,640 (5.6%)
Oil--Crude Producers........................................................................ 577,675 (0.1%)
Oil--Domestic............................................................................... 12,288,633 (1.9%)
Oil--International.......................................................................... 37,270,188 (5.9%)
Oil Services................................................................................ 6,695,613 (1.1%)
Paper....................................................................................... 8,585,105 (1.4%)
Photography................................................................................. 4,004,325 (0.6%)
Printing & Publishing....................................................................... 7,978,951 (1.3%)
Railroad.................................................................................... 7,750,478 (1.2%)
Retail Trade................................................................................ 29,479,447 (4.6%)
Services.................................................................................... 4,541,599 (0.7%)
Shoes....................................................................................... 1,906,875 (0.3%)
Soaps....................................................................................... 12,378,362 (1.9%)
Textiles & Apparel.......................................................................... 1,231,638 (0.2%)
Tire & Rubber............................................................................... 1,576,100 (0.2%)
Toys & Musical Instruments.................................................................. 792,458 (0.1%)
Transportation--Trucking.................................................................... 907,625 (0.1%)
Utilities--Electric......................................................................... 21,261,693 (3.3%)
Utilities--Gas Distribution................................................................. 3,778,086 (0.6%)
Utilities--Gas Pipeline..................................................................... 3,294,056 (0.5%)
Utilities--Telephone........................................................................ 53,586,928 (8.5%)
Video....................................................................................... 14,232,219 (2.2%)
-------------
Total Common Stock.......................................................................... 632,418,521 (99.4%)
TOTAL SHORT-TERM OBLIGATIONS--U.S. TREASURY BILLS............................................. 5,503,636 (0.9%)
-------------
TOTAL INVESTMENTS............................................................................. 637,922,157 (100.3%)
Other Assets Less Liabilities................................................................. (2,098,918) (-0.3%)
-------------
NET ASSETS.................................................................................... $ 635,823,239 (100.0%)
------------- -----------
------------- -----------
</TABLE>
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
METROPOLITAN SERIES FUND, INC.
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONCLUDED)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
PORTFOLIO
------------------------
VALUE
(NOTE 1A)
-------------
<S> <C> <C>
COMMON STOCK
Aerospace.................................................................................... $ 37,289,175 (3.9%)
Airlines..................................................................................... 23,823,062 (2.5%)
Automotive................................................................................... 3,636,625 (0.4%)
Business Services............................................................................ 43,265,943 (4.5%)
Chemical..................................................................................... 9,393,750 (1.0%)
Computer Software & Service.................................................................. 83,974,480 (8.8%)
Diversified.................................................................................. 9,028,800 (0.9%)
Drug......................................................................................... 23,960,467 (2.5%)
Electrical Equipment......................................................................... 27,345,600 (2.9%)
Electronics.................................................................................. 15,239,300 (1.6%)
Financial Services........................................................................... 14,461,700 (1.5%)
Food & Beverage.............................................................................. 18,494,325 (1.9%)
Hospital Supply.............................................................................. 236,600 (0.0%)
Hotel & Restaurant........................................................................... 57,102,144 (6.0%)
Insurance.................................................................................... 52,168,826 (5.4%)
Machinery.................................................................................... 32,567,513 (3.4%)
Office Equipment............................................................................. 41,544,576 (4.3%)
Oil.......................................................................................... 37,022,038 (3.9%)
Oil Services................................................................................. 24,723,888 (2.6%)
Personal Care................................................................................ 1,040,775 (0.1%)
Printing & Publishing........................................................................ 7,862,175 (0.8%)
Recreation................................................................................... 49,853,613 (5.2%)
Retail Trade................................................................................. 120,841,866 (12.6%)
Textiles & Apparel........................................................................... 72,565,958 (7.6%)
Tobacco...................................................................................... 22,317,300 (2.3%)
Utilities--Telephone......................................................................... 19,429,313 (2.0%)
-------------
Total Common Stock........................................................................... 849,189,812 (88.6%)
CONVERTIBLE PREFERRED STOCK
Machinery.................................................................................... 6,481,163 (0.7%)
PREFERRED STOCK
Airlines..................................................................................... 7,062,000 (0.7%)
-------------
Total Equity Securities........................................................................ 862,732,975 (90.0%)
TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS............................................. 9,658,850 (1.0%)
TOTAL SHORT-TERM OBLIGATIONS--COMMERCIAL PAPER................................................. 58,265,000 (6.1%)
-------------
TOTAL INVESTMENTS.............................................................................. 930,656,825 (97.1%)
Other Assets Less Liabilities.................................................................. 28,258,408 (2.9%)
-------------
NET ASSETS..................................................................................... $ 958,915,233 (100.0%)
-------------
-------------
</TABLE>
77
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY INTERNATIONAL AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------- ----------- ---------- ------------------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Metropolitan
Series Fund,Inc. at Value (Note
1A):
Growth Portfolio (4,269,698
shares; cost $101,750,658)... $ 125,828,002 -- -- -- -- -- --
Income Portfolio (1,817,114
shares; cost $22,842,868).... -- $22,659,415 -- -- -- -- --
Money Market Portfolio
(323,560 shares; cost
$3,471,171).................. -- -- $3,420,032 -- -- -- --
Diversified Portfolio
(5,512,792 shares; cost
$80,659,387)................. -- -- -- $90,905,936 -- -- --
International Stock Portfolio
(1,540,949 shares; cost
$19,522,156)................. -- -- -- -- $ 19,153,994 -- --
Stock Index Portfolio (844,721
shares; cost $13,622,223).... -- -- -- -- -- $16,505,843 --
Aggressive Growth Portfolio
(2,322,078 shares; cost
$56,034,032)................. -- -- -- -- -- -- $64,019,697
------------- ----------- ---------- ------------------------ ----------- -----------
Total Investments........... 125,828,002 22,659,415 3,420,032 90,905,936 19,153,994 16,505,843 64,019,697
Cash and Accounts Receivable...... 131 21 16,888 88 35 41
------------- ----------- ---------- ------------------------ ----------- -----------
Total Assets................ 125,828,133 22,659,436 3,436,920 90,906,024 19,154,029 16,505,884 64,019,697
LIABILITIES....................... 655,789 121,528 616,888 97,980 53,034 351,984
------------- ----------- ---------- ------------------------ ----------- -----------
NET ASSETS........................ $ 125,172,344 $22,537,908 $3,436,920 $90,289,136 $ 19,056,049 $16,452,850 $63,667,713
------------- ----------- ---------- ------------------------ ----------- -----------
------------- ----------- ---------- ------------------------ ----------- -----------
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------------------------------------
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
---------- --------- ----------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)...................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Expenses:
Mortality and expense charges (Note
3)..................................... 24,424 4,616 1,035 17,881 4,489 4,199 14,696
---------- --------- ----------- ----------- ------------ --------- -----------
Net investment income (loss)................ (24,424) (4,616) (1,035) (17,881) (4,489) (4,199) (14,696)
---------- --------- ----------- ----------- ------------ --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions............................. 98,585 (8,905) (3,594) 33,043 10,683 17,238 14,501
Change in unrealized appreciation
(depreciation) of investments............ 7,888,566 (457,115) 41,721 2,878,728 181,925 715,920 3,969,174
---------- --------- ----------- ----------- ------------ --------- -----------
Net realized and unrealized gain (loss) on
investments (Note 1B).................... 7,987,151 (466,020) 38,127 2,911,771 192,608 733,158 3,983,675
---------- --------- ----------- ----------- ------------ --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $7,962,727 $(470,636) $ 37,092 $2,893,890 $ 188,119 $ 728,959 $3,968,979
---------- --------- ----------- ----------- ------------ --------- -----------
---------- --------- ----------- ----------- ------------ --------- -----------
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH DIVISION INCOME DIVISION DIVISION
--------------------------------- --------------------------------- ----------------
FOR THE THREE FOR THE THREE FOR THE THREE
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED
MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)..................... $ (24,424) $ 4,694,831 $ (4,616) $ 1,147,331 $ (1,035)
Net realized gain (loss)
from security
transactions............... 98,585 293,233 (8,905) (8,290) (3,594)
Unrealized appreciation
(depreciation) of
investments................ 7,888,566 19,543,807 (457,115) 1,977,261 41,721
---------------- --------------- ---------------- --------------- ----------------
Net increase (decrease) in
net assets resulting from
operations................. 7,962,727 24,531,871 (470,636) 3,116,302 37,092
---------------- --------------- ---------------- --------------- ----------------
From capital transactions:
Net premiums................ 10,920,142 41,455,659 1,932,990 8,687,776 985,143
Redemptions (Note 4)........ (1,052,808) (2,766,288) (188,822) (546,157) (4,911)
Net portfolio transfers
(Note 4)................... 357,897 395,373 36,138 36,042 (374,271)
Other net transfers (Note
4)......................... (5,456,236) (19,059,583) (1,083,233) (4,186,427) (180,873)
Net increase (decrease) in
net assets resulting from
capital transactions....... 4,768,995 20,025,161 697,073 3,991,234 425,088
---------------- --------------- ---------------- --------------- ----------------
NET CHANGE IN NET ASSETS...... 12,731,722 44,557,032 226,437 7,107,536 462,180
Net Assets--beginning of
period....................... 112,440,622 67,883,590 22,311,471 15,203,935 2,974,740
---------------- --------------- ---------------- --------------- ----------------
Net Assets--end of period..... $ 125,172,344 $ 112,440,622 $ 22,537,908 $ 22,311,471 $ 3,436,920
---------------- --------------- ---------------- --------------- ----------------
---------------- --------------- ---------------- --------------- ----------------
<CAPTION>
DIVERSIFIED DIVISION
---------------------------------
FOR THE THREE
FOR THE YEAR MONTHS ENDED FOR THE YEAR
ENDED MARCH 31, ENDED
DECEMBER 31, 1996 DECEMBER 31,
1995 (UNAUDITED) 1995
--------------- ---------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)..................... $ 128,508 $ (17,881) $ 4,695,480
Net realized gain (loss)
from security
transactions............... 35,201 33,043 248,523
Unrealized appreciation
(depreciation) of
investments................ 4,641 2,878,728 10,898,818
--------------- ---------------- ---------------
Net increase (decrease) in
net assets resulting from
operations................. 168,350 2,893,890 15,842,821
--------------- ---------------- ---------------
From capital transactions:
Net premiums................ 2,988,786 7,955,690 31,888,789
Redemptions (Note 4)........ (89,665) (705,739) (2,358,803)
Net portfolio transfers
(Note 4)................... (3,328,483) (33,297) (416,768)
Other net transfers (Note
4)......................... (1,058,931) (4,002,149) (15,856,704)
Net increase (decrease) in
net assets resulting from
capital transactions....... (1,488,293) 3,214,505 13,256,514
--------------- ---------------- ---------------
NET CHANGE IN NET ASSETS...... (1,319,943) 6,108,395 29,099,335
Net Assets--beginning of
period....................... 4,294,683 84,180,741 55,081,406
--------------- ---------------- ---------------
Net Assets--end of period..... $ 2,974,740 $ 90,289,136 $ 84,180,741
--------------- ---------------- ---------------
--------------- ---------------- ---------------
</TABLE>
See Notes to Financial Statements.
80
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE
INTERNATIONAL STOCK DIVISION STOCK INDEX DIVISION GROWTH DIVISION
--------------------------------- --------------------------------- ----------------
FOR THE THREE FOR THE THREE FOR THE THREE
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED
MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)..................... $ (4,489) $ 27,416 $ (4,199) $ 213,805 $ (14,696)
Net realized gain (loss)
from security
transactions............... 10,683 28,349 17,238 29,512 14,501
Unrealized appreciation
(depreciation) of
investments................ 181,925 136,578 715,920 2,271,366 3,969,174
---------------- --------------- ---------------- --------------- ----------------
Net increase (decrease) in
net assets resulting from
operations................. 188,119 192,343 728,959 2,514,683 3,968,979
---------------- --------------- ---------------- --------------- ----------------
From capital transactions:
Net premiums................ 2,833,781 12,024,423 3,173,708 7,870,004 9,948,415
Redemptions (Note 4)........ (153,984) (392,901) (60,312) (232,828) (437,362)
Net portfolio transfers
(Note 4)................... (38,614) (658,961) 486,880 1,324,319 45,919
Other net transfers (Note
4)......................... (1,069,390) (5,248,525) (1,302,155) (2,897,249) (4,190,035)
Net increase (decrease) in
net assets resulting from
capital transactions....... 1,571,793 5,724,036 2,298,121 6,064,246 5,366,937
---------------- --------------- ---------------- --------------- ----------------
NET CHANGE IN NET ASSETS...... 1,759,912 5,916,379 3,027,080 8,578,929 9,335,916
Net Assets--beginning of
period...................... 17,296,137 11,379,758 13,425,770 4,846,841 54,331,797
---------------- --------------- ---------------- --------------- ----------------
Net Assets--end of period..... $ 19,056,049 $ 17,296,137 $ 16,452,850 $ 13,425,770 $ 63,667,713
---------------- --------------- ---------------- --------------- ----------------
---------------- --------------- ---------------- --------------- ----------------
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
1995
---------------
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss)..................... $ 4,726,548
Net realized gain (loss)
from security
transactions............... 152,387
Unrealized appreciation
(depreciation) of
investments................ 4,188,117
---------------
Net increase (decrease) in
net assets resulting from
operations................. 9,067,052
---------------
From capital transactions:
Net premiums................ 32,859,273
Redemptions (Note 4)........ (1,185,240)
Net portfolio transfers
(Note 4)................... 2,162,117
Other net transfers (Note
4)......................... (14,163,669)
Net increase (decrease) in
net assets resulting from
capital transactions....... 19,672,481
---------------
NET CHANGE IN NET ASSETS...... 28,739,533
Net Assets--beginning of
period...................... 25,592,264
---------------
Net Assets--end of period..... $ 54,331,797
---------------
---------------
</TABLE>
81
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Metropolitan Life Separate Account UL (the "Separate Account") is a
multi-division unit investment trust registered under the Investment Company Act
of 1940 and presently consists of seven investment divisions used to support
variable universal life insurance policies. The assets in each division are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc. (the "Fund"). Each portfolio has varying investment objectives
relative to growth of capital and income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property of
Metropolitan Life.
These unaudited financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results for the
interim period presented. A summary of significant accounting policies, all of
which are in accordance with generally accepted accounting principles, is set
forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios.
B. SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified
cost.
C. FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account will
be treated as a part of Metropolitan Life and its operations, and the
Separate Account will not be taxed separately as a "regulated investment
company" under existing law. Metropolitan Life is taxed as a life
insurance company. The policies permit Metropolitan Life to charge
against the Separate Account any taxes, or reserves for taxes,
attributable to the maintenance or operation of the Separate Account.
Metropolitan Life is not currently charging any federal income taxes
against the Separate Account arising from the earnings or realized
capital gains attributable to the Separate Account. Such charges may be
imposed in future years depending on market fluctuations and transactions
involving the Separate Account.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge
from premiums before amounts are allocated to the Separate Account. In
the case of certain of the policies, Metropolitan Life also deducts a
Federal income tax charge before amounts are allocated to the Separate
Account. The Federal income tax charge is imposed in connection with
certain of the policies to recover a portion of the Federal income tax
adjustment attributable to policy acquisition expenses.
2. DIVIDENDS
There were no dividends declared, as of March 31, 1996, for the period of
January 1, 1996 through March 31, 1996.
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Life. This charge is
equivalent to the effective annual rate of .90% of the average daily value of
the net assets in the Separate Account which are attributable to such policies.
4. RECLASSIFICATION
Items in the Statement of Changes in Net Assets for December 31, 1995 have
been reclassified to conform to changes made to the format presentation.
83
<PAGE>
APPENDIX TO PROSPECTUS
OPTIONAL INCOME PLANS
The insurance proceeds when the covered person dies, the proceeds payable on
the Final Date, or the cash surrender value payable on full surrender of a
Certificate, instead of being paid in one lump sum, may be applied under one or
more of the following income plans. Values under the income plans do not depend
upon the investment experience of a separate account. The selection of an income
plan can have significant federal income tax consequences associated with the
Certificate proceeds. Owners and beneficiaries should consult with qualified tax
advisers in this regard.
OPTION 1. INTEREST INCOME
The amount applied will earn interest which will be paid monthly.
Withdrawals of at least $500 each may be made at any time by written request.
OPTION 2. INSTALLMENT INCOME FOR A STATED PERIOD
Monthly installment payments will be made so that the amount applied, with
interest, will be paid over the period chosen (from 1 to 30 years).
OPTION 2A. INSTALLMENT INCOME OF A STATED AMOUNT
Monthly installment payments of a chosen amount will be made until the
entire amount applied, with interest, is paid.
OPTION 3. SINGLE LIFE INCOME--GUARANTEED PAYMENT PERIOD
Monthly payments will be made during the lifetime of the payee with a chosen
guaranteed payment period of 10, 15 or 20 years.
OPTION 3A. SINGLE LIFE INCOME--GUARANTEED RETURN
Monthly payments will be made during the lifetime of the payee. If the payee
dies before the total amount applied under this plan has been paid, the
remainder will be paid in one sum as a death benefit.
OPTION 4. JOINT AND SURVIVOR LIFE INCOME
Monthly payments will be made jointly to two persons during their lifetime
and will continue during the remaining lifetime of the survivor. A total payment
period of 10 years is guaranteed.
OTHER FREQUENCIES AND PLANS. Instead of monthly payments, the owner may
elect to have payments made quarterly, semiannually or annually. Other income
plans may be arranged with MetLife's approval.
CHOICE OF INCOME PLANS. See "Certificate Benefits--Optional Income Plans"
and "Certificate Rights-- Surrenders," regarding how optional income plans may
be chosen. When an income plan starts, a separate contract will be issued
describing the terms of the plan. Specimen contracts may be obtained from the
Administrative Office, and reference should be made to these forms for further
details.
LIMITATIONS. If the payee is not a natural person, the choice of an income
plan will be subject to MetLife's approval. A collateral assignment will modify
a prior choice of income plan. The amount due the assignee will be payable in
one sum and the balance will be applied under the income plan. A choice of an
income plan will not become effective unless each payment under the plan would
be at least $50. Income plan payments may not be assigned and, to the extent
permitted by law, will not be subject to the claims of creditors.
INCOME PLAN RATES. Amounts applied under the interest income and
installment income plans will earn interest at a rate set from time to time by
MetLife but never less than 3% per year. Life income payments will be based on a
rate set by MetLife and in effect on the date the amount to be applied becomes
payable, but never less than the minimum payments guaranteed in the Certificate.
Such minimum guaranteed payments are based on certain assumed mortality rates
and an interest rate of 3%.
84
<PAGE>
OPTIONAL INSURANCE BENEFITS
Optional insurance benefit riders may be attached to a Certificate, subject
to, their availability under the Group Policy, their availability under state
law, certain insurance underwriting requirements and the payment of additional
premiums. These riders are described in general terms below. Limitations and
conditions are contained in the riders, and the description below is subject to
the specific terms of the riders. A prospective purchaser may obtain a specimen
Certificate with riders from the Administrative Office. The duration, but not
the amount, of rider benefits may depend on the investment experience of a
separate account.
The following riders will be provided to all Owners if elected by the
participating entity:
WAIVER OF MONTHLY DEDUCTION DURING TOTAL DISABILITY. This rider waives the
entire monthly deduction during the "Total Disability" of the covered person if
the covered person is "Totally Disabled" for at least six months beginning prior
to age 60. "Total Disability" or "Totally Disabled" means that because of
sickness or an injury the covered person cannot do his or her job, and cannot do
any other job for which they are fit by education, training or experience.
Monthly deductions will continue to be waived until the earliest of the
following: (a) the date the covered person is no longer totally disabled, or (b)
the date the covered person does not give MetLife proof of Total Disability when
required, or (c) the day before the date the covered person becomes 65 years
old. If there has been an increase in the death benefit resulting from a request
by the Owner and the Owner at the time of the increase did not request or did
not qualify for this rider with respect to such increase, monthly deductions for
charges related to such increase will continue to be made against the cash value
of the Certificate. This could result in the cash value being insufficient to
cover the monthly deductions related to the increase. In such a case, the grace
period and termination provisions of the Certificate would apply only to such
increase in death benefit. Since the monthly deduction with respect to the
increase in the death benefit could reduce the cash value of the Certificate to
zero, it may be advantageous for the Owner, at the time of the total disability,
to reduce the death benefit to that amount which is subject to this rider.
ACCELERATED DEATH BENEFIT. This rider provides for a one-time discounted
payment of all or a portion of the death benefit to the Owner if the covered
person's life span has been drastically limited so that the covered person is
expected to die within six months or twelve months, as specified in the rider,
or is not expected recover from the cause of reduction in life span. In
addition, some riders also provide this benefit if the covered person is
permanently confined to a Nursing Home and has a life expectancy of less than
two years. The size of the benefit payment and the maximum benefit are stated in
the rider. There are no premiums or rider fees for this rider. A payment of all
the discounted death benefit will not be subject to any surrender charges.
Upon payment of a portion of the death benefit, the death benefit under the
Certificate is reduced to reflect the amount of the payment. In addition, the
specified face amount, the cash value and the cash surrender value are reduced
by the same proportion as the amount of the reduction of the death benefit
divided by the death benefit prior to the payment. Any outstanding loan is
reduced and paid out of the proceeds of the portion only if such reduction is
necessary to keep the Certificate in force. Moreover, in the case of payment of
all of the death benefit, the amount of any outstanding Certificate loan will be
deducted from the payment.
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors should
be consulted to determine the effect on an individual situation.
LIVING BENEFITS. This rider provides benefits in the form of living
benefits to the Owner or covered person when "Unable to Care" for the Covered
Person and when conditions specified in the rider are met. "Unable to Care"
means that the Owner or covered person is unable to perform specified activities
of daily living without human assistance each and every time performance of the
activities is necessary. This may include the following types of activities:
bathing, dressing, transferring/mobility, toileting/continence, and eating. The
amount of living benefits available under this rider will be an amount of up to
50% of the specified face amount on the date when the conditions specified in
this rider are met. However, the amount of Death Benefit payable at the covered
person's death will be reduced by the amount of living benefits paid. Living
benefits will not be paid for conditions resulting from, caused or contributed
by a mental or nervous condition, other than Alzheimer's disease; or alcohol or
drug abuse. Preexisting conditions may not be covered by this rider.
85
<PAGE>
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors should
be consulted to determine the effect on an individual situation.
LIVING BENEFITS. This rider provides benefits in the form of living
benefits to the Owner or covered person when "Unable to Care" for the Covered
Person and when conditions specified in the rider are met. "Unable to Care"
means that the Owner or covered person is unable to perform specified activities
of daily living without human assistance each and every time performance of the
activities is necessary. This may include the following types of activities:
bathing, dressing, transferring/mobility, toileting/continence, and eating. The
amount of living benefits availabe under this rider will be an amount of up to
50% of the specified face amount on the date when the conditions specified in
this rider are met. However, the amount of Death Benefit payable at the covered
person's death will be reduced by the amount of living benefits paid. Living
benefits will not be paid for conditions resulting from, caused or contributed
by a mental or nervous condition, other than Alzheimer's disease; or alcohol or
drug abuse. Preexisting conditions may not be covered by this rider.
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors should
be consulted to determine the effect on an individual situation.
The following riders may be elected by either the participating entity or
the Owner, as set forth in the Policy or Certificate:
ACCIDENTAL DEATH BENEFIT. This rider provides additional insurance equal to
an amount stated in the Certificate if the covered person dies from an accident
prior to age 70. It also provides an additional amount equal to twice the stated
amount if the covered person dies from an accident occurring while the covered
person is a fare-paying passenger on a common carrier. This rider is available
at issue only.
ACCIDENTAL DEATH OR DISMEMBERMENT BENEFIT. In addition to benefits
described under "Accidental Death Benefits," above, this rider provides benefits
if a covered person is injured in an accident if the covered loss occurs not
more than 90 days after the date of an accident and prior to age 70. Covered
losses may include loss of life, a hand, foot or sight of an eye. The amount of
benefits on account of a covered person is the amount specified in the
Certificate.
DEPENDENT LIFE BENEFITS. This rider provides insurance on the life of a
dependent payable to the Owner or other designated beneficiary while the
benefits are in effect for that dependent on the date of death as set forth in
this rider. A dependent may be the Owner's spouse or unmarried child. A child
who may be covered includes a child who is supported solely by you and
permanently living in the home of which you are the head, a child who is legally
adopted or a stepchild who lives in your home. A child may be covered until age
19 and in some cases up to 23 years of age. A dependent child with a physical
handicap or mental retardation may continue to be a dependent. The amount of
dependent term insurance will be specified in the rider.
86
<PAGE>
METLIFE -REGISTERED TRADEMARK-
GV UL
GROUP VARIABLE UNIVERSAL LIFE
PROSPECTUSES FOR
- GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES AND
CERTIFICATES
ISSUED BY
METROPOLITAN LIFE INSURANCE
COMPANY
- METROPOLITAN SERIES FUND, INC.
VERSION 1
ML-GVUL (8/96 EDITION) PRINTED
IN U.S.A.
POLICY FORM NO. 2130-S
96061ELS (5/97) MLIC-LD
[LOGO]
<TABLE>
<S> <C>
METLIFE CUSTOMER SERVICE CENTER BULK RATE
177 SOUTH COMMONS DRIVE ZIP+4 BARCODED
AURORA, ILLINOIS 60507 U.S. POSTAGE PAID
ADDRESS CORRECTION REQUESTED RUTLAND, VT
FORWARDING AND RETURN PERMIT 220
POSTAGE GUARANTEED
</TABLE>
<PAGE>
METLIFE -REGISTERED TRADEMARK-
GVUL
PROSPECTUSES FOR
- GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES AND CERTIFICATES
ISSUED BY
METROPOLITAN LIFE INSURANCE COMPANY
- METROPOLITAN SERIES FUND, INC.
<PAGE>
AUGUST 1, 1996
PROSPECTUS
FOR
GROUP VARIABLE UNIVERSAL LIFE INSURANCE POLICIES AND CERTIFICATES ISSUED UNDER
THE GROUP POLICIES
(Minimum Specified Face Amount For A Certificate-$10,000)
(Minimum Group Size-1,000 eligible lives)
Issued by
METROPOLITAN LIFE INSURANCE COMPANY
Group variable universal life insurance policies ("Group Policies") and
certificates available through the Group Policies ("Certificates") are offered
by this Prospectus. The Group Policies and Certificates are issued by
Metropolitan Life Insurance Company, New York, NY ("MetLife"). Generally, so
long as the Group Policy remains in force, the Certificates are designed to
provide lifetime insurance coverage on the covered persons named in the
Certificates, as well as maximum flexibility in connection with premium
payments. This flexibility allows an owner of a Certificate to provide for
changing insurance needs within the confines of a single insurance product.
Group Policies may be issued to an employer (referred to herein as
"participating entity") or to a trust that is adopted by a participating entity.
Employees (including employees' spouses where specified in the Group Policy) of
adopting employers may own Certificates issued under their respective
participating entity's Group Policy. Unless the Certificate provides otherwise,
only the owner of the Certificate (the "Owner") may exercise the rights set
forth in the Certificate.
The Certificate provides for a death benefit payable at the covered person's
death. The death benefit varies because it includes the Certificate's cash value
in addition to a fixed insurance amount.
The premiums paid, less premium expense charges, will generally be allocated
at the Owner's discretion among one or more of the available investment
divisions of MetLife Separate Account UL ("Separate Account") and/or a fixed
interest account ("Fixed Account") within the General Account of MetLife. The
participating entity may select which investment divisions will be available to
Owners. If the participating entity is contributing premiums to Certificates
issued under its Group Policy, it may limit the ability of Owners to allocate
any premiums contributed by such participating entity among the available
investment divisions. The assets in each investment division are invested in
shares of a corresponding portfolio of the Metropolitan Series Fund, Inc.
("Fund"). The accompanying prospectus for the Fund describes the investment
objectives and certain attendant risks of the six currently available portfolios
of the Fund: Growth Portfolio, Income Portfolio, Diversified Portfolio,
Aggressive Growth Portfolio, International Stock Portfolio and Stock Index
Portfolio. The International Stock Portfolio is NOT available in California.
The Certificate's cash value will vary with the investment experience of the
Separate Account investment divisions to which amounts are allocated and the
fixed rates of interest earned by allocations to the Fixed Account. The cash
value will also be adjusted for other factors, including the amount of charges
imposed and the premium payments made.
The Owner may withdraw or borrow a portion of the Certificate's cash
surrender value, or the Certificate may be fully surrendered, at any time,
subject to certain limitations.
The Owner has the flexibility to vary the frequency and amount of premium
payments, subject to certain restrictions and conditions.
MetLife is the investment manager of the Fund and the distributor of its
shares. MetLife also distributes and administers the Certificates. State Street
Research & Management Company ("State Street Research") is the sub-investment
manager with respect to the Growth, Income, Diversified and Aggressive Growth
Portfolios of the Fund. State Street Research is a wholly-owned subsidiary of
MetLife. GFM International Investors Limited ("GFM") is the sub-investment
manager with respect to the International Stock Portfolio of the Fund. GFM is a
subsidiary of MetLife.
As in the case of other life insurance policies, it may not be advantageous
to purchase group variable universal life insurance as a replacement for an
existing life insurance policy or in addition to an existing variable universal
life insurance policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THIS PROSPECTUS IS NOT VALID UNLESS ATTACHED TO THE CURRENT PROSPECTUS FOR THE
METROPOLITAN SERIES FUND, INC., WHICH CONTAINS ADDITIONAL INFORMATION ABOUT THE
FUND.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
1 Madison Avenue, New York, New York 10010 Telephone (800) 523-2894
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DEFINITIONS...................................... A-3
SUMMARY.......................................... A-5
Who is the Issuer of the Group Policies and
Certificates?................................... A-5
What are Separate Account UL, the Fixed Account
and the Metropolitan Series Fund?............... A-5
What Death Benefit is Available under the
Certificate?.................................... A-6
What Flexibility Does an Owner have to Adjust the
Amount of the Death Benefit?.................... A-6
What Flexibility Does an Owner have in Connection
with Premium Payments?.......................... A-6
What Happens to Certificates when the
Participating Entity's Active Participation in
the Group Policy is Terminated?................. A-7
If the Participating Entity Continues to
Participate in the Group Policy, How Long Will
the Certificate Remain in Force?................ A-7
How are Net Premiums Allocated?.................. A-7
May the Certificate be Surrendered or the Cash
Value Partially Withdrawn?...................... A-7
Is There a "Free Look" Period?................... A-8
What is the Loan Privilege?...................... A-8
What Charges are Assessed in Connection with the
Certificate?.................................... A-8
What is the Tax Treatment of Cash Value?......... A-9
Is the Beneficiary Subject to Federal Income Tax
on the Death Benefit?........................... A-9
Is the Death Benefit or the Cash Value Subject to
Federal Estate Tax?............................. A-9
How should Premium Payments, Owner Requests and
Other Communications be sent to MetLife?........ A-9
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND.... A-9
The Separate Account............................. A-9
Metropolitan Series Fund......................... A-10
CERTIFICATE BENEFITS............................. A-11
Death Benefit.................................... A-11
Cash Value....................................... A-12
Benefit at Final Date............................ A-19
Optional Income Plans............................ A-19
Optional Insurance Benefits...................... A-19
PAYMENT AND ALLOCATION OF PREMIUMS............... A-20
<CAPTION>
PAGE
---------
<S> <C>
Issuance of a Certificate........................ A-20
Premiums......................................... A-20
Allocation of Premiums and Cash Value............ A-21
Termination of Participating Entity Participation
in the Group Policy............................. A-22
Effect of Termination of Group Policy
Participation on Owners......................... A-23
Certificate Termination and Reinstatement While
the Group Policy is in Effect................... A-23
CHARGES AND DEDUCTIONS........................... A-24
Premium Expense Charges.......................... A-24
Monthly Deduction From Cash Value................ A-24
Charges Against the Separate Account............. A-25
Guarantee of Certain Charges..................... A-26
Other Charges.................................... A-26
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUES, CASH
SURRENDER VALUES AND ACCUMULATED PREMIUMS....... A-26
CERTIFICATE RIGHTS............................... A-30
Loan Privileges.................................. A-30
Surrender and Withdrawal Privileges.............. A-31
Exchange Privilege............................... A-31
THE FIXED ACCOUNT................................ A-32
General Description.............................. A-32
Fixed Account Cash Value......................... A-32
Death Benefit, Transfer, Withdrawal, Surrender
and Certificate Loan Rights..................... A-33
RIGHTS RESERVED BY METLIFE....................... A-33
OTHER CERTIFICATE PROVISIONS..................... A-33
SALES AND ADMINISTRATION OF THE GROUP POLICIES
AND CERTIFICATES................................ A-34
DISTRIBUTION OF THE GROUP POLICIES AND
CERTIFICATES.................................... A-35
FEDERAL TAX MATTERS.............................. A-35
MANAGEMENT....................................... A-37
VOTING RIGHTS.................................... A-40
Right to Instruct Voting of Fund Shares.......... A-40
REPORTS.......................................... A-40
STATE REGULATION................................. A-41
REGISTRATION STATEMENT........................... A-41
LEGAL MATTERS.................................... A-41
EXPERTS.......................................... A-41
FINANCIAL STATEMENTS............................. A-42
APPENDIX TO PROSPECTUS........................... A-80
</TABLE>
THE GROUP POLICY AND CERTIFICATE ARE NOT AVAILABLE IN ALL STATES. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE. METLIFE DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS OTHER THAN
AS CONTAINED IN THIS PROSPECTUS OR ANY ATTACHED PROSPECTUS OR ANY SUPPLEMENT
THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY METLIFE.
A-2
<PAGE>
DEFINITIONS
ADMINISTRATIVE OFFICE--The office of MetLife at 177 South Commons Drive,
Aurora, Illinois 60507, to which all Owner communications are to be sent.
MetLife may, by written notice, name other locations within the United States to
serve as designated offices, in place of or in addition to the office above.
AGE--For each covered person in a particular group, Age is defined as of a
day selected by the participating entity and set forth in the Group Policy. Age
can be measured from the Date of the Group Policy or from December 31st of a
given year, or from any other date agreed to by MetLife and the participating
entity.
ALLOCATION DATE--The date the first premium is applied to the Separate
Account pursuant to the designation in the Certificate enrollment form and/or
Group Policy application, as applicable. During the first Group Policy year, it
is set at twenty days after the Investment Start Date with respect to any
Certificate. During this twenty day period the net premium allocated to the
investment divisions of the Separate Account under any new Certificate will be
applied to the Fixed Account. After the first Group Policy year, the Allocation
Date for all new Certificates issued with respect to that Group is the
Investment Start Date.
BENEFICIARY--The beneficiary is the person or persons designated by the
Owner to receive the insurance proceeds upon the death of the covered person.
CASH SURRENDER VALUE--The cash value less any indebtedness and any accrued
and unpaid monthly deduction.
CASH VALUE--The sum of the Certificate cash values in the Fixed Account, the
investment divisions of the Separate Account and the Loan Account.
CERTIFICATE--The group variable universal life insurance certificates issued
under the group variable universal life insurance policy offered by MetLife and
described in this Prospectus.
CERTIFICATE MONTH--The month beginning on the monthly anniversary.
COVERED PERSON--The person upon whose life the Certificate is issued.
DATE OF RECEIPT--The date premiums and communications are actually received
at an Administrative Office. Premium payments and communications will be deemed
to be received on the Date of Receipt with three exceptions: (1) when they are
received on any day that is not a Valuation Date; (2) when they are received by
means other than U.S. mail after 4:00 p.m. New York City time. With regard to
(1) and (2) above, the Date of Receipt will be deemed to be the next Valuation
Date. The third exception is the date of receipt for the first premium payment
with regard to each Certificate. In this case, and subject to the exceptions set
forth in (1) and (2) above, the Date of Receipt is the later of (1) the Date of
Certificate and (2) the date the first premium for a Certificate is received at
the Administrative Office.
DATE OF CERTIFICATE--The effective date for life insurance protection under
the Certificate. The Date of Certificate is set forth in the Certificate and is
used to determine Certificate years and Certificate months from issue.
Certificate anniversaries are measured from the Date of Certificate.
DATE OF GROUP POLICY--The date set forth in the Group Policy that is used to
determine Group Policy years and Group Policy months. Group Policy anniversaries
are measured from the Date of Group Policy.
FINAL DATE--The certificate anniversary on which the covered person is age
95 or later if specified in the Certificate.
FIXED ACCOUNT--An account which is part of the General Account and to which
MetLife will allocate net premiums as directed by the Owner or participating
entity, as applicable, and credit certain fixed rates of interest.
GENERAL ACCOUNT--The assets of MetLife other than those allocated to the
Separate Account or any other legally-segregated separate account.
GROUP--A participating entity and all Owners and/or people eligible to
become Owners under the participating entity's Group Policy.
A-3
<PAGE>
GROUP POLICY--For ease of reference in this Prospectus, this term includes
both the group variable universal life insurance policy that the participating
entity either participates in, is a party to or owns and which is offered by
MetLife and described in this Prospectus together with any administration
agreement entered into between the participating entity and MetLife.
INDEBTEDNESS--The total of any unpaid Certificate loan and loan interest.
INVESTMENT START DATE--The Date of Receipt of the first premium with respect
to a Certificate.
INVESTMENT DIVISION--A subdivision of the Separate Account. The assets in
each investment division are invested exclusively in the shares of a specified
portfolio.
LOAN ACCOUNT--An account within the General Account to which cash value from
the Separate Account and/or the Fixed Account in an amount equal to a
Certificate loan requested by an Owner is transferred.
MINIMUM GROUP SIZE--The minimum number of people in a group that is
necessary before an employer can purchase a Group Policy. The minimum group size
is currently 1,000 lives; however, MetLife reserves the right to issue a Group
Policy or provide coverage to a participating entity that does not meet the
minimum group size.
MINIMUM SPECIFIED FACE AMOUNT--The minimum specified face amount of
insurance for which a Certificate may be issued. The amount is set forth in the
Certificate. The Certificate will never specify a minimum specified face amount
of less than $10,000.
MONTHLY ANNIVERSARY--The same date in each month as the Date of Group Policy
or the date the Certificate is issued, as applicable. For purposes of the
Separate Account, whenever the monthly anniversary date falls on a date other
than a valuation date, the next valuation date will be deemed to be the monthly
anniversary.
MONTHLY DEDUCTION--Charges deducted monthly from the cash value of a
Certificate and which include any monthly cost of insurance, monthly cost of
benefits provided by riders and monthly administration charge.
OWNER--The person so designated in the enrollment form for the Certificate
or as subsequently changed.
PAID-UP--An election under the Certificate whereby the Owner may terminate
the death benefit (and any riders in effect) and use all or part of the cash
surrender value as a single premium for a paid-up benefit under the Certificate.
If the paid-up election is made, all or part of the remaining cash value in the
Certificate will be transferred to the General Account and may no longer be
allocated to the Separate Account or the Fixed Account. The Owner will receive
any remaining cash surrender value that is not used to purchase a paid-up
benefit. The paid-up benefit elected must not be more than can be purchased
using the Certificate's cash surrender value or more than the death benefit
under the Certificate at the time the election is made and must not be less than
$10,000.
PLANNED PERIODIC PREMIUM--An Owner's self-determined amount of premium
planned to be paid at fixed intervals over a specified period of time. The Owner
is not required to follow this schedule after the first premium payment.
PORTABLE--A status that occurs when a covered person is no longer part of
the participating entity's group. A Certificate becomes portable when an event
specified in the Certificate occurs. These events may include: termination of
the covered person's employment (other than through retirement) and retirement
as determined by the Participating Entity. An Owner of a portable Certificate
will no longer be deemed to be a member of the participating entity's group for
purposes of determining cost of insurance rates and charges.
PORTFOLIO--A portfolio represents a different class (or series) of stock of
Metropolitan Series Fund, Inc., a mutual fund in which the Separate Account
assets are invested.
PRO RATA BASIS--Allocations made in the same proportion that the
Certificate's cash value in the Fixed Account and the Certificate's cash value
in each investment division of the Separate Account bear to the Certificate's
total cash value (except for the cash value, if any, in the Loan Account) as of
the Date of Receipt of a request.
A-4
<PAGE>
SEPARATE ACCOUNT--Metropolitan Life Separate Account UL, a separate
investment account of MetLife through which premiums paid under the Certificate
are invested to the extent allocated to the Separate Account by the Owner.
SPECIFIED FACE AMOUNT--The amount set forth in the Certificate.
VALUATION DATE--Each day on which the New York Stock Exchange is open for
trading or, on days other than when the New York Stock Exchange is open, on
which it is determined that there is a sufficient degree of trading in the
Fund's portfolio securities that the current net asset value of its redeemable
securities might be materially affected. Valuations for any date other than a
Valuation Date will be determined as of the next Valuation Date.
VALUATION PERIOD--The period between two successive Valuation Dates,
commencing at 4:00 p.m., New York City time, on each valuation date and ending
at 4:00 p.m., New York City time, on the next succeeding Valuation Date.
SUMMARY
Unless the context indicates otherwise, this summary and the discussion in
the rest of this Prospectus assume that cash surrender values are sufficient to
pay all charges deducted on monthly anniversaries, that no Certificate loans
have been made and that no riders are in effect (see "Loan Privileges--Effect of
a Certificate Loan," "Payment and Allocation of Premiums--Certificate
Termination and Reinstatement While the Group Policy is in Effect," and
"Appendix to Prospectus").
This Prospectus describes only those aspects of the Certificate that relate
to the Separate Account since only interests in the Separate Account are being
offered by this Prospectus. Aspects of the Fixed Account are briefly summarized
in order to give a better understanding of how the Certificate functions (see
"The Fixed Account").
WHO IS THE ISSUER OF THE GROUP POLICIES AND CERTIFICATES?
MetLife, the issuer of the Group Policies and Certificates, is a mutual life
insurance company. It was incorporated under the laws of the State of New York
in 1866 and since 1868 it has been engaged in the life insurance business under
the name Metropolitan Life Insurance Company. Its Home Office is located at 1
Madison Avenue, New York, New York 10010. It is authorized to transact business
in all states of the United States, the District of Columbia, Puerto Rico and
all Provinces of Canada. MetLife, serving millions of people, is one of the
largest financial services companies in the world with many of the largest
United States corporations for its clients. On December 31, 1995, MetLife had
total life insurance in force of approximately $1.3 trillion and total assets
under management of over $179 billion.
WHAT ARE SEPARATE ACCOUNT UL, THE FIXED ACCOUNT AND THE METROPOLITAN SERIES
FUND?
The Owner may allocate the net premiums paid under the Certificate to one or
more of the investment divisions of the Separate Account, a separate investment
account of MetLife (see "The Separate Account") and/or to a Fixed Account
established by MetLife. In some cases, however, the participating entity may
select the investment divisions available to Owners. Also, the participating
entity may retain the right to allocate any net premiums it pays unless and
until the covered person retires (as determined by the participating entity) or
the Owner's Certificate becomes portable.
There are currently six investment divisions available in the Separate
Account. The assets in each division are invested in a separate class (or
series) of stock of the Fund, a "series" type of mutual fund (see "Metropolitan
Series Fund"). Each class of stock represents a separate portfolio within the
Fund. The six portfolios of the Fund which are currently available to Owners are
the Growth Portfolio, the Income Portfolio, the Diversified Portfolio, the
Aggressive Growth Portfolio, the International Stock Portfolio and the Stock
Index Portfolio. The International Stock Portfolio is not available in
California. Net premiums allocated to the Fixed Account are held in the General
Account of MetLife.
Each portfolio of the Fund has a different investment objective and is
managed by MetLife. For providing investment management services to the Fund,
MetLife receives a fee from the Fund equivalent to an annual
A-5
<PAGE>
rate of .25% of the average daily value of the aggregate net assets of the
Growth, Income, Diversified, and Stock Index Portfolios and an annual rate of
.75% of the average daily value of the aggregate net assets of the International
Stock and Aggressive Growth Portfolios. State Street Research provides
sub-investment management services with respect to the Growth, Income,
Aggressive Growth and Diversified Portfolios. GFM provides sub-investment
management services with respect to the International Stock Portfolio. For these
services, State Street Research and GFM receive an annual percentage fee from
MetLife. State Street Research and GFM are subsidiaries of MetLife and their
fees are the sole responsibility of MetLife, and not the Fund. In addition to
the investment management fees, other direct expenses are charged against the
assets of the Fund.
For a full description of the Fund, see the prospectus for the Fund, which
is attached at the end of this Prospectus, and the Fund's Statement of
Additional Information referred to therein.
WHAT DEATH BENEFIT IS AVAILABLE UNDER THE CERTIFICATE?
The Certificate provides for the payment of a benefit upon the death of the
covered person. The death benefit is the specified face amount of the
Certificate plus the cash value on the date of death. If greater than the death
benefit otherwise payable a minimum death benefit equivalent to a percentage,
determined by age at death, of the cash value will be paid. The insurance
proceeds payable will be reduced by any outstanding indebtedness and any accrued
and unpaid charges (see "Certificate Benefits--Death Benefit").
In addition, an Owner has the flexibility to add optional insurance benefits
by riders specified in the Certificate. These may include a waiver of monthly
deduction during total disability rider; an accelerated death benefit rider a
living benefits rider; an accidental death benefit rider; an accidental death or
dismemberment benefit rider; and a dependent life benefits rider (see
"Certificate Benefits--Optional Insurance Benefits"). The cost of these optional
insurance benefits will be deducted from the cash value as part of the monthly
deduction (see "Charges and Deductions--Monthly Deduction From Cash Value").
Proceeds under the Certificate may be received in cash or under one of the
available optional income plans described in the Appendix to Prospectus (see
"Certificate Benefits--Optional Income Plans").
WHAT FLEXIBILITY DOES AN OWNER HAVE TO ADJUST THE AMOUNT OF THE DEATH BENEFIT?
The Owner may increase the specified face amount of the Certificate on a
date or dates determined by the participating entity and set forth in the Group
Policy (see "Certificate Benefits"). For employees of a participating entity,
automatic increases in specified face amount will be made in conjunction with
each employee's salary increase on a date or dates specified by the
participating entity. Any increases in the death benefit are subject to
MetLife's underwriting rules (see "Certificate Benefits--Change in Specified
Face Amount"). Any specified face amount increase also will result in additional
charges (see "Certificate Benefits--Increases," and "Effect of Changes in
Specified Face Amount on Charges"). The specified face amount may also be
decreased by the Owner after the first Certificate year. The specified face
amount may never be less than the minimum specified face amount set forth in the
Certificate. In no event will the specified face amount be less than $10,000. An
increase or decrease in the death benefit may have tax consequences (see
"Federal Tax Matters").
WHAT FLEXIBILITY DOES AN OWNER HAVE IN CONNECTION WITH PREMIUM PAYMENTS?
If elected by a participating entity and authorized by the Owner, premiums
are paid through payroll deduction and are remitted to MetLife by such employer
on at least a monthly basis. If payroll deduction is not available, the Owner
may remit premiums to MetLife directly on a quarterly or annual basis. Premium
payments will not be credited to the Owner's Certificate until received by
MetLife. An Owner has considerable flexibility concerning the amount and
frequency of premium payments. An Owner need not pay any specific amount of
minimum premiums. Instead, an Owner may, subject to certain restrictions, make
premium payments in any amount and at any frequency. However, the Owner may be
required to make an unscheduled premium payment in order to keep the Certificate
in force (see "Payment and Allocation of Premiums").
A-6
<PAGE>
WHAT HAPPENS TO CERTIFICATES WHEN THE PARTICIPATING ENTITY'S ACTIVE
PARTICIPATION IN THE GROUP POLICY IS TERMINATED?
If the participating entity or MetLife decides to terminate the
participating entity's participation in the Group Policy, the participating
entity will cease remitting any payroll deductions of premiums. In addition, no
future Certificates will be issued under the Group Policy. The current
Certificates may also be terminated by MetLife under certain circumstances.
There are also circumstances where an Owner may continue the Certificate even
after the participating entity's termination of its participation in the Group
Policy. If the Certificate is not terminated, different current charges may
apply but the guaranteed charges will not be greater than they were prior to the
termination of the Group Policy. (See "Effect of Termination of the Group Policy
Participation on Owners").
IF THE PARTICIPATING ENTITY CONTINUES TO PARTICIPATE IN THE GROUP POLICY, HOW
LONG WILL THE CERTIFICATE REMAIN IN FORCE?
The Certificate will terminate only when its cash surrender value is
insufficient to pay the monthly deduction (see "Charges and Deductions--Monthly
Deduction from Cash Value"), and the grace period expires without a sufficient
payment being made (see "Certificate Termination and Reinstatement While the
Group Policy is in Effect--Termination"). Therefore, failure to pay premiums
will not automatically cause the Certificate to terminate and payment of
premiums does not guarantee that the Certificate will remain in force until its
final date.
HOW ARE NET PREMIUMS ALLOCATED?
The portion of the premium available for allocation ("net premium") equals
the premium paid less premium expense charges (see "Charges and
Deductions--Premium Expense Charges"). The participating entity or Owner, as
applicable, determines in the application for the Group Policy or enrollment
form for the Certificate, respectively, what portions, if any, of net premiums
paid by each are to be allocated to the investment divisions of the Separate
Account and/or to the Fixed Account. Allocations with respect to the Fixed
Account are effective as of the Investment Start Date. Allocations with respect
to the investment divisions of the Separate Account are effective as of the
Allocation Date, as explained more fully under "Payment and Allocation of
Premiums--Allocation of Premiums and Cash Value." An Owner or participating
entity, as applicable, may change allocations of future net premiums at any time
without charge by notifying MetLife in writing, subject to certain limitations
(see "Payment and Allocation of Premiums--Allocation of Premiums and Cash
Value"). Because investment performance of a Separate Account investment
division (unlike that of the Fixed Account) is not guaranteed by MetLife,
allocation of net premiums to the Separate Account investment divisions
increases the amount of investment risk to the Owner, and allocation to the
Fixed Account decreases such risk. On the other hand, the potential benefit of
the Fixed Account is limited to the return guaranteed by MetLife plus any
discretionary return declared by MetLife from time to time.
Subject to certain restrictions, currently, an Owner may transfer amounts
among the investment divisions of the Separate Account or between the Separate
Account and the Fixed Account without charge (see "Charges and Deductions"). In
the first 24 Certificate months, an Owner may transfer the entire amount in the
Separate Account to the Fixed Account without charge (see "Certificate
Rights--Exchange Privilege" and "The Fixed Account Death Benefit, Transfer,
Withdrawal, Surrender, and Certificate Loan Rights.") An Owner may also elect to
participate in one of the systematic investment strategies (see "Allocation of
Premiums and Cash Value--Systematic Investment Strategies").
MAY THE CERTIFICATE BE SURRENDERED OR THE CASH VALUE PARTIALLY WITHDRAWN?
The Owner may surrender the Certificate at any time and receive the cash
surrender value of the Certificate. Subject to certain limitations, the Owner
also may make partial withdrawals from the cash surrender value at any time
prior to the final date (see "Certificate Rights--Surrender and Withdrawal
Privileges"). Certificates under some Group Policies may be subject to a
transaction charge of up to $25. Surrenders and withdrawals may have certain tax
consequences (see "Federal Tax Matters").
A-7
<PAGE>
IS THERE A "FREE LOOK" PERIOD?
The Certificate provides for a free-look period that lasts until 10 days
after receipt (except where state law requires a longer period for replacement
policies or other reasons) or 45 days after the enrollment form has been
completed, whichever is later. The Owner may return the Certificate within this
period and MetLife will send the Owner a complete refund of any premiums paid
within 7 days. The refund of any premium paid by check, however, may be delayed
until the check has cleared the Owner's bank.
Following an increase in specified face amount requested by an Owner, there
is a similar free look period that extends until the later of 10 days after the
Owner receives revised Certificate pages reflecting the increase or 45 days
after the request for the increase has been completed. During this period, the
Owner may elect to terminate the increase, and all Certificate values will be
restored to what they would have been had the increase not occurred. MetLife
will also refund the amount of any premiums paid, to the extent necessary for
the Certificate to continue to be within the definition of life insurance for
federal income tax purposes (see "Premiums--Premium Limitations").
WHAT IS THE LOAN PRIVILEGE?
An Owner may obtain a Certificate loan at any time that the Certificate has
a loan value. Loans may be repaid at any time prior to the Final Date (see
"Certificate Rights--Loan Privileges"). Certificates under some Group Policies
may be subject to a transaction charge of up to $25. Loans are not available for
Owners who have exercised the paid-up Certificate provision, except as otherwise
required by law.
WHAT CHARGES ARE ASSESSED IN CONNECTION WITH THE CERTIFICATE?
PREMIUM EXPENSE CHARGES. Premium expense charges vary based on the Group
Policy under which the Certificate is issued. These charges may consist of a
charge of .35% of each premium payment to recover a portion of MetLife's
estimated cost for the federal income tax treatment of deferred acquisition
costs ("DAC tax charge") and a state premium tax charge of up to 5% of each
premium payment (see "Charges and Deductions--Premium Expense Charges").
MONTHLY DEDUCTION. The charges deducted as part of the monthly deduction
can vary based upon the Group Policy under which an Owner's Certificate is
issued. Cash value may be reduced by a monthly deduction equal to the sum of any
applicable: (1) charge for the cost of insurance. MetLife uses simplified
underwriting and guaranteed issue procedures. While the current costs of
insurance rates are generally lower than 100% of the 1980 Commissioners Standard
Ordinary Mortality Table Males, age last birthday ("1980 CSO Table"), the
guaranteed rates are up to 150% of the maximum rates that could be charged based
on the 1980 CSO table. The use of simplified underwriting and guaranteed issue
procedures may result in the cost of insurance charges being higher for some
healthy individuals. This charge will be deducted as part of a monthly combined
charge consisting of the cost of insurance charge and a component of the charge
for administration; (2) cost of any optional insurance benefits added by rider;
(3) monthly administration charge. The monthly administration charge is
comprised of two components. The first is a charge that is deducted as part of
the monthly combined charge (the other part of the monthly combined charge is
the cost of insurance, as described above). This component will never exceed 50%
of this monthly combined charge. The second component is a charge which may be
up to $3.00 per Certificate per month as specified in the Certificate. No profit
is expected to be derived from the aggregate of the administration charges set
forth in this paragraph. (See "Charges and Deductions--Monthly Deduction from
Cash Value.")
CHARGES AGAINST SEPARATE ACCOUNT. A daily charge equivalent to an effective
annual rate of at least .45% and not to exceed .90% of the average daily net
asset value attributable to the Policies of each investment division of the
Separate Account is imposed to compensate MetLife for its assumption of certain
mortality and expense risks (see "Charges and Deductions--Charge for Mortality
and Expense Risks").
No charges are currently made against the Separate Account for federal or
state income taxes with respect to earnings or capital gains which may be
attributable to the Separate Account. Should MetLife determine that such taxes
will be imposed, MetLife may make deductions from the Separate Account to pay
these taxes (see "Federal Tax Matters"). The imposition of such taxes would
result in a reduction of the cash value in the Separate Account.
A-8
<PAGE>
WHAT IS THE TAX TREATMENT OF CASH VALUE?
Cash value under a Certificate is subject to the same federal income tax
treatment as cash value under a conventional fixed benefit life insurance
policy. Under existing tax law, if a Certificate is not a modified endowment
contract as discussed in the following paragraph, a Certificate owner generally
will be taxed on cash value withdrawn from the Certificate, the cash value
received upon surrender of the Certificate or the cash value distributed at the
Final Date of a Certificate only to the extent these amounts, when added to
previous distributions, exceed the total premiums paid. Amounts received upon
surrender or withdrawal or on the Final Date of a Certificate in excess of
premiums paid will be treated as ordinary income.
Special rules regarding taxation, including the imposition of a tax penalty,
govern pre-death withdrawals from life insurance contracts referred to as
modified endowment contracts. For more information, see "Federal Tax Matters."
IS THE BENEFICIARY SUBJECT TO FEDERAL INCOME TAX ON THE DEATH BENEFIT?
Like death benefits payable under conventional fixed benefit life insurance
policies, death benefit proceeds payable under the Certificate under current law
are generally completely excludable from the gross income of the beneficiary. As
a result, the beneficiary generally will not be taxed on death benefit proceeds
(see "Federal Tax Matters").
IS THE DEATH BENEFIT OR THE CASH VALUE SUBJECT TO FEDERAL ESTATE TAX?
The death benefit under the Certificate or the cash value may be subject to
federal estate tax (see "Federal Tax Matters").
HOW SHOULD PREMIUM PAYMENTS, OWNER REQUESTS AND OTHER COMMUNICATIONS BE SENT TO
METLIFE?
Premium payments and other communications (such as transfer requests, loan
requests, loan repayments, withdrawal requests, surrender requests, changes of
beneficiary, changes of the specified face amount, or changes of premium
allocation) should be sent to the Administrative Office for the Certificate.
MetLife may name different Administrative Offices for different transactions. In
the future MetLife may permit transfer and withdrawal or other requests to be
made by telephone.
To exercise rights under a Certificate, the Owner must follow the procedures
stated in the Certificate. To request a payment, change the allocation among the
investment divisions, change the beneficiary, change the specified face amount,
change an address or request any other action by MetLife, the Owner should
utilize the forms prepared by MetLife for each purpose. The forms are available
from the Administrative Offices.
SEPARATE ACCOUNT AND METROPOLITAN SERIES FUND
THE SEPARATE ACCOUNT
The Separate Account, which is a separate investment account of MetLife, was
established by MetLife pursuant to the New York Insurance Law on December 13,
1988. The Separate Account also receives premium payments in connection with
other variable universal life insurance products issued by MetLife. The assets
allocated to the Separate Account are the property of MetLife, and MetLife is
not a trustee by reason of the Separate Account.
The Separate Account meets the definition of "separate account" under the
federal securities laws. All income, gains and losses, whether or not realized,
from assets allocated to the Separate Account are credited to or charged against
the Separate Account without regard to other income, gains or losses of MetLife.
Each Certificate provides that such portion of the assets in the Separate
Account as equals the liabilities (and reserves) of MetLife with respect to the
Separate Account shall not be chargeable with liabilities arising out of any
other business of MetLife. The liabilities are the actuarially determined amount
of MetLife's total commitments under the Certificates; the reserves are the
assets allocated to pay these commitments. The values of the assets in the
Separate Account will not at any time be less than the sum of all amounts then
allocated to the Separate Account under variable life insurance policies.
MetLife may accumulate in the Separate Account mortality and expense risk
charges, mortality gains and investment gains on those assets (which represent
such charges) in the Separate Account and other amounts
A-9
<PAGE>
in excess of MetLife's liabilities and reserves with respect to the Separate
Account. MetLife may from time to time transfer to its General Account any
assets in the Separate Account in excess of such reserves and liabilities.
Although the Separate Account is an integral part of MetLife, the Separate
Account is registered with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940 ("1940 Act").
Registration does not involve supervision of management or investment practices
or policies of the Separate Account or of MetLife by the Commission.
There are currently six available investment divisions in the Separate
Account. The assets in each investment division are invested in a separate class
(or series) of stock issued by the Fund. Each class of stock represents a
separate portfolio within the Fund. New investment divisions may be added as new
portfolios are added to the Fund and made available to Owners. In addition,
investment divisions may be eliminated from the Separate Account. One division,
not listed below, has been eliminated from the Separate Account except for
Groups that had received a written quotation regarding the Group Policy and the
Certificates from MetLife, including a quotation for the cost of insurance rates
applicable to such Group, before May 15, 1996.
METROPOLITAN SERIES FUND
The Fund is a "series" type of mutual fund which is registered with the
Securities and Exchange Commission as a diversified open-end management
investment company under the 1940 Act. The Fund has served as the investment
medium for the Separate Account since the Separate Account commenced operations.
A brief summary of the investment objectives of each available Fund portfolio
that may be available to Owners is set forth below.
GROWTH PORTFOLIO. The investment objective of this portfolio is to achieve
long-term growth of capital and income, and moderate current income, by
investing primarily in common stocks that are believed to be of good quality or
to have good growth potential or which are considered to be undervalued based on
historical investment standards.
INCOME PORTFOLIO. The investment objective of this portfolio is to achieve
the highest possible total return, by combining current income with capital
gains, consistent with prudent investment risk and the preservation of capital,
by investing primarily in fixed-income, high-quality debt securities.
DIVERSIFIED PORTFOLIO. The investment objective of this portfolio is to
achieve a high total return while attempting to limit investment risk and
preserve capital by investing in equity securities, fixed-income debt
securities, or short-term money market instruments, or any combination thereof,
at the discretion of State Street Research.
AGGRESSIVE GROWTH PORTFOLIO. The investment objective of this portfolio is
to achieve maximum capital appreciation by investing primarily in common stocks
(and equity and debt securities convertible into or carrying the right to
acquire common stocks) of emerging growth companies, undervalued securities or
special situations.
INTERNATIONAL STOCK PORTFOLIO. The investment objective of this portfolio
is to achieve long-term growth of capital by investing primarily in common
stocks and equity-related securities of non-United States companies. This
portfolio is not available in connection with Group Policies and Certificates
issued in California.
STOCK INDEX PORTFOLIO. The investment objective of this portfolio is to
equal the performance of the Standard & Poor's 500 Composite Stock Price Index
(adjusted to assume reinvestment of dividends) by investing in the common stock
of companies which are included in the index.
MetLife purchases and redeems Fund shares for the Separate Account at their
net asset value without the imposition of any sales or redemption charges. Such
shares represent an interest in one of the portfolios of the Fund which
correspond to the investment divisions of the Separate Account. Any dividend or
capital gain distributions received from the Fund are likewise reinvested in
Fund shares at net asset value as of the dates paid. The distributions have the
effect of reducing the value of each share of the Fund and increasing the number
of Fund shares outstanding. However, the total cash value in the Separate
Account does not change as a result of such distributions.
A-10
<PAGE>
On each Valuation Date, shares of each portfolio are purchased or redeemed
by MetLife for the Separate Account, based on, among other things, the amounts
of net premiums allocated to the Separate Account, dividends and distributions
reinvested, transfers to and among investment divisions, Certificate loans, loan
repayments and benefit payments to be effected pursuant to the terms of the
Certificates as of that date. Such purchases and redemptions for the Separate
Account are effected at the net asset value per share for each portfolio
determined as of 4:00 p.m., New York City time, on that same Valuation Date.
A full description of the Fund, its investment policies and restrictions,
its charges and other aspects of its operation is contained in the prospectus
for the Fund, which is attached at the end of this Prospectus, and in the
Statement of Additional Information referred to therein. See "The Fund and its
Purpose" in the prospectus for the Fund for a discussion of the different
separate accounts for MetLife and its affiliates that invest in the Fund and the
risks related thereto.
CERTIFICATE BENEFITS
DEATH BENEFIT
As long as the Certificate remains in force (see "Certificate Termination
and Reinstatement While the Group Policy is in Effect--Termination"), MetLife
will, upon due proof of the covered person's death, pay the insurance proceeds
of the Certificate to the named beneficiary. The proceeds may be received by the
beneficiary in a single sum or under one or more of the available optional
income plans as described in the Appendix to Prospectus.
The insurance proceeds are: (a) the death benefit provided on the date of
death; plus (b) any additional insurance on the covered person's life that is
provided by rider; minus (c) any outstanding indebtedness and any accrued and
unpaid charges; and minus (d) certain amounts of death benefit previously
decreased as a result of a claim under a rider to the Policy.
The death benefit is equal to the specified face amount of insurance plus
the cash value.
MINIMUM DEATH BENEFIT--There is a minimum death benefit equal to the greater
of (1) the death benefit and (2) a percentage of the cash value as set forth in
the following table. The minimum death benefit is determined in accordance with
federal income tax laws, to ensure that the Certificate qualifies as a life
insurance contract and that the insurance proceeds will be excluded from the
gross income of the beneficiary.
TABLE
<TABLE>
<CAPTION>
ATTAINED AGE OF
COVERED PERSON AT
THE BEGINNING OF PERCENTAGE OF
THE CERTIFICATE YEAR CASH VALUE
- -------------------------------------- -----------------
<S> <C>
40 and less:.......................... 250%
45:................................... 215%
50:................................... 185%
55:................................... 150%
60:................................... 130%
65:................................... 120%
<CAPTION>
ATTAINED AGE OF
COVERED PERSON AT
THE BEGINNING OF PERCENTAGE OF
THE CERTIFICATE YEAR CASH VALUE
- -------------------------------------- -----------------
<S> <C>
70:................................... 115%
75:................................... 105%
80:................................... 105%
85:................................... 105%
90:................................... 105%
95:................................... 100%
</TABLE>
For the ages not listed, the percentage decreases by a ratable portion for each
full year.
In no event will the death benefit be lower than the minimum amount required
to maintain the Certificate as life insurance under federal income tax law and
applicable Internal Revenue Service rules.
The death benefit provides insurance protection as well as possible build-up
of cash value. The death benefit varies as the cash value changes.
If the covered person dies on a date that is not a Valuation Date, the
amount of death benefit proceeds payable will be determined as of the next
Valuation Date.
CHANGE IN SPECIFIED FACE AMOUNT. Subject to certain limitations, an Owner
may request an increase in the specified face amount of a Certificate on a date
or dates determined by the participating entity and set forth in the Group
Policy (see "Decreases" and "Increases" below). For Owners who are qualifying
employees of
A-11
<PAGE>
employers who are participating entities, automatic increases in specified face
amount will be made in conjunction with each employee's salary increases on a
date or dates determined by the participating entity, unless such employee
notifies MetLife in writing that no such automatic increases are desired. Any
increases in the specified face amount are subject to MetLife's underwriting
rules which may include a requirement for satisfactory evidence of the covered
person's insurability. The specified face amount may also be decreased by the
Owner after the first Certificate year. An increase or decrease in the death
benefit may have tax consequences (see "Federal Tax Matters"). Any increase or
decrease in the specified face amount requested by the Owner will become
effective on the monthly anniversary on or next following the date of approval
of the request.
DECREASES. The specified face amount remaining in force after any requested
decrease may not be less than the minimum specified face amount as specified in
the Certificate. No decrease in the specified face amount will be permitted if
it would result in total premiums paid exceeding the then current maximum
premium limitations determined by Internal Revenue Code rules (see
"Premiums--Premium Limitations"). For purposes of determining the cost of
insurance charge (see "Charges and Deductions--Cost of Insurance"; "Cost of
Insurance Rate"; and "Rate Class"), a decrease in the specified face amount will
reduce the specified face amount in the following order: (a) the specified face
amount provided by the most recent increases successively; and (b) the specified
face amount on the Date of Certificate.
INCREASES. Any requirements as to the minimum amount of an increase are
specified in the Certificate. Any increases in specified face amount are subject
to MetLife's underwriting rules.
EFFECT OF CHANGES IN SPECIFIED FACE AMOUNT ON CHARGES. A change in the
specified face amount may affect the net amount at risk which may affect an
Owner's cost of insurance charge and the monthly administration charge (see
"Charges and Deductions--Cost of Insurance," "Cost of Insurance Rate," "Rate
Class," "Administrative Charge"). This in turn can affect the level of
subsequent cash values and death benefit. A change in the specified face amount
may also affect the Certificate's status as a modified endowment contract for
tax purposes (see "Federal Tax Matters").
CASH VALUE
The total cash value of a Certificate at any time is the sum of the
Certificate's cash values in the Fixed Account (see "The Fixed Account"), the
Loan Account (see "Certificate Rights--Loan Privileges"), and the investment
divisions of the Separate Account at such time. The Certificate's cash value in
the Separate Account may increase or decrease on each Valuation Date depending
on the investment return of the chosen investment divisions of the Separate
Account (see "Separate Account Net Investment Return"). There is no guaranteed
minimum cash value in the Separate Account.
CALCULATION OF SEPARATE ACCOUNT CASH VALUE. The portion of the first net
premium allocated to the investment divisions of the Separate Account under a
Certificate that is issued within the first Group Policy year will automatically
be allocated to the Fixed Account from the Investment Start Date to the
Allocation Date. Otherwise, on each Valuation Date, the Certificate's cash value
in an investment division of the Separate Account will equal:
(1) The cumulative amount of all net premium payments, transfers of cash
value, loan repayments and interest credited on Certificate loans that are
allocated to the investment division; minus
(2) Any cash value transferred, surrendered or withdrawn from the
investment division (including transfers to the Loan Account); minus
(3) The portion of all charges and deductions allocated to the
Certificate's cash value in the investment division (see "Charges and
Deductions"); plus or minus
(4) The cumulative net investment return (discussed below) on the amount
of cash value in the investment division.
The Certificate's total cash value in the Separate Account equals the sum of
the Certificate's cash value in each investment division.
A-12
<PAGE>
SEPARATE ACCOUNT NET INVESTMENT RETURN. An investment division's net
investment return is determined as of 4:00 p.m., New York City time, on each
Valuation Date. All transactions and calculations with respect to the
Certificates as of any Valuation Date are determined as of such time.
Each investment division is credited with a rate of net investment return
equal to its gross rate of investment return during the Valuation Period less
(1) an adjustment for the Separate Account's charge for mortality and expense
risks (equivalent to at least .45% and not more than .90% on an annual basis)
and (2) a charge for MetLife's taxes, if any such tax charge becomes necessary
in the future (see "Charges and Deductions--Charges Against the Separate
Account"). The investment division's gross rate of investment return is equal to
the rate of increase or decrease in the net asset value per share of the
underlying Fund portfolio over the Valuation Period, adjusted upward to take
appropriate account of any dividends paid by the portfolio during the period.
Depending primarily on the investment experience of the underlying Fund
portfolio, an investment division's net investment return may be either positive
or negative during a Valuation Period.
RATES OF RETURN. The following rates of return for the portfolios of the
Fund shown below reflect all charges against the available Fund portfolios. THEY
DO NOT REPRESENT WHAT MAY HAPPEN IN THE FUTURE. IN ADDITION, THERE ARE
SIGNIFICANT CHARGES AGAINST THE SEPARATE ACCOUNT, PREMIUMS AND THE CASH VALUE IN
EACH CERTIFICATE THAT ARE NOT IMPOSED AGAINST THE AVAILABLE FUND PORTFOLIOS AND
ARE THEREFORE NOT REFLECTED. These charges, i.e. charges against premiums,
charges for mortality and expense risks, the administration charge, and the cost
of insurance (see "Charges and Deductions--Premium Expense Charges," and
"Monthly Deduction from Cash Value"), significantly decrease the rates of return
on a given Certificate. The rate of return is computed for each portfolio by
subtracting the net asset value per share at the beginning of the period from
the net asset value per share at the end of the period, adjusting for dividends
declared on that portfolio's shares and dividing the result by the net asset
value per share at the beginning of the period. The resulting ratio is then
annualized to obtain the Average Annual Return shown. The annualization makes
the assumption that the rate of return does not vary from any one year period to
another and takes into account the effect of compounding.
Rates of return are useful for reviewing the effectiveness of Fund
management and for comparing the investment returns of the underlying Fund
portfolios. HOWEVER, FOR THE REASONS STATED ABOVE, NO OWNER SHOULD EXPECT TO
RECEIVE FUND RETURN. The hypothetical historical illustrations that appear below
demonstrate the effect on the underlying Fund Portfolios' rates of return of all
charges against the separate account, premiums and the cash value in the Policy
illustrated.
The first column shown for each investment division begins on the later of
the date the portfolio of the Fund in which it invests began operations and the
date the first registration statement relating to such portfolio was declared
effective by the Securities and Exchange Commission and ends on the date
indicated. Other periods shown begin on January 1st and end on December 31st of
the following year, except that the average annual return column is for the
entire period shown for the division in question. Thus the rates of return are
based on the actual historical experience of the available Fund portfolios. The
annual return for the International Stock Portfolio was increased due to the
voluntary assumption by MetLife of certain expenses for the
A-13
<PAGE>
International Stock Portfolio of the Fund in 1993 (see "Management of the Fund"
in the prospectus for the Fund). This subsidization affected annual return only
by .01%. There was no subsidization in 1994 or 1995.
<TABLE>
<CAPTION>
6/24/83- 1/1/84- 1/1/85- 1/1/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93-
12/31/83 12/31/84 12/31/85 12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
------- -------- -------- -------- ------- ------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH........ -4.60% 0.61% 34.80% 10.19% 5.67% 9.88% 39.96% -9.98% 33.18% 11.57% 14.41%
INCOME........ 2.00% 13.83% 27.21% 19.58% -1.98% 9.23% 13.42% 9.98% 17.42% 6.90% 11.32%
<CAPTION>
AVERAGE
1/1/94- 1/1/95- ANNUAL
12/31/94 12/31/95 RETURN
------- -------- --------
<S> <C> <C> <C>
GROWTH........ -3.75% 34.49% 12.94%
INCOME........ -3.32% 19.70 11.29%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
7/25/86- 1/1/87- 1/1/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/86 12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
------- ------- ------- -------- -------- -------- ------- -------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIVERSIFIED... 3.41% 3.54% 8.88% 23.26% -0.89% 24.94% 9.49% 12.79% -3.44% 27.87% 11.16%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
4/29/88- 1/1/89- 1/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
------- -------- -------- -------- -------- -------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AGGRESSIVE
GROWTH..... 4.62% 33.11% -11.35% 66.46% 10.37% 22.66% -3.52% 31.00% 17.80%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
5/1/90- 1/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
------- -------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STOCK
INDEX....... 1.95% 29.76% 7.44% 9.55% 1.15% 37.95% 14.67%
</TABLE>
<TABLE>
<CAPTION>
AVERAGE
5/1/91- 1/1/92- 1/1/93- 1/1/94- 1/1/95- ANNUAL
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 RETURN
------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL
STOCK......... -1.55% -10.21% 47.76% 4.45% 1.81% 7.29%
</TABLE>
A-14
<PAGE>
ILLUSTRATIONS. In order to demonstrate how the investment experience of
the available portfolios of the Fund would have affected the death benefit and
cash value of a Certificate, hypothetical illustrations showing the hypothetical
net return of each investment division are set forth below. These hypothetical
illustrations are based on the actual historical experience of the available
Fund portfolios as if the Separate Account had been in existence and a
Certificate had been issued on the dates indicated. THEY DO NOT REPRESENT WHAT
MAY HAPPEN IN THE FUTURE.
The illustrations are based on the payment of monthly premiums of $100 for a
specified face amount of $100,000 for an individual aged 40. The illustrations
assume that no riders are in effect. The periods illustrated are based on the
rates of return for such periods set forth in "Rates of Return" above. The
illustrations assume no Certificate loans have been made; therefore cash
surrender values for the guaranteed illustrations would be $25 less than the
cash values shown due to the deduction of a surrender transaction charge, and
cash surrender values for the current illustrations would be equal to the cash
values shown because it is assumed that no surrender transaction charge is
deducted.
For each investment division, one illustration is based on the guaranteed
charge rates under a hypothetical representative standard Group Policy; the
other illustration is based as if the current charge rates were in effect during
the period illustrated that would be representative of such a Group Policy. The
actual maximum and current charge rates can be expected to vary from one Group
Policy to another (see "Charges and Deductions").
The guaranteed illustrations assume: (1) that the covered person is in a
rate class that has cost of insurance charges equal to 100% of the maximum rates
that could be charged based on the 1980 Commissioners Standard Ordinary
Mortality Table, Males, age last birthday ("1980 CSO Table"); (2) a $3.00 per
Certificate per month administration charge plus a charge for administration
included as part of the monthly combined charge equal to the same amount charged
for the cost of insurance described in (1) above; (3) a .35% DAC tax charge; (4)
a 2.5% premium tax rate; (5) a daily charge against the Separate Account for
mortality and expense risks equivalent to an effective annual rate of .90% of
the average daily value of the assets in the Separate Account attributable to
the Certificates; and (6) a surrender transaction charge of $25.
The current illustrations assume: (1) that the covered person is in a rate
class that has standardized cost of insurance charges equal as set forth in the
following table:
<TABLE>
<CAPTION>
MONTHLY CURRENT COST
OF INSURANCE RATE
- ---------------------------------------
RATE PER THOUSAND DOLLARS
AGE OF INSURANCE
- ---------- ---------------------------
<S> <C>
40 to 44 $ 0.17
45 to 49 $ 0.29
50 to 54 $ 0.48
55 to 59 $ 0.75
60 to 64 $ 1.17
65 to 69 $ 2.10
</TABLE>
(2) a $1.50 per Certificate per month administration charge, plus a charge for
administration included as part of the monthly combined charge equal to 20% of
amount charged for the cost of insurance described in (1) above; (3) a 0.35% DAC
tax charge; (4) a 2.5% premium tax rate; (5) a daily charge against the Separate
Account for mortality and expense risks equivalent to an effective annual rate
of .45% of the average daily value of the assets in the Separate Account
attributable to the Certificates; and (6) no surrender transaction charge.
These examples of Certificate performance are for a specific age, rate
class, and group mortality characteristics premium payment pattern and policy
anniversary as set forth above. The benefits are calculated for a specific
Certificate anniversary. The amount and timing of premium payments would affect
individual Certificate benefits as would any withdrawals or Certificate loans.
Performance may be shown for the systematic investment strategies made
available under the Certificates (see "Allocation of Premiums and Cash
Value--Systematic Investment Strategies"). Average annual
A-15
<PAGE>
return for each of the systematic investment strategies may be calculated by
presuming a certain dollar value at the beginning of a period, and comparing
this dollar value with the dollar value, based on historical performance for the
applicable investment divisions or the Fixed Account, at the end of the period,
expressed as a percentage. The average annual return in each case will assume
that no withdrawals have occurred and will not reflect charges against premiums,
cost of insurance or other monthly policy charges.
This Prospectus also contains illustrations based on assumed rates of
return. See "Illustrations Of Death Benefit, Cash Values And Accumulated
Premiums."
The following examples show how the hypothetical net return of the
investment division which invests in the corresponding portfolio of the Fund
would have affected benefits for a Certificate issued on the January 1
immediately following the effective date of such portfolio if that Certificate
imposed the charges and had the other characteristics discussed above under
"Illustrations." These examples assume that net premiums and related cash values
were in the applicable investment division for the entire period.
GROWTH
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ----------- -------------
<S> <C> <C> <C>
1984................................................... $ 1,247 $ 936 $ 100,938
1985................................................... 3,080 2,306 102,306
1986................................................... 4,615 3,446 103,446
1987................................................... 5,950 4,432 104,432
1988................................................... 7,789 5,786 105,786
1989................................................... 12,302 8,913 108,913
1990................................................... 12,226 8,686 108,686
1991................................................... 17,685 12,368 112,368
1992................................................... 21,056 14,541 114,541
1993................................................... 25,370 17,339 117,339
1994................................................... 25,581 17,055 117,055
1995................................................... 35,803 23,366 123,366
</TABLE>
GROWTH
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
1984................................................... $ 1,247 $ 517 $ 100,517
1985................................................... 3,080 1,208 101,208
1986................................................... 4,615 1,711 101,711
1987................................................... 5,950 2,081 102,081
1988................................................... 7,789 2,531 102,531
1989................................................... 12,302 3,724 103,724
1990................................................... 12,226 3,424 103,424
1991................................................... 17,685 4,547 104,547
1992................................................... 21,056 4,957 104,957
1993................................................... 25,370 5,448 105,448
1994................................................... 25,581 4,937 104,937
1995................................................... 35,803 6,121 106,121
</TABLE>
A-16
<PAGE>
INCOME
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ----------- -------------
<S> <C> <C> <C>
1984................................................... $ 1,332 $ 1,000 $ 101,000
1985................................................... 3,091 2,314 102,314
1986................................................... 4,992 3,728 103,728
1987................................................... 6,101 4,544 104,544
1988................................................... 7,904 5,872 105,872
1989................................................... 10,252 7,412 107,412
1990................................................... 12,572 8,903 108,903
1991................................................... 16,096 11,216 111,216
1992................................................... 18,465 12,700 112,700
1993................................................... 21,809 14,835 114,835
1994................................................... 22,274 14,730 114,730
1995................................................... 27,978 18,052 118,052
</TABLE>
INCOME
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
1984................................................... $ 1,332 $ 552 $ 100,552
1985................................................... 3,091 1,212 101,212
1986................................................... 4,992 1,853 101,853
1987................................................... 6,101 2,125 102,125
1988................................................... 7,904 2,563 102,563
1989................................................... 10,252 3,077 103,077
1990................................................... 12,572 3,468 103,468
1991................................................... 16,096 4,062 104,062
1992................................................... 18,465 4,237 104,237
1993................................................... 21,809 4,506 104,506
1994................................................... 22,274 4,051 104,051
1995................................................... 27,978 4,373 104,373
</TABLE>
DIVERSIFIED
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ----------- -------------
<S> <C> <C> <C>
1987................................................... $ 1,142 $ 857 $ 100,857
1988................................................... 2,486 1,862 101,862
1989................................................... 4,393 3,282 103,282
1990................................................... 5,570 4,151 104,151
1991................................................... 8,333 6,195 106,195
1992................................................... 10,419 7,538 107,538
1993................................................... 13,018 9,233 109,233
1994................................................... 13,744 9,588 109,588
1995................................................... 18,936 13,031 113,031
</TABLE>
A-17
<PAGE>
DIVERSIFIED
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
1987................................................... $ 1,142 $ 473 $ 100,473
1988................................................... 2,486 970 100,970
1989................................................... 4,393 1,612 101,612
1990................................................... 5,570 1,910 101,910
1991................................................... 8,333 2,657 102,657
1992................................................... 10,419 3,080 103,080
1993................................................... 13,018 3,554 103,554
1994................................................... 13,744 3,425 103,425
1995................................................... 18,936 4,267 104,267
</TABLE>
STOCK INDEX
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ----------------- ------------- -------------
<S> <C> <C> <C>
1991................................................... $ 1,357 $ 1,019 $ 101,019
1992................................................... 2,734 2,047 102,047
1993................................................... 4,249 3,174 103,174
1994................................................... 5,508 4,105 104,105
1995................................................... 9,020 6,704 106,704
</TABLE>
STOCK INDEX
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ----------------- ------------- -------------
<S> <C> <C> <C>
1991................................................... $ 1,357 $ 563 $ 100,563
1992................................................... 2,734 1,070 101,070
1993................................................... 4,249 1,566 101,566
1994................................................... 5,508 1,894 101,894
1995................................................... 9,020 2,892 102,892
</TABLE>
AGGRESSIVE GROWTH
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ----------- -------------
<S> <C> <C> <C>
1989................................................... $ 1,338 $ 1,004 $ 101,004
1990................................................... 2,327 1,743 101,743
1991................................................... 5,437 4,061 104,061
1992................................................... 7,372 5,492 105,492
1993................................................... 10,389 7,717 107,717
1994................................................... 11,207 8,130 108,130
1995................................................... 16,018 11,414 111,414
</TABLE>
AGGRESSIVE GROWTH
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE DEATH BENEFIT
- ------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
1989................................................... $ 1,338 $ 554 $ 100,554
1990................................................... 2,327 909 100,909
1991................................................... 5,437 2,002 102,002
1992................................................... 7,372 2,558 102,558
1993................................................... 10,389 3,396 103,396
1994................................................... 11,207 3,427 103,427
1995................................................... 16,018 4,567 104,567
</TABLE>
A-18
<PAGE>
INTERNATIONAL STOCK
BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND DEATH
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE BENEFIT
- ----------------------------------------------------------- --------------- ----------- ------------
<S> <C> <C> <C>
1992....................................................... $ 1,143 $ 858 $ 100,858
1993....................................................... 3,110 2,329 102,329
1994....................................................... 4,400 3,286 103,286
1995....................................................... 5,729 4,268 104,268
</TABLE>
INTERNATIONAL STOCK
BASED ON GUARANTEED CHARGES
<TABLE>
<CAPTION>
PREMIUMS
ACCUMULATED
CERTIFICATE YEAR ENDING AT FUND DEATH
ON DECEMBER 31ST OF RATES OF RETURN CASH VALUE BENEFIT
- ----------------------------------------------------------- --------------- ----------- ------------
<S> <C> <C> <C>
1992....................................................... $ 1,143 $ 474 $ 100,474
1993....................................................... 3,110 1,219 101,219
1994....................................................... 4,400 1,632 101,632
1995....................................................... 5,729 1,983 101,983
</TABLE>
From time to time the Separate Account may advertise its performance ranking
information among similar investments as compiled by Lipper Analytical Services
Inc., Morningstar, Inc. and other independent organizations.
From time to time the Separate Account may compare the performance of its
investment divisions with the performance of common stocks, long-term government
bonds, long-term corporate bonds, intermediate-term government bonds, Treasury
Bills, certificates of deposit and savings accounts. The Separate Account may
use the Consumer Price Index in its advertisements as a measure of inflation for
comparison purposes.
BENEFIT AT FINAL DATE
If the covered person is living, MetLife will pay to the Owner the cash
value of the Certificate on the Final Date, reduced by any outstanding
indebtedness (see "Certificate Benefits--Cash Value"). The Final Date of a
Certificate is the Certificate anniversary on which the covered person is 95 or
later, if so requested by the Owner and permitted by law (see "Federal Tax
Matters").
OPTIONAL INCOME PLANS
During the covered person's lifetime, the Owner may arrange for the cash
surrender value to be paid in a single sum, in an account that earns interest or
under one or more of the available optional income plans. For more specifics
regarding optional income plans, see the Appendix to Prospectus. These choices
are also available at the Final Date. If no election is made, MetLife will place
the amount in an account that earns interest. The payee will have immediate
access to all or any part of the account.
When the insurance proceeds are payable in a single sum, the beneficiary
may, within one year of the covered person's death, select one or more of the
optional income plans, if no payments have yet been made. If the insurance
proceeds become payable under an optional income plan and the beneficiary has
the right to withdraw the entire amount, the beneficiary may name and change
contingent beneficiaries.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, one or more of the optional insurance
benefits described in the Appendix to Prospectus, may be included with a
Certificate by rider. The cost of any optional insurance benefits will be
deducted as part of the monthly deduction (see "Charges and Deductions--Monthly
Deduction From Cash Value"). See the Appendix to Prospectus, for a discussion of
how certain riders affect the benefits and the exercise of certain rights under
the Certificate.
A-19
<PAGE>
PAYMENT AND ALLOCATION OF PREMIUMS
ISSUANCE OF A CERTIFICATE
Certificates will only be offered to eligible employees, and their spouses
when provided by the participating entity. Individuals wishing to purchase a
Certificate must complete an enrollment form which must be received in good
order by the Administrative Office before a Certificate will be issued or any
investment return will commence thereunder. A Certificate will not be issued
with a specified face amount less than the Minimum Specified Face Amount.
Acceptance is subject to MetLife's underwriting rules. MetLife reserves the
right to reject an enrollment for any reason permitted by law.
PREMIUMS
The Owner is not required to pay any specific amount of premiums. MOREOVER
THE PAYMENT OF PREMIUMS WILL NOT GUARANTEE THAT THE CERTIFICATE REMAINS IN
FORCE. Instead, the duration of the Certificate while the Group Policy is in
force depends upon the Certificate's cash surrender value (see "Certificate
Termination and Reinstatement While the Group Policy is in
Effect--Termination").
Premiums will be paid through payroll deduction, where provided by the
participating entity. A participating entity may remit payroll deductions to
MetLife as much as 30 days after the deduction is made. If there is no payroll
deduction available, an Owner may elect to pay the premium quarterly or
annually.
Subject to the minimum and maximum premium limitations described below, an
Owner may make unscheduled premium payments at any time in any amount. The
Certificate, therefore, provides the Owner with the flexibility to vary the
frequency and amount of premium payments to reflect changing financial
conditions.
During the first Group Policy year, the portion of the first premium payment
under each Certificate allocated to investment divisions of the Separate Account
will be allocated to the Fixed Account from the Investment Start Date until the
Allocation Date as discussed in detail under "Allocation of Net Premiums,"
below. Thereafter, the portion of a premium payment allocated to the investment
divisions of the Separate Account under such Certificates and any portion of
premium payments allocated to the investment divisions of the Separate Account
under Certificates issued after the first Group Policy year are credited to the
Separate Account as of the Date of Receipt of the premium payment, together with
any necessary allocation instructions in good order from the participating
entity. The portion of each premium payment under each certificate allocated to
the Fixed Account is credited to the Fixed Account as of the Date of Receipt.
PREMIUM LIMITATIONS. The Certificate will terminate after a grace period
commencing on a monthly anniversary when the cash surrender value is
insufficient to pay the monthly deduction on that date. Except as described
below, the total of all premiums paid, both planned and unplanned, can never
exceed the then current maximum premium limitation determined by Internal
Revenue Code rules relating to the definition of life insurance. If at any time
a premium is paid that would result in total premiums exceeding the then current
maximum premium limitations, MetLife will accept only that portion of the
premium that will make total premiums equal the limit. Any part of the premium
in excess of that amount will be refunded, and no further premiums will be
accepted until allowed by the maximum premium limitations. These limitations
will not apply to any premium that is required to be paid in order to prevent
the Certificate from terminating.
There may be cases where the total of all premiums paid could cause the
Certificate to be classified as a modified endowment contract (see "Federal Tax
Matters"). The annual statement (see "Reports") sent to each Owner will include
information regarding the modified endowment contract status of a Certificate.
In cases where a Certificate is not an irrevocable modified endowment contract,
the annual statement will indicate what action the Certificate owner can take to
reverse the modified endowment contract status of the Certificate.
The first premium may not be less than the planned periodic premium. Every
unplanned premium payment must be at least $100. Premium payments less than
these minimum amounts will be refunded to the Owner. These minimum premium
limits can be changed by MetLife. No increase will take effect until 90 days
after notice is sent to the Owner.
A-20
<PAGE>
ALLOCATION OF PREMIUMS AND CASH VALUE
NET PREMIUMS. The net premium equals the premium paid less premium expense
charges (see "Charges and Deductions--Premium Expense Charges").
ALLOCATION OF NET PREMIUMS. In the enrollment form for a Certificate, the
Owner indicates the initial allocation of net premiums among the Fixed Account
and the investment divisions of the Separate Account. In some cases, the
participating entity retains the right to allocate the portion of any net
premiums it pays rather than the Owner pays among the Fixed Account and the
investment divisions of the Separate Account unless and until the covered person
retires, as determined by the participating entity (if the covered person is
employed by the participating entity), or the Certificate becomes portable. The
Certificate includes a description of the Owner's right to allocate net
premiums. The minimum percentage of each premium that may be allocated to the
Fixed Account or any investment division of the Separate Account is 10%.
Allocation percentages must be in whole numbers; for example, 33 1/3% may not be
chosen. The Owner may change the allocation of future net premiums without
charge at any time by providing MetLife with written notification at the
Administrative Office. The change will be effective as of the Date of Receipt of
the notice at the Administrative Office.
A newly-issued Certificate is credited with an investment return commencing
with the date the first premium for that Certificate is received, or, if later,
the Date of Certificate. With one exception, the investment return that
commences on this "Investment Start Date" is based on the allocation among the
Fixed Account and the investment divisions of the Separate Account selected by
the Owner (or, to the extent mentioned in the preceding paragraph, the
participating entity). The one exception is for Certificates that are issued
during the first year that the related Group Policy has been in effect. For
those Certificates, the initial premium payments allocated to the investment
division of the Separate Account will be allocated to and earn the current
interest rate in the Fixed Account during the 20 day period of time from the
Investment Start Date to the Allocation Date. Thereafter, the investment return
is based on the investment allocation selected by the Owner or participating
entity as mentioned above.
The Certificate's cash value in the investment divisions of the Separate
Account will vary with the investment experience of these investment divisions,
and the Owner bears this investment risk. Owners should periodically review
their allocations of net premiums and cash values in light of market conditions
and their overall financial planning requirements.
CASH VALUE TRANSFERS. Except as described below, on and after the
Allocation Date the Owner may transfer cash value among the Fixed Account and
investment divisions of the Separate Account. In some cases, the participating
entity may retain the right to transfer the portion of any cash value
attributable to net premiums it pays rather than the Owner pays among the Fixed
Account and the investment divisions of the Separate Account unless and until
the covered person retires, as determined by the participating entity (if the
covered person is employed by the participating entity) or the Owner's
Certificate becomes portable. In addition, in some cases, the maximum amount
that may be transferred from the Fixed Account in any Certificate year is the
greater of $200 or 25% of the largest amount in the Fixed Account over the last
four Certificate years, or, if the Certificate has been in effect for less than
that period, since the Certificate date. This limit does not apply to a full
surrender, to any loans taken or to any transfers made under a systematic
investment strategy (see "Systematic Investment Strategies").The Certificate
includes a description of the Owner's cash value transfer rights. There is no
charge for transfers.
A transfer must be made in either dollar amounts or a percentage in whole
numbers. The minimum amount that may be transferred is the lesser of $200 or the
total amount in an investment division or, if the transfer is from the Fixed
Account, the total amount in the Fixed Account. Transferring cash value from one
or more investment divisions and/or the Fixed Account into one or more other
investment divisions and/or the Fixed Account counts as one transfer. MetLife
will effectuate transfers and determine all values in connection with transfers
as of the Date of Receipt of written notice at the Administrative Office, except
in the limited circumstances described under "Other Certificate
Provisions--Payment Deferment," and "The Fixed Account--Death Benefit Transfer,
Withdrawal, Surrender and Certificate Loan Rights."
A-21
<PAGE>
Transfers are not taxable transactions under current law. Transfer requests
must be in writing in a form acceptable to MetLife, or in another form of
communication acceptable to MetLife.
MetLife reserves the right, if permitted by state law, to allow Owners to
make transfer requests by telephone. If MetLife decides to permit this transfer
procedure, and an Owner elects to participate in the transfer procedure, the
following will apply: the Owner will authorize MetLife to act upon the telephone
instructions of any person purporting to be the Owner, assuming MetLife's
procedures have been followed, to make transfers both from amounts in the
Certificate's Fixed Account and in the Separate Account. MetLife will institute
reasonable procedures to confirm that any instructions communicated by telephone
are genuine. All telephone calls will be recorded, and the Owner will be asked
to produce the Owner's personalized data prior to MetLife initiating any
transfer requests by telephone. Additionally, as with other transactions, the
Owner will receive a written confirmation of any such transfer. Neither MetLife
nor the Separate Account will be liable for any loss, expense or cost arising
out of any requests that MetLife or the Separate Account reasonably believe to
be genuine. In the event that these transfer procedures are instituted and in
the further event that an Owner who has elected to use such procedures
encounters difficulty with them, such Owner should make the request to the
Administrative Office.
SYSTEMATIC INVESTMENT STRATEGIES. For certain groups, MetLife may permit
the Owner to submit a written authorization directing MetLife to make transfers
on a continuing periodic basis from one investment division to another or to the
Fixed Account. MetLife currently offers three such investment strategies: the
"Equity Generator," the "Equalizer" and the "Allocator." Both the "Equity
Generator" and the "Allocator" may be elected at any time. The "Equalizer" may
be elected only on a Certificate anniversary. Only one of these systematic
investment strategies may be in effect at any one time. The Owner may submit a
written request electing a strategy or directing MetLife to cancel a systematic
investment strategy at any time. The election of any systematic investment
strategy will become effective on the later of the Allocation Date and the end
of the free look period.
Under the "Equity Generator," Owners may have the interest earned on amounts
in the Fixed Account transferred to the Stock Index Investment Division. Any
such transfer from the Fixed Account to the Stock Index Investment Division will
be made at the beginning of each Certificate month following the Certificate
month in which the interest is earned. The transfer will only be made for a
month during which at least $20.00 in interest is earned. Amounts earned during
a month in which less than $20.00 in interest is earned will remain in the Fixed
Account.
Under the "Equalizer," at the beginning of each Certificate month, a
transfer is made from the Stock Index investment division to the Fixed Account
or from the Fixed Account to the Stock Index investment division in order to
make the Fixed Account and Stock Index investment division equal in value. While
the "Equalizer" is in effect, any cash value transfer out of the Stock Index
investment division that is not part of this systematic investment strategy will
automatically terminate the "Equalizer" election. The Owner may then reelect the
"Equalizer" strategy commencing on the next Certificate anniversary.
Under the "Allocator," at the beginning of each Certificate month, an amount
designated by the Owner is transferred from the Fixed Account to any investment
division(s) specified by the Owner. The Owner may choose to do this in one of
the following three ways: (1) designating an amount to be transferred from the
Fixed Account each month until amounts in that investment division are
exhausted; (2) designating an amount to be transferred from the Fixed Account
for a certain number of months; or (3) designating a total amount to be
transferred from the Fixed Account in equal monthly installments over a certain
number of months. The Owner's designations must allow the "Allocator" to remain
in effect for at least three months.
TERMINATION OF PARTICIPATING ENTITY PARTICIPATION IN THE GROUP POLICY
Participation in the Group Policy will terminate if the participating entity
decides to terminate its participation in the Group Policy. In addition, MetLife
may also terminate the participating entity's participation in the Group Policy
if during any twelve month period, the aggregate specified face amount for all
Owners under the Group Policy or the number of Certificates falls by certain
amounts or below the minimum permissible levels established by MetLife. Both the
participating entity and MetLife must provide ninety days' written notice to the
A-22
<PAGE>
other as well to the Owners before terminating participation in the Group
Policy. Termination of participation in the Group Policy means that the
participating entity will no longer remit premiums to MetLife through payroll
deduction and that no new Certificates will be issued under the participating
entity's group. Owners of portable Certificates as defined in the Certificate as
of the Certificate monthly anniversary next following the termination of the
participating entity's participation in the Group Policy and Owners who
exercised the paid-up Certificate provision as of a date not later than the last
Certificate monthly anniversary immediately prior to notice of termination being
sent to Owners will remain Owners of the Certificates.
EFFECT OF TERMINATION OF GROUP POLICY PARTICIPATION ON OWNERS
A Termination by the participating entity or MetLife of the participating
entity's participation in the Group Policy will not affect Owners whose
Certificates have become portable or who have exercised their paid-up
Certificate option by dates specified in the preceding paragraph. For all other
Owners, the following applies: If the participating entity replaces the Group
Policy with another life insurance product that accumulates cash value,
Certificates will be terminated and cash surrender values of each Owner will be
transferred to the other life insurance product. If the Owner does not elect to
be covered under the new product or if the new product does not provide coverage
for the Owner, the Certificate's cash surrender value will be transferred to the
Owner. If the participating entity replaces the Group Policy with a life
insurance product that does not accumulate cash value, Certificates will be
terminated and Owners will receive their cash surrender value. In this case and
in any other case where Owners receive their cash surrender value, Owners may
purchase an annuity product from MetLife instead. If the participating entity
does not replace the Group Policy with another life insurance product, then,
depending on the terms of the Certificate, Owners may have the option of
electing to become Owners of portable Certificates or Owners of paid-up
Certificates, or Owners may have the option of electing the standard conversion
rights set forth in the Certificate or receiving the cash surrender value of
their Certificates. If an Owner becomes the Owner of a portable Certificate, the
current cost of insurance may change but will never be higher than the
guaranteed cost of insurance. If an Owner elects the standard conversion rights,
insurance provided will be substantially less (and in some cases nominal) than
the insurance provided under the Certificate. The Owner will receive any cash
surrender value not used to purchase such standard conversion right.
CERTIFICATE TERMINATION AND REINSTATEMENT WHILE THE GROUP POLICY IS IN EFFECT
TERMINATION. If the cash surrender value on any monthly anniversary is
insufficient to cover the monthly deduction, MetLife will notify the Owner and
any assignee of record of that shortfall. The Owner will then have a grace
period of the greater of 61 days, measured from the Certificate monthly
anniversary, or 30 days after the date notice is mailed, to make sufficient
payment. Failure to make a sufficient payment within the grace period will
result in termination of the Certificate without any cash surrender value. If
the covered person dies during the grace period, the insurance proceeds will
still be payable, but any accrued and unpaid monthly deductions will be deducted
from the proceeds.
REINSTATEMENT. Unless the Group Policy is terminated and the Owner would
not have been permitted to retain the Certificate on a portable or paid-up basis
(see, "Effect of Termination of Group Policy Participation on Owners" above), a
terminated Certificate may be reinstated any time within 3 years (or longer
where required by state law) after the end of the grace period and before the
Final Date by submitting the following items to MetLife: (1) a written request
for reinstatement; (2) evidence of insurability satisfactory to MetLife; and (3)
a premium that, after the deduction of the premium expense charges (see "Charges
and Deductions-- Premium Expense Charges"), is large enough to cover the monthly
deductions through the end of the grace period and for at least the two
Certificate months commencing with the effective date of reinstatement.
Indebtedness on the date of termination will be cancelled and need not be
repaid and will not be reinstated. The amount of cash surrender value on the
date of reinstatement will be determined in the manner set forth in the
Certificate.
The date of reinstatement will be the the monthly anniversary next following
the date of approval of the request. The terms of the original Certificate,
including the insurance rates provided therein, will apply to the reinstated
Certificate. A reinstated Certificate is subject to a new two year period of
contestability (see "Other Certificate Provisions--Incontestability").
A-23
<PAGE>
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGES
TAX CHARGES. Two charges are currently made for taxes related to premiums.
These taxes include any federal, state or local taxes measured by or based on
the amount of premiums received by MetLife. A charge of .35% of each premium
payment is made for the purpose of recovering a portion of the DAC tax charge.
MetLife represents that this charge is reasonable in relation to MetLife's
increased federal income tax burden under the Internal Revenue Code resulting
from the receipt of premiums. An additional charge is made for state premium
taxes. Premium taxes vary from state to state, and may be zero in some cases.
One rate will be charged for each group. The initial charge for each group will
be an estimate of anticipated taxes to be incurred on behalf of each Group
Policy during the first Group Policy year. For each Group Policy year after the
first Group Policy year, the state premium tax charge will be based on
anticipated taxes taking into account actual state and local premium taxes
incurred on behalf of each Group Policy in the prior year and known factors
affecting the coming year's taxes. This charge may vary based on changes in the
law or changes in the residences of the Owners. This charge may vary from 0 to
5% of premium. MetLife will waive state premium taxes for Internal Revenue Code
section 1035 exchanges from any other policy to a Certificate. MetLife will
waive the DAC tax charge for Internal Revenue Code section 1035 exchanges from
another MetLife policy to a Certificate. MetLife does not anticipate making a
profit on this charge.
MONTHLY DEDUCTION FROM CASH VALUE
The monthly deduction from cash value includes the cost of insurance charge,
the charge for optional insurance benefits added by rider (see "Certificate
Benefits--Optional Insurance Benefits"), and the administration charges. The
cost of insurance charge, and the administration charges are discussed
separately in the paragraphs that follow. The charges that comprise the monthly
deduction can vary depending upon the Group Policy under which an Owner's
Certificate is issued. The Certificate describes the charges applicable to each
Owner.
The monthly deduction accrues on each monthly anniversary commencing with
the Date of Certificate; however, the actual deduction may be made up to 45 days
after each such monthly anniversary. It will be allocated among the Fixed
Account and each investment division of the Separate Account on a Pro Rata
Basis. See "Payment and Allocation of Premiums--Issuance of a Certificate"
regarding when insurance coverage starts under a newly issued Certificate.
COST OF INSURANCE. Because the cost of insurance depends upon a number of
variables, it can vary from month to month. MetLife will determine the monthly
cost of insurance charge by multiplying the applicable cost of insurance rate or
rates by the insurance amount for each Certificate month. The insurance amount
for a Certificate month is (a) the death benefit at the beginning of the
Certificate month, less (b) the cash value at the beginning of the Certificate
month.
The insurance amount will be affected by changes in the specified face
amount of the Certificate (see "Certificate Benefits--Death Benefits"). The
insurance amount and therefore the cost of insurance will be greater if the
specified face amount is increased. If the minimum death benefit is in effect
(see "Death Benefit--Minimum Death Benefit"), then the cost of insurance will
vary directly with the cash value.
The cost of insurance charge will be deducted as part of a monthly combined
charge consisting of the cost of insurance charge and a component of the charge
for administration (see "Administration Charge").
COST OF INSURANCE RATE. Cost of insurance rates are based on the age and
rate class of the covered person and group mortality characteristics, the
particular characteristics (such as the rate class structure, the degree of
stability in the charges sought by the participating entity and portability
features) under the Group Policy that are agreed to by MetLife and the
participating entity, and the amount of any surplus to be transferred to MetLife
from any previous insurer (see "Other Certificate Provisions--Dividends"). The
actual monthly cost of insurance rates will be based on MetLife's expectations
as to future experience. They will not, however, be greater than the guaranteed
cost of insurance rates set forth in the Certificate. These guaranteed rates may
be up to 150% of the maximum rates that could be charged based on the 1980 CSO
Table. The maximum guaranteed rates are higher than the 1980 CSO Table because
MetLife uses simplified underwriting
A-24
<PAGE>
and guaranteed issue procedures whereby the covered person may not be required
to submit to a medical or paramedical examination, and may provide coverage to
groups that present substandard risk characteristics according to underwriting
criteria. Under certain circumstances a covered person may be required to submit
to a medical or paramedical examination. The current cost of insurance rates for
most groups are lower than 100% of the 1980 CSO Table. Any change in the cost of
insurance rates will apply to all persons of the same insuring age, rate class
and group. MetLife reviews its cost of insurance rates annually and adjusts the
rates from time to time based on several factors including the number of
Certificates in force for each group, the number of Certificates in the group
surrendered or becoming portable during the period and the actual experience of
the group.
RATE CLASS. The rate class of a covered person affects the cost of
insurance rate. MetLife and the participating entity will agree to the number of
classes and characteristics of each class. The classes may vary by smokers and
nonsmokers, active and retired status, Owners of portable Certificates and other
Owners, and/or any other nondiscriminatory classes agreed to by the
participating entity. Where smoker and non-smoker divisions are provided, a
covered person who is in the non-smoker division of a rate class will have a
lower cost of insurance than a covered person in the smoker division of the same
rate class, even if each covered person has an identical Certificate.
ADMINISTRATION CHARGE. The monthly administration charge is comprised of
two components. The first component of the administration charge is a charge
that is deducted as part of the monthly combined charge (the other part of the
monthly combined charge is the cost of insurance, as described above). This
component will never exceed 50% of the monthly combined charge. Since this
component of the monthly administration charge will be related to the insurance
amount of the Certificate, any change in the specified face amount of a
Certificate may result in a change in this component of the monthly
administration charge. The second component of the charge is a charge which may
be up to $3.00 per Certificate per month as specified in the Certificate. The
Certificate will describe the administration charge applicable to each Owner.
This charge will be used to compensate MetLife for expenses incurred in the
administration of the Certificate as a group variable universal life
certificate. These expenses include the cost of processing enrollments,
determining insurability, and establishing and maintaining Certificate records.
Differences in the administration charge rates applicable to different Group
Policies will be determined by MetLife based on expected differences in the
administrative costs under the Certificates or in the amount of revenues that
MetLife expects to derive from the charge. Such differences may result, for
example, from features under each Group Policy that are agreed to by MetLife and
the participating entity; the extent to which certain administrative functions
in connection with the Group Policy are to be performed by MetLife or by the
participating entity; and the expected average Certificate size. No profit is
expected to be derived from the aggregate of these administration charges.
CHARGES AGAINST THE SEPARATE ACCOUNT
CHARGE FOR MORTALITY AND EXPENSE RISKS. A daily charge is made against the
Separate Account for mortality and expense risks assumed by MetLife. The amount
of the charge is equivalent to an effective annual rate of at least .45% and is
guaranteed not to exceed an effective annual rate of .90% of the average daily
value of the assets in the Separate Account which are attributable to the
Policies. MetLife reserves the right, if permitted by applicable law, to change
the structure of mortality and expense risk charge so that it is charged on a
monthly basis as a percentage of cash value attributable to the Separate Account
or so that it is charged as a component of the monthly combined charge.
The mortality risk assumed is that covered persons may live for a shorter
period of time than estimated and, thus, a greater amount of death benefits than
expected will be payable. The expense risk assumed is that expenses incurred in
issuing and administering the Certificates will be greater than estimated.
MetLife will realize a gain if the charges prove ultimately to be more than
sufficient to cover the actual costs of such mortality and expense commitments.
If the charges are not sufficient, the loss will fall on MetLife. If its
estimates of future mortality and expense experience are accurate, MetLife
anticipates that it will realize a profit from the mortality and expense risk
charge; however if such estimates are inaccurate, MetLife could incur a loss.
A-25
<PAGE>
Differences in the mortality and expense risk charge rates applicable to
different Group Policies will be determined by MetLife based on differences in
the levels of mortality and expense risks under those Policies. Differences in
mortality and expense risk arise principally from the fact that (a) the factors
discussed above under "Monthly Deduction From Cash Value" on which the cost of
insurance and administration charges are based are more uncertain in some cases
than in others and (b) MetLife's ability to recover any unexpected mortality and
administrative expense costs from the cost of insurance and administration
charges will also vary from case to case depending on the maximum rates for such
charges agreed upon by MetLife and the participating entity. MetLife will
determine cost of insurance, administration, and mortality and expense risk
charge rates pursuant to its established actuarial procedures, and in doing so
MetLife will not discriminate unreasonably or unfairly against Owners of
Certificates under any Group Policy.
CHARGE FOR INCOME TAXES. Currently, no charge is made against the Separate
Account for income taxes. However, MetLife may decide to make such a charge in
the future (see "Federal Tax Matters").
GUARANTEE OF CERTAIN CHARGES
MetLife guarantees, and may not increase the rates specified in the
Certificate for the following charges: the charge for the estimated cost of
Federal income tax treatment of deferred acquisition costs, apart from any
change in the law; the maximum cost of insurance charge; the maximum
administration charge; and the maximum charge for mortality and expense risks
with respect to the Certificates.
OTHER CHARGES
FUND INVESTMENT MANAGEMENT FEE AND EXPENSES. Shares of the Fund are
purchased for the Separate Account at their net asset value, which reflects Fund
fees and expenses as described more fully under "What are Separate Account UL,
the Fixed Account and the Metropolitan Series Fund?" and in the attached
prospectus for the Fund.
The Certificates do not impose any charges for sales expenses. Such expenses
will be paid from other sources, including any excess accumulated charges for
mortality and expense risks under the Certificates, any other gains attributable
to operations with respect to the Certificates and MetLife's general assets and
surplus.
ILLUSTRATIONS OF DEATH BENEFIT, CASH VALUES AND ACCUMULATED PREMIUMS
The tables in this section illustrate the way in which a Certificate's death
benefit and cash value could vary over an extended period of time assuming that
all premiums are allocated to and remain in the Separate Account for the entire
period shown and hypothetical gross investment rates of return for the Fund
(i.e., investment income and capital gains and losses, realized or unrealized)
equivalent to constant gross (after tax) annual rates of 0%, 6% and 12%. The
tables are based on the payment of monthly premiums (see "Premiums--Premium
Limitations"), for a specified face amount of $100,000 for an individual who is
age 40. The illustrations assume no Certificate loans have been made; therefore
cash surrender values for the guaranteed illustrations would be $25 less than
the cash values shown due to the deduction of a surrender transaction charge,
and cash surrender values for the current illustrations would be equal to the
cash values shown because it is assumed that no surrender transaction charge is
deducted.
The guaranteed illustrations assume: (1) that the covered person is in a
rate class that has maximum guaranteed cost of insurance charges equal to 100%
of the maximum rates that could be charged based on the 1980 CSO Table; (2) a
$3.00 per Certificate per month administration charge, plus a charge for
administration included as part of the monthly combined charge equal to the same
amount charged for the cost of insurance described in (1) above; (3) a .35% DAC
tax charge; (4) a 2.5% premium tax rate; (5) a daily charge against the Separate
Account for mortality and expense risks equivalent to an effective annual rate
of .90% of the average daily value of the assets in the Separate Account
attributable to the Certificates; and (6) a surrender transaction charge of $25.
A-26
<PAGE>
The current illustrations assume: (1) that the covered person is in a rate
class that does not distinguish between smoker and nonsmoker and has current
standardized cost of insurance charges as set forth in the following table:
<TABLE>
<CAPTION>
MONTHLY CURRENT COST
OF INSURANCE RATE
- ---------------------------------------
RATE PER THOUSAND DOLLARS
AGE OF INSURANCE
- ---------- ---------------------------
<S> <C>
40 to 44 $ 0.17
45 to 49 $ 0.29
50 to 54 $ 0.48
55 to 59 $ 0.75
60 to 64 $ 1.17
65 to 69 $ 2.10
</TABLE>
Comparable illustrations for a covered person in MetLife's standard smoker
underwriting risk classification or in a substandard risk classification would
show lower cash values and, therefore, a lower death benefit. Conversely,
comparable illustrations for a covered person in MetLife's standard nonsmoker
underwriting risk classification would show higher cash values and cash
surrender values and, therefore, a higher death benefit; (2) a $1.50 per
Certificate per month administration charge, plus a charge for administration
included as part of the monthly combined charge equal to 20% of the amount
charged for the cost of insurance described in (1) above; (3) a .35% DAC tax
charge; (4) a 2.5% premium tax rate; (5) a daily charge against the Separate
Account for mortality and expense risks equivalent to an effective annual rate
of .45% of the average daily value of the assets in the Separate Account
attributable to the Certificates; and (6) no surrender transaction charge.
The amounts shown for the death benefits and cash values also take into
account the daily charge to the Fund for investment management services
equivalent to an annual rate of .42% of the average daily value of the aggregate
net assets of the available Fund portfolios (an average of the rates for the six
available portfolios of the Fund) and .10% for other direct expenses of the
available Fund portfolios (the average daily rate of such expenses for the
available Fund portfolios during 1995). Taking account of the charges for
investment management services, other Fund expenses and the current charge for
mortality and expense risks, the gross annual investment rates of return of 0%,
6% and 12% correspond to actual (or net) annual rates of: -.96%, 4.98% and
10.92%, respectively. With the guaranteed charges, the gross annual investment
rates of return of 0%, 6% and 12% correspond to actual (or net) annual rates of:
- -1.41%, 4.50% and 10.42%, respectively.
The guaranteed maximum charge illustration is based on rates charged under a
hypothetical representative standard Group Policy; the current charge
illustrations are based on rates that would be representative of such a Group
Policy (see "Monthly Deduction From Cash Value--Cost of Insurance Rate"). The
actual maximum current charge rates can be expected to vary from one Group
Policy to another.
The second column of the tables shows the amount which would accumulate if
an amount equal to the annual planned premium were invested to earn interest,
after taxes, at 5% compounded annually.
Upon request, MetLife will furnish an illustration reflecting the proposed
covered person's age, Certificate charges, the specified face amount or premium
amount requested, frequency of premium payments, and any available rider
requested.
A-27
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
GUARANTEED CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF
CERTIFICATE INTEREST -------------------------- -----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ------------------------------ ----------- ------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1............................ $ 1,232 $ 496 $ 512 $ 528 $100,496 $100,512 $100,528
2............................ 2,526 931 992 1,053 100,931 100,992 101,053
3............................ 3,885 1,303 1,433 1,572 101,303 101,433 101,572
4............................ 5,311 1,606 1,829 2,078 101,606 101,829 102,078
5............................ 6,809 1,837 2,174 2,564 101,837 102,174 102,564
6............................ 8,382 1,993 2,460 3,025 101,993 102,460 103,025
7............................ 10,033 2,070 2,679 3,452 102,070 102,679 103,452
8............................ 11,767 2,064 2,824 3,836 102,064 102,824 103,836
9............................ 13,588 1,971 2,885 4,168 101,971 102,885 104,168
10........................... 15,499 1,783 2,849 4,431 101,783 102,849 104,431
15........................... 26,590 0(3) 519 3,863 0(3) 100,519 103,863
20........................... 40,746 0(3) 0 (3) 0 (3) 0(3) 0(3) 0(3)
25........................... 58,812 0(3) 0 (3) 0 (3) 0(3) 0(3) 0(3)
30........................... 81,870 0(3) 0 (3) 0 (3) 0(3) 0(3) 0(3)
</TABLE>
- ---------
(1) Assumes monthly payments of $100 paid at the beginning of each Certificate
month. The values would vary from those shown if the amount or frequency of
payments varies.
(2) Assumes no loan or partial withdrawal has been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium payments
may cause the Certificate to terminate because of insufficient cash value.
(3) Zero value in cash value, cash surrender value and death benefit indicate
termination of insurance coverage in the absence of a sufficient additional
premium payment; see "Payment and Allocation of Premiums--Termination," on
page A-24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER
AND DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT,
CASH VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CERTIFICATE YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH
VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY
METLIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-28
<PAGE>
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE(1)
ISSUE AGE 40
SPECIFIED FACE AMOUNT: $100,000
CURRENT CHARGES
<TABLE>
<CAPTION>
TOTAL CASH VALUE(2) TOTAL DEATH BENEFIT(2)
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
END OF AT 5% RATES OF RETURN OF RATES OF RETURN OF
CERTIFICATE INTEREST -------------------------- -----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12%
- ------------------------------ ----------- ------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1............................ $ 1,232 $ 898 $ 927 $ 956 $100,898 $100,927 $100,956
2............................ 2,526 1,788 1,900 2,015 101,788 101,900 102,015
3............................ 3,885 2,669 2,922 3,191 102,669 102,922 103,191
4............................ 5,311 3,541 3,995 4,495 103,541 103,995 104,495
5............................ 6,809 4,405 5,120 5,941 104,405 105,120 105,941
6............................ 8,382 5,089 6,125 7,362 105,089 106,125 107,362
7............................ 10,033 5,766 7,179 8,939 105,766 107,179 108,939
8............................ 11,767 6,437 8,286 10,687 106,437 108,286 110,687
9............................ 13,588 7,101 9,448 12,626 107,101 109,448 112,626
10........................... 15,499 7,758 10,668 14,777 107,758 110,668 114,777
15........................... 26,590 9,618 16,188 27,811 109,618 116,188 127,811
20........................... 40,746 9,492 21,019 47,133 109,492 121,019 147,133
25........................... 58,812 6,422 23,748 75,589 106,422 123,748 175,589
30........................... 81,870 0(3) 19,633 114,549 0(3) 119,633 214,549
</TABLE>
- ---------
(1) Assumes monthly payments of $100 paid at the beginning of each Certificate
month. The values would vary from those shown if the amount or frequency of
payments varies.
(2) Assumes no loan or partial withdrawal has been made. Excessive loans or
withdrawals, adverse investment performance or insufficient premium payments
may cause the Certificate to terminate because of insufficient cash value.
(3) Zero value in cash value, cash surrender value and death benefit indicate
termination of insurance coverage in the absence of a sufficient additional
premium payment; see "Payment and Allocation of Premiums--Termination," on
page A-24 for further details.
IT IS EMPHASIZED THAT THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN
ABOVE ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL INVESTMENT RATES OF RETURN
MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A NUMBER OF
FACTORS, INCLUDING THE PREMIUM AND CASH VALUE ALLOCATIONS MADE BY AN OWNER
AND DIFFERENT RATES OF RETURN OF THE FUND PORTFOLIOS. THE DEATH BENEFIT,
CASH VALUE AND CASH SURRENDER VALUE FOR A CERTIFICATE WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL INVESTMENT RATES OF RETURN AVERAGED 0%, 6%
AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE OR BELOW THOSE AVERAGES
FOR INDIVIDUAL CERTIFICATE YEARS OR IF ANY PREMIUMS WERE ALLOCATED OR CASH
VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE BY
METLIFE OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-29
<PAGE>
CERTIFICATE RIGHTS
LOAN PRIVILEGES
CERTIFICATE LOAN. At any time, the Owner may borrow money from MetLife
using the Certificate as the only security for the loan. Certificates under some
Group Policies may be subject to a transaction charge of up to $25 for each
loan. The smallest amount the Owner can borrow at any one time is $200. The
maximum amount that may be borrowed at any time is the loan value. The loan
value equals 75% (or higher where required by state law) of the cash surrender
value. For situations where a Certificate loan may be treated as a taxable
distribution, see "Federal Tax Matters."
ALLOCATION OF CERTIFICATE LOAN. MetLife will allocate a Certificate loan
among the Fixed Account and the investment divisions of the Separate Account on
a Pro Rata Basis.
INTEREST. Interest charges can vary depending upon the Group Policy under
which an Owner's Certificate is issued. The Certificate describes the interest
charges applicable to each Owner. The interest rate may be up to 8% per year.
The Certificate specifies the current interest rate applicable to each Owner.
Interest payments are generally due at the beginning of each Certificate year.
However, MetLife reserves the right to make interest payments due in a different
manner. If unpaid within 31 days after it is due, interest will be treated as a
new loan subject to the interest rates applicable at that time and an amount
equal to such interest due will be transferred from the Fixed Account and the
investment divisions of the Separate Account on a Pro Rata Basis to the Loan
Account. Generally, interest paid to MetLife in connection with Certificate
loans is not deductible. For further information with respect to loan interest
deductibility, counsel and other competent advisors should be consulted.
EFFECT OF A CERTIFICATE LOAN. As of the Date of Receipt of the loan
request, cash value equal to the portion of the Certificate loan allocated to
the Fixed Account and to each investment division will be transferred from the
Fixed Account and/or such investment divisions to the Certificate Loan Account,
reducing the Certificate's cash value in the accounts from which the transfer
was made. The transfer will be allocated among the Fixed Account and investment
divisions of the Separate Account on a Pro Rata Basis (see "Charges and
Deductions--Monthly Deduction from Cash Value").
Cash value in the Loan Account equal to indebtedness will be credited with
interest at a rate equal to the rate of loan interest charged less a percentage
charge, determined by MetLife. This charge may be up to 2%. Thus, the interest
rate credited may be up to 8%. The Certificate indicates the current charge
applicable to each Owner and the current interest rate credited to the amounts
in the Loan Account. The minimum rate credited to the Loan Account will be 4%
per year. NO ADDITIONAL INTEREST WILL BE CREDITED TO THE CASH VALUE IN THE LOAN
ACCOUNT, NOR WILL THE CASH VALUE IN THE LOAN ACCOUNT PARTICIPATE IN ANY
INVESTMENT EXPERIENCE APPLICABLE TO THE SEPARATE ACCOUNT.
The Certificate's cash value in the Loan Account will be the outstanding
indebtedness on the Valuation Date plus any interest credited to the Loan
Account which has not yet been allocated to the Fixed Account or the investment
divisions of the Separate Account as of the Valuation Date. Interest credited to
amounts in the Loan Account will be allocated at least once a year among the
Fixed Account and the investment divisions of the Separate Account in the same
proportion as the net premiums are then being allocated.
INDEBTEDNESS. Indebtedness equals the outstanding Certificate loan and loan
interest. If, on a monthly anniversary, indebtedness exceeds the cash value
minus the monthly deduction, MetLife will notify the Owner and any assignee of
record. If a sufficient payment is not made to MetLife within the greater of 61
days, measured from the such monthly anniversary, or 30 days after the date
notice of the start of the grace period is mailed, the Certificate will
terminate without value. The Certificate may, however, later be reinstated,
subject to certain conditions (see "Certificate Termination and Reinstatement
While the Group Policy is in Effect").
REPAYMENT OF INDEBTEDNESS. Indebtedness may be repaid any time before the
Final Date while the covered person is living. If not repaid, MetLife will
deduct indebtedness from any amount payable under the Certificate. As of the
Date of Receipt of the repayment, the Certificate's cash value in the
Certificate Loan Account securing indebtedness will be allocated among the Fixed
Account and the investment divisions of the
A-30
<PAGE>
Separate Account in the same proportion that net premiums are being allocated to
those accounts at the time of repayment. The Owner should designate whether a
payment is intended as a loan repayment or a premium payment. Any payment for
which no designation is made will be treated as a premium payment.
SURRENDER AND WITHDRAWAL PRIVILEGES
Subject to the limitations set forth below, at any time before the earlier
of the death of the covered person and the Final Date, the Owner may make a
partial withdrawal or totally surrender the Certificate by sending a written
request to Administrative Office. The maximum amount available for surrenders or
withdrawal is the cash surrender value on the Date of Receipt of the request.
Certificates under some Group Policies may be subject to a transaction charge of
up to $25 (or, if less, 2% of the amount withdrawn) for each surrender,
withdrawal or partial withdrawal. This charge would be used to defray MetLife's
costs on effecting the transaction and it would not be designed to yield any
profit to MetLife. No transaction charge will apply to the termination of a
Certificate due to the termination of the Group Policy by either the
participating entity or MetLife. For any tax consequences in connection with a
partial withdrawal or surrender, see "Federal Tax Matters."
SURRENDERS. The Owner may surrender the Certificate for its cash surrender
value. If the Certificate is being surrendered, MetLife may require that the
Certificate itself be returned along with the request. An Owner may elect to
have the proceeds paid in a single sum. If the covered person dies after the
surrender of the Certificate and payment to the Owner of the cash surrender
value but before the end of the Certificate month in which the surrender
occurred, a death benefit will be payable to the beneficiary in an amount equal
to the difference between the Certificate's death benefit and cash value, both
computed as of the surrender date.
PARTIAL WITHDRAWALS. The Owner may make a partial withdrawal from the
Certificate's cash surrender value. The minimum partial withdrawal is $200. The
amount withdrawn will be deducted from the Certificate's cash value as of the
Date of Receipt. The amount will be deducted from the Fixed Account and the
investment divisions of the Separate Account on a Pro Rata Basis. The death
benefit will be reduced by the amount withdrawn.
In some cases, the maximum amount that may be withdrawn through a partial
withdrawal from the Fixed Account in any Certificate year is the greater of $200
or 25% of the largest amount in the Fixed Account over the last four Certificate
years, or, if the Certificate has been in force less than such period, since the
Certificate date. The Certificate includes a description of the Owner's rights
to make partial withdrawals.
EXCHANGE PRIVILEGE
During the first 24 Certificate months following the issuance of the
Certificate, the Owner may exercise the Certificate exchange privilege, which
results in the transfer at any one time of the entire amount in the Separate
Account to the Fixed Account, and the allocation of all future net premiums to
the Fixed Account. This will, in effect, serve as an exchange of the Certificate
for the equivalent of a flexible premium fixed benefit life insurance policy. No
charge will be imposed on such transfer in exercising this exchange privilege.
Moreover, the Owner may subsequently transfer amounts back to one or more of the
investment divisions of the Separate Account at any time, within the limitations
described in "Allocation of Premiums and Cash Value--Cash Value Transfers."
Similarly, during the first 24 months following an increase in the specified
face amount requested by the Owner, the Owner may request a one time charge-free
transfer of the Separate Account cash value attributable to the increase to the
Fixed Account, including a transfer in the amount of any premium payments that
have been deemed attributable to the increase.
In those states which require it, the Owner may also, during the first 24
Certificate months following the issuance of the Certificate, without charge, on
one occasion exchange any Certificate still in force for a flexible premium
fixed benefit life insurance policy issued by MetLife. Upon such exchange, the
Certificate's cash value will be transferred to the General Account of MetLife.
A-31
<PAGE>
THE FIXED ACCOUNT
An Owner may allocate net premiums and transfer cash value to the Fixed
Account, which is part of the General Account of MetLife. Because of exemptive
and exclusionary provisions, interests in the Fixed Account have not been
registered under the Securities Act of 1933 and neither the Fixed Account nor
the General Account has been registered as an investment company under the 1940
Act. Accordingly, neither the General Account, the Fixed Account nor any
interests therein are generally subject to the provisions of these Acts and
MetLife has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this Prospectus relating to the
Fixed Account. Disclosures regarding the Fixed Account may, however, be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
GENERAL DESCRIPTION
This Prospectus is generally intended to serve as a disclosure document only
for the aspects of the Group Policy and Certificates involving the Separate
Account and contains only selected information regarding the Fixed Account. For
complete details regarding the Fixed Account, see the Certificate.
Subject to applicable law, MetLife has sole discretion over the investment
of the assets of the General Account, including those in the Fixed Account.
Unlike the assets of the Separate Account, the assets in the Fixed Account, as a
part of the General Account, are chargeable with liabilities arising out of any
other business of MetLife.
The allocation or transfer of funds to the Fixed Account does not entitle an
Owner to share in the investment experience of the General Account. Instead,
MetLife guarantees that cash value in the Fixed Account will accrue interest at
an effective annual rate of at least 4%, independent of the actual investment
experience of the General Account. MetLife is not obligated to credit interest
at any higher rate, although MetLife may do so, in its sole discretion.
FIXED ACCOUNT CASH VALUE
Net premiums allocated to the Fixed Account are credited to the Certificate.
The Certificate's cash value in the Fixed Account will reflect the amount and
frequency of premium payments allocated to the Fixed Account, the amount of
interest credited to amounts in the Fixed Account, any partial withdrawals, any
transfers from or to the investment divisions of the Separate Account, any
Certificate indebtedness and any charges imposed on amounts in the Fixed Account
in connection with the Certificate. ANY INTEREST METLIFE CREDITS ON THE
CERTIFICATE'S CASH VALUE IN THE FIXED ACCOUNT IN EXCESS OF THE GUARANTEED RATE
OF 4% PER YEAR WILL BE DETERMINED IN THE SOLE DISCRETION OF METLIFE. THE OWNER
ASSUMES THE RISK THAT INTEREST CREDITED TO AMOUNTS OF CASH VALUE IN THE FIXED
ACCOUNT MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 4% PER YEAR. The cash
value in the Fixed Account will be calculated on each Valuation Date.
MetLife will declare a rate of excess interest which is guaranteed until the
end of the calendar year in which the Group Policy first becomes effective.
Thereafter, as of January 1 of each year, MetLife will declare the rate of
excess interest applicable to net premium payments allocated to the Fixed
Account during each such year. As of January 1 of each year, MetLife will also
declare the rate of excess interest applicable to cash value in the Fixed
Account. MetLife may also establish multiple bands of excess interest. This
means that different rates of excess interest may apply to premium payments
received in different years. Transfers made into the Fixed Account will be
treated as new premium payments for these purposes.
The guaranteed and excess interest are credited each Valuation Date. Once
credited, that interest will be guaranteed and become part of the Certificate's
cash value in the Fixed Account. The portion of the monthly deduction that is
deducted from the Fixed Account will be charged against the most recent premiums
paid and interest credited thereto.
A-32
<PAGE>
DEATH BENEFIT, TRANSFER, WITHDRAWAL, SURRENDER, AND CERTIFICATE LOAN RIGHTS
Amounts in the Fixed Account are generally subject to the same rights and
limitations as are amounts allocated to the investment divisions of the Separate
Account with respect to transfers, withdrawals, surrenders and Certificate loans
(see "Certificate Benefits--Death Benefit," "Allocation of Premiums and Cash
Value--Cash Value Transfers," "Loan Privileges," "Surrender and Withdrawal
Privileges"). However, transfers from the Fixed Account may be subject to
additional limitations as described under "Allocation of Premiums and Cash
Value."
MetLife reserves the right to delay transfers, withdrawals, surrenders and
the payment of the Certificate loans allocated to the Fixed Account for up to
six months (see "Other Certificate Provisions--Payment and Deferment"). Payments
to pay premiums on another policy with MetLife will not be delayed.
RIGHTS RESERVED BY METLIFE
MetLife reserves the right to make certain changes if, in its judgment, they
would best serve the interests of the Owners or would be appropriate in carrying
out the purposes of the Certificates. Any changes will be made only to the
extent and in the manner permitted by applicable laws. Also, when required by
law, MetLife will obtain Owner approval of the changes and approval from any
appropriate regulatory authority. Examples of the changes MetLife may make
include:
- To operate the Separate Account in any form permitted under the 1940 Act
or in any other form permitted by law.
- To take any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act.
- To transfer any assets in any investment division to another investment
division, or to one or more separate accounts, or to the Fixed Account; or
to add, combine or remove investment divisions in the Separate Account.
- To substitute, for the Fund shares held in any investment division, the
shares of another portfolio of the Fund or the shares of another
investment company or any other investment permitted by law.
- To change the way MetLife assesses charges, but without increasing the
aggregate amount charged to the Fixed Account or the Separate Account in
connection with the Certificates.
- To make any other necessary technical changes in the Certificate in order
to conform with any action the above provisions permit MetLife to take.
If any of these changes result in a material change in the underlying
investments of an investment division to which the net premiums of a Certificate
are allocated, MetLife will notify the Owner of such change, and the Owner may
then make a new choice of investment divisions or the Fixed Account without
charge.
OTHER CERTIFICATE PROVISIONS
OWNER. The Owner of a Certificate is the covered person unless another
owner has been named in the enrollment form for the Certificate. Unless
otherwise reserved by the participating entity, the Owner is entitled to
exercise all rights under a Certificate while the covered person is alive,
including the right to name a new owner or a contingent owner who would become
the owner if the Owner should die before the covered person dies.
BENEFICIARY. The beneficiary is the person or persons to whom the insurance
proceeds are payable upon the covered person's death. The Owner may name a
contingent beneficiary to become the beneficiary if all the beneficiaries die
while the covered person is alive. If no beneficiary or contingent beneficiary
is alive when the covered person dies, the Owner (or the Owner's estate) will be
the beneficiary. While the covered person is alive, the Owner may change any
beneficiary or contingent beneficiary.
If more than one beneficiary is alive when the covered person dies, they
will be paid in equal shares, unless the Owner has chosen otherwise.
A-33
<PAGE>
INCONTESTABILITY. MetLife will not contest the validity of a Certificate
after it has been in force during the covered person's lifetime for two years
from the Date of Certificate (or date of reinstatement if a terminated
Certificate is reinstated) except with respect to certain optional insurance
benefits that may be added subsequent to the Date of Certificate. MetLife will
not contest the validity of any increase requested by an Owner in the death
benefit after such increase has been in force during the covered person's
lifetime for two years from its effective date.
SUICIDE. The insurance proceeds will not be paid if the covered person
commits suicide, while sane or insane, within two years (or less if required by
state law) from the Date of Certificate. Instead, MetLife will pay the
beneficiary an amount equal to all premiums paid for the Certificate, without
interest, less any outstanding Certificate loan and less any partial cash
withdrawal. If the covered person commits suicide, while sane or insane, more
than two years after the Date of Certificate but within two years (or less if
required by state law) from the effective date of any increase in the death
benefit, MetLife's liability with respect to such increase will be limited to
the cost thereof.
MISSTATEMENT OF AGE. If the covered person's age as stated in the
enrollment form for a Certificate is not correct, benefits under a Certificate
will be adjusted to reflect the correct age.
COLLATERAL ASSIGNMENT. The Owner may assign a Certificate as collateral.
All rights under the Certificate will be transferred to the extent of the
assignee's interest. MetLife is not bound by an assignment or release thereof,
unless it is in writing and is recorded at the Administrative Office. MetLife is
not responsible for the validity of any assignment or release thereof.
PAYMENT AND DEFERMENT. With respect to amounts in the investment divisions
of the Separate Account, payment of the death benefit, all or a portion of the
cash surrender value, free look proceeds or a loan will ordinarily be made
within seven days after the Date of Receipt of all documents required for such
payment. MetLife will pay interest on the amount of death benefit at a rate
which is currently 6% per year (or such higher rate as may be required by state
law) from the date of death until the date of payment of the death benefit.
However, MetLife may defer the determination, application or payment of any
such amount or any transfer of cash value in the Separate Account for any period
during which the New York Stock Exchange is closed (other than customary weekend
and holiday closing), for any period during which any emergency exists as a
result of which it is not reasonably practicable for MetLife to determine the
investment experience for a Certificate or for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
Owners. MetLife will not defer a loan used to pay premiums on other policies or
certificates issued by it.
As with traditional life insurance, MetLife can delay payment of the entire
insurance proceeds or other Certificate benefits if entitlement to payment is
being questioned or is uncertain.
DIVIDENDS. The Group Policies and Certificates are participating. However,
in view of the manner in which MetLife has determined the premium rates and
charges, it is not anticipated that the Group Policies and Certificates will be
entitled to any dividend. In this connection, when a participating entity
transfers coverage from a prior insurer to a MetLife Group Policy, or transfers
coverage from a MetLife Group Policy to a successor insurer, certain amounts of
surplus may also be transferred, respectively, to MetLife or to the successor
insurance company, rather than being declared as dividends.
The description throughout this Prospectus of the features of the
Certificates is subject to the specific terms of the Certificates.
SALES AND ADMINISTRATION OF THE GROUP POLICIES AND CERTIFICATES
MetLife performs the sales and administrative services relating to the Group
Policies and Certificates. The office of MetLife which administers the Group
Policies and Certificates is located in Aurora, Illinois. Each participating
entity and Owner will be notified which office will be the Administrative Office
for servicing the Certificates. MetLife may name different Administrative
Offices for different transactions.
A-34
<PAGE>
MetLife acts as the principal underwriter (distributor) of the Group
Policies and Certificates as defined in the 1940 Act (see "Distribution of the
Group Policies and Certificates"). In addition to selling insurance and
annuities, MetLife also serves as investment adviser to certain other advisory
clients, and is also principal underwriter for Metropolitan Tower Separate
Accounts One and Two of Metropolitan Tower Life Insurance Company, a
wholly-owned subsidiary of MetLife, and Metropolitan Life Separate Account E of
MetLife, each of which is registered as a unit investment trust under the 1940
Act. Finally, MetLife acts as principal underwriter for other forms of variable
universal life insurance policies, premiums for which may also be allocated to
the Separate Account.
BONDING. The directors, officers and employees of MetLife are bonded in the
amount of $50,000,000, subject to a $5,000,000 deductible.
DISTRIBUTION OF THE GROUP POLICIES AND CERTIFICATES
The Group Policies and Certificates will be sold by individuals who are
licensed life insurance sales representatives and registered representatives of
MetLife, the principal underwriter of the Certificates. MetLife is registered
with the Securities and Exchange Commission under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. No commissions are paid to MetLife's registered
representatives for distribution of the Group Policies or Certificates, although
MetLife representatives may earn certain incentive award credits.
Group Policies and Certificates may also be sold through other registered
broker-dealers who have entered into selling agreements with MetLife.
Commissions or fees which are payable to a broker-dealer or third party
administrator ("TPA") are set forth in MetLife's schedules of group insurance
commission rates. Payments or commissions to broker-dealers or TPAs normally
consist of two elements. The first element is based on the lowest premium
sufficient to keep the Certificate in force. Under this element, a commission is
payable to a maximum of 15% of premium, as described above, and is based upon
the services provided by the broker-dealer or TPA. The second element is a per
Certificate payment, based upon total number of Certificates issued under the
Group Policy. Maximum first year payments and renewal payments per Certificate
are specified in MetLife's schedules of group insurance commission rates. In no
event will commissions exceed the maximum percentage of gross premium commission
payable under New York State law, for all Certificates.
All payments and commissions are paid by MetLife. They do not result in any
charges against the Group Policy or Certificates in addition to those set forth
under "Charges and Deductions." Since no Group Policies or Certificates were
sold during 1995, no compensation had been paid as of December 31, 1995.
FEDERAL TAX MATTERS
The following description is a brief summary of some of the tax rules,
primarily related to federal income and estate taxes, which in the opinion of
MetLife are currently in effect.
The Certificate receives the same federal income and estate tax treatment as
fixed benefit life insurance. The death benefit payable under the Certificate is
generally excludable from the gross income of the beneficiary under Section 101
of the Internal Revenue Code ("Code") and the Owner is not deemed to be in
constructive receipt of the cash values under the Certificate until actual
withdrawal or surrender.
Under existing tax law, an Owner generally will be taxed on cash value
withdrawn from the Certificate and cash value received upon surrender of the
Certificate. Under most circumstances, unless a Certificate is a modified
endowment contract as discussed below, and unless the distribution occurs during
the first 15 Certificate years, only the amount withdrawn, received upon
surrender or distributed at the Final Date of a Certificate that exceeds the
total premiums paid (less previous non-taxable withdrawals) will be treated as
ordinary income. During the first 15 Certificate years, cash distributions from
a Certificate, made as a result of a Certificate change that reduces the death
benefit or other benefits under a Certificate, will be taxable to the Owner,
under a complex formula, to the extent that cash value exceeds premiums paid
(less previous non-taxable withdrawals).
A-35
<PAGE>
Section 817(h) of Code and the Treasury Regulations thereunder set
diversification rules for the investments underlying the Group Policies, in
order for the Group Policies to be treated as life insurance. MetLife believes
that these diversification standards will be satisfied. There is a provision in
the regulations which allows for the correction of an inadvertent failure to
diversify. Failure to comply with the rules found in the regulations would
result in immediate taxation to Owners of all positive investment experience
credited to a Certificate for the period of non-compliance and until such time
as a settlement of the matter is reached with the Internal Revenue Service.
There is a possibility that regulations may be proposed or that a
controlling ruling may be issued in the future describing the extent to which
Owner control over allocation of cash value may cause Owners to be treated as
the owners of Separate Account assets for tax purposes. MetLife reserves the
right to amend the Group Policies in any way necessary to avoid any such result.
MetLife also believes that loans received under the Certificate will be
treated as indebtedness of an Owner for federal tax purposes, and, unless the
Certificate is or becomes a modified endowment contract as described below or
terminates, that no part of any loan received under a Certificate will
constitute income to the Owner. However, any remaining outstanding loan at the
time the Certificate is totally surrendered, exchanged, terminated or on the
Final Date may be subject to tax depending of the amount of gain in the
Certificate.
In the case of a modified endowment contract, amounts received before death
including Certificate loans, are treated first as income (to the extent of gain)
and then as recovered investment. For purposes of determining the amount
includible in income, all modified endowment contracts issued by the same
company (or affiliate) to the same Owner during any calendar year will be
treated as one modified endowment contract. Finally, an additional 10% income
tax is generally imposed on the taxable portion of amounts received before age
59 1/2 under a modified endowment contract.
In general, a modified endowment contract is a life insurance contract
entered into or, generally, materially changed after June 20, 1988 that fails to
meet a "7-pay test". Each Certificate is tested separately for purposes of the
7-pay test. Under the 7-pay test, if the amount of premiums paid with respect to
a Certificate at any time during the first 7 Certificate years exceeds the sum
of the net level premiums which would have been paid if the Certificate provided
for paid-up future benefits after the payment of 7 level annual payments, the
Certificate is a modified endowment contract. A Certificate may have to be
reviewed under the 7-pay test even after the first seven Certificate years in
the case of certain events such as a material modification of the Certificate as
discussed below. If there is a reduction in benefits under the Certificate
during any 7-pay testing period, the 7-pay test is applied using the reduced
benefits level. Any distribution made within two years before a Certificate
fails the 7-pay test may be treated as made in anticipation of such failure.
Whether or not a particular Certificate meets these definitional
requirements is dependent on the date it was entered into, premium payments made
and the periodic premium payments to be made, the level of death benefit, any
changes in the level of death benefits, the extent of any prior cash
withdrawals, and other factors. Generally, a life insurance policy which is
received in exchange for a modified endowment contract will also be considered a
modified endowment contract.
A Certificate should be reviewed upon issuance, upon making a cash
withdrawal, upon making a change in future benefits and upon making a material
modification to the Certificate to determine to what extent, if any, these tax
rules apply. A material modification to a Certificate includes, but is not
limited to, any requested increase in the future benefits provided under the
Certificate. However, in general, increases that are attributable to the payment
of premiums necessary to fund the lowest death benefit payable in the first 7
Certificate years will not be considered material modifications. The annual
statement sent to each Owner will include information regarding the modified
endowment contract status of a Certificate (see "Premiums--Premium
Limitations").
Counsel and other competent advisors should be consulted to determine how
these rules apply to an individual situation and before making premium payments,
increasing or decreasing the total face insurance amount, or adding or removing
a rider.
A-36
<PAGE>
While employee pay all group variable universal life should generally be
treated as separate from any Internal Revenue Code Section 79 Group Term Life
Insurance Plan concurrently in effect, in some circumstances group variable
universal life could be viewed as being part of such a plan, giving rise to
adverse tax consequences.
Congress may, in the future, consider other legislation that, if enacted,
could adversely affect the tax treatment of life insurance policies. In
addition, the Treasury Department may by regulation or interpretation modify the
above described tax effects. Any legislative or administrative action could be
applied retroactively.
The death benefit payable under the Certificate is includable in the covered
person's gross estate for federal estate tax purposes if the death benefit is
paid to the covered person's estate or if the death benefit is paid to a
beneficiary other than the estate and the covered person either possessed
incidents of ownership in the Certificate at the time of death or transferred
incidents of ownership in the Certificate to another person within three years
of death.
Whether or not any federal estate tax is payable with respect to the death
benefit of the Certificate which is included in the covered person's gross
estate depends on a variety of factors including the following. A smaller size
estate may be exempt from federal estate tax because of a current estate tax
credit which generally is equivalent to an exemption of $600,000. In addition, a
death benefit paid to a surviving spouse may not be taxable because of a 100%
estate tax marital deduction. Furthermore, a death benefit paid to a tax-exempt
charity may not be taxable because of the allowance of an estate tax charitable
deduction.
If the Owner of the Certificate is not the covered person, and the Owner
dies before the covered person, the value of the Certificate, as determined
under Internal Revenue Service regulations, is includable in the federal gross
estate of the Owner for federal estate tax purposes. Whether a federal estate
tax is payable depends on a variety of factors, including those listed in the
preceding paragraph.
State and local income, estate, inheritance and other tax consequences of
ownership or receipt of Certificate proceeds depend on the circumstances of each
covered person, Owner or beneficiary.
Finally, employer involvement and other factors determine whether group
variable universal life is subject to the Employee Retirement Income Security
Act ("ERISA").
The foregoing summary does not purport to be complete or to cover all
situations. Counsel and other competent advisors should be consulted for more
complete information.
MANAGEMENT
The present directors and the senior officers and secretary of Metropolitan
Life are listed below, together with certain information concerning them:
DIRECTORS, OFFICERS-DIRECTORS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME PRINCIPAL OCCUPATION & BUSINESS ADDRESS WITH METLIFE
- -------------------------------- -------------------------------------------------- ----------------------------------
<S> <C> <C>
Theodossios Athanassiades....... Vice-Chairman of the Board, Vice-Chairman of the Board and
Metropolitan Life Insurance Company, Director
One Madison Avenue,
New York, NY 10010.
Curtis H. Barnette.............. Chairman and Chief Executive Officer Director
Bethlehem Steel Corp.,
1170 Eighth Avenue,
Martin Tower 2118,
Bethlehem, PA 18016-7699.
Joan Ganz Cooney................ Chairman, Executive Committee, Director
Children's Television Workshop,
One Lincoln Plaza,
New York, NY 10023
</TABLE>
A-37
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME PRINCIPAL OCCUPATION & BUSINESS ADDRESS WITH METLIFE
- -------------------------------- -------------------------------------------------- ----------------------------------
<S> <C> <C>
James R. Houghton............... Retired Chairman of the Board, Director
Corning Incorporated,
80 East Market Street
2nd Floor
Corning, NY 14830.
Harry P. Kamen.................. Chairman, President and Chairman, President, Chief
Chief Executive Officer, Executive Officer and Director
Metropolitan Life Insurance Company,
One Madison Avenue,
New York, NY 10010.
Helene L. Kaplan................ Of Counsel, Skadden, Arps, Slate, Director
Meagher & Flom,
919 Third Avenue,
New York, NY 10022.
Richard J. Mahoney.............. Chairman of the Executive Committee, Director
Monsanto Company - Mail Zone N3L
800 N. Lindbergh Blvd.,
St. Louis, MO 63167.
Allen E. Murray................. Retired Chairman of the Board Director
and Chief Executive Officer,
Mobil Corporation,
P.O. Box 2072
New York, NY 10163.
John J. Phelan, Jr.............. Retired Chairman and Chief Executive Director
Officer, New York Stock Exchange, Inc.,
P.O. Box 312,
Mill Neck, NY 11765
John B. M. Place................ Former Chairman of the Board, Director
Crocker National Corporation,
111 Sutter Street, 4th Fl.,
San Francisco, CA 94104.
Hugh B. Price................... President and Chief Executive Officer, Director
National Urban League, Inc.,
500 East 62nd Street
New York, NY 10021
Robert G. Schwartz.............. Retired Chairman of the Board, Director
President and Chief Executive Officer,
Metropolitan Life Insurance Company,
200 Park Avenue, Suite 5700
New York, NY 10166.
Ruth J. Simmons................. President, Director
Smith College,
College Hall 20,
North Hampton, MA 01063
William S. Sneath............... Retired Chairman of the Board, Director
Union Carbide Corporation,
41 Leeward Lane,
Riverside, CT 06878.
John R. Stafford................ Chairman of the Board, President Director
and Chief Executive Officer,
American Home Products Corporation,
Five Giralda Farms
Madison, NJ 07940.
</TABLE>
A-38
<PAGE>
OFFICERS*
<TABLE>
<CAPTION>
NAME OF OFFICER POSITION WITH METLIFE
- --------------------------------------------- ------------------------------------------------------------------------
<S> <C>
Harry P. Kamen............................... Chairman, President and Chief Executive Officer
Theodossios Athanassiades.................... Vice-Chairman of the Board
Gerald Clark................................. Senior Executive Vice-President and Chief Investment Officer
Stewart G. Nagler............................ Senior Executive Vice-President and Chief Financial Officer
Gary A. Beller............................... Executive Vice-President, Chief Legal Officer and General Counsel
Robert H. Benmosche.......................... Executive Vice President
C. Robert Henrikson.......................... Executive Vice-President
John D. Moynahan, Jr......................... Executive Vice-President
Catherine A. Rein............................ Executive Vice-President
John H. Tweedie.............................. Executive Vice-President
Richard M. Blackwell......................... Senior Vice-President
James B. Digney.............................. Senior Vice-President
William T. Friedewald........................ Senior Vice-President and Chief Medical Director
Frederick P. Hauser.......................... Senior Vice-President & Controller
Anne E. Hayden............................... Senior Vice-President
Jeffrey J. Hodgman........................... Senior Vice-President
Leland C. Launer, Jr......................... Senior Vice-President
Terence I. Lennon............................ Senior Vice-President
David A. Levene.............................. Senior Vice-President
James L. Lipscomb............................ Senior Vice-President
James M. Logan............................... Senior Vice-President
Francis P. Lynch............................. Senior Vice-President
Thomas F. McDermott.......................... Senior Vice-President
John C. Morrison, Jr......................... Senior Vice-President
Dominick A. Prezzano......................... Senior Vice-President
Leo T. Rasmussen............................. Senior Vice-President
Vincent P. Reusing........................... Senior Vice-President
Robert E. Sollmann, Jr....................... Senior Vice-President
Thomas L. Stapleton.......................... Senior Vice-President & Tax Director
William J. Toppeta........................... Senior Vice-President
Arthur G. Typermass.......................... Senior Vice-President & Treasurer
James A. Valentino........................... Senior Vice-President
Judy E. Weiss................................ Senior Vice-President and Chief Actuary
Stephen E. White............................. Senior Vice-President
Richard F. Wiseman........................... Senior Vice-President
Harvey M. Young.............................. Senior Vice-President
Christine N. Markussen....................... Vice-President and Secretary
</TABLE>
- ---------
* The principal occupation of each officer, except for Gary A. Beller, Robert H.
Benmosche and Terence I. Lennon during the last five years has been as an
officer of MetLife or an affiliate thereof. The business address of each
officer is 1 Madison Avenue, New York, New York 10010. Gary A. Beller has been
an officer of MetLife since November, 1994; prior thereto, he was a Consultant
and Executive Vice-President and General Counsel of the American Express
Company. Robert H. Benmosche has been an Officer of MetLife since September,
1995; prior thereto, he was an executive Vice-President of Paine Webber.
Terence I. Lennon has been an officer of MetLife since March, 1994; prior
thereto, he was Assistant Deputy Superintendent and Chief Examiner of the New
York State Department of Insurance.
A-39
<PAGE>
VOTING RIGHTS
RIGHT TO INSTRUCT VOTING OF FUND SHARES
In accordance with its view of present applicable law, MetLife usually will
vote the shares of each of the portfolios of the Fund which are deemed
attributable to Certificates at regular and special meetings of the shareholders
of the Fund based on instructions received from persons having the voting
interest in corresponding investment divisions of the Separate Account. However,
if the 1940 Act or any rules thereunder should be amended or if the present
interpretation thereof should change, and as a result MetLife determines that it
is permitted to vote such shares of the Fund in its own right, it may elect to
do so.
Accordingly, the Owner will have a voting interest under a Certificate. The
number of shares held in each Separate Account investment division deemed
attributable to each Owner is determined by dividing a Certificate's cash value
in that division, if any, by the net asset value of one share in the
corresponding Fund portfolio in which the assets in that Separate Account
investment division are invested. Fractional votes will be counted. The number
of shares concerning which an Owner has the right to give instructions will be
determined as of the record date for the meeting.
Fund shares held in each registered separate account of MetLife or any
affiliate that are or are not attributable to life insurance policies (including
the Certificates) or annuity contracts and for which no timely instructions are
received will be voted in the same proportion as the shares for which voting
instructions are received by that separate account. Fund shares held in the
General Account or unregistered separate accounts of MetLife or its affiliates
will be voted in the same proportion as the aggregate of (i) the shares for
which voting instructions are received and (ii) the shares that are voted in
proportion to such voting instructions. However, if MetLife or an affiliate
determines that it is permitted to vote any such shares of the Fund in its own
right, it may elect to do so subject to the then current interpretation of the
1940 Act or any rules thereunder.
The Owners may give instructions regarding, among other things, the election
of the Board of Directors of the Fund, ratification of the selection of the
Fund's independent auditors, and the approval of the Fund's investment manager
and sub-investment manager.
Each Owner having a voting interest will be sent voting instruction
soliciting material and a form for giving voting instructions to MetLife.
Current interpretations and rules under the 1940 Act permit Fund shares to
be voted in a manner contrary to Owner voting instructions under certain
circumstances. In the event that MetLife does disregard voting instructions, a
summary of the action and the reasons for such action will be included in the
next semiannual report to Owners.
REPORTS
Owners will receive promptly statements of significant transactions such as
changes in specified face amount, transfers among investment divisions, partial
withdrawals, increases in loan principal by the Owner, loan repayments,
termination for any reason, reinstatement and premium payments. Transactions
pursuant to systematic investment strategies (see "Payment and Allocation of
Premiums") may be confirmed quarterly. Owners whose premiums are automatically
remitted under payroll deduction plans do not receive individual confirmation of
premium payments from MetLife apart from that provided by their bank or
employer. A statement will be sent at least annually to the Owner within thirty
days after the period covered summarizing all of the above transactions and
deductions of charges occurring during that Certificate year and setting forth
the status of the death benefit, cash and cash surrender values, amounts in the
investment divisions and Fixed Account, any policy loan and unpaid loan interest
added to loan principal. Any statement will also discuss the modified endowment
contract status of a Certificate (see "Premiums--Premium Limitations"). In
addition, an Owner will be sent semiannual reports containing financial
statements for the Fund, as required by the 1940 Act.
A-40
<PAGE>
STATE REGULATION
MetLife is subject to regulation and supervision by the Insurance Department
of the State of New York, which periodically examines its affairs. It is also
subject to the insurance laws and regulations of all jurisdictions where it is
authorized to do business. Where required, a copy of the form of Group Policy
and form of Certificate has been filed with, and approved by, insurance
officials in each jurisdiction where the Group Policy and Certificates are sold.
MetLife intends to satisfy the necessary requirements to distribute the
Certificates in all fifty states and the District of Columbia as soon as
possible.
MetLife is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business, for the purposes of determining solvency and
compliance with local insurance laws and regulations. Such statements are
available for public inspection at state insurance department offices.
REGISTRATION STATEMENT
A registration statement under the Securities Act of 1933 has been filed
with the Securities and Exchange Commission relating to the offering described
in this Prospectus. This Prospectus does not contain all the information set
forth in the registration statement and amendments thereto and the exhibits
filed as a part thereof, to all of which reference is hereby made for additional
information concerning the Separate Account, MetLife and the Certificates. The
additional information may be obtained at the Commission's main office in
Washington, D.C., upon payment of the prescribed fees.
LEGAL MATTERS
The legality of the Group Policies and Certificates described in this
Prospectus has been passed upon by Christopher P. Nicholas, Associate General
Counsel of Metropolitan Life. Messrs. Freedman, Levy, Kroll & Simonds,
Washington, D.C., have advised MetLife on certain matters relating to the
federal securities laws.
EXPERTS
The financial statements included in this Prospectus of Metropolitan Life
Separate Account UL as of December 31, 1995 and for the two years then ended and
the financial statements of Metropolitan Life Insurance Company as of December
31, 1995 and 1994 and for the three years ended December 31, 1995 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 opinions given upon the authority of such firm as experts in auditing
and accounting.
Actuarial matters included in this Prospectus have been examined by George
J. Kalb, FSA, MAAA, Vice-President and Actuary of MetLife, as stated in his
opinion filed as an exhibit to the registration statement.
A-41
<PAGE>
FINANCIAL STATEMENTS
The financial statements of MetLife included in this Prospectus should be
considered only as bearing upon the ability of MetLife to meet its obligations
under the Group Policies and Certificates.
The most current financial statements of MetLife are those as of the end of
the most recent fiscal year. MetLife does not prepare financial statements for
publication more often than annually and believes that any incremental benefit
to prospective Policy owners that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. In addition, MetLife represents that there have
been no adverse changes in its financial condition or operations between the end
of the most current fiscal year and the date of this Prospectus.
A-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
Metropolitan Life Insurance Company:
We have audited the accompanying balance sheets of Metropolitan Life Insurance
Company (the Company) as of December 31, 1995 and 1994 and the related
statements of operations and surplus and of cash flow for each of the three
years in the period ended December 31, 1995. 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 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 financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1995 and 1994
and the results of its operations and its cash flow for each of the three years
in the period ended December 31, 1995 in conformity with accounting practices
prescribed or permitted by insurance regulatory authorities and generally
accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1996
A-43
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
NOTES 1995 1994
--------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Bonds............................................................................... 4,11 $ 70,955 $ 65,592
Stocks.............................................................................. 3,4,11 3,646 3,672
Mortgage loans...................................................................... 3,4,11 14,211 14,524
Real estate......................................................................... 9,470 10,417
Policy loans........................................................................ 11 3,956 3,964
Cash and short-term investments..................................................... 11 1,923 2,334
Other invested assets............................................................... 3 2,480 2,262
Premiums deferred and uncollected................................................... 1,568 1,250
Investment income due and accrued................................................... 1,589 1,440
Separate Account assets............................................................. 31,707 25,424
Other assets........................................................................ 627 298
----------- -----------
TOTAL ASSETS................................................................ $ 142,132 $ 131,177
----------- -----------
----------- -----------
LIABILITIES AND SURPLUS
Liabilities
Reserves for life and health insurance and annuities................................ 5,11 $ 76,249 $ 73,204
Policy proceeds and dividends left with the Company................................. 11 4,482 3,534
Dividends due to policyholders...................................................... 1,371 1,407
Premium deposit funds............................................................... 11 12,891 14,006
Interest maintenance reserve........................................................ 1,148 881
Other policy liabilities............................................................ 3,882 3,364
Investment valuation reserves....................................................... 1,860 1,981
Separate Account liabilities........................................................ 31,226 25,159
Other liabilities................................................................... 2,459 1,337
----------- -----------
TOTAL LIABILITIES........................................................... 135,568 124,873
----------- -----------
Surplus
Special contingency reserves........................................................ 754 682
Surplus notes....................................................................... 10 1,400 700
Unassigned funds.................................................................... 4,410 4,922
----------- -----------
TOTAL SURPLUS............................................................... 6,564 6,304
----------- -----------
TOTAL LIABILITIES AND SURPLUS........................................... $ 142,132 $ 131,177
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
A-44
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS AND SURPLUS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NOTES 1995 1994 1993
--------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
INCOME
Premiums, annuity considerations and deposit funds.......................... 5 $ 19,972 $ 19,881 $ 19,442
Considerations for supplementary contracts and dividend accumulations....... 2,979 2,879 1,654
Net investment income....................................................... 7,825 7,143 7,356
Other income................................................................ 5 156 80 231
--------- --------- ---------
Total income........................................................ 30,932 29,983 28,683
--------- --------- ---------
BENEFITS AND EXPENSES
Benefit payments (other than dividends)..................................... 25,055 23,533 21,417
Changes to reserves, deposit funds and other policy liabilities............. 321 1,619 (439)
Insurance expenses and taxes (excluding tax on capital gains)............... 6 3,160 2,492 2,595
Net transfers to Separate Accounts.......................................... 675 503 3,239
Dividends to policyholders.................................................. 1,520 1,676 1,606
--------- --------- ---------
Total benefits and expenses......................................... 30,731 29,823 28,418
--------- --------- ---------
Net gain from operations.................................................... 201 160 265
Net realized capital losses................................................. 3,6 (873) (54) (132)
--------- --------- ---------
NET (LOSS) INCOME........................................................... (672) 106 133
SURPLUS ADDITIONS (DEDUCTIONS)
Change in general account net unrealized capital gains...................... 3 442 150 131
Change in investment valuation reserves..................................... 121 (306) (169)
Issuance of surplus notes................................................... 10 700 -- 700
Other adjustments--net...................................................... 1,5 (331) (52) 594
--------- --------- ---------
NET CHANGE IN SURPLUS....................................................... 260 (102) 1,389
SURPLUS AT BEGINNING OF YEAR................................................ 6,304 6,406 5,017
--------- --------- ---------
SURPLUS AT END OF YEAR...................................................... $ 6,564 $ 6,304 $ 6,406
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
A-45
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
CASH PROVIDED
Premiums, annuity considerations and deposit funds received.......................... $ 19,662 $ 19,983 $ 19,599
Considerations for supplementary contracts and dividend accumulations received....... 3,051 2,948 1,748
Net investment income received....................................................... 7,579 6,828 6,931
Other income received................................................................ 166 80 134
--------- --------- ---------
Total receipts................................................................. 30,458 29,839 28,412
--------- --------- ---------
Benefits paid (other than dividends)................................................. 23,939 22,387 20,092
Insurance expenses and taxes paid (excluding tax on capital gains)................... 2,337 2,366 2,532
Net cash transfers to Separate Accounts.............................................. 692 524 3,304
Dividends paid to policyholders...................................................... 1,473 1,684 1,596
Other--net........................................................................... (1,872) 368 (1,051)
--------- --------- ---------
Total payments................................................................. 26,569 27,329 26,473
--------- --------- ---------
Net cash from operations............................................................. 3,889 2,510 1,939
Proceeds from long-term investments sold, matured or repaid after deducting taxes on
capital gains of $102 for 1995, $60 for 1994 and $546 for 1993..................... 60,790 46,459 55,420
Issuance of surplus notes............................................................ 700 -- 700
Other cash provided.................................................................. 370 -- 369
--------- --------- ---------
TOTAL CASH PROVIDED.................................................................. 65,749 48,969 58,428
--------- --------- ---------
CASH APPLIED
Cost of long-term investments acquired............................................... 65,122 47,845 58,033
Other cash applied................................................................... 1,038 162 247
--------- --------- ---------
TOTAL CASH APPLIED................................................................... 66,160 48,007 58,280
--------- --------- ---------
NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS........................................ (411) 962 148
CASH AND SHORT-TERM INVESTMENTS:
BEGINNING OF YEAR.................................................................... 2,334 1,372 1,224
--------- --------- ---------
END OF YEAR.......................................................................... $ 1,923 $ 2,334 $ 1,372
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to financial statements.
A-46
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. BUSINESS AND ACCOUNTING POLICIES
Metropolitan Life Insurance Company (the Company) principally provides life
insurance and annuity products and pension, pension-related and
investment-related services to individuals, corporations and other institutions.
The Company and its insurance subsidiaries also provide non-medical health,
disability and property and casualty insurance. Through its non-insurance
subsidiaries, the Company also offers investment management and advisory
services and commercial finance.
The Company's financial statements are prepared on the basis of accounting
practices prescribed or permitted by the Insurance Department of the State of
New York, which practices currently are considered to be generally accepted
accounting principles for mutual life insurance companies (see Note 12). The
primary interest of insurance regulatory authorities is the ability of the
Company to fulfill its obligations to policyholders; therefore, the financial
statements are oriented to the insured public. Significant accounting policies
applied in preparing the financial statements follow.
INVESTED ASSETS AND RELATED RESERVES
Bonds qualifying for amortization are stated at amortized cost; all other
bonds at prescribed values. Unaffiliated preferred stocks are stated principally
at cost; unaffiliated common stocks are carried at market value. Mortgage loans
are stated principally at their amortized indebtedness. Short-term investments
generally mature within one year and are carried at amortized cost. Policy loans
are stated at unpaid principal balances.
Investments in subsidiaries are stated at equity in net assets and are
included in stocks. Changes in net assets, excluding additional amounts
invested, are included in unrealized capital gains or losses. Dividends from
subsidiaries are reported by the Company as earnings in the year the dividends
are declared. The excess of the purchase prices of non-insurance subsidiaries
over the fair values of the net assets acquired (goodwill) is amortized on a
straight-line basis.
Investment real estate, other than real estate joint ventures and
subsidiaries, is stated at depreciated cost net of non-recourse debt and an
allowance for losses on real estate expected to be disposed of in the near term.
Depreciation is generally calculated by the constant yield method for real
estate purchased prior to December 1990 and the straight-line method if
purchased thereafter. Real estate acquired in satisfaction of debt is valued at
the lower of cost or estimated fair value at date of foreclosure and is
subsequently stated at depreciated cost. Investments in real estate joint
ventures, included in other invested assets, and real estate subsidiaries,
included in stocks, are reported using the equity method and are generally
adjusted to reflect the constant yield method of depreciation for real estate
assets acquired by such entities prior to December 1990.
In 1994, the Company changed to the straight-line method of determining
depreciation on real estate acquired prior to December 1990 if the estimated
fair value of the real estate is less than ninety percent of depreciated cost.
This change had the effect of increasing depreciation expense by approximately
$80 million in 1994.
Investments in non-real estate partnerships are included in other invested
assets and are accounted for using the equity method. The carrying value
generally reflects the Company's share of unrealized gains and losses relating
to the market value of publicly traded common stocks held by the partnerships.
Impairments of individual investments that are considered to be other than
temporary are recognized when incurred.
Mandatory reserves have been established for general account investments in
accordance with guidelines prescribed by insurance regulatory authorities. Such
reserves consist of an Asset Valuation Reserve
A-47
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AVR) for all invested assets and an Interest Maintenance Reserve (IMR), which
defers the recognition of realized capital gains and losses (net of income tax)
attributable to interest rate fluctuations on fixed income investments over the
estimated remaining duration of the investments sold. Prior to 1994, the Company
also established voluntary investment valuation reserves for certain general
account investments. Changes to the AVR and voluntary investment reserves are
reported as direct additions to or deductions from surplus. Transfers to the IMR
are deducted from realized capital gains; IMR amortization is included in net
investment income.
Net realized capital gains or losses are presented net of federal capital
gains tax or benefit, respectively, and transfers to the IMR.
POLICY RESERVES
Reserves for permanent plans of individual life insurance sold after 1959,
universal life plans and certain term plans sold after 1982 are computed
principally on the Commissioners' Reserve Valuation Method. Reserves for other
life insurance policies are computed on the net level premium method. Reserves
for individual annuity contracts are computed on the net level premium method,
the net single premium method or the Commissioners' Annuity Reserve Valuation
Method, as appropriate. Reserves for group annuity contracts are computed on the
net single premium method. The reserves are based on mortality, morbidity and
interest rate assumptions prescribed by New York State Insurance Law. Such
reserves are sufficient to provide for contractual surrender values.
Periodically to reflect changes in circumstances, the Company may change the
assumptions, methodologies or procedures used to calculate reserves. During
1993, the Company and certain of its wholly-owned life insurance subsidiaries
made certain changes which increased the Company's surplus by $667 million
(substantially all of which related to interest rate changes).
INCOME AND EXPENSES
Premiums are recognized over the premium-paying period. Investment income is
reported as earned. Expenses, including policy acquisition costs and federal
income taxes, are charged to operations as incurred.
During 1995, the Company recorded a restructuring charge of $72 million
related primarily to the consolidation of office space leased for administration
and agency sales offices. The Company anticipates additional restructuring
charges over the next few years.
SEPARATE ACCOUNT OPERATIONS
Investments held in the Separate Accounts (stated at market value) and
liabilities of the Separate Accounts (including participants' corresponding
equity in the Separate Accounts) are reported separately as assets and
liabilities. The Separate Accounts' operating results are reflected in the
changes to these assets and liabilities.
ESTIMATES
The preparation of financial statements in conformity with accounting
practices prescribed or permitted by regulatory authorities and generally
accepted accounting principles requires that management 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.
2. MERGER
During 1995, the Company and New England Mutual Life Insurance Company (The
New England) entered into a definitive agreement pursuant to which The New
England will be merged with and into the
A-48
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Company (the Merger) subject to various conditions, including but not limited
to, regulatory approvals and the necessary approvals of the policyholders of the
Company and The New England. Upon consummation of the proposed Merger, the
Company will be the surviving company. It is currently anticipated that the
Merger will occur during the first half of 1996.
If the proposed Merger is consummated, the financial statements of the
Company and The New England will be combined to present the financial position
and results of operations of the combined entity. Summary unaudited pro forma
combined balance sheet information relating to the combined entity and summary
historical balance sheet information relating to The New England as of December
31, 1995 and 1994 and summary unaudited pro forma combined statement of
operations information and summary historical statement of operations
information relating to The New England for the years ended December 31, 1995,
1994, and 1993, are shown below (in millions):
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA THE NEW ENGLAND
COMBINED HISTORICAL
------------------------ --------------------
1995 1994 1995 1994
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
At December 31:
Total assets........................................................ $ 157,773 $ 146,260 $ 16,261 $ 15,753
Investment valuation reserves....................................... 2,012 1,987 429 362
Total surplus (including combined pro forma surplus notes of $1,548
for 1995 and $848 for 1994 and The New England historical surplus
notes of $148 for 1995 and 1994).................................. 6,802 6,564 624 632
</TABLE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED THE NEW ENGLAND HISTORICAL
------------------------------- -------------------------------
1995 1994 1993 1995 1994 1993
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
For the Years Ended December 31:
Total income....................................... $ 33,668 $ 32,811 $ 31,533 $ 2,758 $ 2,844 $ 2,878
Dividends to policyholders......................... 1,731 1,883 1,833 211 207 227
Net gain from operations........................... 346 231 303 159 88 57
Net (loss) income.................................. (566) 124 70 60 42 89
</TABLE>
Certain adjustments will be made to the Company's financial statements if
the Merger is consummated in order to conform the accounting policies and
practices reflected in the financial statements of the combined entities. The
unaudited pro forma combined amounts presented above include management's
estimate of the effects of such adjustments, related principally to differences
in accounting for real estate and mortgage loans, on summary combined
information as if the Merger had occurred on January 1, 1993. The amount of the
adjustments will be finalized upon consummation of the planned Merger.
3. UNCONSOLIDATED SUBSIDIARIES AND OTHER AFFILIATES
The Company's subsidiary operations primarily include insurance, real estate
investment and brokerage activities, investment management and advisory
services, mortgage originations and servicing, and commercial finance. At
December 31, 1995 and 1994, subsidiary assets were $23,008 million and $21,476
million, respectively. At December 31, 1995 and 1994, subsidiary liabilities
were $20,393 million and $18,905 million, respectively. Subsidiary revenues were
$4,588 million, $4,715 million and $4,525 million in 1995, 1994 and 1993,
respectively. Dividends from subsidiaries amounted to $558 million, $186 million
and $175 million in 1995, 1994 and 1993, respectively.
A-49
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Unamortized goodwill was $129 million at December 31, 1994. There was no
unamortized goodwill at December 31, 1995.
The Company incurs charges on behalf of its subsidiaries which are
reimbursed pursuant to agreements for shared use of property, personnel and
facilities. Charges under such agreements were approximately $194 million, $307
million and $355 million in 1995, 1994 and 1993, respectively.
The Company's net equity in joint ventures and other partnerships was $2,424
million and $2,250 million at December 31, 1995 and 1994, respectively. The
Company's share of income from such entities was $97 million, $26 million and
$76 million for 1995, 1994 and 1993, respectively.
Many of the Company's real estate joint ventures have loans with the
Company. The carrying values of such mortgages were $1,054 million and $1,372
million at December 31, 1995 and 1994, respectively. The Company had other loans
outstanding to its affiliates with carrying values of $2,599 million and $2,073
million at December 31, 1995 and 1994, respectively.
In January 1995, the Company and The Travelers Insurance Company (Travelers)
contributed their respective group medical health care benefits businesses to a
corporate joint venture, The MetraHealth Companies, Inc. (MetraHealth). In
October 1995, the Company and Travelers sold their investments in MetraHealth to
a non-affiliated health care management services company. For its interest in
MetraHealth, a subsidiary of the Company received $485 million face amount of
shares of redeemable preferred stock of the purchaser, $276 million in cash and
rights to additional consideration based on the 1995 earnings of MetraHealth.
The transaction resulted in post-tax income of $443 million to the Company,
including an amount based on the 1995 estimated financial results of
MetraHealth. The Company also has the right to receive up to an additional $169
million in cash for each of 1996 and 1997, based on the consolidated financial
results of the purchaser for each of such years.
During 1995, the Company sold Century 21 Real Estate Corporation (real
estate brokerage operation), Metmor Financial Inc. (mortgage banking) and
Metropolitan Trust Company of Canada (trust operation and mortgage
administration) for $127 million, $56 million and $41 million, respectively,
resulting in pre-tax realized capital losses of $167 million, $247 million and
$86 million, respectively. The sales also resulted in $452 million of unrealized
capital gains representing the reversal of prior period unrealized capital
losses relating to the subsidiaries.
A-50
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
4. INVESTMENTS
DEBT SECURITIES
The carrying value, gross unrealized gain (loss) and estimated fair value of
bonds and redeemable preferred stocks (debt securities), by category, as of
December 31, 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
GROSS UNREALIZED
CARRYING -------------------- ESTIMATED
VALUE GAIN (LOSS) FAIR VALUE
--------- --------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
DECEMBER 31, 1995:
Bonds:
U. S. Treasury securities and obligations of U.S. government
corporations and agencies........................................... $ 12,871 $ 1,556 $ (2) $ 14,425
States and political subdivisions..................................... 1,865 582 (2) 2,445
Foreign governments................................................... 1,871 221 -- 2,092
Corporate............................................................. 29,992 1,872 (105) 31,759
Mortgage-backed securities............................................ 18,888 749 (27) 19,610
Other................................................................. 5,468 336 (16) 5,788
--------- --------- --------- -----------
Total bonds............................................................. $ 70,955 $ 5,316 $ (152) $ 76,119
--------- --------- --------- -----------
--------- --------- --------- -----------
Redeemable preferred stocks............................................. $ 39 $ -- $ (3) $ 36
--------- --------- --------- -----------
--------- --------- --------- -----------
DECEMBER 31, 1994:
Bonds:
U. S. Treasury securities and obligations of U.S. government
corporations and agencies........................................... $ 9,807 $ 322 $ (546) $ 9,583
States and political subdivisions..................................... 1,483 69 (21) 1,531
Foreign governments................................................... 1,931 26 (60) 1,897
Corporate............................................................. 31,262 291 (1,682) 29,871
Mortgage-backed securities............................................ 17,485 251 (851) 16,885
Other................................................................. 3,624 18 (215) 3,427
--------- --------- --------- -----------
Total bonds............................................................. $ 65,592 $ 977 $ (3,375) $ 63,194
--------- --------- --------- -----------
--------- --------- --------- -----------
Redeemable preferred stocks............................................. $ 44 $ -- $ (14) $ 30
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
A-51
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The carrying value and estimated fair value of bonds, by contractual
maturity, at December 31, 1995 are shown below. Bonds not due at a single
maturity date have been included in the table in the year of final maturity.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without prepayment
penalties.
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
--------- -----------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less........................................... $ 2,171 $ 2,191
Due after one year through five years............................. 17,277 17,717
Due after five years through ten years............................ 17,188 18,381
Due after ten years............................................... 15,431 18,220
--------- -----------
Subtotal...................................................... 52,067 56,509
Mortgage-backed securities........................................ 18,888 19,610
--------- -----------
--------- -----------
Total......................................................... $ 70,955 $ 76,119
--------- -----------
--------- -----------
</TABLE>
Proceeds from the sales of debt securities during 1995, 1994 and 1993 were
$50,831 million, $36,401 million and $50,395 million, respectively. During 1995,
1994 and 1993, respectively, gross gains of $814 million, $577 million and
$1,316 million, and gross losses of $352 million, $561 million and $96 million
were realized on those sales. Realized investment gains and losses are
determined by specific identification.
MORTGAGE LOANS
Mortgage loans are collateralized by properties located throughout the
United States and Canada. Approximately 15 percent and 9 percent of the
properties are located in California and Illinois, 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.
As of December 31, 1995 and 1994, the mortgage loan investments were
categorized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Office Buildings......................................................... 32% 36%
Retail................................................................... 18% 17%
Residential.............................................................. 20% 21%
Agricultural............................................................. 20% 18%
Other.................................................................... 10% 8%
--- ---
Total................................................................ 100% 100%
--- ---
--- ---
</TABLE>
FINANCIAL INSTRUMENTS
The Company has a securities lending program whereby large blocks of
securities are loaned to third parties, primarily major brokerage firms. Company
policy requires a minimum of 102 percent of the fair value of the loaned
securities to be separately maintained as collateral for the loans. The
collateral is recorded in memorandum records and not reflected in the
accompanying balance sheets. To further minimize the credit risks related to
this lending program, the Company regularly monitors the financial condition of
counterparties to these agreements.
During the normal course of business, the Company agrees with independent
parties to purchase or sell bonds over fixed or variable periods of time. The
off-balance sheet risks related to changes in the quality of the
A-52
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
underlying bonds are mitigated by the fact that commitment periods are generally
short in duration and provisions in the agreements release the Company from its
commitments in case of significant changes in the financial condition of the
independent party or the issuer of the bond.
The Company engages in a variety of derivative transactions with respect to
the general account. Those derivatives, such as forwards, futures, options,
foreign exchange agreements and swaps, which do not themselves generate interest
or dividend income, are acquired or sold in order to hedge or reduce risks
applicable to assets held, or expected to be purchased or sold, and liabilities
incurred or expected to be incurred. The Company does not engage in trading of
these derivatives.
In 1995 and 1994, the Company engaged in three primary derivatives
strategies. The Company entered into a number of anticipatory hedges using
forwards to limit the interest rate exposures of investments in debt securities
expected to be acquired within one year. The Company also hedged a number of
investments in debt securities denominated in foreign currencies by executing
swaps and forwards to ensure a United States dollar rate of return. In addition,
the Company purchased a limited number of interest rate caps to hedge against
rising interest rates on a portfolio of assets which the Company purchased to
match the liabilities it incurred.
Income and expenses related to derivatives used to hedge or manage risks are
recorded on the accrual basis as an adjustment to the yield of the related
securities over the periods covered by the derivative contracts. Gains and
losses relating to early terminations of interest rate swaps used to hedge or
manage interest rate risk are deferred and amortized over the remaining period
originally covered by the swap. Gains and losses relating to derivatives used to
hedge the risks associated with anticipated transactions are deferred and
utilized to adjust the basis of the transaction once it has closed. If it is
determined that the transaction will not close, such gains and losses are
included in realized capital gains and losses.
ASSETS ON DEPOSIT
As of December 31, 1995 and 1994, the Company had assets on deposit with
regulatory agencies of $5,281 million and $5,145 million, respectively.
5. REINSURANCE AND OTHER INSURANCE TRANSACTIONS
In the normal course of business, the Company assumes and cedes reinsurance
with other insurance companies.
The Company acquired, in part through reinsurance effective in January 1995,
the group life, dental, disability, accidental death and dismemberment, vision
and long-term care insurance businesses from Travelers and certain of its
subsidiaries for $403 million. Commissions of $142 million and $4 million were
charged to earnings during 1995 and 1994, respectively, and considerations in
excess of commissions of $208 million and $49 million were recorded as a direct
charge to surplus in 1995 and 1994, respectively. In January, 1995, the Company
received assets with a fair market value equal to the $1,565 million of
liabilities assumed under the reinsurance agreements. The reinsured businesses
convert to Company contracts at policy anniversary date.
During 1995, the Company entered into reinsurance agreements with
MetraHealth to facilitate the transfer of certain of its group medical health
care business to MetraHealth.
The Company also has reinsurance agreements with certain of its life
insurance subsidiaries. Reserves for insurance assumed pursuant to these
agreements are included in reserves for life and health insurance and annuities
and amounted to $2,143 million and $1,193 million at December 31, 1995 and 1994,
respectively.
A-53
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
In 1993, the Company assumed $1,540 million of life insurance and annuity
reserves of a New York life insurance company under rehabilitation and received
assets having a fair value equal to the reserves assumed.
The financial statements are shown net of ceded reinsurance. The amounts
related to reinsurance agreements, including agreements described above but
excluding certain agreements with non-affiliates for which the Company provides
administrative services, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Reinsurance premiums assumed..................................... $ 890 $ 237 $ 264
Reinsurance ceded:
Premiums....................................................... 457 77 86
Other income................................................... 26 1 3
Reduction in insurance liabilities (at December 31)............ 71 31 28
</TABLE>
A contingent liability exists with respect to reinsurance ceded should the
reinsurers be unable to meet their obligations.
Activity in the liability for unpaid group accident and health policy and
contract claims is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Balance at January 1....................................... $ 1,708 $ 1,588 $ 1,517
Less reinsurance recoverables............................ 1 1 1
--------- --------- ---------
Net balance at January 1................................... 1,707 1,587 1,516
--------- --------- ---------
Incurred related to:
Current year............................................. 2,424 1,780 1,797
Prior years.............................................. (23) (7) (40)
--------- --------- ---------
Total incurred............................................. 2,401 1,773 1,757
--------- --------- ---------
Paid related to:
Current year............................................. 1,464 1,260 1,306
Prior years.............................................. 417 393 380
--------- --------- ---------
Total paid................................................. 1,881 1,653 1,686
--------- --------- ---------
Net balance at December 31................................. 2,227 1,707 1,587
Plus reinsurance recoverables............................ 93 1 1
--------- --------- ---------
Balance at December 31..................................... $ 2,320 $ 1,708 $ 1,588
--------- --------- ---------
--------- --------- ---------
</TABLE>
6. FEDERAL INCOME TAXES
The Company's federal income tax return is consolidated with certain
affiliates. The consolidating companies have executed a tax allocation
agreement. Under this agreement, the federal income tax provision is computed on
a separate return basis. Members receive reimbursement to the extent that their
losses and other credits result in a reduction of the current year's
consolidated tax liability.
Federal income tax expense has been calculated in accordance with the
provisions of the Internal Revenue Code, as amended (the Code). Under the Code,
the amount of federal income tax expense includes a tax on the Company's surplus
calculated by a prescribed formula that incorporates a differential earnings
A-54
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
rate between stock and mutual life insurance companies. In 1995, the Company
changed its calculation of surplus tax which resulted in an increase in 1995
federal income tax expense of $95 million. Had such change occurred prior to
1993, the Company's insurance expenses and taxes (excluding tax on capital
gains) and net loss for the year ended December 31, 1995 would have been $2,758
million and $270 million, respectively; the Company's surplus, insurance
expenses and taxes (excluding tax on capital gains) and net loss at and for the
year ended December 31, 1994 would have been $5,902 million, $2,894 million and
$296 million, respectively; and the Company's insurance expenses and taxes
(excluding tax on capital gains) and net income for the year ended December 31,
1993 would have been $2,702 million and $26 million, respectively. The change
would have had no effect on December 31, 1993 surplus and surplus at December
31, 1992 would have been $5,124 million.
Total federal income taxes on operations and realized capital gains of $479
million, $192 million and $596 million were incurred in 1995, 1994 and 1993,
respectively.
7. EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has defined benefit pension plans covering all eligible
employees and sales representatives of the Company and certain of its
subsidiaries. The Company is both the sponsor and administrator of these plans.
Retirement benefits are based on years of credited service and final average
earnings' history. The Company's funding policy is to make the minimum
contribution required by the Employee Retirement Income Security Act of 1974.
Components of the net periodic pension (credit) cost for the years ended
December 31, 1995, 1994 and 1993 for the defined benefit qualified and
non-qualified pension plans are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................... $ 58 $ 88 $ 71
Interest cost on projected benefit obligation.................. 215 209 191
Return on assets............................................... (262) 15 (380)
Net amortization and deferrals................................. (33) (298) 110
--------- --------- ---------
Net periodic pension (credit) cost............................. $ (22) $ 14 $ (8)
--------- --------- ---------
--------- --------- ---------
</TABLE>
The assumed long-term rate of return on assets used in determining the net
periodic pension (credit) cost was 9.5 percent in 1995 and 8.5 percent in 1994
and 1993. The Company is recognizing the unrecognized net asset at transition,
attributable to the adoption of Statement of Financial Accounting Standards No.
87, EMPLOYERS' ACCOUNTING FOR PENSIONS, in 1993, over the average remaining
service period at the transition date of employees expected to receive benefits
under the pension plans.
A-55
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The funded status of the qualified and non-qualified defined benefit pension
plans and a comparison of the accumulated benefit obligation, plan assets and
projected benefit obligation at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Actuarial present value of obligations:
Vested............................................................ $ (2,724) $ (2,266)
Non-vested........................................................ (43) (47)
--------- ---------
Accumulated benefit obligation...................................... $ (2,767) $ (2,313)
--------- ---------
--------- ---------
Projected benefit obligation........................................ $ (3,094) $ (2,676)
Plan assets at contract value....................................... 3,286 2,900
--------- ---------
Plan assets in excess of projected benefit obligation............... 192 224
Unrecognized prior service cost..................................... 73 92
Unrecognized net loss from past experience different from that
assumed........................................................... 79 33
Unrecognized net asset at transition................................ (326) (365)
Adjustment required to recognize minimum liability.................. (19) --
--------- ---------
Accrued pension cost at December 31................................. $ (1) $ (16)
--------- ---------
--------- ---------
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 7.25 percent for 1995, 8.5 percent
for 1994 and 7.5 percent for 1993 in the United States and 8.0 percent for 1995,
7.25 percent for 1994 and 7.0 percent for 1993 in Canada. The weighted average
assumed rate of increase in future compensation levels was 4.5 percent in 1995
and 5.0 percent in 1994 and 1993. In addition, several other factors, such as
expected retirement dates and mortality, enter into the determination of the
actuarial present value of the accumulated benefit obligation.
The pension plans' assets are principally investment contracts issued by the
Company.
During 1995, the Company recognized a pension plan curtailment gain before
income tax of $8 million. This gain relates to the transfer of Company group
medical health care business personnel to MetraHealth.
SAVINGS AND INVESTMENT PLAN
The Company sponsors a savings and investment plan available for
substantially all employees under which the Company matches a portion of
employee contributions. During 1995, 1994 and 1993, the Company contributed $34
million, $42 million and $48 million, respectively, to the plan.
OTHER POSTRETIREMENT BENEFITS
The Company also provides certain postretirement health care and life
insurance benefits for retired employees through insurance contracts.
Substantially all of the Company's employees may, in accordance with the plans
applicable to such benefits, become eligible for these benefits if they attain
retirement age, with sufficient service, while working for the Company.
The costs of non-pension postretirement benefits are recognized on an
accrual basis in accordance with guidelines prescribed by insurance regulatory
authorities. Such guidelines require the recognition of a postretirement benefit
obligation for current retirees and fully eligible or vested employees. As
prescribed by
A-56
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
the guidelines, the Company has elected to recognize over a period of twenty
years the unrecognized postretirement benefit asset and obligation (net asset
and obligation at transition) in existence on January 1, 1993 (effective date of
guidelines).
The following table sets forth the postretirement health care and life
insurance plans' combined status reconciled with the amounts included in the
Company's balance sheets at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------------ ------------------------------
OVERFUNDED UNDERFUNDED OVERFUNDED UNDERFUNDED
------------- --------------- ------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligations of retirees
and fully eligible participants............................ $ (295) $ (776) $ (262) $ (787)
Plan assets (Company insurance contracts) at contract
value...................................................... 397 411 393 358
------ ------ ------ ------
Plan assets in excess of (less than) accumulated
postretirement benefit obligation.......................... 102 (365) 131 (429)
Unrecognized net loss (gain) from past experience different
from that assumed and from changes in assumptions.......... 53 (83) (6) (44)
Prior service cost not yet recognized in net periodic
retirement benefit cost.................................... (5) -- (5) --
Unrecognized (asset) obligation at transition................ (102) 438 (108) 464
------ ------ ------ ------
Prepaid (Accrued) non-pension postretirement benefit cost at
December 31................................................ $ 48 $ (10) $ 12 $ (9)
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
The components of the net periodic non-pension postretirement benefit cost
for the years ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Service cost..................................................................................... $ 26 $ 31 $ 32
Interest cost on accumulated postretirement benefit obligation................................... 74 76 87
Return on plan assets (Company insurance contracts).............................................. (61) (37) (36)
Amortization of transition asset and obligation.................................................. 18 18 20
Net amortization and deferrals................................................................... (4) (10) (17)
--- --- ---
Net periodic non-pension postretirement benefit cost............................................. $ 53 $ 78 $ 86
--- --- ---
--- --- ---
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
non-pension postretirement benefit obligation was 10.0 percent in 1995, 11.0
percent in 1994 and 12.0 percent in 1993, gradually decreasing to 5.25 percent,
6.5 percent and 5.5 percent, respectively, over twelve years. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7.25 percent, 8.5 percent, and 7.5 percent at December 31, 1995,
1994 and 1993, respectively.
If the health care cost trend rate assumptions were increased 1.0 percent,
the accumulated postretirement benefit obligation as of December 31, 1995, 1994
and 1993 would be increased 9.0 percent, 7.1 percent, and 7.2 percent,
respectively. The effect of this change on the sum of the service and interest
cost components of the net periodic postretirement benefit cost for the years
ended December 31, 1995, 1994 and 1993 would be an increase of 11.0 percent, 7.9
percent and 7.8 percent, respectively.
A-57
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
8. LEASES
LEASE INCOME
During 1995, 1994 and 1993, the Company received $1,742 million, $1,786
million and $1,482 million, respectively, in lease income related to its
investment real estate. In accordance with standard industry practice, certain
of the Company's lease agreements with retail tenants result in income that is
contingent on the level of the tenants' sales revenues.
LEASE EXPENSE
The Company has entered into various lease agreements for office space, data
processing and other equipment. Rental expense under such leases was $171
million, $193 million and $214 million for the years ended December 31, 1995,
1994 and 1993, respectively. Future gross minimum rental payments under non-
cancelable leases, including those leases for which the Company recorded a
restructuring charge in 1995, are as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- --------------------------------------------------------------
<S> <C>
1996.......................................................... $ 107
1997.......................................................... 82
1998.......................................................... 66
1999.......................................................... 48
2000.......................................................... 32
Thereafter.................................................... 53
---------
Total..................................................... $ 388
---------
---------
</TABLE>
9. OTHER COMMITMENTS AND CONTINGENCIES
GUARANTEES
The Company has entered into certain arrangements in the course of its
business which, under certain circumstances, may impose significant financial
obligations on the Company. The Company has entered into a support agreement
with a subsidiary whereby the Company has agreed to maintain the subsidiary's
net worth at one dollar or more. At December 31, 1995, the subsidiary's assets,
which consist principally of loans to affiliates, amounted to $3,309 million and
its net worth amounted to $11 million.
In addition, the Company has entered into arrangements with certain of its
subsidiaries and affiliates to assist such subsidiaries and affiliates in
meeting various jurisdictions' regulatory requirements regarding capital and
surplus. The Company has also entered into a support arrangement with respect to
the reinsurance obligations of a subsidiary.
No material payments have been made under these arrangements and it is the
opinion of management that any payments required pursuant to these arrangements
would not likely have a material adverse effect on the Company's financial
position.
LITIGATION
In 1994, the Company entered into consent agreements (involving the payment
of fines and policyholder restitution payments) with state authorities,
including the insurance departments of all states, arising out of regulatory
proceedings and investigations relating to alleged improper practices in the
sale of individual life insurance. Litigation relating to the Company's
individual life insurance sales practices (including individual actions and
purported class actions) has also been instituted by or on behalf of
policyholders and others, and additional litigation relating to the Company's
sales practices may be commenced in the future. In addition, an
A-58
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
investigation by the Office of the United States Attorney for the Middle
District of Florida, in conjunction with a grand jury, into certain of the sales
practices that were the focus of the state investigations is ongoing. Various
litigation, claims and assessments against the Company, in addition to the
aforementioned, have arisen in the course of the Company's business, operations
and activities.
In certain of the matters referred to above, including actions with multiple
plaintiffs, 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 to make
a meaningful estimate of the amount or range of loss that could result from an
unfavorable outcome in all such matters, it is the opinion of the Company's
management that their outcome, after consideration of the provisions made in the
Company's financial statements, is not likely to have a material adverse effect
on the Company's financial position.
10. SURPLUS NOTES
The carrying values of surplus notes at December 31, 1995 and 1994 are shown
below:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
6.30% surplus notes scheduled to mature on November 1, 2003...................... $ 400 $ 400
7.00% surplus notes scheduled to mature on November 1, 2005...................... 250 --
7.70% surplus notes scheduled to mature on November 1, 2015...................... 200 --
7.45% surplus notes scheduled to mature on November 1, 2023...................... 300 300
7.80% surplus notes scheduled to mature on November 1, 2025...................... 250 --
--------- ---------
Total.................................................................... $ 1,400 $ 700
--------- ---------
--------- ---------
</TABLE>
Interest on the Company's surplus notes is scheduled to be paid
semi-annually; principal payments are scheduled to be paid upon maturity. Such
payments of interest and principal may be made only with the prior approval of
the Superintendent of Insurance of the State of New York (Superintendent).
Subject to the prior approval of the Superintendent, the 7.45 percent
surplus notes may be redeemed, as a whole or in part, at the election of the
Company at any time on or after November 1, 2003. During 1995 and 1994, the
Company obtained Superintendent approval for and made total interest payments of
$48 million on the surplus notes.
11. FAIR VALUE INFORMATION
The estimated fair value amounts of financial instruments presented below
have been determined by the Company using market information available as of
December 31, 1995 and 1994 and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret market data to
develop the estimates of fair value for financial instruments for which there
are no available market value quotations.
A-59
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The estimates presented below are not necessarily indicative of the amounts
the Company could have realized in a market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C>
DECEMBER 31, 1995:
Assets
Bonds.............................................................................. $ 70,955 $ 76,119
Stocks, including subsidiaries..................................................... 3,646 3,608
Mortgage loans..................................................................... 14,211 14,818
Policy loans....................................................................... 3,956 4,023
Cash and short-term investments.................................................... 1,923 1,923
Liabilities
Investment contracts included in:
Reserves for life and health insurance and annuities............................. 18,137 18,211
Policy proceeds and dividends left with the Company.............................. 4,482 4,488
Premium deposit funds............................................................ 12,891 13,322
Other financial instruments
Bond purchase agreements........................................................... $ 601 3.3
Bond sales agreements.............................................................. 80 (0.5)
Interest rate swaps................................................................ 280 1.5
Interest rate caps................................................................. 231 --
Foreign currency swaps............................................................. 89 4.4
Foreign currency forwards.......................................................... 10 --
Covered call options............................................................... 25 (1.9) 1.9
Futures contracts.................................................................. 1,402 (19.5) --
Unused lines of credit............................................................. 1,600 1.1
</TABLE>
A-60
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
----------- --------- -----------
(IN MILLIONS)
DECEMBER 31, 1994:
<S> <C> <C> <C>
Assets
Bonds.............................................................................. $ 65,592 $ 63,194
Stocks, including subsidiaries..................................................... 3,672 3,660
Mortgage loans..................................................................... 14,524 14,269
Policy loans....................................................................... 3,964 3,645
Cash and short-term investments.................................................... 2,334 2,334
Liabilities
Investment contracts included in:
Reserves for life and health insurance and annuities............................. 16,354 16,370
Policy proceeds and dividends left with the Company.............................. 3,534 3,519
Premium deposit funds............................................................ 14,006 13,997
Other Financial Instruments
Bond purchase agreements........................................................... $ 2,755 4.1
Bond sales agreements.............................................................. 1,450 0.8
Interest rate swaps................................................................ 272 (7.1)
Interest rate caps................................................................. 185 (0.1)
Foreign currency swaps............................................................. 36 (0.4)
Foreign currency forwards.......................................................... 4 (0.2) (0.1)
Covered call options............................................................... 25 (1.9) 1.9
Unused lines of credit............................................................. 1,450 1.0
</TABLE>
For bonds that are publicly traded, estimated fair value was obtained from
an independent market pricing service. Publicly traded bonds represented
approximately 78 percent of the carrying value and estimated fair value of the
total bonds as of December 31, 1995 and 77 percent of the carrying value and
estimated fair value of the total bonds as of December 31, 1994. For all other
bonds, estimated fair value was determined by management, based on interest
rates, maturity, credit quality and average life. Included in bonds are loaned
securities with estimated fair values of $8,148 million and $5,154 million at
December 31, 1995 and 1994, respectively. Estimated fair values of stocks were
generally based on quoted market prices, except for investments in common stock
of subsidiaries, which are based on equity in net assets of the subsidiaries.
Estimated fair values of mortgage loans were generally based on discounted
projected cash flows using interest rates offered for loans to borrowers with
comparable credit ratings and for the same maturities. Estimated fair values of
policy loans were based on discounted projected cash flows using U.S. Treasury
rates to approximate interest rates and Company experience to project patterns
of loan repayment. For cash and short-term investments, the carrying amount is a
reasonable estimate of fair value.
Included in reserves for life and health insurance and annuities, policy
proceeds and dividends left with the Company and premium deposit funds are
amounts classified as investment contracts representing policies or contracts
that do not incorporate significant insurance risk. The fair values for these
liabilities are estimated using discounted projected cash flows, based on
interest rates being offered for similar contracts with maturities consistent
with those remaining for the contracts being valued. Policy proceeds and
dividends left with the Company also include other liabilities without defined
durations. The estimated fair value of such liabilities, which generally are of
short duration or have periodic adjustments of interest rates, approximates
their carrying value.
A-61
<PAGE>
METROPOLITAN LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Estimated fair values of bond purchase/sale agreements were based on fees
charged to enter into similar arrangements or on the estimated cost to terminate
the outstanding agreements. For interest rate and foreign currency swaps,
interest rate caps, interest rate futures, foreign currency forwards, futures
contracts and covered call options, estimated fair value is the amount at which
the contracts could be settled based on estimates obtained from dealers. The
Company had unused lines of credit under agreements with various banks. The
estimated fair values of unused lines of credit were based on fees charged to
enter into similar agreements.
12. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR MUTUAL LIFE INSURANCE
COMPANIES
The Company, as a mutual life insurance company, prepares its financial
statements in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of New York (statutory financial
statements) which currently are considered to be generally accepted accounting
principles (GAAP) for mutual life insurance companies. However, the Financial
Accounting Standards Board (FASB) has issued certain pronouncements effective
for 1996 annual financial statements and thereafter. Such pronouncements will no
longer allow statutory financial statements to be described as being prepared in
conformity with GAAP. Upon the effective date of the pronouncements, in order
for their financial statements to be described as being prepared in conformity
with GAAP, mutual life insurance companies will be required to adopt all
applicable accounting principles promulgated by the FASB in any general purpose
financial statements that they may issue. If permitted by insurance regulatory
authorities, the Company will issue 1996 general purpose financial statements
reflecting the adoption of all applicable GAAP pronouncements. However, the
Company has not finalized the quantification of the effects of the application
of the pronouncements on its financial statements.
A-62
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Metropolitan Life Insurance Company:
We have audited the accompanying statements of assets and liabilities of the
Growth, Income, Money Market, Diversified, International Stock, Stock Index, and
Aggressive Growth Divisions of Metropolitan Life Separate Account UL (the
"Separate Account") as of December 31, 1995, and the related statements of
operations for the year then ended and of changes in net assets for each of the
two years in the period then ended. These financial statements are the
responsibility of the Separate Account's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the custodian and the depositor of the Separate Account. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets of the Growth, Income, Money Market, Diversified,
International Stock, Stock Index and Aggressive Growth Divisions of Metropolitan
Life Separate Account UL as of December 31, 1995 and the results of their
operations for the year ended and the changes in their net assets for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
New York, New York
February 19, 1996
A-63
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY INTERNATIONAL AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------- ----------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Metropolitan Series
Fund, Inc. at Value (Note 1A):
Growth Portfolio (4,099,345
shares; cost $96,789,176)....... $ 112,977,954 -- -- -- -- -- --
Income Portfolio (1,760,947
shares; cost $22,143,191)....... -- $22,416,853 -- -- -- -- --
Money Market Portfolio (282,752
shares; cost $3,047,618)........ -- -- $2,954,758 -- -- -- --
Diversified Portfolio (5,310,254
shares; cost $77,330,732)....... -- -- -- $84,698,553 -- -- --
International Stock Portfolio
(1,414,995 shares; cost
$17,940,365).................... -- -- -- -- $17,390,288 -- --
Stock Index Portfolio (725,046
shares; cost $11,289,160)....... -- -- -- -- -- $13,456,861 --
Aggressive Growth Portfolio
(2,111,288 shares; cost
$50,602,535).................... -- -- -- -- -- -- $54,619,026
------------- ----------- ---------- ----------- ------------ ----------- -----------
Total Investments................. 112,977,954 22,416,853 2,954,758 84,698,553 17,390,288 13,456,861 54,619,026
Cash and Accounts Receivable........ -- -- 20,391 -- -- -- --
------------- ----------- ---------- ----------- ------------ ----------- -----------
Total Assets...................... 112,977,954 22,416,853 2,975,149 84,698,553 17,390,288 13,456,861 54,619,026
LIABILITIES......................... 537,332 105,382 409 517,812 94,151 31,091 287,229
------------- ----------- ---------- ----------- ------------ ----------- -----------
NET ASSETS.......................... $ 112,440,622 $22,311,471 $2,974,740 $84,180,741 $17,296,137 $13,425,770 $54,331,797
------------- ----------- ---------- ----------- ------------ ----------- -----------
------------- ----------- ---------- ----------- ------------ ----------- -----------
</TABLE>
See Notes to Financial Statements.
A-64
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
----------- ---------- --------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)................... $ 5,497,071 $1,312,997 $ 161,198 $ 5,314,778 $ 152,268 $ 290,369 $5,091,762
Expenses:
Mortality and expense charges (Note
3)................................. 802,240 165,666 32,690 619,298 124,852 76,564 365,214
----------- ---------- --------- ----------- ------------ ---------- -----------
Net investment income.................... 4,694,831 1,147,331 128,508 4,695,480 27,416 213,805 4,726,548
----------- ---------- --------- ----------- ------------ ---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions........................... 293,233 (8,290) 35,201 248,523 28,349 29,512 152,387
Change in unrealized appreciation of
investments............................ 19,543,807 1,977,261 4,641 10,898,818 136,578 2,271,366 4,188,117
----------- ---------- --------- ----------- ------------ ---------- -----------
Net realized and unrealized gain on
investments (Note 1B).................. 19,837,040 1,968,971 39,842 11,147,341 164,927 2,300,878 4,340,504
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................. $24,531,871 $3,116,302 $ 168,350 $15,842,821 $ 192,343 $2,514,683 $9,067,052
----------- ---------- --------- ----------- ------------ ---------- -----------
----------- ---------- --------- ----------- ------------ ---------- -----------
</TABLE>
See Notes to Financial Statements.
A-65
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH INCOME MONEY MARKET
DIVISION DIVISION DIVISION
----------------------------- --------------------------- ---------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 4,694,831 $ 1,529,435 $ 1,147,331 $ 971,668 $ 128,508 $ 130,231
Net realized gain (loss)
from security
transactions.............. 293,233 53,162 (8,290) (9,894) 35,201 (79,321)
Unrealized appreciation
(depreciation) of
investments............... 19,543,807 (4,282,800) 1,977,261 (1,415,108) 4,641 36,172
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
operations................ 24,531,871 (2,700,203) 3,116,302 (453,334) 168,350 87,082
------------- ------------- ------------ ------------ ------------ ------------
From capital transactions:
Net premiums................ 41,455,659 45,546,952 8,687,776 10,328,856 2,988,786 6,425,154
Net portfolio transfers..... (4,142,623) (2,746,223) (1,257,339) 48,939 (3,815,269) (6,647,524)
Other net transfers......... (17,287,875) (16,398,757) (3,439,203) (3,317,903) (661,810) (703,798)
Substitutions (Note 4)...... -- -- -- -- -- --
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting from
capital transactions...... 20,025,161 26,401,972 3,991,234 7,059,892 (1,488,293) (926,168)
------------- ------------- ------------ ------------ ------------ ------------
NET CHANGE IN NET ASSETS.... 44,557,032 23,701,769 7,107,536 6,606,558 (1,319,943) (839,086)
NET ASSETS--BEGINNING OF
YEAR...................... 67,883,590 44,181,821 15,203,935 8,597,377 4,294,683 5,133,769
------------- ------------- ------------ ------------ ------------ ------------
NET ASSETS--END OF YEAR..... $ 112,440,622 $ 67,883,590 $ 22,311,471 $ 15,203,935 $ 2,974,740 $ 4,294,683
------------- ------------- ------------ ------------ ------------ ------------
------------- ------------- ------------ ------------ ------------ ------------
</TABLE>
See Notes to Financial Statements.
A-66
<PAGE>
<TABLE>
<CAPTION>
DIVERSIFIED INTERNATIONAL STOCK
DIVISION DIVISION
--------------------------- ---------------------------
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995 1994 1995 1994
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 4,695,480 $ 1,734,612 $ 27,416 $ 485,015
Net realized gain (loss)
from security
transactions.............. 248,523 22,275 28,349 80,235
Unrealized appreciation
(depreciation) of
investments............... 10,898,818 (3,636,719) 136,578 (842,359)
------------ ----------- ------------ -----------
Net increase (decrease) in
net assets resulting from
operations................ 15,842,821 (1,879,832) 192,343 (277,109)
------------ ----------- ------------ -----------
From capital transactions:
Net premiums................ 31,888,789 41,263,327 12,024,423 11,498,165
Net portfolio transfers..... (5,102,550) (4,980,679) (1,502,438) 1,014,621
Other net transfers......... (13,529,725) (14,095,050) (4,797,949) (3,556,411)
Substitutions (Note 4)...... -- 2,235,074 -- --
------------ ----------- ------------ -----------
Net increase (decrease) in
net assets resulting from
capital transactions...... 13,256,514 24,422,672 5,724,036 8,956,375
------------ ----------- ------------ -----------
NET CHANGE IN NET ASSETS.... 29,099,335 22,542,840 5,916,379 8,679,266
NET ASSETS--BEGINNING OF
YEAR...................... 55,081,406 32,538,566 11,379,758 2,700,492
------------ ----------- ------------ -----------
NET ASSETS--END OF YEAR..... $ 84,180,741 $55,081,406 $ 17,296,137 $11,379,758
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
<CAPTION>
STOCK INDEX AGGRESSIVE GROWTH
DIVISION DIVISION
----------------------------- ------------------------------
1995 1994 1995 1994
------------- ------------ --------------- -----------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 213,805 $ 132,182 $ 4,726,548 $ (98,251)
Net realized gain (loss)
from security
transactions.............. 29,512 5,039 152,387 5,076
Unrealized appreciation
(depreciation) of
investments............... 2,271,366 (129,802) 4,188,117 (100,707)
------------- ------------ --------------- -----------
Net increase (decrease) in
net assets resulting from
operations................ 2,514,683 7,419 9,067,052 (193,882)
------------- ------------ --------------- -----------
From capital transactions:
Net premiums................ 7,870,004 4,316,325 32,859,273 28,325,697
Net portfolio transfers..... 876,498 (301,802) (190,487) (15,434)
Other net transfers......... (2,682,256) (1,454,580) (12,996,305) (10,302,089)
Substitutions (Note 4)...... -- -- -- --
------------- ------------ --------------- -----------
Net increase (decrease) in
net assets resulting from
capital transactions...... 6,064,246 2,559,943 19,672,481 18,008,174
------------- ------------ --------------- -----------
NET CHANGE IN NET ASSETS.... 8,578,929 2,567,362 28,739,533 17,814,292
NET ASSETS--BEGINNING OF
YEAR...................... 4,846,841 2,279,479 25,592,264 7,777,972
------------- ------------ --------------- -----------
NET ASSETS--END OF YEAR..... $ 13,425,770 $ 4,846,841 $ 54,331,797 $25,592,264
------------- ------------ --------------- -----------
------------- ------------ --------------- -----------
</TABLE>
A-67
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Metropolitan Life Separate Account UL (the "Separate Account") is a
multi-division unit investment trust registered under the Investment Company Act
of 1940 and presently consists of seven investment divisions used to support
variable universal life insurance policies. The assets in each division are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc. (the "Fund"). Each portfolio has varying investment objectives
relative to growth of capital and income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property of
Metropolitan Life.
A summary of significant accounting policies, all of which are in accordance
with generally accepted accounting principles, is set forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios. A summary of investments of the seven
designated portfolios of the Fund in which the seven investment divisions of the
Separate Account invest as of December 31, 1995 is included as Note 5. The
methods used to value the Fund's investments at December 31, 1995 are described
in Note 1A of the Fund's 1994 Annual Report.
B. SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified cost.
C. FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account will be
treated as a part of Metropolitan Life and its operations, and the Separate
Account will not be taxed separately as a "regulated investment company" under
existing law. Metropolitan Life is taxed as a life insurance company. The
policies permit Metropolitan Life to charge against the Separate Account any
taxes, or reserves for taxes, attributable to the maintenance or operation of
the Separate Account. Metropolitan Life is not currently charging any federal
income taxes against the Separate Account arising from the earnings or realized
capital gains attributable to the Separate Account. Such charges may be imposed
in future years depending on market fluctuations and transactions involving the
Separate Account.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge from
premiums before amounts are allocated to the Separate Account. In the case of
certain of the policies, Metropolitan Life also deducts a Federal income tax
charge before amounts are allocated to the Separate Account. The Federal income
tax charge is imposed in connection with certain of the policies to recover a
portion of the Federal income tax adjustment attributable to policy acquisition
expenses.
2. DIVIDENDS
On April 19, 1995 and December 19, 1995, the Fund declared dividends for all
shareholders of record on April 25, 1995 and December 27, 1995, respectively.
The amount of dividends received by the Separate Account was $17,820,443. The
dividends were paid to Metropolitan Life on April 26, 1995 and December 28,
1995, respectively, and were immediately reinvested in additional shares of the
portfolios in which the investment divisions invest. As a result of this
reinvestment, the number of shares of the Fund held by each of
A-68
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
the seven investment divisions increased by the following: Growth Portfolio
203,974 shares, Income Portfolio 103,768 shares, Money Market Portfolio 15,439
shares, Diversified Portfolio 334,236 shares, International Stock Portfolio
12,446 shares, Stock Index Portfolio 15,791 shares, and Aggressive Growth
Portfolio 199,098 shares.
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Life. This charge is
equivalent to the effective annual rate of .90% of the average daily value of
the net assets in the Separate Account which are attributable to such policies.
4. SUBSTITUTION OF DIVISION
On June 1, 1994, the net assets of the Equity Income Division were
transferred to the Diversified Division under a substitution plan.
A-69
<PAGE>
NOTES TO FINANCIAL STATEMENTS-(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROWTH PORTFOLIO INCOME PORTFOLIO
--------------------------- -------------------------
<S> <C> <C> <C> <C>
VALUE VALUE
(NOTE 1A) (NOTE 1A)
COMMON STOCK
Aerospace........... $ 46,873,200 (4.3%)
Automotive.......... 8,400,388 (0.8%)
Banking............. 46,664,450 (4.3%)
Building............ 6,695,350 (0.6%)
Business Services... 17,307,250 (1.6%)
Chemical............ 62,351,063 (5.7%)
Computer Software &
Service............ 64,486,020 (5.9%)
Drug................ 68,975,425 (6.3%)
Electrical
Equipment.......... 18,014,400 (1.6%)
Electronics......... 60,681,096 (5.5%)
Financial
Services........... 50,077,876 (4.6%)
Food & Beverage..... 56,499,225 (5.1%)
Hospital
Management......... 23,432,125 (2.1%)
Hospital Supply..... 46,253,650 (4.2%)
Hotel &
Restaurant......... 22,954,525 (2.1%)
Insurance........... 31,977,600 (2.9%)
Machinery........... 47,891,562 (4.4%)
Metals & Mining..... 7,637,612 (0.7%)
Office Equipment.... 68,138,213 (6.2%)
Oil................. 69,771,787 (6.4%)
Oil Services........ 18,143,500 (1.7%)
Paper............... 8,429,400 (0.8%)
Personal Care....... 24,817,000 (2.3%)
Retail Trade........ 82,486,135 (7.5%)
Tobacco............. 26,525,550 (2.4%)
Toys & Musical
Instruments........ 9,913,984 (0.9%)
Utilities-Telephone... 31,793,450 (2.9%)
Video............... 49,360,428 (4.5%)
---------------
Total Common
Stock.............. 1,076,552,264 (98.3%)
---------------
CONVERTIBLE
PREFERRED STOCK
Oil Services........
PREFERRED STOCK
Retail Trade........
---------------
Total Stock
Securities......... $ 1,076,552,264 (98.3%)
---------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Banking............. $ 13,202,211 (3.7%)
Financial
Services........... 27,942,460 (8.0%)
Industrial-Miscellaneous... 29,715,375 (8.5%)
Mortgage Backed..... 12,183,305 (3.5%)
-------------
Total Corporate
Bonds.............. 83,043,351 (23.7%)
-------------
Federal Agency
Obligations........ 19,288,010 (5.5%)
Federal Treasury
Obligations........ 173,723,485 (49.7%)
Foreign
Obligations........ 31,751,086 (9.1%)
Government
Sponsored.......... 5,854,471 (1.7%)
Yankee Bonds........ 18,464,936 (5.3%)
-------------
Total Bonds......... 249,081,988 (95.0%)
-------------
SHORT-TERM
OBLIGATIONS
Bank Note...........
Bankers'
Acceptance.........
Commercial Paper.... $ 19,775,000 (1.8%) 13,785,000 (3.9%)
Corporate Note......
Federal Agency
Obligations........
Federal Treasury
Obligations........
--------------- -------------
Total Short-Term
Obligations........ 19,775,000 (1.8%) 13,785,000 (3.9%)
--------------- -------------
TOTAL INVESTMENTS... 1,096,327,264 (100.1%) 345,910,339 (98.9%)
Other Assets Less
Liabilities........ (1,576,667) (-0.1%) 4,002,689 (1.1%)
--------------- -------------
NET ASSETS.......... $ 1,094,750,597 (100.0%) $ 349,913,028 (100.0%)
--------------- -------------
--------------- -------------
<CAPTION>
MONEY MARKET PORTFOLIO
DIVERSIFIED PORTFOLIO
------------------------- -------------------------
<S> <C> <C> <C> <C>
VALUE VALUE
(NOTE 1A) (NOTE 1A)
COMMON STOCK
Aerospace........... $ 24,440,850 (2.2%)
Automotive.......... 3,604,913 (0.3%)
Banking............. 27,106,325 (2.4%)
Building............ 3,872,713 (0.4%)
Business Services... 10,205,126 (0.9%)
Chemical............ 37,025,888 (3.3%)
Computer Software &
Service............ 38,000,276 (3.4%)
Drug................ 42,703,588 (3.8%)
Electrical
Equipment.......... 10,512,000 (1.0%)
Electronics......... 37,210,134 (3.3%)
Financial
Services........... 33,011,138 (3.0%)
Food & Beverage..... 33,167,400 (3.0%)
Hospital
Management......... 16,054,075 (1.4%)
Hospital Supply..... 25,576,525 (2.3%)
Hotel &
Restaurant......... 13,319,088 (1.2%)
Insurance........... 18,682,688 (1.7%)
Machinery........... 28,921,275 (2.6%)
Metals & Mining..... 4,655,687 (0.4%)
Office Equipment.... 39,834,663 (3.6%)
Oil................. 42,551,035 (3.8%)
Oil Services........ 10,505,225 (0.9%)
Paper............... 4,914,800 (0.4%)
Personal Care....... 15,836,400 (1.4%)
Retail Trade........ 48,731,799 (4.4%)
Tobacco............. 16,507,200 (1.5%)
Toys & Musical
Instruments........ 5,967,406 (0.5%)
Utilities-Telephone. 18,417,625 (1.7%)
Video............... 28,511,540 (2.6%)
-------------
Total Common
Stock.............. 639,847,382 (57.4%)
-------------
CONVERTIBLE
PREFERRED STOCK
Oil Services........ 154,500 (0.0%)
PREFERRED STOCK
Retail Trade........ 209,061 (0.0%)
-------------
Total Stock
Securities......... $ 640,210,943 (57.4%)
-------------
LONG-TERM DEBT
SECURITIES
Corporate Bonds:
Banking............. $ 20,432,477 (1.8%)
Financial
Services........... 38,284,443 (3.5%)
Industrial-Miscellan 39,027,649 (3.5%)
Mortgage Backed..... 12,889,132 (1.2%)
-------------
Total Corporate
Bonds.............. 110,633,701 (10.0%)
-------------
Federal Agency
Obligations........ 24,303,049 (2.2%)
Federal Treasury
Obligations........ 227,577,120 (20.4%)
Foreign
Obligations........ 43,686,100 (3.9%)
Government
Sponsored.......... 7,073,233 (0.6%)
Yankee Bonds........ 26,274,500 (2.4%)
-------------
Total Bonds......... 328,914,002 (29.5%)
-------------
SHORT-TERM
OBLIGATIONS
Bank Note........... $ 1,999,841 (4.9%)
Bankers'
Acceptance......... 1,966,149 (4.8%)
Commercial Paper.... 17,760,043 (43.9%) 31,189,000 (2.8%)
Corporate Note...... 2,006,689 (5.0%)
Federal Agency
Obligations........ 9,613,137 (23.8%)
Federal Treasury
Obligations........ 6,874,040 (17.0%)
------------- -------------
Total Short-Term
Obligations........ 40,219,899 (99.4%) 31,189,000 (2.8%)
------------- -------------
TOTAL INVESTMENTS... 40,219,899 (99.4%) 1,110,947,646 (99.7%)
Other Assets Less
Liabilities........ 236,376 (0.6%) 3,885,951 (0.3%)
------------- -------------
NET ASSETS.......... $ 40,456,275 (100.0%) $1,114,833,597 (100.0%)
------------- -------------
------------- -------------
</TABLE>
A-70
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL STOCK
PORTFOLIO
--------------------------
VALUE
(NOTE 1A)
--------------
<S> <C> <C>
COMMON STOCK
Airlines......................... $ 778,273 (0.3%)
Automotive....................... 5,547,826 (1.9%)
Banking.......................... 9,258,655 (3.1%)
Beverages........................ 6,315,913 (2.1%)
Broadcasting & Publishing........ 755,063 (0.3%)
Building......................... 7,676,572 (2.6%)
Business Services................ 5,642,530 (1.9%)
Chemicals........................ 5,969,074 (2.0%)
Electrical Equipment............. 9,578,893 (3.2%)
Financial Services............... 9,274,046 (3.1%)
Foods............................ 6,130,161 (2.1%)
Health & Personal Care........... 10,013,145 (3.4%)
Industrial--Miscellaneous........ 5,939,198 (2.0%)
Insurance........................ 8,712,224 (2.9%)
Leisure.......................... 5,033,575 (1.7%)
Machinery........................ 10,540,444 (3.5%)
Metals--Steel & Iron............. 3,707,213 (1.2%)
Metals--Gold..................... 17,292,196 (5.8%)
Metals--Miscellaneous............ 11,269,782 (3.8%)
Miscellaneous.................... 1,417,500 (0.5%)
Miscellaneous Materials.......... 10,149,225 (3.4%)
Office Equipment................. 205,063 (0.1%)
Offshore Funds & Investment
Trusts......................... 5,181,098 (1.7%)
Oil--Domestic.................... 9,941,445 (3.3%)
Oil--International............... 783,833 (0.3%)
Paper............................ 527,824 (0.2%)
Railroad......................... 2,987,040 (1.0%)
Real Estate...................... 5,468,829 (1.8%)
Recreation....................... 3,126,583 (1.1%)
Retail Trade..................... 9,116,882 (3.1%)
Telecommunications............... 888,768 (0.3%)
Textiles & Apparel............... 1,304,293 (0.4%)
Transportation--Trucking......... 624,375 (0.2%)
Utilities--Electric.............. 4,080,974 (1.4%)
Utilities--Water................. 998,366 (0.3%)
Wholesale & International
Trade.......................... 4,857,355 (1.6%)
--------------
Total Common Stock............... 201,094,236 (67.6%)
Convertible Preferred Stock........ 426,075 (0.1%)
Preferred Stock.................... 2,488,326 (0.9%)
Total Equity Securities............ 204,008,637 (68.6%)
Convertible Bonds.................. 17,774,377 (6.0%)
--------------
TOTAL INVESTMENTS.................. 221,783,014 (74.6%)
Other Assets Less Liabilities.... 75,678,027 (25.4%)
--------------
NET ASSETS......................... $ 297,461,041 (100.0%)
--------------
--------------
</TABLE>
A-71
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
METROPOLITAN SERIES FUND, INC.
5. A SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONTINUED)
<TABLE>
<CAPTION>
STOCK INDEX
PORTFOLIO
--------------------------
VALUE
(NOTE 1A)
-------------
<S> <C> <C>
COMMON STOCK
Aerospace................................................................................... $ 13,979,982 (2.2%)
Airlines.................................................................................... 2,644,937 (0.4%)
Automotive.................................................................................. 16,087,052 (2.5%)
Banking..................................................................................... 41,224,016 (6.5%)
Beverages................................................................................... 35,762,761 (5.6%)
Building.................................................................................... 6,721,186 (1.1%)
Chemical.................................................................................... 22,748,995 (3.6%)
Container................................................................................... 769,825 (0.1%)
Cosmetics................................................................................... 4,724,749 (0.7%)
Drug........................................................................................ 41,170,632 (6.5%)
Electrical Connectors....................................................................... 1,504,050 (0.2%)
Electrical Equipment........................................................................ 23,767,938 (3.7%)
Electronics................................................................................. 26,279,796 (4.1%)
Financial Services.......................................................................... 19,611,919 (3.1%)
Foods....................................................................................... 16,942,138 (2.7%)
Hospital Management......................................................................... 6,287,681 (1.0%)
Hospital Supply............................................................................. 19,150,108 (3.0%)
Hotel & Restaurant.......................................................................... 6,409,988 (1.0%)
Industrials--Miscellaneous.................................................................. 13,838,876 (2.2%)
Insurance................................................................................... 22,054,204 (3.5%)
Leisure..................................................................................... 1,010,300 (0.2%)
Machinery................................................................................... 9,363,339 (1.5%)
Metals--Aluminum............................................................................ 2,557,576 (0.4%)
Metals--Gold................................................................................ 3,688,584 (0.6%)
Metals--Miscellaneous....................................................................... 2,603,457 (0.4%)
Metals--Steel & Iron........................................................................ 2,102,738 (0.3%)
Office Equipment............................................................................ 35,293,640 (5.6%)
Oil--Crude Producers........................................................................ 577,675 (0.1%)
Oil--Domestic............................................................................... 12,288,633 (1.9%)
Oil--International.......................................................................... 37,270,188 (5.9%)
Oil Services................................................................................ 6,695,613 (1.1%)
Paper....................................................................................... 8,585,105 (1.4%)
Photography................................................................................. 4,004,325 (0.6%)
Printing & Publishing....................................................................... 7,978,951 (1.3%)
Railroad.................................................................................... 7,750,478 (1.2%)
Retail Trade................................................................................ 29,479,447 (4.6%)
Services.................................................................................... 4,541,599 (0.7%)
Shoes....................................................................................... 1,906,875 (0.3%)
Soaps....................................................................................... 12,378,362 (1.9%)
Textiles & Apparel.......................................................................... 1,231,638 (0.2%)
Tire & Rubber............................................................................... 1,576,100 (0.2%)
Toys & Musical Instruments.................................................................. 792,458 (0.1%)
Transportation--Trucking.................................................................... 907,625 (0.1%)
Utilities--Electric......................................................................... 21,261,693 (3.3%)
Utilities--Gas Distribution................................................................. 3,778,086 (0.6%)
Utilities--Gas Pipeline..................................................................... 3,294,056 (0.5%)
Utilities--Telephone........................................................................ 53,586,928 (8.5%)
Video....................................................................................... 14,232,219 (2.2%)
-------------
Total Common Stock.......................................................................... 632,418,521 (99.4%)
TOTAL SHORT-TERM OBLIGATIONS--U.S. TREASURY BILLS............................................. 5,503,636 (0.9%)
-------------
TOTAL INVESTMENTS............................................................................. 637,922,157 (100.3%)
Other Assets Less Liabilities................................................................. (2,098,918) (-0.3%)
-------------
NET ASSETS.................................................................................... $ 635,823,239 (100.0%)
------------- -----------
------------- -----------
</TABLE>
A-72
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
METROPOLITAN SERIES FUND, INC.
5. SUMMARY OF INVESTMENTS AS OF DECEMBER 31, 1995--(CONCLUDED)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
PORTFOLIO
------------------------
VALUE
(NOTE 1A)
-------------
<S> <C> <C>
COMMON STOCK
Aerospace.................................................................................... $ 37,289,175 (3.9%)
Airlines..................................................................................... 23,823,062 (2.5%)
Automotive................................................................................... 3,636,625 (0.4%)
Business Services............................................................................ 43,265,943 (4.5%)
Chemical..................................................................................... 9,393,750 (1.0%)
Computer Software & Service.................................................................. 83,974,480 (8.8%)
Diversified.................................................................................. 9,028,800 (0.9%)
Drug......................................................................................... 23,960,467 (2.5%)
Electrical Equipment......................................................................... 27,345,600 (2.9%)
Electronics.................................................................................. 15,239,300 (1.6%)
Financial Services........................................................................... 14,461,700 (1.5%)
Food & Beverage.............................................................................. 18,494,325 (1.9%)
Hospital Supply.............................................................................. 236,600 (0.0%)
Hotel & Restaurant........................................................................... 57,102,144 (6.0%)
Insurance.................................................................................... 52,168,826 (5.4%)
Machinery.................................................................................... 32,567,513 (3.4%)
Office Equipment............................................................................. 41,544,576 (4.3%)
Oil.......................................................................................... 37,022,038 (3.9%)
Oil Services................................................................................. 24,723,888 (2.6%)
Personal Care................................................................................ 1,040,775 (0.1%)
Printing & Publishing........................................................................ 7,862,175 (0.8%)
Recreation................................................................................... 49,853,613 (5.2%)
Retail Trade................................................................................. 120,841,866 (12.6%)
Textiles & Apparel........................................................................... 72,565,958 (7.6%)
Tobacco...................................................................................... 22,317,300 (2.3%)
Utilities--Telephone......................................................................... 19,429,313 (2.0%)
-------------
Total Common Stock........................................................................... 849,189,812 (88.6%)
CONVERTIBLE PREFERRED STOCK
Machinery.................................................................................... 6,481,163 (0.7%)
PREFERRED STOCK
Airlines..................................................................................... 7,062,000 (0.7%)
-------------
Total Equity Securities........................................................................ 862,732,975 (90.0%)
TOTAL LONG-TERM DEBT SECURITIES--CONVERTIBLE BONDS............................................. 9,658,850 (1.0%)
TOTAL SHORT-TERM OBLIGATIONS--COMMERCIAL PAPER................................................. 58,265,000 (6.1%)
-------------
TOTAL INVESTMENTS.............................................................................. 930,656,825 (97.1%)
Other Assets Less Liabilities.................................................................. 28,258,408 (2.9%)
-------------
NET ASSETS..................................................................................... $ 958,915,233 (100.0%)
-------------
-------------
</TABLE>
A-73
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY INTERNATIONAL AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------- ----------- ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in Metropolitan
Series Fund,Inc. at Value
(Note 1A):
Growth Portfolio (4,269,698
shares; cost
$101,750,658)............... $ 125,828,002 -- -- -- -- -- --
Income Portfolio (1,817,114
shares; cost $22,842,868)... -- $22,659,415 -- -- -- -- --
Money Market Portfolio
(323,560 shares; cost
$3,471,171)................. -- -- $3,420,032 -- -- -- --
Diversified Portfolio
(5,512,792 shares; cost
$80,659,387)................ -- -- -- $90,905,936 -- -- --
International Stock Portfolio
(1,540,949 shares; cost
$19,522,156)................ -- -- -- -- $19,153,994 -- --
Stock Index Portfolio (844,721
shares; cost $13,622,223)... -- -- -- -- -- $16,505,843 --
Aggressive Growth Portfolio
(2,322,078 shares; cost
$56,034,032)................ -- -- -- -- -- -- $64,019,697
------------- ----------- ---------- ----------- ------------ ----------- -----------
Total Investments........... 125,828,002 22,659,415 3,420,032 90,905,936 19,153,994 16,505,843 64,019,697
Cash and Accounts Receivable...... 131 21 16,888 88 35 41
------------- ----------- ---------- ----------- ------------ ----------- -----------
Total Assets................ 125,828,133 22,659,436 3,436,920 90,906,024 19,154,029 16,505,884 64,019,697
LIABILITIES....................... 655,789 121,528 616,888 97,980 53,034 351,984
------------- ----------- ---------- ----------- ------------ ----------- -----------
NET ASSETS........................ $ 125,172,344 $22,537,908 $3,436,920 $90,289,136 $19,056,049 $16,452,850 $63,667,713
------------- ----------- ---------- ----------- ------------ ----------- -----------
------------- ----------- ---------- ----------- ------------ ----------- -----------
</TABLE>
See Notes to Financial Statements.
A-74
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------------------------------------
MONEY INTERNATIONAL STOCK AGGRESSIVE
GROWTH INCOME MARKET DIVERSIFIED STOCK INDEX GROWTH
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
---------- --------- ----------- ----------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends (Note 2)...................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Expenses:
Mortality and expense charges (Note
3).................................... 24,424 4,616 1,035 17,881 4,489 4,199 14,696
---------- --------- ----------- ----------- ------------ --------- -----------
Net investment income (loss)................ (24,424) (4,616) (1,035) (17,881) (4,489) (4,199) (14,696)
---------- --------- ----------- ----------- ------------ --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions............................ 98,585 (8,905) (3,594) 33,043 10,683 17,238 14,501
Change in unrealized appreciation
(depreciation) of investments........... 7,888,566 (457,115) 41,721 2,878,728 181,925 715,920 3,969,174
---------- --------- ----------- ----------- ------------ --------- -----------
Net realized and unrealized gain (loss) on
investments (Note 1B)................... 7,987,151 (466,020) 38,127 2,911,771 192,608 733,158 3,983,675
---------- --------- ----------- ----------- ------------ --------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.................. $7,962,727 $(470,636) $ 37,092 $2,893,890 $ 188,119 $ 728,959 $3,968,979
---------- --------- ----------- ----------- ------------ --------- -----------
---------- --------- ----------- ----------- ------------ --------- -----------
</TABLE>
See Notes to Financial Statements.
A-75
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
MONEY MARKET
GROWTH DIVISION INCOME DIVISION DIVISION
--------------------------------- --------------------------------- ----------------
FOR THE THREE FOR THE THREE FOR THE THREE
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED
MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ (24,424) $ 4,694,831 $ (4,616) $ 1,147,331 $ (1,035)
Net realized gain (loss)
from security
transactions.............. 98,585 293,233 (8,905) (8,290) (3,594)
Unrealized appreciation
(depreciation) of
investments............... 7,888,566 19,543,807 (457,115) 1,977,261 41,721
---------------- --------------- ---------------- --------------- ----------------
Net increase (decrease) in
net assets resulting from
operations................ 7,962,727 24,531,871 (470,636) 3,116,302 37,092
---------------- --------------- ---------------- --------------- ----------------
From capital transactions:
Net premiums................ 10,920,142 41,455,659 1,932,990 8,687,776 985,143
Redemptions (Note 4)........ (1,052,808) (2,766,288) (188,822) (546,157) (4,911)
Net portfolio transfers
(Note 4).................. 357,897 395,373 36,138 36,042 (374,271)
Other net transfers (Note
4)........................ (5,456,236) (19,059,583) (1,083,233) (4,186,427) (180,873)
Net increase (decrease) in
net assets resulting from
capital transactions...... 4,768,995 20,025,161 697,073 3,991,234 425,088
---------------- --------------- ---------------- --------------- ----------------
NET CHANGE IN NET ASSETS...... 12,731,722 44,557,032 226,437 7,107,536 462,180
Net Assets--beginning of
period....................... 112,440,622 67,883,590 22,311,471 15,203,935 2,974,740
---------------- --------------- ---------------- --------------- ----------------
Net Assets--end of period..... $ 125,172,344 $ 112,440,622 $ 22,537,908 $ 22,311,471 $ 3,436,920
---------------- --------------- ---------------- --------------- ----------------
---------------- --------------- ---------------- --------------- ----------------
<CAPTION>
DIVERSIFIED DIVISION
---------------------------------
FOR THE THREE
FOR THE YEAR MONTHS ENDED FOR THE YEAR
ENDED MARCH 31, ENDED
DECEMBER 31, 1996 DECEMBER 31,
1995 (UNAUDITED) 1995
--------------- ---------------- ---------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 128,508 $ (17,881) $ 4,695,480
Net realized gain (loss)
from security
transactions.............. 35,201 33,043 248,523
Unrealized appreciation
(depreciation) of
investments............... 4,641 2,878,728 10,898,818
--------------- ---------------- ---------------
Net increase (decrease) in
net assets resulting from
operations................ 168,350 2,893,890 15,842,821
--------------- ---------------- ---------------
From capital transactions:
Net premiums................ 2,988,786 7,955,690 31,888,789
Redemptions (Note 4)........ (89,665) (705,739) (2,358,803)
Net portfolio transfers
(Note 4).................. (3,328,483) (33,297) (416,768)
Other net transfers (Note
4)........................ (1,058,931) (4,002,149) (15,856,704)
Net increase (decrease) in
net assets resulting from
capital transactions...... (1,488,293) 3,214,505 13,256,514
--------------- ---------------- ---------------
NET CHANGE IN NET ASSETS...... (1,319,943) 6,108,395 29,099,335
Net Assets--beginning of
period....................... 4,294,683 84,180,741 55,081,406
--------------- ---------------- ---------------
Net Assets--end of period..... $ 2,974,740 $ 90,289,136 $ 84,180,741
--------------- ---------------- ---------------
--------------- ---------------- ---------------
</TABLE>
See Notes to Financial Statements.
A-76
<PAGE>
<TABLE>
<CAPTION>
AGGRESSIVE
INTERNATIONAL STOCK DIVISION STOCK INDEX DIVISION GROWTH DIVISION
--------------------------------- --------------------------------- ----------------
FOR THE THREE FOR THE THREE FOR THE THREE
MONTHS ENDED FOR THE YEAR MONTHS ENDED FOR THE YEAR MONTHS ENDED
MARCH 31, ENDED MARCH 31, ENDED MARCH 31,
1996 DECEMBER 31, 1996 DECEMBER 31, 1996
(UNAUDITED) 1995 (UNAUDITED) 1995 (UNAUDITED)
---------------- --------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ (4,489) $ 27,416 $ (4,199) $ 213,805 $ (14,696)
Net realized gain (loss)
from security
transactions.............. 10,683 28,349 17,238 29,512 14,501
Unrealized appreciation
(depreciation) of
investments............... 181,925 136,578 715,920 2,271,366 3,969,174
---------------- --------------- ---------------- --------------- ----------------
Net increase (decrease) in
net assets resulting from
operations................ 188,119 192,343 728,959 2,514,683 3,968,979
---------------- --------------- ---------------- --------------- ----------------
From capital transactions:
Net premiums................ 2,833,781 12,024,423 3,173,708 7,870,004 9,948,415
Redemptions (Note 4)........ (153,984) (392,901) (60,312) (232,828) (437,362)
Net portfolio transfers
(Note 4).................. (38,614) (658,961) 486,880 1,324,319 45,919
Other net transfers (Note
4)........................ (1,069,390) (5,248,525) (1,302,155) (2,897,249) (4,190,035)
Net increase (decrease) in
net assets resulting from
capital transactions...... 1,571,793 5,724,036 2,298,121 6,064,246 5,366,937
---------------- --------------- ---------------- --------------- ----------------
NET CHANGE IN NET ASSETS...... 1,759,912 5,916,379 3,027,080 8,578,929 9,335,916
Net Assets--beginning of
period...................... 17,296,137 11,379,758 13,425,770 4,846,841 54,331,797
---------------- --------------- ---------------- --------------- ----------------
Net Assets--end of period..... $ 19,056,049 $ 17,296,137 $ 16,452,850 $ 13,425,770 $ 63,667,713
---------------- --------------- ---------------- --------------- ----------------
---------------- --------------- ---------------- --------------- ----------------
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
1995
---------------
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS:
From operations:
Net investment income
(loss).................... $ 4,726,548
Net realized gain (loss)
from security
transactions.............. 152,387
Unrealized appreciation
(depreciation) of
investments............... 4,188,117
---------------
Net increase (decrease) in
net assets resulting from
operations................ 9,067,052
---------------
From capital transactions:
Net premiums................ 32,859,273
Redemptions (Note 4)........ (1,185,240)
Net portfolio transfers
(Note 4).................. 2,162,117
Other net transfers (Note
4)........................ (14,163,669)
Net increase (decrease) in
net assets resulting from
capital transactions...... 19,672,481
---------------
NET CHANGE IN NET ASSETS...... 28,739,533
Net Assets--beginning of
period...................... 25,592,264
---------------
Net Assets--end of period..... $ 54,331,797
---------------
---------------
</TABLE>
A-77
<PAGE>
METROPOLITAN LIFE SEPARATE ACCOUNT UL
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
Metropolitan Life Separate Account UL (the "Separate Account") is a
multi-division unit investment trust registered under the Investment Company Act
of 1940 and presently consists of seven investment divisions used to support
variable universal life insurance policies. The assets in each division are
invested in shares of the corresponding portfolio of the Metropolitan Series
Fund, Inc. (the "Fund"). Each portfolio has varying investment objectives
relative to growth of capital and income.
The Separate Account was formed by Metropolitan Life Insurance Company
("Metropolitan Life") on December 13, 1988, and registered as a unit investment
trust on January 5, 1990. The assets of the Separate Account are the property of
Metropolitan Life.
These unaudited financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results for the
interim period presented. A summary of significant accounting policies, all of
which are in accordance with generally accepted accounting principles, is set
forth below:
1. SIGNIFICANT ACCOUNTING POLICIES
A. VALUATION OF INVESTMENTS
Investments in shares of the Fund are valued at the reported net asset
values of the respective portfolios.
B. SECURITY TRANSACTIONS
Purchases and sales are recorded on the trade date. Realized gains and
losses on sales of investments are determined on the basis of identified
cost.
C. FEDERAL INCOME TAXES
In the opinion of counsel of Metropolitan Life, the Separate Account will
be treated as a part of Metropolitan Life and its operations, and the
Separate Account will not be taxed separately as a "regulated investment
company" under existing law. Metropolitan Life is taxed as a life
insurance company. The policies permit Metropolitan Life to charge
against the Separate Account any taxes, or reserves for taxes,
attributable to the maintenance or operation of the Separate Account.
Metropolitan Life is not currently charging any federal income taxes
against the Separate Account arising from the earnings or realized
capital gains attributable to the Separate Account. Such charges may be
imposed in future years depending on market fluctuations and transactions
involving the Separate Account.
D. NET PREMIUMS
Metropolitan Life deducts a sales load and a state premium tax charge
from premiums before amounts are allocated to the Separate Account. In
the case of certain of the policies, Metropolitan Life also deducts a
Federal income tax charge before amounts are allocated to the Separate
Account. The Federal income tax charge is imposed in connection with
certain of the policies to recover a portion of the Federal income tax
adjustment attributable to policy acquisition expenses.
2. DIVIDENDS
There were no dividends declared, as of March 31, 1996, for the period of
January 1, 1996 through March 31, 1996.
A-78
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. EXPENSES
With respect to assets in the Separate Account that support certain
policies, Metropolitan Life applies a daily charge against the Separate Account
for the mortality and expense risks assumed by Metropolitan Life. This charge is
equivalent to the effective annual rate of .90% of the average daily value of
the net assets in the Separate Account which are attributable to such policies.
4. RECLASSIFICATION
Items in the Statement of Changes in Net Assets for December 31, 1995 have
been reclassified to conform to changes made to the format presentation.
A-79
<PAGE>
APPENDIX TO PROSPECTUS
OPTIONAL INCOME PLANS
The insurance proceeds when the covered person dies, the proceeds payable on
the Final Date, or the cash surrender value payable on full surrender of a
Certificate, instead of being paid in one lump sum, may be applied under one or
more of the following income plans. Values under the income plans do not depend
upon the investment experience of a separate account. The selection of an income
plan can have significant federal income tax consequences associated with the
Certificate proceeds. Owners and beneficiaries should consult with qualified tax
advisers in this regard.
OPTION 1. INTEREST INCOME
The amount applied will earn interest which will be paid monthly.
Withdrawals of at least $500 each may be made at any time by written request.
OPTION 2. INSTALLMENT INCOME FOR A STATED PERIOD
Monthly installment payments will be made so that the amount applied, with
interest, will be paid over the period chosen (from 1 to 30 years).
OPTION 2A. INSTALLMENT INCOME OF A STATED AMOUNT
Monthly installment payments of a chosen amount will be made until the
entire amount applied, with interest, is paid.
OPTION 3. SINGLE LIFE INCOME--GUARANTEED PAYMENT PERIOD
Monthly payments will be made during the lifetime of the payee with a chosen
guaranteed payment period of 10, 15 or 20 years.
OPTION 3A. SINGLE LIFE INCOME--GUARANTEED RETURN
Monthly payments will be made during the lifetime of the payee. If the payee
dies before the total amount applied under this plan has been paid, the
remainder will be paid in one sum as a death benefit.
OPTION 4. JOINT AND SURVIVOR LIFE INCOME
Monthly payments will be made jointly to two persons during their lifetime
and will continue during the remaining lifetime of the survivor. A total payment
period of 10 years is guaranteed.
OTHER FREQUENCIES AND PLANS. Instead of monthly payments, the owner may
elect to have payments made quarterly, semiannually or annually. Other income
plans may be arranged with MetLife's approval.
CHOICE OF INCOME PLANS. See "Certificate Benefits--Optional Income Plans"
and "Certificate Rights-- Surrenders," regarding how optional income plans may
be chosen. When an income plan starts, a separate contract will be issued
describing the terms of the plan. Specimen contracts may be obtained from the
Administrative Office, and reference should be made to these forms for further
details.
LIMITATIONS. If the payee is not a natural person, the choice of an income
plan will be subject to MetLife's approval. A collateral assignment will modify
a prior choice of income plan. The amount due the assignee will be payable in
one sum and the balance will be applied under the income plan. A choice of an
income plan will not become effective unless each payment under the plan would
be at least $50. Income plan payments may not be assigned and, to the extent
permitted by law, will not be subject to the claims of creditors.
INCOME PLAN RATES. Amounts applied under the interest income and
installment income plans will earn interest at a rate set from time to time by
MetLife but never less than 3% per year. Life income payments will be based on a
rate set by MetLife and in effect on the date the amount to be applied becomes
payable, but never less than the minimum payments guaranteed in the Certificate.
Such minimum guaranteed payments are based on certain assumed mortality rates
and an interest rate of 3%.
A-80
<PAGE>
OPTIONAL INSURANCE BENEFITS
Optional insurance benefit riders may be attached to a Certificate, subject
to, their availability under the Group Policy, their availability under state
law, certain insurance underwriting requirements and the payment of additional
premiums. These riders are described in general terms below. Limitations and
conditions are contained in the riders, and the description below is subject to
the specific terms of the riders. A prospective purchaser may obtain a specimen
Certificate with riders from the Administrative Office. The duration, but not
the amount, of rider benefits may depend on the investment experience of a
separate account.
The following riders will be provided to all Owners if elected by the
participating entity:
WAIVER OF MONTHLY DEDUCTION DURING TOTAL DISABILITY. This rider waives the
entire monthly deduction during the "Total Disability" of the covered person if
the covered person is "Totally Disabled" for at least six months beginning prior
to age 60. "Total Disability" or "Totally Disabled" means that because of
sickness or an injury the covered person cannot do his or her job, and cannot do
any other job for which they are fit by education, training or experience.
Monthly deductions will continue to be waived until the earliest of the
following: (a) the date the covered person is no longer totally disabled, or (b)
the date the covered person does not give MetLife proof of Total Disability when
required, or (c) the day before the date the covered person becomes 65 years
old. If there has been an increase in the death benefit resulting from a request
by the Owner and the Owner at the time of the increase did not request or did
not qualify for this rider with respect to such increase, monthly deductions for
charges related to such increase will continue to be made against the cash value
of the Certificate. This could result in the cash value being insufficient to
cover the monthly deductions related to the increase. In such a case, the grace
period and termination provisions of the Certificate would apply only to such
increase in death benefit. Since the monthly deduction with respect to the
increase in the death benefit could reduce the cash value of the Certificate to
zero, it may be advantageous for the Owner, at the time of the total disability,
to reduce the death benefit to that amount which is subject to this rider .
ACCELERATED DEATH BENEFIT. This rider provides for a one-time discounted
payment of all or a portion of the death benefit to the Owner if the covered
person's life span has been drastically limited so that the covered person is
expected to die within six months or twelve months, as specified in the rider,
or is not expected recover from the cause of reduction in life span. In addition
some riders also provide this benefit if the covered person is permanently
confined to a Nursing Home and has a life expectancy of less than two years. The
size of the benefit payment and the maximum benefit are stated in the rider.
There are no premiums or rider fees for this rider.
Upon payment of a portion of the death benefit, the death benefit under the
Certificate is reduced to reflect the amount of the payment. In addition, the
specified face amount, the cash value and the cash surrender value are reduced
by the same proportion as the amount of the reduction of the death benefit
divided by the death benefit prior to the payment. Any outstanding loan is
reduced and paid out of the proceeds of the portion only if such reduction is
necessary to keep the Certificate in force. Moreover, in the case of payment of
all of the death benefit, the amount of any outstanding Certificate loan will be
deducted from the payment.
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors should
be consulted to determine the effect on an individual situation.
LIVING BENEFITS. This rider provides benefits in the form of living
benefits to the Owner or covered person when "Unable to Care" for the Covered
Person and when conditions specified in the rider are met. "Unable to Care"
means that the Owner or covered person is unable to perform specified activities
of daily living without human assistance each and every time performance of the
activities is necessary. This may include the following types of activities:
bathing, dressing, transferring/mobility, toileting/continence, and eating. The
amount of living benefits available under this rider will be an amount of up to
50% of the specified face amount on the date when the conditions specified in
this rider are met. However, the amount of Death Benefit payable at the covered
person's death will be reduced by the amount of living benefits paid. Living
benefits will not be paid for conditions resulting from, caused or contributed
by a mental or nervous condition, other than Alzheimer's disease; or alcohol or
drug abuse. Preexisting conditions may not be covered by this rider.
A-81
<PAGE>
The payment under this rider may be taxable or may affect eligibility for
benefits under state or federal law. Counsel and other competent advisors should
be consulted to determine the effect on an individual situation.
The following riders may be elected by either the participating entity or
the Owner, as set forth in the Policy or Certificate:
ACCIDENTAL DEATH BENEFIT. This rider provides additional insurance equal to
an amount stated in the Certificate if the covered person dies from an accident
prior to age 70. It also provides an additional amount equal to twice the stated
amount if the covered person dies from an accident occurring while the covered
person is a fare-paying passenger on a common carrier. This rider is available
at issue only.
ACCIDENTAL DEATH OR DISMEMBERMENT BENEFIT. In addition to benefits
described under "Accidental Death Benefits," above, this rider provides benefits
if a covered person is injured in an accident if the covered loss occurs not
more than 90 days after the date of an accident and prior to age 70. Covered
losses may include loss of life, a hand, foot or sight of an eye. The amount of
benefits on account of a covered person is the amount specified in the
Certificate.
DEPENDENT LIFE BENEFITS. This rider provides insurance on the life of a
dependent payable to the Owner or other designated beneficiary while the
benefits are in effect for that dependent on the date of death as set forth in
this rider. A dependent may be the Owner's spouse or unmarried child. A child
who may be covered includes a child who is supported solely by you and
permanently living in the home of which you are the head, a child who is legally
adopted or a stepchild who lives in your home. A child may be covered until age
19 and in some cases up to 23 years of age. A dependent child with a physical
handicap or mental retardation may continue to be a dependent. The amount of
dependent term insurance will be specified in the rider.
A-82
<PAGE>
METLIFE -REGISTERED TRADEMARK-
GV UL
GROUP VARIABLE UNIVERSAL LIFE
PROSPECTUSES FOR
- GROUP VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES AND
CERTIFICATES
ISSUED BY
METROPOLITAN LIFE INSURANCE
COMPANY
- METROPOLITAN SERIES FUND, INC.
VERSION 2
ML-GVUL (8/96 EDITION) PRINTED
IN U.S.A.
POLICY FORM NO. 2130-S
96061ELT (EXP 5/97) MLIC-LD
[LOGO]
METLIFE CUSTOMER SERVICE CENTER BULK RATE
177 SOUTH COMMONS DRIVE ZIP+4 BARCODED
AURORA, ILLINOIS 60507 U.S. POSTAGE PAID
ADDRESS CORRECTION REQUESTED RUTLAND, VT
FORWARDING AND RETURN PERMIT 220
POSTAGE GUARANTEED
<PAGE>
PART II
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference Table.
Form of Supplement to the Prospectus, consisting of 2 pages.
The Prospectus--Version No. 1, consisting of 87 pages.
The Prospectus--Version No. 2, consisting of 83 pages.
Undertaking to File Reports, filed with the initial filing of this
Registration Statement on April 14, 1995.
Undertaking pursuant to Rule 484(b)(1) under the Securities Act of 1933,
filed with the initial filing of this Registration Statement on April 14,
1995.
Representation, Description and Undertaking pursuant to rule
6e-3(T)(b)(13)(iii)(F) under the Investment Company Act of 1940, filed
with the initial filing of this Registration Statement on April 14, 1995.
The signatures.
Written Consents of the following persons:
Christopher P. Nicholas, filed with the initial filing of this
Registration Statement on April 14, 1995.
George J. Kalb (filed with Exhibit 6 below)
Deloitte & Touche LLP
The following exhibits:
<TABLE>
<C> <C> <S> <C>
1.A (1) -- Resolution of Board of Directors of Metropolitan Life effecting the
establishment of Metropolitan Life Separate Account........................... *
(2) --Not Applicable
(3) --(a) Not Applicable
--(b) Form of Selected Broker Agreement......................................... +++
--(c) Schedule of sales commissions............................................. ****
(4) --Not applicable
(5) --(a) Specimen Group Variable Universal Life Insurance Policy (including any
alternate pages as required by state law) with form of riders, if any..... ++
--(b) Specimen Group Variable Universal Life Insurance Certificate issued under
the Group Variable Universal Life Policy (including any alternate pages as
required by state law) with form of riders, if any........................ ++
(6) --(a) Charter and By-Laws of Metropolitan Life.................................. ++++
--(b) Amendment to By-Laws...................................................... ++++
(7) --Not Applicable
(8) --Not Applicable
(9) --Not Applicable
(10) --(a) Application Form for Policy and Form of Receipt........................... +++
--(b) Enrollment Form for Certificate and Form of Receipt....................... +++
--(c) Request For Systematic Transfer Option Form............................... +++
2. --See Exhibit 1.A(5) above
3. -- Opinion and consent of Counsel as to the legality of the securities being
sold.......................................................................... ++
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <C> <S> <C>
4. --Not Applicable
5. --Not Applicable
6. -- Opinion and consent of George J. Kalb relating to the Group Variable
Universal Life Insurance Policies, including representations required under
the terms of an SEC exemptive order (File No. 812-9452) permitting the
deduction of a charge to compensate MetLife for the tax impact of deferral of
acquisition costs............................................................. +
7. -- Form of Notice of Cancellation Right and Request for Cancellation relating to
Group Variable Universal Life Insurance Certificates pursuant to Rule
6e-3(T)(b)(13)(viii) under the Investment Company Act of 1940................. ++
8. --Powers of Attorney............................................................ **
9. -- Method of Computing Exchange pursuant to Rule 6e-3(T)(b)(13)(v)(B) under the
Investment Company Act of 1940 (not required because there will be no cash
value adjustments)
10. -- Statement of Metropolitan Life pursuant to Rule 27d-2 under the Investment
Company Act of 1940........................................................... ***
11. -- Memorandum describing certain procedures filed pursuant to Rule
6e-3(T)(b)(12)(iii)........................................................... ++
27. -- Financial Data Schedule of Separate Account UL (period ending March 31,
1996)......................................................................... +
</TABLE>
- ---------
+ Filed herewith.
* Incorporated by reference to the initial filing of the Registration
Statement of Separate Account UL (File No. 33-32813) on January 5, 1990.
** Powers of Attorney for signatories other than Theodossios Athanassiades,
Harry P. Kamen Stewart G. Nagler and Curtis H. Barnette were filed with the
filing of Post-Effective Amendment No. 1 to the Registration Statement of
Separate Account UL (File No. 33-32813) on March 1, 1991. Powers of
Attorney for Theodossios Athanassiades and Harry P. Kamen were filed with
the initial filing of the Registration Statement of Separate Account UL
(File No. 33-57320) on January 22, 1993. A Power of Attorney for Stewart G.
Nagler was filed with Pre-Effective Amendment No. 1 of the Registration
Statement of Separate Account UL (File No. 33-57320) on July 29, 1993. A
Power of Attorney for Curtis H. Barnette was filed with the initial filing
of this Registration Statement of Separate Account UL (File No. 33-91226)
on April 14, 1995. Powers of Attorney for Hugh B. Price and Ruth J. Simmons
were filed with Pre-Effective Amendment No. 1 to this Registration
Statement of Separate Account UL (File No. 33-91226) on September 8, 1995.
The foregoing Powers of Attorney are incorporated herein by reference.
*** Incorporated herein by reference to the filing of Post-Effective Amendment
No. 4 to the Registration Statement of Separate Account UL (File No.
33-47927) on April 26, 1996.
**** Incorporated by reference from the sections entitled "Distribution of the
Group Policies and Certificates" in the prospectuses that are included in
this amended Registration Statement.
++ Included in the initial filing of this Registration Statement of Separate
Account UL (File No. 33-91226) on April 14, 1995.
+++ Included in the filing of Pre-Effective Amendment No. 1 of this
Registration Statement of Separate Account UL (File No. 33-91226) on
September 8, 1995.
++++ Incorporated herein by reference to the filing of Post-Effective Amendment
No. 4 to the Registration Statement of Separate Account UL (File No.
33-57320) on March 1, 1996.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, METROPOLITAN
LIFE INSURANCE COMPANY CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS FOR
EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT TO RULE 485(b)
UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY
AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE CITY OF
NEW YORK, STATE OF NEW YORK, THIS 2ND DAY OF JULY, 1996.
<TABLE>
<S> <C>
METROPOLITAN LIFE
(SEAL) INSURANCE COMPANY
By: /s/ RICHARD M. BLACKWELL
-------------------------------------------
RICHARD M. BLACKWELL, ESQ.
SENIOR VICE-PRESIDENT & GENERAL COUNSEL
Attest: /s/ RUTH GLUCK
----------------------------------------
RUTH GLUCK, ESQ.
ASSISTANT SECRETARY
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDED
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- -------------------------------------------- -----------------------
<C> <S> <C>
* Chairman, President, Chief Executive Officer
- --------------------------------------------------- and Director (Principal Executive Officer)
HARRY P. KAMEN
* Vice-Chairman of the Board and Director
----------------------------------------
THEODOSSIOS ATHANASSIADES
* Senior Executive Vice-President and Chief
---------------------------------------- Financial Officer (Principal Financial
STEWART G. NAGLER Officer)
* Senior Executive Vice-President and
---------------------------------------- Controller (Principal Accounting Officer)
FREDERICK P. HAUSER
* Director
----------------------------------------
CURTIS H. BARNETTE
* Director
----------------------------------------
JOAN GANZ COONEY
*By /s/ CHRISTOPHER P. NICHOLAS July 2, 1996
------------------------------------
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- -------------------------------------------- -----------------------
<C> <S> <C>
* Director
----------------------------------------
HELENE L. KAPLAN
* Director
----------------------------------------
RICHARD J. MAHONEY
* Director
----------------------------------------
ALLEN E. MURRAY
* Director
----------------------------------------
JOHN J. PHELAN, JR.
* Director
----------------------------------------
JOHN B. M. PLACE
* Director
----------------------------------------
HUGH B. PRICE
* Director
----------------------------------------
ROBERT G. SCHWARTZ
* Director
----------------------------------------
RUTH J. SIMMONS
* Director
----------------------------------------
WILLIAM S. SNEATH
* Director
----------------------------------------
JOHN R. STAFFORD
*By /s/ CHRISTOPHER P. NICHOLAS July 2, 1996
------------------------------------
CHRISTOPHER P. NICHOLAS, ESQ.
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
METROPOLITAN LIFE SEPARATE ACCOUNT UL, CERTIFIES THAT IT MEETS ALL OF THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS AMENDED REGISTRATION STATEMENT PURSUANT
TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS AMENDED
REGISTRATION STATEMENT TO BE SIGNED, ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO
DULY AUTHORIZED, AND ITS SEAL TO BE HEREUNTO AFFIXED AND ATTESTED, ALL IN THE
CITY OF NEW YORK, STATE OF NEW YORK THIS 2ND DAY OF JULY, 1996.
<TABLE>
<C> <S>
METROPOLITAN LIFE
SEPARATE ACCOUNT UL
(REGISTRANT)
By: METROPOLITAN LIFE
INSURANCE COMPANY
(DEPOSITOR)
(SEAL) By: /s/ RICHARD M. BLACKWELL
----------------------------------
RICHARD M. BLACKWELL, ESQ.
SENIOR VICE-PRESIDENT
AND GENERAL COUNSEL
Attest: /s/ RUTH GLUCK
------------------------------------
RUTH GLUCK, ESQ.
ASSISTANT SECRETARY
</TABLE>
II-5
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 33-91226 of Metropolitan Life Separate Account UL on Form S-6 of
our report dated February 19, 1996 relating to Metropolitan Life Separate
Account UL, and of our report dated February 9, 1996 relating to Metropolitan
Life Insurance Company both appearing in the Prospectuses, which are a part of
such Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectuses.
DELOITTE & TOUCHE LLP
New York, New York
July 2, 1996
II-6
<PAGE>
July 2, 1996
Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010
Dear Sirs:
This opinion is furnished in connection with the filing of Post-Effective
Amendment No. 1 to Registration Statement No. 33-91226 on Form S-6
("Registration Statement") which covers premiums received under Group Variable
Universal Life Insurance Policies with a minimum group size of 200 eligible
lives ("Small Group Policies") and premium received under Group Variable
Universal Life Insurance Polices with a minimum group size of 1000 eligible
lives ("Large Group Policies") offered by Metropolitan Life Insurance Company
("MLIC") in each State where they have been approved by appropriate State
insurance authorities. As a Vice-President and Actuary of MLIC, I have reviewed
the Small Group Policy form and the Large Group Policy form and I am familiar
with the Registration Statement and Exhibits thereto. In my opinion:
(1) The illustrations of death benefits, cash values, cash surrender values and
accumulated premiums for the Small Group Policy on pages 16 to 20 and on
pages 30 to 33 of the prospectus relating to the Small Group Policies
included in the Registration Statement ("Small Group Prospectus"), based on
the assumptions stated in the illustrations, are consistent with the
provisions of the Small Group Policies. Such assumptions, including the
assumed current charge levels, are reasonable. The Small Group Policies
have not been designed so as to make the relationship between premiums and
benefits, as shown in the illustrations on pages 16 to 20 and on pages 30
to 33, appear to be correspondingly more favorable to a prospective
purchaser of a certificate under the Small Group Policy for males age 40 in
the underwriting categories specified in the illustrations, than to
prospective purchasers of certificates under Small Group Policies for a
male at other ages or in other underwriting classes or for a female. Nor
were the particular illustrations shown selected for the purpose of making
this relationship appear more favorable.
<PAGE>
(2) The illustrations of the amount of surrender charge which would be taken
upon the surrender of a particular certificate issued pursuant to a Small
Group Policy on pages 29 and 30 based on the assumptions stated in the
illustrations, are consistent with the provisions of the Small Group
Policy.
(3) The charge for federal taxes that is imposed under the Small Group Policies
is reasonable in relation to MLIC's increased tax burden under Section 848
of the Internal Revenue Code of 1986, resulting from MLIC's receipt of
premiums under such Small Group Policies. The cost to MLIC of capital used
to satisfy its increased tax burden under Section 848 is, in essence,
MLIC's targeted after-tax rate of return. The targeted after-tax rate of
return is reasonable and the factors taken into account by MLIC in
determining such targeted after-tax rate of return are appropriate factors
to consider.
(4) The illustrations of death benefits, cash values, and accumulated premiums
for the Large Group Policy on pages A-15 to A-19 and on pages A-26 to A-29
of the prospectus relating to the Large Group Policies included in the
Registration Statement ("Large Group Prospectus"), based on the assumptions
stated in the illustrations, are consistent with the provisions of the
Large Group Policies. Such assumptions, including the assumed current
charge levels, are reasonable. The Large Group Policies have not been
designed so as to make the relationship between premiums and benefits, as
shown in the illustrations on pages A-15 to A-19 and on pages A-26 to A-29,
appear to be correspondingly more favorable to a prospective purchaser of a
certificate under the Large Group Policy for males age 40 in the
underwriting risk categories specified in the illustrations, than to
prospective purchasers of certificates under Large Group Policies for a
male at other ages or in other underwriting classes or for a female. Nor
were the particular illustrations shown selected for the purpose of making
this relationship appear more favorable.
(5) The charge for federal taxes that is imposed under the Large Group Policies
is reasonable in relation to MLIC's increased tax burden under Section 848
of the Internal Revenue Code of 1986, resulting from MLIC's receipt of
premiums under such Large Group Policies. The cost to MLIC of capital used
to satisfy its increased tax burden under Section 848 is, in essence,
MLIC's targeted after-tax rate of return. The targeted after-tax rate of
return is reasonable and the factors taken into account by MLIC in
determining such targeted after-tax rate of return are appropriate factors
to consider.
<PAGE>
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in each of
the Small Group Prospectus and the Large Group Prospectus.
Very truly yours,
/s/George J. Kalb
-----------------------
George J. Kalb
Vice-President and
Actuary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> GROWTH DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 101750668
<INVESTMENTS-AT-VALUE> 101750658
<RECEIVABLES> 131
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 125828133
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 655789
<TOTAL-LIABILITIES> 655789
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 10230695
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 452438
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 24077344
<NET-ASSETS> 125172344
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 24424
<NET-INVESTMENT-INCOME> (24424)
<REALIZED-GAINS-CURRENT> 98585
<APPREC-INCREASE-CURRENT> 7888566
<NET-CHANGE-FROM-OPS> 7962727
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12731722
<ACCUMULATED-NII-PRIOR> 10255119
<ACCUMULATED-GAINS-PRIOR> 353853
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 24424
<AVERAGE-NET-ASSETS> 102055709
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> INCOME DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 22842868
<INVESTMENTS-AT-VALUE> 22659415
<RECEIVABLES> 21
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22659436
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 121528
<TOTAL-LIABILITIES> 121528
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2937960
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3524)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (182453)
<NET-ASSETS> 22537908
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4616
<NET-INVESTMENT-INCOME> (4616)
<REALIZED-GAINS-CURRENT> (8905)
<APPREC-INCREASE-CURRENT> (457115)
<NET-CHANGE-FROM-OPS> (470636)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 226437
<ACCUMULATED-NII-PRIOR> 2942576
<ACCUMULATED-GAINS-PRIOR> 5381
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4616
<AVERAGE-NET-ASSETS> 20305275
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> MONEY MARKET DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 3471171
<INVESTMENTS-AT-VALUE> 3420032
<RECEIVABLES> 16888
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3436920
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 426288
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (42621)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (51139)
<NET-ASSETS> 3436920
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 1035
<NET-INVESTMENT-INCOME> (1035)
<REALIZED-GAINS-CURRENT> (3594)
<APPREC-INCREASE-CURRENT> 41721
<NET-CHANGE-FROM-OPS> 37092
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 462180
<ACCUMULATED-NII-PRIOR> 427323
<ACCUMULATED-GAINS-PRIOR> (77822)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1035
<AVERAGE-NET-ASSETS> 3404328
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> DIVERSIFIED DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 80659387
<INVESTMENTS-AT-VALUE> 90905936
<RECEIVABLES> 88
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 90906024
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 616888
<TOTAL-LIABILITIES> 616888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 8820684
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 314109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10246549
<NET-ASSETS> 90289136
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 17881
<NET-INVESTMENT-INCOME> (17881)
<REALIZED-GAINS-CURRENT> 33043
<APPREC-INCREASE-CURRENT> 2878728
<NET-CHANGE-FROM-OPS> 2893890
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6108395
<ACCUMULATED-NII-PRIOR> 8838565
<ACCUMULATED-GAINS-PRIOR> 281066
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17881
<AVERAGE-NET-ASSETS> 76956449
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
METROPOLITAN LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> INTERNATIONAL STOCK DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 19522156
<INVESTMENTS-AT-VALUE> 19153994
<RECEIVABLES> 35
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19154029
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97980
<TOTAL-LIABILITIES> 97980
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 590019
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 121883
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (368152)
<NET-ASSETS> 19056049
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4489
<NET-INVESTMENT-INCOME> (4489)
<REALIZED-GAINS-CURRENT> 10683
<APPREC-INCREASE-CURRENT> 181925
<NET-CHANGE-FROM-OPS> 188119
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1759912
<ACCUMULATED-NII-PRIOR> 594508
<ACCUMULATED-GAINS-PRIOR> 111200
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4489
<AVERAGE-NET-ASSETS> 15746896
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> STOCK INDEX DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 13622223
<INVESTMENTS-AT-VALUE> 16505843
<RECEIVABLES> 41
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 16505884
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53034
<TOTAL-LIABILITIES> 53034
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 386843
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 60984
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2883621
<NET-ASSETS> 16452850
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 4199
<NET-INVESTMENT-INCOME> (4199)
<REALIZED-GAINS-CURRENT> 17238
<APPREC-INCREASE-CURRENT> 715920
<NET-CHANGE-FROM-OPS> 728959
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3027080
<ACCUMULATED-NII-PRIOR> 391042
<ACCUMULATED-GAINS-PRIOR> 43746
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4199
<AVERAGE-NET-ASSETS> 11184481
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METROPOLITAN
LIFE SEPARATE ACCOUNT UL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> AGGRESSIVE GROWTH DIVISION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 56034032
<INVESTMENTS-AT-VALUE> 64019697
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64019697
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 351984
<TOTAL-LIABILITIES> 351984
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5042417
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 172215
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7985665
<NET-ASSETS> 63667713
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 14696
<NET-INVESTMENT-INCOME> (14696)
<REALIZED-GAINS-CURRENT> 14501
<APPREC-INCREASE-CURRENT> 3969174
<NET-CHANGE-FROM-OPS> 3968979
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9335916
<ACCUMULATED-NII-PRIOR> 5057113
<ACCUMULATED-GAINS-PRIOR> 157714
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14696
<AVERAGE-NET-ASSETS> 48527946
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
